[Senate Hearing 107-682]
[From the U.S. Government Publishing Office]
S. Hrg. 107-682
TREASURY AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL YEAR 2003
=======================================================================
HEARINGS
before a
SUBCOMMITTEE OF THE
COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
on
H.R. 5120/S. 2740
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,
2003, AND FOR OTHER PURPOSES
__________
Department of the Treasury
Executive Office of the President
__________
Printed for the use of the Committee on Appropriations
Available via the World Wide Web: http://www.access.gpo.gov/congress/
senate
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COMMITTEE ON APPROPRIATIONS
ROBERT C. BYRD, West Virginia, Chairman
DANIEL K. INOUYE, Hawaii TED STEVENS, Alaska
ERNEST F. HOLLINGS, South Carolina THAD COCHRAN, Mississippi
PATRICK J. LEAHY, Vermont ARLEN SPECTER, Pennsylvania
TOM HARKIN, Iowa PETE V. DOMENICI, New Mexico
BARBARA A. MIKULSKI, Maryland CHRISTOPHER S. BOND, Missouri
HARRY REID, Nevada MITCH McCONNELL, Kentucky
HERB KOHL, Wisconsin CONRAD BURNS, Montana
PATTY MURRAY, Washington RICHARD C. SHELBY, Alabama
BYRON L. DORGAN, North Dakota JUDD GREGG, New Hampshire
DIANNE FEINSTEIN, California ROBERT F. BENNETT, Utah
RICHARD J. DURBIN, Illinois BEN NIGHTHORSE CAMPBELL, Colorado
TIM JOHNSON, South Dakota LARRY CRAIG, Idaho
MARY L. LANDRIEU, Louisiana KAY BAILEY HUTCHISON, Texas
JACK REED, Rhode Island MIKE DeWINE, Ohio
Terrence E. Sauvain, Staff Director
Charles Kieffer, Deputy Staff Director
Steven J. Cortese, Minority Staff Director
Lisa Sutherland, Minority Deputy Staff Director
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Subcommittee on Treasury and General Government
BYRON L. DORGAN, North Dakota, Chairman
BARBARA A. MIKULSKI, Maryland BEN NIGHTHORSE CAMPBELL, Colorado
MARY L. LANDRIEU, Louisiana RICHARD C. SHELBY, Alabama
JACK REED, Rhode Island MIKE DeWINE, Ohio
ROBERT C. BYRD, West Virginia TED STEVENS, Alaska
(ex officio) (ex officio)
Professional Staff
Chip Walgren
Nicole Rutberg
Pat Raymond (Minority)
Lula Edwards (Minority)
C O N T E N T S
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Thursday, March 14, 2002
Page
Department of the Treasury: Office of the Secretary.............. 1
Wednesday, March 20, 2002
Executive Office of the President: Office of Management and
Budget......................................................... 53
Wednesday, April 17, 2002
Department of the Treasury: Office of Enforcement................ 95
U.S. Secret Service.......................................... 112
Bureau of Alcohol, Tobacco and Firearms...................... 126
Financial Crimes Enforcement Network......................... 143
Federal Law Enforcement Training Center...................... 152
Thursday, April 18, 2002
Department of the Treasury: U.S. Customs Service................. 193
Wednesday, April 24, 2002
Executive Office of the President: Office of National Drug
Control Policy................................................. 237
Wednesday, May 15, 2002
Department of the Treasury: Internal Revenue Service............. 293
TREASURY AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL YEAR 2003
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THURSDAY, MARCH 14, 2002
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 2:21 p.m., in room SD-138, Dirksen
Senate Office Building, Hon. Byron L. Dorgan (chairman)
presiding.
Present: Senators Dorgan and Reed.
DEPARTMENT OF THE TREASURY
Office of the Secretary
STATEMENT OF HON. PAUL H. O'NEILL, SECRETARY
ACCOMPANIED BY EDWARD KINGMAN, ASSISTANT SECRETARY FOR MANAGEMENT AND
CHIEF FINANCIAL OFFICER
opening remarks
Senator Dorgan. The hearing will come to order. First, let
me apologize to the Secretary. We had a vote that is still
underway and we were delayed. Some of my colleagues will be
here shortly, but I want to begin the hearing knowing that your
time requirements are tight. We thank you, Mr. Secretary, for
joining us today. This is the hearing of the Subcommittee on
Treasury and General Government Appropriations subcommittee to
talk about funding for those functions that exist in your
agency.
Let me make just a couple of brief comments. I will put my
entire statement in the record and then we will hear from you,
Mr. Secretary, and have some questions. This hearing kickoff
the subcommittee's series of hearings on President Bush's
Fiscal Year 2003 budget request for the Treasury Department and
other agencies under our jurisdiction.
To no one's surprise, this is going to be a very difficult
budget year. The anticipated budget surpluses have vanished and
our resources are stretched thin. We have had an economic
slowdown, a recession of sorts. We are not sure how deep and
whether we are completely out of that recession, but we also
face a war against terrorism, both at home and abroad. So
things have changed dramatically since the last time we met.
The Treasury Department is a key player in all of these
activities. At a hearing 2 years ago I held up an orange rubber
cone and talked about northern border security and the fact
that at many ports of entry on the northern border that rubber
cone represented America's security after 10:00 at night. I
proposed early last year a northern border initiative and
included $25 million in the budget to deal with that.
September 11, of course, intervened and we not only
provided that $25 million but also additional funding. That was
made available for the Customs Service, the Border Patrol, and
the INS. So we have had a lot to do with respect to the issue
of border security. Mr. Secretary, you and I have had some
meetings about the issue of the Customs Service and border
security and the level of staffing that is required. I think
that we on this subcommittee want to work with you to reach the
right result in all of those areas.
One of the things that concerns me about this budget
request, and we will want to talk about at some length today,
is the Customs Service budget which relies in part, on a $250
million fee. That fee to deal with the issue of ACE and other
related issues, in many ways, is a substitute for a tax
increase. Congress has rejected similar fees on previous
occasions and will again this year likely reject it. So the
question is, if that funding mechanism is not approved, what
will be the method by which we fund these issues?
I am going to talk a little today, Mr. Secretary, in my
questions about the issue of tax shelter abuses and the amount
of resources you believe we ought to provide to combat that
because I fear that what we have is a proliferation of tax
shelter abuses. Having chaired some of the Enron hearings and
knowing that hundreds of their subsidiaries have been run out
of one post office box in the Cayman Islands, I am very
concerned about what has been happening with respect to these
tax shelter abuses. There have been some announcements by the
Treasury Department that have concerned me so I want to talk
about that.
I think accounting firms, lawyers, and others have become
very aggressive in trying to find ways for their clients to
avoid taxes. In fact overly aggressive in my opinion that
requires us to provide the resources necessary to try to thwart
this kind of activity so that those big institutions can begin
to pay their fair share of the cost of Government for America
as well. So I want to talk a little about that today.
I want to congratulate you, Mr. Secretary, on another
matter, for your willingness to take a good look at the issue
of debt relief and development in the Third World. Yesterday,
Mr. Bono of U2 came by. He has met with many people in this
town. He has a great passion, of course, for these issues, and
he spoke very highly of your focus and the discussions
apparently you have had. He is a very articulate and
interesting person.
I understand that you are going to be in Africa in May
taking a look at some of these issues dealing with the plague
of AIDS in Africa, which is also something this country has to
be greatly concerned about.
prepared statement
So with that as a brief introduction, let me ask Senator
Reed if he has some introductory comments and then we will hear
from the Secretary.
[The statement follows:]
Prepared Statement of Senator Byron L. Dorgan
Welcome Mr. Secretary. We are pleased that you are here today to
kick-off this Subcommittee's series of hearings on President Bush's
fiscal year 2003 budget request for the Treasury Department and other
agencies under our jurisdiction.
To no one's surprise this will be a difficult budget year. The
anticipated budget surpluses have vanished and our resources are
stretched thin by the war against terrorism both at home and abroad.
The Treasury Department is a key player in this war.
At a subcommittee hearing 2 years ago, I held up an orange rubber
traffic cone and stated that the cone was our nighttime guardian at far
too many ports of entry along our northern border. I used the orange
cone to illustrate a chronic lack of attention to security resources on
that 4,000 mile long border. The attempted incursion by Ressam--the so-
called Millenium bomber--at a border crossing in Washington State 2
years ago served as a wake-up call. The tragic events of September 11
brought the needs of our northern border into clear focus.
I am pleased that the Administration has listened to the concerns
of northern border Members and others regarding the need for additional
resources along this vast frontier. Indeed, page 21 of the President's
budget document has a color photo of a northern border point of entry
patrolled by orange cones.
I think we can jointly state today that the era of the orange
traffic cone is over.
It took us awhile to get to this point, however.
You and I had a difference of opinion about the need for the
Customs Service to have additional people and resources post September
11. I understand your belief that a business case must be made before
dumping more money on a given program. But I suggest that law
enforcement requirements should be justified differently than those for
office supplies or computer systems. I do not think you can make a
sound ``business'' case for placing two law enforcement officers at
non-24 hour ports-of-entry which have fewer than 50 cars entering the
country on a given day. But you certainly can make a strong ``national
security'' case for the enhanced presence of those law enforcement
personnel.
That said, I think we can agree that the resources the Congress
provided to the Customs Service in December appear to be well targeted.
And I agree that it probably makes sense for us to pause this year and
allow Customs to hire the new personnel and get the new technology in
place before we attempt to add additional resources.
But it seems to me that the message still may not be getting
through. Your budget request to fund a significant portion of the
Customs Service budget relies on a $250 million tax increase. Yes--it
is couched as a ``user fee''--but that is merely a tax increase under a
different name. When the last Administration tried to fund part of
Customs operations using this increase, Congress did not go along. I
doubt that we will this time. But times have changed since then. We
face a war against terrorism at home. Customs and Treasury are key
players in this war. The Defense Department and Justice Department are
budgeted for significant, ``hard dollar'' increases. Yet we appear to
be playing budgetary games with the Customs Service. To me, this
demonstrates a lack of seriousness on the part of the Treasury
Department when it comes to the war on terrorism which I will want to
further explore with you when we get to the questions.
Mr. Secretary, I will also want to focus my questions on the
Administration's apparent lack of zeal when it comes to pursing tax
shelter abuses. If you need additional resources to combat the war on
terrorism, I suggest you and your staff review this policy. The last
Administration aggressively started this process, yet you and your team
have changed course. For instance, I have read that Enron was able to
operate more than 600 firms through one post office box in the Cayman
Islands. Cracking down on this tax avoidance is one way to find the
funds to fight the war while at the same time ensuring a level of tax
fairness for the American taxpayer.
Finally, on the issue of appropriate staffing and policy direction
when operating within limited budgets, I want to get into the targeting
of your Department's limited resources. Specifically, I want to address
the aggressive pursuit of U.S. citizens traveling to Cuba by the Office
of Foreign Assets Control instead of the aggressive pursuit of foreign
terrorists' assets.
We welcome you here this afternoon and look forward to your
testimony. But first, let me turn to my Ranking Member, Senator
Campbell, for any remarks he wishes to make.
STATEMENT OF SENATOR JACK REED
Senator Reed. Thank you, Mr. Chairman, and thank you, Mr.
Secretary. Welcome. We appreciate your appearance this
afternoon. We all understand the challenges this year in the
budget because of many factors, not the least of which is the
September 11 attack and its aftermath.
PREPARED STATEMENT
Indeed, that attack has underscored the many law
enforcement responsibilities that the Department of Treasury
has. I know that there has been some increases particularly in
those areas, but I would suspect that we still have significant
challenges facing IRS and Customs modernization, also bringing
online and increasing the Financial Crimes Enforcement Network.
There is a host of other issues that I would like to deal with
in my questions, but thank you very much, Mr. Secretary, for
joining us this afternoon.
[The statement follows:]
Prepared Statement of Senator Jack Reed
Thank you Mr. Chairman. I appreciate the appearance of Secretary
O'Neill before the Subcommittee this afternoon, so that we may get a
better picture of what the Administration believes are its priorities
for the coming year at the Treasury Department.
I recognize the tightness of budgets this year, and I appreciate
that the Department does have an overall increase, particularly in
homeland defense areas. It is critical that we increase our efforts at
protecting our borders through Customs, as well as aggressively go
after financial terrorist infrastructures through the Financial Crimes
Enforcement Network (FinCen), and just as important, prevent terrorists
from gaining access to firearms.
However, I believe that we probably still have many areas where
there are a lack of increases, which are critical to other domestic
needs. This includes continued IRS and Customs modernization projects.
In addition, I do have several other issues that I would like to pursue
with the Secretary.
Senator Dorgan. Mr. Secretary, you may proceed. We will
include your entire statement as a part of the record. You may
summarize. And if you would introduce your colleague as well we
would appreciate it.
STATEMENT OF SECRETARY PAUL O'NEILL
Secretary O'Neill. With me today is Assistant Secretary
Kingman. I am happy for him to be here. I am happy for him to
be on board. He is a very talented individual. He has had years
of progressively responsible experience in the private sector.
I think he is on his way to making a great contribution in the
public sector as well.
Mr. Chairman, and Senator Reed, thank you very much for
inviting us here today to testify on the budget. I would like
to insert my full statement, as you suggest, in the record and
then I will make an abbreviated statement just for openers.
In the year since I spoke to this subcommittee the world
has changed. The change is very evident at the U.S. Treasury
where we are center stage for some of the toughest challenges
facing our country. Treasury's top three priorities are
familiar to every American. First, we are responsible for
implementing the President's domestic and international
economic security agenda, creating jobs at home and boosting
economic growth abroad.
Second, Treasury is securing our homeland through the work
of the U.S. Customs Service, the Secret Service, the Bureau of
Alcohol, Tobacco, and Firearms, and the Federal Law Enforcement
Training Center.
Third, the Treasury is leading the financial war on
terrorism. We have already blocked more than $34 million in
terrorist assets and our allies around the world have blocked
more than $70 million.
I know that this committee appreciates the importance of
these tasks and in a moment I will highlight six critical
budget items that we need most to achieve our objectives for
the year. But I would first like to comment on our efforts to
make Treasury a world-class organization because my top
priority as Secretary of the Treasury is to lead this
organization to excellence.
A world-class organization treats all of its people with
dignity and respect, gives them the tools to do meaningful
work, and recognizes them for their accomplishments. It sets
goals at the limits of possibility and then stretches to meet
them, measuring results, not just efforts. At Treasury, we are
a long way from achieving true excellence. Computer systems do
not lead excellence. Dollars do not lead excellence. People
lead excellence.
We need to develop a team of people who know what world-
class looks like. This is never easy, but it is especially
difficult for a Government enterprise which has so many
constraints on its options.
The first thing I did when I got this job was to ask every
one of our bureaus and offices to review what they do and why
they do it. The review is not finished but we are already
making progress. For example, early in the review process I
discovered that every year it takes 5 months to close the books
of the department. That just did not make any sense to me. How
can we say to people that their work is important when they are
required to rework the numbers for 5 months every year?
I know from experience that companies as large as the
Treasury Department close their books in a matter of days. So I
asked our people to figure out how to close the books faster.
We examined the process, we streamlined it, and now we are
closing the books in an average of 3 days.
I will give another example. When we looked at the IRS
large case audits we found that 40 percent of the resources
were spent on compliance issues for just two regulations: the
research and experimentation tax credit and the capitalization
guidance. We resolved the confusion in these regulations and
now we can devote those audit resources to more pressing,
important issues.
Of course, this is just plucking hairs off the tax code
beast. Ideally we would revamp the whole thing to make it
easier, to make it possible in fact to administer the tax code
at a reasonable cost for taxpayers and the Government alike.
These examples show a few early efforts to find and fix
institutional problems at the Treasury. But many of our
problems and their solutions are buried beneath decades of
business as usual bad habits. For example, over the years there
have been at least 29 audit findings showing material
weaknesses in Treasury operations, some dating back to the
1980s. Few have been corrected, and we find this unacceptable.
The Treasury management team is dedicated to diagnosing our
problems and implementing step by step solutions that produce
real measurable value for the American taxpayers, our
shareholders. We do not have all the answers yet. In fact I do
not think we even have all the questions yet, but we intend to
keep you, the Congress, our Board of Directors, fully informed
of our progress.
Let me comment further on some of the most important
requests in our budget for the coming year. First in the area
of information technology, this year's budget includes
significant increases for two information technology projects
in the Treasury Department: the IRS business systems
modernization and the Customs Service automated commercial
environment. We are continuing these projects but we are also
relooking at them.
We are asking fundamental questions such as, is IT platform
design part of the core Treasury mission or central competency?
If not, why are we designing and building these systems in-
house? Why are we buying computer hardware that is likely to be
obsolete by the time it is in full use? Can we streamline
deployment so that we see a return on investment sooner and so
that we avoid the risk of ugly surprises when we flip the
switch at the end?
We do need to invest in these technology upgrades to begin
raising department productivity to 21 century levels, just as
the private sector has raised productivity through technology
investment over the past decade. Higher productivity means
taxpayers get more service for less money. But we are not
stamping approval on projects because they are already
underway.
Second on the subject of resource levels for the Treasury
Department law enforcement activities. As I said, much of
homeland security takes place at Treasury. I believe that our
budget represents the funding levels necessary to accomplish
the current missions of the Treasury law enforcement activity.
As the committee knows, outside of our proposed business
strategy adjustment, our fiscal year 2003 request maintains the
current program levels of Treasury law enforcement.
As I testified last year, if there is a solid business case
to increase the funding level for a Treasury program I will be
the first to request that increase. But I do not believe in
spending tax dollars when we have no way of measuring whether
we are successful. Every dollar spent on Treasury law
enforcement we believe should produce a more secure homeland.
Third, with regard to improving the performance of the IRS,
under the leadership of Commissioner Rossotti, the IRS has made
progress toward improving customer satisfaction and improving
compliance rates. While the Commissioner and I have no
intention of returning the IRS to peak employment levels, we do
feel that the IRS needs to increase its staffing in order to
provide America's taxpayers with top quality service. This
year's funding will enable us to better promote electronic
filing, stabilize audit rates, and increase IRS efforts to
combat money laundering.
In the area of information technology modernization, this
year's budget includes significant increases for the two
information technology projects that I have already mentioned.
We are just now beginning to see the benefits of these efforts,
and we must maintain the momentum with full funding in order to
achieve IRS and Customs core missions.
The Treasury Departmental Offices develop the Executive
Branch's domestic and international fiscal policy, oversee
nearly 40 percent of Federal law enforcement, and manage the
Government's finances, all on about 1 percent of the overall
Treasury budget. In fiscal year 2002, the Departmental Offices
hit a 5 percent shortfall in mandatory costs and as a result we
put into place tighter management processes for all staffing
and expenses. We have instituted a hiring chill, cut travel,
and streamlined procurement. The funding level we are
requesting is the minimum to maintain the effectiveness of the
Department Offices.
On the issue of, Mr. Chairman, a Customs user fee, as you
said this budget does propose a $250 million increase in the
user fee to fund an equivalent amount of Customs Service
operations for enhanced homeland security. These user fees have
not increased since 1985, and based on inflation and our
increased scrutiny of incoming air and sea passengers since
September 11 I believe this increase is a reasonable fee to be
charged. We need to enact it by July 1, 2002 to ensure
uninterrupted Customs functioning.
Finally, with regard to the business strategy adjustment
that I know the committee will have some interest in,
throughout my career in both business and Government I have
challenged my organization to reduce cost through increased
efficiency. I started this cost-cutting process last year at
the Departmental Offices. This year I have asked each Treasury
bureau to follow suit and examine the way they do business in
order to identify and eliminate low value activities.
Specifically, I have asked everyone to identify savings equal
to 25 percent of the Administration's projected non-pay
inflationary increases.
PREPARED STATEMENT
I thank you for your consideration today. With your support
we can and we will make the United States Treasury Department a
world-class organization that will be a model for Government
and deserving of support from America's taxpayers. Finally, Mr.
Chairman and Mr. Reed, I would say to you, we will know we have
arrived when the private sector comes to see how to do things
better.
[The statement follows:]
Prepared Statement of Secretary Paul H. O'Neill
Mr. Chairman, Senator Campbell, and members of the Committee, I
appreciate this opportunity to discuss Treasury's fiscal year 2003
budget request.
As you know, Treasury plays a crucial role in the core functions of
government, and serves as tax administrator, revenue collector, law
enforcer, financial manager, as well as leading policymaker for tax
policy, banking policy and international and domestic economic policy.
For fiscal year 2003, we are proposing a performance budget that
will enable Treasury to continue to provide the American public with
both the service and program reliability it expects and deserves. I
have challenged each of my bureaus to carefully examine their
operations to achieve improved effectiveness in business practices. I
expect that Treasury can realize reasonable savings from this type of
review through reviewing programmatic efforts on a continual basis and
reducing or removing those producing little or no value.
Our budget request totals $16.654 billion for all operations.
Taking into account the offset from the proposed $250 million dedicated
toward Customs commercial operations, our program level totals $16.903
billion, compared to $16.5 billion appropriated in fiscal year 2002,
and $14.8 billion in fiscal year 2001.
Mr. Chairman, the budget request includes the impact of proposed
legislation for retirement and health costs for Federal employees and I
will speak to that proposal later in my statement. However, I do want
to note that the budget presents for the Committee the comparative
information on this proposal for prior fiscal years, in order to not
materially affect the real changes being proposed and reviewed by the
Committee for fiscal year 2003.
We have provided the Committee with a detailed breakdown and
justification for Treasury's fiscal year 2003 budget request. I would
like to take the opportunity today to highlight four important areas of
focus for fiscal year 2003.
Treasury's fiscal year 2003 budget recognizes the importance of,
and provides adequate and appropriate funding for, the following:
--Protecting our Nation from Terrorists and Terrorist Activity;
--Stewarding Change through Technological Improvement;
--Improving Customer Service & Compliance at the Internal Revenue
Service;
--Achieving the President's Management Agenda.
FIRST.--In light of the recent events concerning terrorism in the
U.S., I would like to discuss Treasury's role in protecting our Nation
from terrorists and terrorist activity.
The tragic events of September 11, 2001 sparked a Nation-wide
effort to prevent and combat terrorism. Treasury has been at the
forefront of these efforts with all of its law enforcement bureaus
participating in counter-terrorism functions, including internal bureau
and agency security and ensuring the continuity of operations. We bear
the responsibility of protecting the Nation on three fronts:
--At its borders;
--In the banks; and
--At home.
In fiscal year 2002, Treasury received $683 million in additional
counter-terrorism funding through the Emergency Supplemental. In the
proposed fiscal year 2003 budget, the follow-on costs associated with
the funding provided in fiscal year 2002 have been estimated in the
amount of $518 million.
Our nation's first line of defense against terrorists and terrorist
activity is the security of our borders.
Following the attacks of September 11, the border threat level was
raised from Alert Level 4 (normal operations) to the highest level,
Alert Level 1 (Code Red). The Customs Service, our Nation's first line
of defense at 301 ports of entry into the Nation, has made the fight
against terrorism its number one priority. In response to this
heightened state of alert, Customs has hired additional personnel to
staff our borders and seaports, and has engaged members of the National
Guard to increase security around our Nation's borders.
Customs received almost $400 million in new fiscal year 2002
appropriations for addressing homeland security matters (in addition to
$65 million provided through separate presidential releases). Of this
amount, $235 million is being used for a combination of personnel and
new equipment in ports of entry on the northern border and at critical
seaports, along with selected investments on the southern land border.
Customs has set out an expenditure plan for this funding for
Congressional review that responds to both short and long-term security
concerns. The recurring cost of labor-intensive efforts will be coupled
with technology investments that will increase efficiencies and enhance
the level and degree of scrutiny for various ports of entry.
The fiscal year 2003 proposal for the U.S. Customs Service includes
$365 million to fund counter-terrorism efforts in the second year,
continuing to focus principally on Northern Border and Marine Port
security efforts, but also addressing other areas of vulnerability,
such as: international money laundering, security infrastructure,
southwest border staffing, and funding for the backup of commercial
data facilities. Ports of Entry (POE) have been identified as main
entry points for terrorists as well as the most likely avenue for them
to introduce implements of terror into the country. The danger this
presents has become a focus for the fiscal year 2003 request.
In fiscal year 2003, Customs will add 626 new positions, in
addition to the 1,075 positions allocated in fiscal year 2002, to
vulnerable locations on the northern and southern land borders, and in
seaports with the highest volume of containerized cargo. They will
counter the terrorist threat while facilitating legitimate trade and
travel.
The fiscal year 2003 request also includes a large complement of
inspection and targeting technology (including a modest research
component), a further expansion of the Advance Passenger Information
System (APIS) to real-time processing capability, and technology to
expedite the passage of goods imported by highly trusted entities.
Finally, low volume Ports of Entry would be protected through
``hardening'' measures including physical barriers, sensors and
monitoring devices to prevent and detect unauthorized crossings.
Customs serves as the lead agency for Operations Green Quest and Shield
America. These multi-agency task forces are dedicated to: (1)
identifying, disrupting, and dismantling terrorist financing sources
and systems, and (2) ensuring that munitions and sensitive U.S.
technologies are not unlawfully exported into the hands of terrorists.
The fiscal year 2003 budget supports and maintains these critical task
forces.
Equally important with protecting our Nation's borders is deterring
the terrorists from being able to finance their operations.
Treasury's Financial Crimes Enforcement Network (FinCEN), along
with the Office of Foreign Assets Control (OFAC), lead the Nation's war
against global terrorism financing.
In his November 7 address at Treasury, President Bush proclaimed
that ``the first strike in the war against terror targeted the
terrorists' financial support.'' Following the attacks, FinCEN and OFAC
were able to identify and stymie numerous supporters of the Al Qaida
and other terrorist organizations by freezing $34 million in terrorist
assets and working with allies overseas to freeze over $45 million.
Funding levels proposed for fiscal year 2003 will better enable FinCEN
to sustain and maintain these activities.
While leading protection efforts on the borders and in the banks,
Treasury has also placed an increased emphasis on security within the
Nation in the protection of our Nation's leaders, foreign dignitaries
and, ultimately, our Nation's freedom. The United States Secret
Service, Bureau of Alcohol, Tobacco and Firearms, and Federal Law
Enforcement Training Center are at the forefront of these efforts.
The United States Secret Service is the only Federal Government
entity charged with the challenging mission of protecting the President
and foreign dignitaries. In response to increasing homeland security
threats, the Secret Service has been assigned new protectees and has
seen significant workload increases in its protective functions. The
fiscal year 2003 budget provides funding to enable the Secret Service
to meet its protective requirements, including funding for travel,
overtime, and follow-on costs associated with Special Agents and
Uniformed Division Officers hired in fiscal year 2002.
Around the world, firearms and explosives are the most frequent
tools of terrorist attacks. The Bureau of Alcohol, Tobacco and Firearms
is charged with enforcing Federal laws relating to commerce in, and the
criminal misuse of, firearms and explosives, and ATF's authority and
technical expertise is an integral component in fighting the Nation's
war against terrorism. Through the awareness that terrorists need funds
to operate, ATF has found that illegal commerce in alcohol and tobacco
products serve as attractive and lucrative sources for generating funds
for illegal activities.
As new law enforcement officials are being recruited and hired to
fulfill the various positions critical to the Nation's war on
terrorism, training for these individuals to perform their duties in a
safe and highly proficient manner has become an immediate necessity.
The Federal Law Enforcement Training Center (FLETC) serves as the
Federal Government's leading provider of law enforcement training.
FLETC currently provides training for 74 Federal Partner Organizations,
and also for State, local and international law enforcement
organizations on a reimbursable basis. Training is provided in the most
cost-effective manner by taking advantage of economies of scale
available only from a consolidated law enforcement training
organization. The fiscal year 2003 request provides funding to maintain
current levels prior to the September 11 terrorist attacks, while also
providing additional funding to support the training of new agents
hired as a result of the attacks.
SECOND.--The fiscal year 2003 budget is Treasury's continuing
commitment to stewarding change through technological improvement. This
effort entails modernizing two of Treasury's mission-critical
technological systems.
The budget continues critical support for the IRS computer
modernization. The Internal Revenue Service is committed to providing
excellent customer service and takes pride in the integrity of their
systems. As a result, they are continually making improvements in
operations efficiency and performance by adopting best business
practices and state-of-the-art technology.
The IRS is replacing its antiquated computer system with an
information technology capacity that is appropriate for the new
century. Modernizing the agency's technology will enable it to deliver
on its pledge to provide better customer service for all.
The Business Systems Modernization effort was begun not just to
keep up with modern systems, but also because it was a necessity due to
the fundamentally deficient nature of the IRS core data systems. The
Master File system, on which all taxpayer accounts reside, is based on
outdated 1960s technology.
It is important, if the agency is to provide quick and reliable
service to its customers, to continue the ongoing shift to modern
standards of technology by adopting a new architecture. As this is the
project's fourth year, much has been achieved, but the process is still
incomplete.
This multi-year endeavor is providing IRS with the technological
tools and revamped business processes needed to deliver first class
customer service to American taxpayers and to ensure that compliance
programs are administered efficiently and fairly.
Fiscal year 2002 and fiscal year 2003 are key transition years for
IRS Modernization efforts, as the foundation of our Nation's tax system
is being replaced, building a bridge to providing interactive and
improved customer service.
The Department's fiscal year 2003 budget provides $450 million for
the continuation of effort in re-engineering business processes and
developing new business systems to replace their antiquated and
obsolete system. This amount is $58 million above the fiscal year 2002
enacted level of $392 million, and $378 million above the fiscal year
2001 enacted level of $72 million.
The budget also continues important investments initiated for the
Customs modernization effort. Illegitimate trade and contraband
trafficking have been of the utmost concern to the Department, the
Administration, the Congress and the American public. This concern was
heightened due to the tragic events of September 11, and increased
pressure has been placed on the Customs Service to inspect all cargo
entering and exiting the United States.
The strains on our Customs Service are growing increasingly severe
every day. Since the Customs Modernization Act was passed in 1993, the
value of exports has grown by 36 percent while the value of imports has
risen by 51 percent. The agency is required to cope with this sharp
rise in input and export volumes with the same outdated technology it
had when the Act was passed.
Customs is not alone in having to work with antiquated technology.
We believe we are on the right track in our efforts to modernize IRS
technology and we have learned a great deal from this experience. 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
they are equipped with the best tools available to fulfill these goals.
In fiscal year 2003, the Customs Service expects to process 27
million formal trade entries. Customs is dedicated to replacing the
outdated and unreliable Automated Commercial System (ACS), which has
been subject to an increasing number of system outages, with the
Automated Commercial Environment (ACE). The replacement system will
enable Customs to adopt a paperless, account-based process for
importers. Fiscal year 2003 marks the third year of funding for this
modernization effort.
Besides trade facilitation and compliance, ACE will play an
integral role, in conjunction with other targeting and inspection
tools, in assisting Customs with the evaluation of high-risk cargo for
possible contraband as it passes the Nation's borders.
The Department's fiscal year 2003 proposal provides for: (1)
additional investments in the automation modernization program to
further develop and migrate to the Automated Commercial Environment
($307.5 million), as well as continued funding for a government-wide
trade data interface through the International Trade Data System ($5.4
million); and (3) sufficient funding to maintain the existing Automated
Commercial System while modernization efforts are underway.
THIRD.--Our fiscal year 2003 budget request addresses the
improvement of customer service and compliance at the Internal Revenue
Service. This has been of significant concern to the Committee and the
Department, and the Internal Revenue Service has been making great
strides for improvement in this area.
To achieve its mission of ``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,'' the IRS has realized that organizational
improvements and increased employee satisfaction lead to improved
customer satisfaction. As a result, strategic objectives focus not only
on the taxpayer, but also on the improvement of the bureau as a whole.
Under the leadership of Commissioner Rossotti, the IRS has already
made impressive progress towards providing a more responsive and
effective service to its customers. But there is still more to
accomplish. An inefficient tax system imposes costs on all. The longer
it takes to implement improvements, the greater the cost to the
consumer and the economy.
The IRS is well down the road towards modernizing its
organizational structure and computer systems. Although the IRS has no
intention of returning to its peak employment, recognizing that real
productivity has made the agency more effective and efficient, modest
staffing increases, along with improvements from systems modernization
are needed to provide the best service in both compliance and customer
service areas.
This is the ideal moment to re-engineer the agency to serve all
Americans by providing the most effective, up-to-date service possible.
We must not allow this opportunity to pass us by.
During its strategic planning and budget process, the IRS
identified $260 million in requirements to improve processing, customer
service and compliance across its organization as part of its tax
administration responsibilities. Using a combination of strategic
redeployment of staff and identification of labor savings programs, the
IRS has been able to internally redirect $158 million from existing
resources to focus on customer service, compliance and workload
requirements.
The fiscal year 2003 request seeks additional funding for the
remaining requirement of $102 million needed to meet this mission-
critical goal. The request supports efforts that are already underway
to improve customer service and compliance operations. Re-engineering
and Quality Improvement projects and programs are focusing on
redesigning internal processes, policies and procedures. These
additional resources, in addition to the redirected resources discussed
earlier, will be realized by the American taxpayer through the
following improvements:
--Providing additional assistance and forms, schedules and new return
types to its e-file website in order to meet the Congressional
goal of having 80 percent of all returns filed electronically;
--Through effective implementation of the e-file and e-services
programs, the IRS will save more than 500 FTE to be redirected
to assist in achieving other parts of this initiative.
--Hiring of lower-cost employees to handle the submission processing
growth anticipated increase from new tax returns filed,
reducing the number of high cost employees needed for
compliance during filing season;
--Increasing the level of telephone service to taxpayers with respect
to tax law inquiries;
--Providing almost instant access to return at Customer service
sites, assisting staff in providing top-quality customer
service to business taxpayers.
FOURTH.--And overriding area of focus for this year's request,
addresses Treasury's role in becoming a results-driven organization,
consistent with the President's Management Reform Agenda. Although it
may referred to as the President's Management Agenda, the concept of
the agenda is very similar to the types of results this Committee is
concerned with.
The Agenda's five areas of emphasis are:
--Strategic Management of Human Capital;
--Expanded Electronic Government;
--Improved Financial Performance;
--Budget and Performance Integration; and
--Competitive Sourcing.
Only through the delicate balance of all five Presidential
Management Initiatives can an organization achieve true world class
performance.
In working to achieve world-class status, the Department emphasizes
the importance of leadership, accountability, excellence, people, trust
and integrity, and improving the work environment. In addition, as the
principal custodian of the revenue collected and debt issued on behalf
of the Federal Government, the Department strives to demonstrate fiscal
stewardship of each congressionally authorized dollar by linking
investments with specific, measurable results.
Presidential Management Initiative 1: Strategic Management of Human
Capital
Treasury's most valuable and strategic asset is its employees, who
are responsible for carrying out the Department's vast array of duties
which affect the lives of every American citizen. Without employees,
the Department would be unable to meet the obligations placed on it by
the American public. I have reemphasized the importance of my employees
and have made every effort to ensure that each employee is (1) used to
their full potential, (2) working in a safe and positive environment,
and (3) providing value-added work to the organization.
I have emphasized that organizations known for excellence are built
on a foundation of dignity and respect for its employees. The
Department is focused on evaluating its work and processes so that each
and every employee feels that their work is meaningful and contributes
to the mission and objectives of the organization. In addition, because
job satisfaction is a number one priority for many employees, I am
dedicated to creating a work culture of performance, challenge,
meaning, and dignity, while providing employees with flexibility to
balance their work and personal lives. Examples of this flexibility
include tele-work and flexiplace programs, alternative work schedules,
and offering family-sensitive benefits.
In order to implement this Presidential Management Initiative, the
Department is continually reassessing its human resource strategies and
support systems to strengthen the quality of both its workforce and its
management.
In the aftermath of September 11, 2001, an increasing number of
Americans have become eager to consider service opportunities in
government. It is imperative that the Department exploits this
opportunity and is able to recruit the best and brightest. As a result,
innovative approaches to recruit high-caliber candidates into mission-
critical positions are underway.
A broad variety of private industries have experienced a direct
correlation between employee satisfaction and customer satisfaction.
Similarly, I believe that high levels of employee satisfaction within
the portfolio of Treasury employees will lead to enhanced service
provided to its citizens, thus yielding higher customer satisfaction
from both stakeholders and service users.
Presidential Management Initiative 2: Expanded Electronic Government
In addition to the strategic management of human capital, the use
and improvement of information technology will assist the Department in
providing solutions to common challenges facing all areas of the
Department. The benefits of these improvements will not only improve
the effectiveness of Treasury operations, but they will also produce
tangible benefits for the American public.
Treasury is currently in the process of reviewing its IT portfolio
for adherence to common standards, and updating and maintaining cost-
benefit analyses for new and ongoing systems. This will yield an
integrated comprehensive enterprise architecture at the Department
level that saves money and reduces the cycle time of major products.
For example, the Internal Revenue Service continues to work towards
the Congressional goal of having 80 percent of all tax and information
returns filed electronically by 2007. As this method of tax filing
becomes more popular, the IRS has reduced processing costs
significantly per document, with less input errors and reduced handling
time and storage costs as well.
Working with the Internal Revenue Service, the Bureau of Alcohol,
Tobacco and Firearms continues to operate systems that electronically
capture revenue and allow forms to be electronically submitted for
tobacco taxation collection.
In efforts to streamline human resources applications, HR Connect,
which is currently operational in six Treasury bureaus, serves as a
single, integrated automated environment for human resource operations
across all Treasury bureaus. When fully operational, HR Connect will
replace the 90+ legacy stand-alone human resources systems that
currently exist. HR Connect will provide standardized information and
will facilitate results-driven decision-making.
As a highly visible agency, Treasury maintains websites that are
among the most frequently accessed, and are therefore tailored to the
specific needs of its customer base--citizens, businesses and other
government agencies. The following are examples of Treasury bureau
websites that were created with the customer in mind, while improving
the cost effectiveness of Treasury:
The U.S. Mint offers a large portion of their services, resources
and products through the Internet. Recognized as one of the top 30 ``e-
tailers'' in the Nation in fiscal year 2000, the Mint's Web sales
exceeded $109 million and their return on investment has reached 20
percent.
Working closely with the Financial Management Service, Mellon Bank,
MasterCard and IBM, the Bureau of Public Debt now sells U.S. Savings
Bonds to the public on a 24/7 basis over the Internet. Within the first
10 months of its operation, the Savings Bond Connection generated $63
million in bond sales, resulting in a 180 percent return on investment.
Presidential Management Initiative 3: Improved Financial Management
Treasury has the responsibility of principal custodian of the
revenue collected and debt issued on behalf of the Federal Government.
To improve financial performance and expand electronic government, it
is imperative that the Department implement modern financial management
systems that are capable of providing timely, accurate and reliable
information.
In recognizing that real-time information is much more valuable
than information that is 5 months old, I have challenged each of the
bureaus to improve their reporting capabilities by moving to a 3-day,
monthly closing of their books by no later than July 3, 2002.
Once all bureaus are implementing a 3-day, monthly close, they will
be able to submit better financial data for consolidated reporting to
bureau and Department. This will enable bureau and Department
management to make results driven decisions, instead of spending the
majority of time aggregating the data. This will also contribute to
increased employee job satisfaction by showing employees that the work
they do contributes to the overall decision-making process.
Bureaus are also in the process of conducting internal risk
assessments focusing on payment controls, determining and investigating
those areas that contain the most potential risk for improper payments.
These assessments will result in improved operational performance,
which will contribute to improved customer service.
Presidential Management Initiative 4: Budget and Performance
Integration
Integrating performance information into the budget decision-making
process allows agencies to more directly focus their resource decisions
on strategies and programs that produce desired results. This effort
has been evolving and ongoing for the past 6 years. The following are
examples of Departmental improvements in this area:
--Bureaus have submitted performance information along with their
budget requests to the Department for several years. The
Department is moving to target better use of this information,
lining up resources, performance data and metrics to become a
more effective decision-making tool for the bureau, the
Department, OMB and Congress, as senior officials are better
able to make resource decisions based on the performance of
programs and initiatives.
--Work continues on presenting bureau measures, which address key
activities using balanced, results-oriented performance
measures, and on improving the quality of this data.
Presidential Management Initiative 5: Competitive Sourcing
Treasury continues its efforts in competitive sourcing, utilizing
contractors whenever necessary to meet its goals. Expanded steps are
underway with each bureau, to enhance competitive sourcing knowledge
sharing, and knowledge management Department-wide so that necessary
sourcing competitions can begin as soon as possible. The Department is
committed to evaluating the merits of its internal efforts, by
understanding competitive sourcing options--migrating to those
outsourced options when it makes sense for the American people based on
cost and value, while retaining those specific mission areas that are
inherently governmental. A number of the Department's bureaus rely
heavily on the private sector.
--The Bureau of Alcohol, Tobacco and Firearms employs a broad array
of contractors to support its mission, and integrates in-house
solutions with outsourced vendors. This allows ATF's leadership
team to focus on their core deliverables and mission-oriented
goals.
--At the Financial Management Service, contractors are involved in 41
percent of the total management support functions.
--The U.S. Mint contracted out 26 percent of its operating expenses
in fiscal year 2000. These contractors performed not only
administrative tasks, but were also responsible for other
functions at the Mint such as advertising, public relations,
printing, numismatic order processing, telemarketing services,
and custodial and facilities management operations. During late
fiscal year 2001 and early fiscal year 2002, the U.S. Mint
built a strategic plan that ensures its employee focus on those
critical areas of performance. They have leveraged the actual
business execution of their operations using contractors, while
their core employee base provides leadership, direction and
critical business efforts.
--IRS and the Department will study the possibilities of outsourcing
some aspects of the collection process.
legislative proposal on retirement and health costs
Mr. Chairman, our budget includes the impact of proposed
legislation for the full funding of certain Federal employee retirement
and health costs. Because Treasury has the third largest agency
financial impact with the implementation of this proposal, I'd like to
provide the some additional background for the Committee.
The President's fiscal year 2003 Budget corrects a long-standing
understatement of the true cost of thousands of government programs.
For some time, the accruing charge of costs associated with the
Federal Employee Retirement System (FERS) and Military Retirement
System (MRS), and a portion of the old Civil Service Retirement System
(CSRS), have been allocated to the affected salary and expense
accounts, and the remainder (a portion of CSRS, other small retirement
systems, and all civilian and military retiree health benefits) has
been charged to central accounts.
The President's Budget presents the amounts associated with
shifting this cost from central accounts to affected program accounts,
starting in fiscal year 2003, predicated on the enactment of
authorization legislation. By shifting this cost to the affected salary
and expense accounts, budget choices for program managers and budget
decision-makers will not distorted by inaccurate cost information. The
proposal does not increase or lower total budget outlays or alter the
surplus/deficit, since the higher payments will be offset by receipts
in the pension and health funds. This change in treatment of costs is
the first in a series of steps that will be taken to ensure that the
full annual cost of resources used--including support services, capital
assets and hazardous waste--is charged properly in the budget
presentation.
conclusion
Mr. Chairman, let me conclude on a personal note. Since becoming
Treasury Secretary last year, I have been deeply impressed by the
intelligence, professionalism and dedication of the people with whom I
have worked, and together, we are working to making this Department a
model for management and service to the American people. I hope the
Committee shares my confidence in the uses that are being made of
taxpayer's funds. In that spirit, I ask that you approve our fiscal
year 2003 budget request to support the work of the Treasury Department
in fulfilling its wide range of responsibilities in serving the
American people. I look forward to working with you, Mr. Chairman, as
well as members of the Committee and your staff, to come up with a
budget that maximizes Treasury's resources in the best interest of the
American people and our country. Thank you again for giving me the
opportunity to meet with you and personally present the Department's
budget. I am willing to answer any questions the Committee may have
concerning the Department's fiscal year 2003 budget.
REACTION TO IMMIGRATION AND NATURALIZATION SERVICE PUBLICITY
Senator Dorgan. Mr. Secretary, thank you very much. Let me
ask a series of questions about a range of issues and then I
will call on Senator Reed.
Let me ask you a question that has nothing to do with your
agency. Yesterday when I was eating Grape Nuts in the morning I
read the Washington Post and the front page story about the INS
sending out a couple of approved visas to Mohamed Atta and one
of the other terrorists. That is not your agency but I assume
you saw that as all of us did and said, what on earth could
allow this to happen, because all of us have systems in our
agencies that deal with massive numbers of names and
information. Give me your reaction to having read that. You are
a businessman. What do we do about things like that?
Secretary O'Neill. I tell you, my first instinct was to
say, it is unimaginable that this could happen with the two
individuals who have become so well known through the media
coverage of September 11. I must tell you my second reaction
was to feel sorry for the employees of the INS. This comes, I
suppose, from having been a Federal Government lifer for 15
years and knowing what it is like to wear the shame of this
kind of an event when it clearly was not done intentionally.
Systems fail.
We tend to make an awful lot of these kind of symbolic
things when they happen in Washington. I understand why we do
that but I have got to tell you, my heart goes out to the
people who work in that agency, who would like to take pride in
what they do. From the reaction to yesterday's revelation I
think, now you have got thousands of people who feel that they
are on the defensive, whose intelligence is under question. So
that was my quick reaction.
And third, a sense--it is partly what I had in mind when I
said to you, we will know we have really succeeded in being an
excellent organization at the Treasury Department when the
private sector comes to see how to do it. It is a reflection of
how I felt when I was here before.
When I came here in 1961 and received 18 months of training
in designing computer systems, I had a high degree of
confidence that I was working for the leading edge organization
in the application of computer technology. Because when I went
out to find out what was going on in Pittsburgh, to see what
U.S. Steel was doing, I came back reassured that they would
never catch up with us because we were so good at taking this
new, marvelous computer technology and applying it to the mass
problems that we had to deal with in those days with Social
Security and veterans benefits programs, both insurance and
dependent benefits. We were so good at what we did and so proud
of what we were doing.
I think for a variety of reasons we have lost that edge.
But I am convinced that we can have that edge again. It is
mostly not about huge increases in funding. It is about
leadership. It is about continuity. It is about understanding
what excellence really is. And it is about the deployment of
good ideas and equipment in a sensible way.
So my hope is that the INS people will pick themselves up
and they will demonstrate to the world that American citizens
should be proud of the people who work for their Government.
Senator Dorgan. The reason I ask that question, and I
appreciate your response, is in putting Customs officers at our
borders we are trying to control our borders. We do not want to
keep people out of this country but we certainly do not want to
let terrorists in, or those who associate with terrorists. In
order to do that we have to have some confidence in the systems
that we have established by which we grant visas and grant
entry to our country.
CUBAN TRAVEL
Let me ask a series of questions. One, you know I would ask
about OFAC and Cuba. If you were a retired, little old lady
from Illinois, a schoolteacher who is now interested in
bicycling and joined a Canadian bicycle tour of Cuba and then a
year and-a-half later got a fine from the Treasury Department
of $9,500 you would be apoplectic about it.
I guess I understand that the law is the law. But I am
wondering whether you think it is a particularly wise use of
resources to ratchet up more energy towards enforcing the law
like this at a time when in OFAC we are trying to chase
terrorists. I wonder whether it is not a lower priority or
should not be a lower priority with you to use those numbers of
people in OFAC to track terrorist activities and leave the
little old ladies that are riding bicycles alone for a while?
Secretary O'Neill. Senator, let me agree with you and with
the implication of your question and then I think I have to at
the same time disagree. If I were responsible for doing this
function in the private sector, and I had the discretion to
decide where to deploy my resources, I would agree with you
completely. I would follow the 80/20 rule. I would concentrate
on those areas that were going to produce the most value. So
sentimentally I want to agree with you.
But I do not know how to bring the notion of discretion to
a law that I feel tells us that we do not have discretion. Now
if we could agree that we could amend the law so that in fact
we did have discretion, then I think we would be on much better
ground.
In fact, as a general proposition, I think we would be so
much better off if we did a thorough review of the laws that
tell us what we should do and must do, and provide a sensible
discretion of the sort that you are suggesting. We would get
much more value for the American people. We would give much
more freedom to the people who are supposed to be making
decisions on the operating activities of the Government. So I
am very much inclined to want to be where you are and it would
be very helpful if we could work together to figure out a way
that we can not put ourselves in violation of the law because
we exercised what seemed like common sense discretion and in
fact then get hauled up for failing to uniformly enforce the
law.
Senator Dorgan. Our job in Congress is to repeal the travel
restriction with respect to Cuba. But to the extent it exists,
I simply observe that all law enforcement has discretion. If
there is jaywalking occurring at the same time that a bank
robbery is occurring, law enforcement officers will move to
deal with the bank robbery. So that discretion exists all over.
I guess my hope would be that OFAC would understand that there
is a greater good these days to deal with the terrorist threat
than the threat of a retired teacher bicycling in Cuba.
DISCLOSURE OF ENFORCEMENT ACTIONS
Having said that a quick question. The Washington Post had
a story on March 6 about OFAC secretly settling more than 100
enforcement actions in 1998 to 2000 against corporations,
banks, and other entities, for violating the trade embargoes
against Cuba and other countries. That is before you came to
the Treasury Department.
The information was disclosed only because of a suit filed
by public interest groups. I am wondering, because OFAC is
being forced by a lawsuit to disclose the settlement of these
cases, will future settlements be made public as a matter of
course?
Secretary O'Neill. It is an issue I think we should look
at. As I have looked at some of the individual cases that are
involved here, it is not clear to me from looking at the law
that it was the intent of Congress to hold people up to public
humiliation for agreeing to settle some of the allegations that
are made. These are not of a class where people have--basically
they have stipulated to an allegation or to a settlement. So I
think we need to look at that and see.
One of the things I find interesting in the way the
language was used, in this particular story the term secret was
used, although to me secret conveys a sense of a willful intent
to hide. I do not think that that is an appropriate
characterization of what took place in this particular case. I
do not think there was a willful intent to restrict access to
things.
Senator Dorgan. Except there was not willful disclosure,
and those who wanted it had to actually file actions in order
to get it. I understand the Commerce Department, State
Department, and others that take enforcement actions routinely
disclose the results of those settlements. I would encourage
you to take a hard look at that. I do not believe it ought to
have to be pried out of the agency.
Again, this story is about a time when you were not there,
but I would encourage you to take a look at it because I think
this information ought to be public.
Secretary O'Neill. Senator, we will do that. We will do
that and we will work with the committee and see if we cannot
find a road that seems sensible.
JOINT BORDER AGENCY
Senator Dorgan. Mr. Secretary, it is my understanding that
Governor Ridge is moving closer to a proposal that would
combine the Customs Service in some sort of joint border agency
with other agencies such as the Immigration Service under the
Department of Justice perhaps.
I am wondering how you feel about that and how would the
revenue-generating responsibilities of the Customs Service, for
example, fit in with such a plan? Especially given the news
this week with respect to the INS, I am wondering if there are
some concerns about that, and what kind of discussions are now
underway. I have only heard them rumored, but they have
obviously been in print with those rumors. What is your
impression of what is happening there, and how do you feel
about it?
Secretary O'Neill. I will not just tell you my impression,
I will tell you what the facts are. Since the terrorist events
of September 11 and the President's appointment of Governor
Ridge as our Director of Homeland Security, we have been asking
ourselves a wide-ranging set of questions about how do we
imagine and envision what homeland security should mean and
what we should be striving for going forward.
For most of us, I guess I would say for all of us, this is
a whole new area of inquiry, because we have never really had
to think, I think, in the past about what is now a current
reality of being attacked on American soil. It is a very
different proposition. I think all of us believe that we need
to rethink the mission.
The example you cited with the two orange cones in the
middle of the road as though that was somehow keeping people
out of the United States is an absurdity on the face of it. And
probably the absurdity was not so awful so long as it was
believable that we were not subject to terrorist attack. That
is clearly not the case anymore.
So indeed, we have had wide-ranging, ongoing conversations
about this question of how to organize so that we can give
assurance to the American people that we have thought about the
right questions, and we have distributed resources in the way
most likely to avoid more American casualties.
I think we are getting close to a Presidential decision. In
fact, I told you I would tell you what is going on. At 5:00
this afternoon we have another meeting on this subject. There
have been lots of papers written, I am sure, because you are a
student of Government and you know these things. The subject of
changing the organization of border-related activities is one
that has been studied in the public administration community I
think for 40 years or so. There are all kinds of papers
available on the Internet on the subject. We have looked at all
of that.
I would say to you at the outset, I do not know of any
institutions, public or private, who rush to change. So as you
might imagine, the immediate response to any idea that anything
is not perfect is, for every individual organization, to put on
the brakes and say, we are perfect; how could we be any better?
So if there is going to be consolidation it ought to be under
our flag. Those are all natural, human reactions.
I think the process of deliberation we are having is a
thorough going over. It involves, for my money, from an
executive branch point of view, all of the correct people that
need to be involved in these considerations. I suspect in the
not-too-distant future the President will decide what he thinks
of all of this analysis work that has been done and then we
will see what we should do.
Let me tell you from my point of view, I have had an
opportunity to visit some Customs locations and to get to know
some of the Customs people and other bureau and departmental
people in the Treasury. These are great people. I was down in
Jacksonville a few weeks ago and I had an opportunity to go out
and look at our aircraft that is doing surveillance work in, if
I can call it, the Latin cone. I talked to the people there.
Their sense of dedication and determination and purpose is
something really to be highly admired I think.
I went out on the wharf and looked at the new electronic
surveillance equipment that the Congress has funded and
provided to see how we are now able to electronically scan
containers that are coming into the country. I think one of the
great things about the Customs Service is what I said about the
people in the INS, these people believe in what they do. They
believe in the Customs Service. They believe in the tradition.
It is a thing to be highly prized and valued.
So as long as we are organized the way we are, I am proud
to carry the flag. If the President with his perspective, and
after listening to all the arguments decides there is a better
way to give the right assurance to the American people, I will
be the advocate for that.
Senator Dorgan. Mr. Secretary, thank you very much. I want
to ask just a couple additional questions if Senator Reed is
not time constrained, and then I will recognize Senator Reed
and then come back and ask a couple of additional questions.
Just one follow-up point. Do you have any notion of when we
might expect a recommendation or a decision by the President on
this?
Secretary O'Neill. I will know better after 5:00 today. I
do not know. Frankly, I came directly here from the President's
speech announcing a new $5 billion initiative to get results in
the area of economic development and I just arrived back 15
minutes before I got in the car with him from New York so I do
not really know.
Senator Dorgan. But is it days or weeks or months?
Secretary O'Neill. I would say certainly less than months.
The President, I expect, will make a decision--I guess I would
say weeks if those are my choices; no more than weeks.
ABUSIVE TAX PRACTICES
Senator Dorgan. Let me ask just a couple of questions about
tax shelters. I have a couple of charts that describe some of
what has happened with respect to reporting. I expect most of
it is accurate but you correct it if it is not. These are
mostly Wall Street Journal stories. There was a report in March
that suggested there is going to be an easing with respect to
the curbs on tax shelters.
The previous Administration under Secretary Summers said,
look, we have got a huge problem here. The tax advisors,
accountants, and attorneys are really trying to find the edge
with their clients. They are becoming very aggressive--very
aggressive in trying to find ways to avoid taxes and we really
need to clamp down on this. As I indicated to you, I have been
chairing some Enron hearings and Enron alone has something over
800 subsidiaries in the Cayman Islands and other tax haven
countries to avoid paying taxes, I assume. I assume people do
not establish a post office box and a company in the Cayman
Islands because that is where their customers are. That is just
symbolic of how aggressive all of this has become.
I have become very concerned about it because there are
estimates by some that we are losing, some say $10 billion,
some say up to $30 billion a year through these aggressive tax
shelters that really require us to clamp down. Some of the
headlines suggest--I will not go through all of this but I want
to give you a chance to respond to some of it. If I might show
the rest of the charts.
One, says that the Bush Administration appears to ease
curbs on tax shelters. The next one, this is March 1, 2002, the
Washington Post, tax shelter disclosure falls short and
agencies seek to halt corporate abuses. This deals with a
specific effort that they expected would have a lot of
companies providing information about the advice they give to
clients; very few of them in fact are.
If I might show the last one. U.S. corporations are using
Bermuda to slash tax bills. That is February 2002. The point
is--I think you understand my meandering question. The point
is, about a year and-a-half, 2 years ago it looked like we were
going to start to squeeze this lemon called tax shelters in an
aggressive and an appropriate way in my judgment.
News reporting has suggested that this Administration
thinks they want to move in the other direction. I would be
very concerned about that--am very concerned about that. So can
you tell me what is behind the headlines here? What are you
doing and how do you feel about these tax shelters?
Secretary O'Neill. Yes, I am delighted to have an
opportunity to respond to this set of questions. Let me begin
by saying, I think tax shelters is a really bad phrase because
it is a value-laden phrase that I do not think we should use.
As a matter of fact when I work with my public relations
people-they will tell you--and I see those words, I write in
what I think the real intention is, which is abusive tax
practices.
Now when I went to school, and it was a long time ago, I
was taught these things about taxes. That they are due and
payable, and that those who do not meet their responsibility
are either guilty of evasion, which is illegal-that is to say,
they did not do what they were supposed to do, or of finding a
way under the law to avoid paying the taxes that someone
thought they should pay. There is a distinction between what is
illegal, which is evasion, and what for one reason or another
is not illegal because it has not been specifically banned,
which is avoidance.
It leads me to a conclusion I am happy to say all over the
country, and I do on every opportunity. Our tax code, Senators,
is an abomination. We would not have either evasion or
avoidance if we did not have 10,000 pages of code and
legislation that takes a genius to understand. I would be
willing to bet you that most of the corporate CEOs could not
find their way through the tax code. They have legions of the
smartest people in the country trying to figure out how to
avoid--not to evade, for the most part, but to avoid-taxes,
which is a legal, lawful activity in our society.
Now, I believe deeply that Americans and American
institutions should pay their tax bills. So what we have
underway right now are several different efforts at the same
time. One, a series of white papers in the individual income
tax area and in the corporate tax area, that goes to the heart
of the issue of simplification. Because I think the more we can
simplify, the more likely we will have an enforceable tax code
that does not take tens of millions of people to administer.
Two an effort to tighten up this area of tax avoidance by
forcing, through a series of penalties, corporations to self-
report where they are walking the edge between avoidance and
evasion. I think most often to give the filers the benefit of
the doubt, where people have found a crease in the law that was
written by the Congress and they are using that crease as a way
to decrease their tax liability.
Senator Dorgan. Mr. Secretary, I apologize for interrupting
you, but often those creases are created by the taxpayers
themselves coming to Congress and saying, create this crease
for us.
Secretary O'Neill. I agree with you.
Senator Dorgan. Congress does it. Having been a tax
administrator for many years, I know that most of those 10,000
pages are there because someone came to lawmakers to say, by
the way, here is a little thing you ought to do to change it or
tweak it for us because it gives us an advantage. So page after
page after page is complexity that is induced by those who want
advantage in the system. Those little creases you talk about,
most of those are put there by people coming here wanting
advantage.
Secretary O'Neill. I certainly agree with you. I think
there are no words in the tax code that are the result of
immaculate conception.
Senator Dorgan. Do not be so sure about that. If you have
ever witnessed a conference committee from the inside you will
see----
Secretary O'Neill. I take your point, Senator.
Senator Dorgan. I want to be more specific about tax
shelters. Let me just ask one final question. Your predecessor,
Secretary Summers called, let me use your term, abusive tax
practices, the most serious compliance issue facing the
American tax system today. Do you feel that?
Secretary O'Neill. No, I think this is a terrible problem,
but I think the complexity of our tax code is the most crucial
problem facing our society, in this way, Senator. I am very
concerned--this is from working around the world in lots of
different countries and seeing where complexity becomes the
enemy of civil society and a sense of civil duty. You get to a
point where people say, the Government will not know whether I
did the right thing or not because even they cannot figure it
out. I will not name names, but there are countries that are
today going down the drain because only 40 percent of the
people pay the taxes that are theoretically due and owing.
I worry a lot about this issue of so complicating the code,
maybe with the best of intentions, that it turns us into--maybe
this is not too pejorative--a banana republic in terms of how
we run our fiscal system. It is a dangerous thing.
Senator Dorgan. I will come back to this issue.
Senator Reed, thanks for being indulgent.
NATIONAL INSTANT CRIMINAL BACKGROUND CHECK SYSTEM (NICS)
Senator Reed. Thank you, Mr. Chairman. Again, thank you,
Secretary O'Neill. As my initial comment suggested, September
11 highlighted the law enforcement aspects of the Department of
Treasury; some aspects that most people do not associate with
the Department of Treasury, and several agencies. One is the
Bureau of Alcohol, Tobacco and Firearms.
I met several weeks after September 11 with officials of
the ATF and they indicated to me that FBI officials compared
the audit log of approved gun sales under the NICS system to
the Government's terrorist watch list based on their request.
We later read about this in the New York Times. It was made
public. So it was clear that at that moment of incredible
danger and vulnerability, many seasoned law enforcement people
felt that this system, this NICS system, had very valuable
information to preempt another attack.
But since that time the Department of Justice and the
Attorney General have suggested that Federal law prohibits any
type of comparison of the NICS records with terrorist records.
I wonder, since the request emanated from your department, Mr.
Secretary, what are your thoughts on the Justice Department's
position and would you support legislation that would make
these records available in antiterrorism investigations?
Secretary O'Neill. I must say I have not looked at this
issue in detail but let me give you a general answer to your
question that flows directly from what I have heard the
President say over and over again. I think we should use all of
the sources and resources that are available to us to track
down, interdict and stop terrorist activity-all of the sources
that we have. So I would not agree that we should in any way
limit our ability to go after people with evil intent.
Senator Reed. Thank you, Mr. Secretary. I followed up my
meeting with a letter and asked the Attorney General what were
the results of this matching process, and you might not have
specific information, but if you could for the record later
provide it. He responded to me, ``Following the September 11
attack the FBI requested that the Bureau of Alcohol, Tobacco,
and Firearms compare ATF databases related to multiple sales,
stolen firearms, and trace crime guns with the watch list
arising out of the investigation. The FBI was advised there
were six matches from this comparison.''
I wonder if you have any information on what those matches
might be in terms of the types of weapons or anything else.
Secretary O'Neill. No, I am sorry, we do not, but we will
provide that for the record, Senator.
[The information follows:]
Use of ATF Databases for Firearms Tracing
The names of 8 individuals from the terrorist watch list matched
the names of individuals found in records of 47 previously traced
firearms or 2 multiple sales reports. These records included traces of
32 pistols, 10 rifles, 5 shotguns and 2 revolvers.
GUN SHOWS
Senator Reed. Thanks very much, Mr. Secretary.
Mr. Secretary, there is another area that has been a
persistent focus of attention, and particularly my attention,
and that is the area of gun shows. In January 1999, a report by
the Department of Treasury entitled, Gun Shows, Brady Checks,
and Gun Crime Traces, concluded that, ``a review of ATF's
recent investigations indicates that gun shows provide a forum
for illegal firearms sales and trafficking.''
My question would be if that is the still the position of
the Department? And regardless, would you support closing the
gun show loophole, the provision in the law that allows private
sellers to continue and operate without background checks at
gun shows?
Secretary O'Neill. I know this is the eggshell area and I
have not, frankly, personally looked at it close enough to give
you an off-the-top-of-the-head answer. So rather than lurch
into an area without consideration, I would rather give you an
answer for the record.
[The information follows:]
The Administration supports in principle amending the Brady Act to
require background checks for all firearms transactions at gun shows.
We must ensure that terrorists and other criminals are prevented from
purchasing weapons at gun shows through an instant criminal background
check that does not unduly burden the law-abiding gun buyers at these
events.
Secretary O'Neill. But I want to go back just for one
second to your earlier question, if I may, and offer this to
you. If you see things that do not make any sense to you in
this area of terrorism, I wish you would feel free to call me
or have one of your staff people call me on the phone so that
we can take immediate action. We should not wait until we have
a formal hearing. If you have knowledge or suspicion that we
are not using all the resources appropriately in our society
working on these terrorist things, believe me, the President
has made it clear to me I do not have a higher priority than
this. I will take your call immediately if you have any
concerns.
EXCLUSION OF SPORTING GUN FIREARMS FOR IMPORTATION
Senator Reed. Thank you, Mr. Secretary. I certainly
appreciate the fact that you want to present an informed answer
so it is entirely fair that you do so on the record
subsequently. I also appreciate your offer of contacting. You
have been very responsive in our previous relationship and I
appreciate that very much.
This other question might go in that same category of I'll
get back to you. Under Title XVIII, the bureau has the right to
exclude from importation firearms that ``are not generally
recognized as particularly suitable for or readily available to
sporting purposes.'' I wonder if you might comment on this now
or later, particularly since there has been some, at least in
the media, discussion of weapons like .50 caliber sniper rifles
and others which do not seem to be of a sporting purpose.
Secretary O'Neill. We will be happy to give you something
for the record.
[The information follows:]
Policy for Importation of Firearms
The Bureau of Alcohol, Tobacco and Firearms has determined that a
.50 caliber rifle is importable as a sporting firearm because it is
particularly suitable for, or readily adaptable to sporting purposes.
Specifically, ATF's longstanding interpretation of ``sporting
purposes'' includes competitive shooting events. In the United States,
there exist numerous organizations that sponsor competition in
silhouette and target shooting events for .50 caliber rifles.
ADEQUACY OF ATF BUDGET
Senator Reed. Thank you very much, Mr. Secretary.
Mr. Secretary, let me just ask one other question which I
think you might be able to respond to now. That is your
estimate of the adequacy of the ATF's budget this year to meet
all the issues we talked about, and issues emerging each day
with respect to terrorism. Do you think it is adequate?
Secretary O'Neill. I think we are fine, and if it looks
like we are not going to be able to fully discharge our
responsibility in a professional way we will come back to you.
PROGRESS OF ACE MODERNIZATION SYSTEM
Senator Reed. Thank you, Mr. Secretary. One final question
and that is with respect to the Customs Service. They are in an
effort to replace their automated commercial system with the
new automated commercial environment. Are you pleased with the
progress to date? Do you see there are any problems that
Customs might be facing? Generally what is your assessment?
Secretary O'Neill. In my oral comments at the beginning I
indicated, and let me maybe even sharpen a little bit what I
intended with my comments, both about the so-called ACE system
and the IRS modernization. Over the last 25 years or so that I
was in the private sector, I was involved both as a board
member and as a CEO working on adoption of very large computer
systems, and I have some scar tissue that I would show you to
prove it.
This whole business of using and deploying complex systems,
and hardware and software technology is one where it is more
frequently the case than not that when you get to that switch-
flipping stage at the end where you hope and pray everything
works, it does not work quite the way you thought.
When I came and began getting briefed on these systems, I
must tell you I was concerned about the development period, for
this reason. In my experience, if you have a very long
development system for computer-based systems, by the time you
get to the end of a very long period, say 10 years, the world
is so changed that you never arrive at the intersection. The
intersection never comes.
As a consequence of that, since Assistant Secretary Kingman
has been on board the last few months, I have asked him and his
staff to give a really concentrated look at these things
because I know that there have been troubles in the past with
IRS modernization, and there has been some skepticism and
concern about the ACE system.
I want to be able to make a personal representation to you,
off the work the Assistant Secretary and his people are doing,
that we buy where we are, and we have confidence in what we are
doing. It would probably take us another 3 or 4 months to be at
a stage where we are willing to say, this is it and we own it.
Because I think we have that obligation to you all, that
even though this was not begun on our watch, that we owe it to
you and the American people to say, we own this. Because it
would really be unfortunate to deploy a whole lot more money,
and then have us or some subsequent administration official
say, we are sorry, for 10 different reasons it did not work.
So we are hard at work trying to get to a point that we can
make a representation to you that we can stand behind with some
confidence.
Senator Reed. Thank you, Mr. Secretary.
Thank you, Mr. Chairman.
ABUSIVE TAX PRACTICES
Senator Dorgan. Mr. Secretary, let me go back to the tax
issue. When I showed you the Wall Street Journal articles and
the Washington Post article you did not respond with vigor so I
do not--let me try to understand how you feel about this and
what you are doing as Secretary.
In recent months Treasury and IRS have announced an amnesty
program of sorts for corporations who have used tax shelters to
come in and abate part of the penalty, have chosen not to
appeal a Federal court ruling against the IRS and a decision
that appears to open the door to some companies to double
deduct certain losses from subsidiaries, signalled they would
issue more generous standards for deducting some business
investments, largely along the lines favored by some people
that have lobbied very hard.
The implication of these stories that would be, for
somebody taking a look at it, that it looks like we're stepping
back here from an aggressive enforcement regime with respect to
abusive tax practices. Is that what is happening?
Secretary O'Neill. Let me respond in a real sharp way:
absolutely not. If anything, I think we are more dedicated to
operating the Government with excellence than maybe anybody who
has ever been here before. We have had some capable people come
to work in this Administration. People who have proven they can
do it. It is not a theory.
Let me tell you why I did not react to these things. I will
pay for this, but I am going to tell you anyway what I think
about this. There is so much stuff in the newspapers parading
as reports that is really editorial--that is to say, someone
having an opinion--that I have just gotten immune to paying any
attention to most of it. There is so much of it that is not
worth reading or knowing because it is misleading and
misrepresenting what is truly going on. Somebody has an axe to
grind.
I do not have enough time in my life to care about people
who are out there, doing whatever they are doing in the
newspapers. I am going to make the world better to the degree I
can, using the great people that we have assembled. The people
who get paid for writing this stuff for a living can go on
doing whatever the hell they want.
Senator Dorgan. That was sharp enough.
Secretary O'Neill. Not to be strong about it.
Senator Dorgan. That was sharper. Tell me then, as somebody
who really believes that what is happening is very abusive out
there, we are losing anywhere from $10 billion to $30 billion I
think, and probably with transfer pricing even more. Tell me
what is happening inside Treasury that demonstrates that this
Treasury Department is really aggressive in going after these
companies and those who are advocating tax shelters that are
abusive.
Secretary O'Neill. The Assistant Secretary for Tax Policy
and his people are very close to having a set of proposals,
some of which actually are not proposals, they are
administrative actions we are going to take, and some that will
require legislative action, to tighten the noose around people
who would create abuses of the tax system, and to highlight
what we would say are abusive practices.
Now as we agreed before, in most of these areas it is going
to turn out that, by intent, the tax Code provided for people
to do some of the things that are now being called abusive. We
are going to have to work with the Congress one by one to
change the language, if we can get the majority of members of
both houses of Congress to agree to cut off this source of
funds that people are taking advantage of. But we are going
after this on a daily, tough-minded way and you will see
something very soon.
Senator Dorgan. So if someone said, look, this is just a
pro-business administration and when they see companies prying
open the curtain and slipping through, there are folks in this
Administration who say, we will just let them do that. They are
our friends.
Secretary O'Neill. You are not going to see any of that in
this Administration. If anything, I think you are going to see
people responding the way they responded to the ideas about
CEOs being responsible for their behavior that the President
put forward as a result of the task force that I led that said
we should have a new standard, and CEOs should certify that
they have told their shareholders and their employees every
quarter everything they know that is material.
The screams and outcries from the community out there were
quite loud. But, I think it demonstrates the intent of this
President and this Administration to work for the highest
standards, and the expectations of people obeying the law, and
beyond obeying the law, following what I would characterize as
the American value system of being able to trust each other.
OECD AND TAX HAVENS
Senator Dorgan. Mr. Secretary, when I tell you that the
Enron Corporation had apparently over 800 subsidiaries in the
Cayman Islands and other tax haven countries, that is a
startling number to me for the Enron Corporation. But the more
I have looked at that corporation, the more I have understood
that it was a company run by people searching for the edge so
they could get near it and probably over it, if possible.
But this describes to me again why it is important for us
to work through the OECD and with other countries in the OECD
to take a good whack at these issues together. We are not in
this alone. Every country has a similar interest in taking a
look at these international enterprises that want to find a way
to do business everywhere, make profits everywhere if possible,
and pay taxes nowhere.
Are you interested in the work that is going on in the OECD
with respect to mutual cooperation in tax abusive practices?
Secretary O'Neill. Yes, indeed. I think you probably know
this. At a hearing, I think it was last June with Senator
Levin, we talked about the subject of the OECD project and the
so-called tax haven work.
I said to him, I know it is probably unusual for witnesses
to make a commitment off the top of their head, but I will
commit to you that before a year passes, the United States will
enter agreements, treaties with the so-called tax haven
countries covering more than 50 percent of all the accounts
that are known about in the so-called tax haven countries, that
will permit us to interact and exchange information as never
before. He told me on that occasion that he had been working on
the problem since 1986 and no one had ever made such a
commitment, no one had ever delivered that kind of a treaty
response.
We are now over 50 percent, I think. Now my staff is going
to die. We may be able to get to 75 percent before we get to
the anniversary, because we have gone out there and we have
created treaty agreements to exchange information with four new
jurisdictions. We will be announcing some more fairly soon.
Again, Senator, I am really interested in producing
results, not just rhetoric. Going back to Senator Levin's
point, we are not just looking at the data since 1986 and
lamenting the fact that we do not have any tax treaties. In 6
months, we have created more tax treaties covering more
accounts than have been done, I think, in history, and we are
going to keep at it.
Senator Dorgan. Mr. Secretary, I wonder if you would have
your people working on the tax shelter issue just provide for
the committee just a very short report describing what the
goals are and what activities you are undertaking, what kind of
legislation might be necessary to close some of these loopholes
and shelters? That would be very helpful to us.
ADDITIONAL FUNDING REQUIREMENTS FOR FLETC
Let me talk just for a moment or ask you about FLETC, the
Federal Law Enforcement Training Center. With the ramping up of
resources in a number of areas in the Federal Government,
especially including INS, Border Patrol, Customs, and also the
Department of Transportation airport security, you have
provided sufficient money I believe for current workloads, but
it appears to me that beyond current workloads in training in
the FLETC facilities we likely would have the opportunity and
would want to train substantially more people, especially those
coming on board through the Department of Transportation. Have
you thought about that, and if so, how would we fund that, the
increases necessary for FLETC to be able to handle that?
Secretary O'Neill. I think two things about this. First of
all, I think this is a really first-rate organization. I had an
opportunity to go down with George Bush, Sr. to dedicate the
FLETC center. I was really impressed with what we have there.
Sometimes I think you can be a little discouraged if you go
look at things that are a little decrepit and have a sense of
being a little shopworn. That is not the feeling about the
FLETC training center. It is a fabulous place with great
facilities and great trainers, I think with a capacity, if I
remember right, of 2,200 students a day in that one facility.
It is really quite impressive.
After we started talking about air marshals, I said to the
President and my colleagues, this is the time when we should
focus those resources on getting air marshals up fast, and then
had some follow-on conversation with Pete Domenici about the
New Mexico facility and what we could do there. Believe me, I
think where we have great activity--I think this is great
activity--we should use it to the fullest. I think we have the
ability to be reimbursed from departments and agencies.
The concern that I had that my people taught me last year
about this whole activity is that because of the delay in the
appropriations process, departments and agencies hold back on
making commitments to fill the slots in these wonderful
training facilities, so we have been getting a very uneven
utilization of the facilities, which does not make any sense to
me at all. So I suggested that we needed kind of a working
capital fund, if you will, in Treasury so that we could say to
departments and agencies, we know you are going to eventually
get your money. In effect, we will float you a loan so that we
can keep the facilities open.
I continue to believe we ought to use that kind of
innovation to make sure that we get full utilization that for
silly budget reasons we do not have peaks and valleys in the
utilization of facilities. So we will work with you to make
sure that we have that result.
HEALTH OF THE AMERICAN ECONOMY
Senator Dorgan. All right. Let me ask you a question about
the economy, if I might. The answer to the question of how we
fund all of these things and what kind of a revenue stream we
get in the Federal Government has a lot to do with the health
of the American economy. We have had a recession, apparently a
reasonably shallow recession of short duration. You have
listened obviously to Mr. Greenspan's assessment of where we
are. Can you give me your analysis of his assessment and then
tell me where you think we are in this economy and what you
expect for the coming year?
Secretary O'Neill. I am happy to do that. In order to do it
with a little sense of continuity let me go back, if I can, to
September 10. I think the data show pretty clearly now that
until September 10 we were in fact moving out of the shallowest
period of the slowdown. That is to say, I think the lowest
period was really experienced sometime back maybe in March or
April of last year and when we got to September we were already
visibly moving out of the slow period into rates of growth that
were not great, but they were not questionably positive; they
were clearly positive.
The shock of September 11 turned our economy off for more
than a week for airlines. I think because of what it did to us
as a people in terms of people just sitting in shock and
looking at their televisions and trying to take on board the
implications of what terrorism was going to mean to our lives,
it was not a surprise that the third quarter had a negative
growth rate.
The day the numbers came out, I did a television interview
and the people said, now we are going to have a recession for
sure, and I said, I do not think so. At least I think there is
still a possibility that the fourth quarter will be positive
GDP, because as I talked to people that I know out in the
country about what was going on, while most of them were
wringing their hands, they were also taking action. They were
taking action in eliminating inventories.
In December, there were no inventories in the automotive
supply chain. When I went out to Cleveland in December and had
breakfast meetings with suppliers to the assembly companies, to
General Motors and Ford and Daimler-Chrysler, all of those
people who supplied wiring harnesses and tires and the like had
no inventory and no expectation of orders, so that they had
really clamped down. So the reason we had a 5.2 percent
productivity growth rate in the fourth quarter--which is
unexperienced in our economy, to have a slow economic period
and have productivity growth of over 5 percent. It is because
out there millions of American business people took timely
action.
It turned out, I am happy to say, I was right, the fourth
quarter real GDP number was 1.4 percent. Now it is not heaven
but it is certainly not zero and it is certainly not two
quarters in a row of negative growth.
Where I think we are now is this, I think we are continuing
to move away from the slow period. I think when the data that
is available--this is dangerous; this is forecasting a little
bit. But I think when the data is available for the first
quarter it will show that the low period in this cycle, if you
can call it a cycle, for company earnings, will turn out to be
the fourth quarter of last year.
Part of the reason for that is it was still low, but it was
also because there was an awful lot of housecleaning done in
the fourth quarter of the year. Lots of companies said, this
year, because of what happened in the third quarter, it was
just a mess, and for all those things that we see we are going
to have to write off; we are going to do it now. So there was a
lot of clean-up in the fourth quarter, which means earnings are
at a very low reported rate.
I think the first quarter is almost certain to be better
than that, and the second quarter I think will be a
continuation of growth. I am expecting by the fourth quarter
that we are going to be operating at what one would like to see
on a continuous basis of 3 percent to 3.5 percent real growth.
The important question here is what happens in the June,
July, August period in terms of business decisions to invest.
Again, from talking to business people, I am confident there
are lots of projects that have been delayed that have economic
return rates of 30 percent or more. Those projects will be
funded when the optimism improves out there in the leadership
of the business community. That is critical to keeping this
going.
TRADE DEFICIT
Senator Dorgan. You must be concerned about the trade
deficit, are you not? Maybe you are not. I think I asked you
that before.
Secretary O'Neill. No, I am not.
Senator Dorgan. Bad question, for you at least. The trade
deficit, in my judgment, certainly represents some storm clouds
in the future, and also the fiscal policy budget deficit that
we are facing is difficult.
CLOSING REMARKS
I just wanted to get your perspective of where we are. We
have a series of other questions I would like to submit. I
think that what I would like to do is ask if my staff can
continue meeting with your key people.
Let me just say something that you alluded to. I too have
visited facilities. I think the people who are working in
Customs, and FLETC, and OFAC, and a whole series of areas in
Treasury have been working very hard. I know I have gone to the
border and I have seen people working 12 hours a day, 6 days a
week. These are dedicated men and women and they do an
excellent job and we want to commend them.
PREPARED STATEMENT OF SENATOR BEN NIGHTHORSE CAMPBELL
Senator Campbell had hoped to be back by the end of this
hearing but he obviously has not been able to do that. He asked
that I submit his statement for the record and ask for your
indulgence. He had other business.
[The statement follows:]
Prepared Statement of Senator Ben Nighthorse Campbell
Thank you, Chairman Dorgan. I, too, would like to welcome Secretary
O'Neill. Thank you for appearing before the Subcommittee to discuss the
fiscal year 2003 budget request for the Department of the Treasury. I
would also like to congratulate Mr. Edward Kingman on his new position
as the Assistant Secretary for Management and Chief Financial Officer
in the Department of the Treasury--welcome.
The tragic events of September 11 put this nation into a tail spin,
and we are all still trying to recover. The fight against terrorism has
become the number one priority and the Department of the Treasury has
stepped up to the plate and taken on some very challenging duties.
--The Financial Crimes Enforcement Network and the Office of Foreign
Assets Control moved quickly to identify and freeze funds used
for terrorist activities.
--The Bureau of Alcohol, Tobacco and Firearms worked along with
others to sift through the rubble of terrorist attack sites to
help recover remains and personal belongings, using techniques
developed from years of investigating bombing and arson cases.
--The Customs Service has worked long and hard to make sure that our
borders are secure.
--The Secret Service was given the task of making sure that events
like the Superbowl and the 2002 Winter Olympic Games were safe
for both athletes and spectators.
--And, the Federal Law Enforcement Training Center has geared up to
train all the needed new Federal law enforcement officers,
including air marshals.
The Department of the Treasury is one of the most diversified
departments within the Federal Government and I look forward to
learning more about the fiscal year 2003 resources needed to carry out
the Department's key priorities:
--Protecting our nation from terrorists and terrorist activities,
--Necessary technological improvements,
--Improving customer service and compliance at the Internal Revenue
Service, and
--Achieving the President's management agenda.
We are also interested in learning how the resources received to
date by the bureaus have been used to help fight the war on terrorism.
Finally, Mr. Secretary, I think the lessons learned through the
GREAT program, managed by the Bureau of Alcohol, Tobacco and Firearms,
are very important resources for at-risk youth of our country. I
appreciate your continued support.
ADDITIONAL COMMITTEE QUESTIONS
Senator Dorgan. So what I would like to do is say that the
record will remain open until the close of business tomorrow
for anyone to submit additional questions or statements for the
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 Byron L. Dorgan
cobra user fee proposal
Question. The Administration is claiming that the Customs Service
fiscal year 2003 budget will receive an increase from fiscal year 2002.
This is largely based on the Administration's proposal for a tax
increase to cover $250 million of homeland security efforts. It is my
understanding that this user fee must be authorized by July 1, 2002 to
begin accruing the total $250 million. Are you working with the
authorizing committees to pass this proposal and what plans do you have
to cover the $250 million shortfall if the legislation is not enacted?
Answer. The Administration will soon send a legislative proposal
for a COBRA fee increase to the House Committee on Ways and Means and
the Senate Committee on Finance. The Administration strongly urges the
enactment of the fee increase because it is essential to the successful
accomplishment of Customs' overall mission. The allocation of the fee
increase would not be restricted to any aspect of that mission.
Consequently, the Administration has not contemplated an operating
approach for Customs based on resources that are $250 million less than
the total availability assumed in the budget request.
business strategy adjustment
Question. You have mandated a business strategy adjustment for most
of the agencies under the Department during fiscal year 2003. This is
essentially forcing agencies in a very tight budget year with no
programmatic increases, to find a total of $84.7 million in savings.
Only one agency, Treasury Inspector General for Tax Administration has
addressed this with a proposal that would result in the elimination of
48 FTE. In addition, the Bureau of Alcohol, Tobacco, and Firearms could
also be forced to decrease personnel as a result of absorbing these
costs. How do you rationalize this policy if law enforcement agencies
are forced to downsize personnel in a time when homeland security is
most needed?
Answer. This type of business review is a common practice among
America's most successful corporations and must occur continuously over
the course of a fiscal year. Highly successful managers in these
organizations seek better uses of limited resources to achieve improved
outcomes at the same or lower cost.
Because this budget is proposed 8 months in advance of fiscal year
2003, this business review exercise is a work in progress. Bureau heads
and financial plan managers are expected to work creatively on mid-
course adjustments until the final quarter of fiscal year 2003, thereby
achieving the most efficient use of all available resources and being
able to more accurately predict fiscal year 2003 requirements.
The actual percentage decrease from fiscal year 2002 in the
Treasury budget request as a result of the Business Strategy Adjustment
is--0.5 percent or $84.7 million, of which approximately half or $38.5
million would be absorbed by the Internal Revenue Service. In the past
decade, worker productivity has grown enormously, leading to growth in
the economy. It is not too much to expect that, by fiscal year 2003,
productivity will once again exceed 1 percent given continued process
re-engineering and technology improvements. Therefore, it is safe to
assume that Treasury can accommodate an adjustment downward of 0.5
percent.
joint border agency
Question. It is my understanding that Governor Ridge is moving
closer to a proposal combining the Customs Service in a joint border
agency with other agencies such as the Immigration and Naturalization
Service (INS) under the Department of Justice. Given the INS's poor
record and this week's most recent blunder of sending approval letters
for student visas of two of the terrorists from September 11, is it the
most appropriate thing to combine these agencies at this time?
Answer. The President recognized the need to make fundamental
changes in the organizational structure of the INS and proposed a
restructuring of that agency last year. I am certain the President will
take all issues into account when considering the recommendation from
the Office of Homeland Security to consolidate border security
agencies.
Question. Do you support Governor Ridge in his efforts to create a
joint border agency and how would the revenue generating
responsibilities of the Customs Service fit in with such a plan?
Answer. I am working with Governor Ridge and the Office of Homeland
Security to ensure that the best advice and a full range of options are
available to the President. It is premature to comment on specific
border agency configurations, which may or may not be officially
proposed to Congress. I am proud to have the U.S. Customs Service
within the Department of the Treasury. The President is listening to
all the arguments and considering various options. Whatever he decides,
I will be an advocate for the President's proposal.
Question. What is the President's timeline for making a decision on
this proposal?
Answer. The Office of Homeland Security has submitted a border
security proposal to the President for his consideration. The White
House has indicated the President will make his decision after a full
review.
Question. What resulted from your 5pm meeting on March 14th, and
any subsequent meetings, on this issue?
Answer. The Principals Committee, on which I serve, met and
deliberated the border security proposal presented by Governor Ridge.
Subsequently, Governor Ridge submitted a proposal to the President for
review.
counterterrorism fund
Question. The Treasury Counterterrorism Fund (CT Fund) was first
appropriated in fiscal year 1997 as a central fund to reimburse any
Treasury organization for the costs of providing support to counter,
investigate, or prosecute terrorism, including payment of rewards in
connection with these activities.
The President's fiscal year 2003 Budget attempts to transform the
Counterterrorism Fund under the Department of Treasury into a
reimbursable account for any agency in the Federal Government for it's
role in a National Special Security Event (NSSE). Congress has
cautioned the Administration on the use of this fund to pay for events
such as the Olympics and other NSSE's. Is it your intention that this
fund be used to reimburse any agency for its participation in these
events?
Answer. The Counterterrorism Fund is available to provide funding
for costs associated with support to counter, investigate, or prosecute
unexpected threats or acts of terrorism. The Fund can also be used to
re-establish the operational capability of an office, facility, or
other property damaged or destroyed as a consequence of any unexpected
domestic or international terrorism act. This authority includes, but
is not limited to, National Special Security Events (NSSEs). NSSEs are
often unpredictable and expensive, and the Counterterrorism Fund has
been an available source of funding that enables us to provide the
level of security necessary for such events.
The U.S. Secret Service, in its responsibilities for designing,
planning, and implementing security for events designated as NSSEs, is
authorized to call on other Federal agencies to provide security
support for NSSEs as may be necessary. The proposed language would
enable those agencies to be reimbursed for costs associated with that
support. The language with respect to authorization for reimbursement
to any Federal agency for costs of providing security at NSSEs is also
framed within limiting parameters: agencies may be reimbursed for costs
of responding to the United States Secret Service's request to provide
such security.
Question. Aren't you concerned that this fund will be depleted by
planned activities that should be budgeted for in all affected
agencies, rather than unforeseen events that will require the
involvement of agencies within the Department of Treasury?
Answer. The language itself sets out the parameters for use of the
Fund, and is very clear in that the Fund is to be used to reimburse the
costs of providing support to counter, investigate, or prosecute
unexpected threats or acts of terrorism.
Due to the limiting nature of the term ``unexpected'' which
precludes the use of the Fund for activities or operations that are
planned, as well as the level of Departmental oversight of the Fund's
administration, we are not concerned that this fund will be depleted by
planned activities.
law enforcement resource requirements
Question. In the past, we have not seen eye to eye on the need for
additional resources for the Customs Service. Even after the events of
September 11 and the clear evidence of shortfalls along our nation's
borders, the Department did not seek additional staffing resources
necessary for the Customs Service. That is why I was very pleased to
see the annualization of these resources in the fiscal year 2003 budget
(with the exception of the proposed tax increase of $250 million to
cover much of these additional costs). In a time when homeland security
is vital and the strengthening of our nation's borders is a frontline
defense requirement, what is your commitment to providing the U.S.
Customs Service and all Treasury law enforcement agencies with the
necessary resources and support they require from the Department?
Answer. The President and I are in agreement that the resource
requirements for any given Federal agency must be evaluated in the
context of government-wide coordination among agencies with related
missions. To succeed in protecting our borders, we must be willing to
reposition our human and financial resources to meet the shifting
avenues for terrorist assault. We will beat terrorism only if we are
more ingenious than the terrorists. Government is sometimes needlessly
expensive and unproductive because there is not the drive to make
effective resource allocation choices for the common good of the
Nation. Each subsequent budget will give us the opportunity to rethink
how best to direct taxpayer dollars to the critical issue.
Question. I understand your belief that a business case must be
made before dumping more money on a given program. But I suggest that
law enforcement requirements should be justified differently than those
for office supplies or computer systems. I do not think you can make a
sound ``business'' case for placing two law enforcement officers at
now--24hr ports-of-entry which have fewer than 50 cars entering the
country on a given day. But you certainly can make a strong ``national
security'' case for the enhanced presence of those law enforcement
personnel. In keeping with the need to secure our nation's borders,
will you also consider national security needs when determining
resources?
Answer. I do not see a conflict between a sound business case for
resource allocation and concerns for national security. The President
has made homeland security a top priority in his budget and I intend to
carry out that commitment by ensuring that the Federal resources we
devote to homeland security are spent wisely, and in fact add to our
Nation's security.
ntia narrowband mandate
Question. All land mobile radios, principally used by law
enforcement, must be replaced to meet NTIA's narrowband mandate by
January 1, 2005. The Department has been working on this effort since
fiscal year 2001 and estimates a cost of $362 million. With the amount
included under the Administration's fiscal year 2003 budget, we are
looking at an estimated $80 million shortfall that will require a
request of $191 million in fiscal year 2004. How does the Department
plan on completing this vital technology conversion for law enforcement
by the deadline within the current budget proposal? What will it mean
for law enforcement if the conversion does not occur by January 1,
2005?
Answer. Based on the fiscal year 2003 President's budget request,
significant infrastructure requirements and implementation have been
shifted into fiscal year 2004 and the first part of fiscal year 2005 in
order to address the NTIA mandate. Budget policy for fiscal year 2004
and fiscal year 2005 will need to reconcile with the requirements of
the Integrated Treasury Network (ITN) business case.
In fiscal year 2001, the program budget request was $52.9 million
and the appropriation was $29.8 million, resulting in a $23.1 million
shortfall. Due to the fiscal year 2001 shortfall, the revised budget
requirement for fiscal year 2002 became $101.6 million and included the
original fiscal year 2002 requirement of $86.8 million plus the
carryover from fiscal year 2001 of $14.8 million. The proposed fiscal
year 2002 President's budget included $25.0 million \1\ for the ITN--
resulting in a revised program shortfall of $76.6 million that was
redistributed evenly between fiscal year 2003 and fiscal year 2004.
This shortfall, combined with a re-evaluation of program requirements
(which reduced the fiscal year 2003 budget request), led to an overall
fiscal year 2003 budget request of $121.3 million. Based on the fiscal
year 2003 President's budget of $31.9 million, infrastructure and
implementation requirements have shifted primarily into fiscal year
2004.
---------------------------------------------------------------------------
\1\ The actual fiscal year 2002 appropriation was $25.9 million,
however, the fiscal year 2003 budget was formulated based on the
President's proposed budget of $25.0 million and associated $76.6
million shortfall. The additional .9 million in fiscal year 2002
funding was utilized to offset program requirements in fiscal year
2004.
---------------------------------------------------------------------------
Treasury, in consultation with OMB, is prepared to take the
necessary budget actions, including those in the current year budget,
to achieve the maximum benefits offered by the ITN and will make
necessary adjustments to meet the NTIA mandate. For example, we may
consider:
--Directing the bureaus to use supplemental wireless communications
funds they may receive from Homeland Security and counter-
terrorism funding to augment ITN implementations, rather than
purchasing equipment in support of their own independent
systems.
--Pursuing a mechanism that would redirect bureau baseline funds that
support their own legacy radio systems into the ITN planning
and implementation effort.
--Establishing a mechanism to recover bureau operations and
maintenance (O&M) costs from their decommissioned legacy radio
systems and redirect toward ITN investment and O&M.
It is important to note that the Department realizes that the
budget process is not independent from other critical aspects of
successful organizational management. In addition to alternative
funding sources, Treasury will also continue to pursue the following
program objectives:
--As requirements dictate, partner and share portions of radio
infrastructure with other Federal agencies. Our MOU with the
Department of Justice researching common architectures and
infrastructures is the start of a process that could lead to
the sharing of public safety infrastructures, and potentially
decrease some ITN life cycle costs.
--Opportunities to partner, leverage, and share infrastructures with
other Federal agencies will continue to be pursued.
The consequences of failing to meet the January 1, 2005 NTIA
narrowband mandate are significant:
--Treasury agents and officers will probably become secondary users
on their current frequencies.
--Agents and officers may find themselves with no communications in
an emergency situation.
--The lives of Department law enforcement and protective personnel
may be endangered.
--Critical Departmental missions affecting national security may be
compromised.
--Horizontal (Department-wide and Federal) and vertical (State and
local first responders) communications interoperability will be
further delayed
--Operations of other Federal agencies dependent on a coordinated
transition to narrowband may be jeopardized.
cobra user fees
Question. COBRA user fees fund all Customs inspectional overtime as
well as over 1,000 positions. The President's budget DOES NOT assume
the reauthorization of COBRA, which is set to expire in September 2003.
What are the President's legislative recommendations to deal with the
loss of this funding?
Answer. The fiscal year 2003 budget does not reflect a specific
Administration position on the extension of the COBRA fee, in either
its existing or proposed form, beyond fiscal year 2003. The extension
issue will be addressed during the fiscal year 2004 budget cycle.
secret service workload balancing
Question. We have been concerned for sometime that the overtime
requirements for Secret Service agents were resulting in significantly
high rates of attrition. For this reason, we initiated a ``workload
balancing'' plan and provided funds for the Service to hire additional
agents and bring their overtime levels to acceptable ranges. Last fall,
this subcommittee provided funding for what we anticipated was the
third and final year for this initiative. However, the spike in the
number of protectees requiring Secret Service attention as a result of
the events of September 11 may undermine the workload initiative. It
could once again return the overtime levels to unacceptable levels and
restart the cycle of attrition.
Are you concerned about attrition in the Secret Service and have
you discussed this situation with the Director?
Answer. Yes, I have discussed these issues with the Director. The
agent hiring initiative has empowered the Secret Service so that it is
well underway in achieving its goal to reduce the attrition rate for
non-retirees, the early resignation or other type of separation from
the Secret Service of young or mid-career agents. However, the Secret
Service has not yet achieved its fiscal year 1994 benchmark attrition
rate of .48 percent. This is largely due to the lag time attributed to
bringing an agent trainee from training to an operational status in the
field.
Question. If this cycle starts again will you be willing to work
with the Secret Service to find the resources to address this critical
problem?
Answer. Yes, I would be willing to work with the Secret Service to
find the resources to address this critical problem in the event that
this cycle starts again.
federal law enforcement training center requirements
Question. The Federal Law Enforcement Training Center is charged
with providing training for a significant portion of the Federal law
enforcement workforce. In budget briefings with our staff, it appears
that the fiscal year 2003 budget request is sufficient to meet FLETC's
currently planned needs for the coming fiscal year. As you are aware,
the Transportation Security Administration (TSA) is in the midst of a
large ramp-up for various aspects of their new responsibilities. A key
part of those responsibilities are going to be law enforcement
activities, including Federal Air Marshals and other law enforcement
agents for the airports. We understand the number of new hires may be
in the thousands, all of whom will need training.
What role will Treasury's Federal Law Enforcement Training Center
have in this undertaking?
Answer. FLETC continues to coordinate with the Transportation
Security Administration (TSA) in determining what their training
requirements will be in the future. FLETC is supporting the TSA through
a three-tiered approach--screeners training assistance, Federal Air
Marshal training, and training for the proposed formation of a new law
enforcement agent group.
Screener Training Assistance
At the request of the TSA, a proposed FAA-developed curriculum was
reviewed and expanded by FLETC subject matter experts for law
enforcement and security content. In February 2002, FLETC hosted a
mini-conference of TSA, FAA, USSS, and loaned executives from the
private sector to the TSA. A pilot program was conducted utilizing a
combination of FAA personnel and FLETC-identified retired law
enforcement officers, who could serve as a potential train-the-trainer
cadre. This was conducted in Glynco, GA.
Starting in March 2002, a second session of course development and
a basic screeners pilot program was conducted at Glynco. It is our
understanding that TSA will conduct the training on a regional and
local basis across the country. FLETC's role will be limited to
providing training validation and assistance on an as-requested basis.
Federal Air Marshal Training
FLETC began training for increased numbers of Federal Air Marshals
in October 2001 at the request of FAA. Program agreement has been
reached between FAA and FLETC on the training format to be used.
Adjustments will continue to be made, as more information becomes
available concerning the long-term mission goals of the TSA, and
FLETC's role in assisting to achieve those goals. FLETC is now
conducting intensive training through its Artesia, NM site on a 6-day
workweek for new Federal Air Marshals. A reimbursement agreement has
also been signed between the two agencies that will cover costs for
tuition, staffing, and equipment needs for this training.
Training for the proposed formation of a new law enforcement agent
group
FLETC and TSA are working on an agreement of training program
content and resources needed for training a new law enforcement agent
workforce under TSA's auspices. TSA expects to begin sending trainees
to Glynco in the summer of 2002. In anticipation of this, the two
agencies are looking at space and training capacity options for
conducting all training at the Glynco facility. Final decisions on
facilities and workload projections have not yet been determined.
Question. Do you plan to provide additional funding and staffing
resources to FLETC, whose fiscal year 2003 request already indicates
their capabilities are stretched to the limits with training
requirements following the September 11 attacks?
Answer. FLETC's fiscal year 2003 budget included sufficient funding
for the requirements that were known at the time of its submission. At
the time the fiscal year 2003 budget was submitted, the TSA
requirements were not known, in fact those requirements are still being
developed. Currently, the cost of the additional training being
provided to TSA by FLETC is being reimbursed by TSA. This arrangement
will have to continue at least through fiscal year 2003 or additional
resources will have to be provided to FLETC for both funding and
staffing.
Question. I would like to follow up with you on our discussion
about the possible creation of a ``working capital fund'' within
Treasury to allow for a more regularized flow of students through
FLETC's training facilities. I am encouraged that you are aware of the
spikes and lulls in the throught-put of students and have given some
thought to this problem. Exactly how do you envision this problem being
addressed? How can we assist you in this endeavor?
Answer. The practicality of a working capital fund that conducts
continuing cycles of business-like activity, in which the fund charges
for the provision of training or training-related services and uses the
proceeds to finance its spending without the uncertainties endemic to
the annual appropriations process, is appealing. Sometimes inherent
delays in the appropriations process cause departments and agencies to
hold back on making commitments to fill FLETC training slots; and as a
result, FLETC periodically experiences an uneven utilization of its
staff, facilities, and resources. On the other hand, we must not
jeopardize the availability of mandatory and qualitative law
enforcement training. Although the concept is appealing from an
enterprise perspective, it also raises challenges when participating
agencies have insufficient funding. As we continue to evaluate such a
funding mechanism we will let the Committee know how it can assist us
in this regard.
visiting customs ports of entry
Question. As a former CEO, you recognize the importance of visiting
your facilities, meeting with the workers and seeing the conditions in
which they must work. In that vein, and recognizing how busy your
schedule is, have you been to any northern border ports-of-entry since
you became Secretary? Have you visited any in the winter? For that
matter, have you been to the southwest border in the summer?
Answer. On February 25, 2002, I visited the Port of Jacksonville,
Florida, as well as the Customs Air Marine Interdiction Division branch
in Jacksonville. I also visited the Customs facility at JFK Airport,
shortly after the September 11, 2001 terrorist attacks. I am especially
looking forward to my site visit to the Detroit port of entry on April
16, 2002. I had two additional visits scheduled to the Northern and
Southwest Borders, but unfortunately both visits were cancelled due to
scheduling conflicts. I look forward to visiting these sites in the
future.
use of technology at the borders and ports of entry
Question. You are aware of the dynamic tension facing the Customs
Service as it pursues its dual role of facilitating the flow of
legitimate trade while at the same time preventing illegal substances
from entering the country. Recently, Customs Commissioner Bonner spoke
about his interest in using technology overseas at some of the largest
seaports--Hong Kong, Rotterdam--to verify the contents of cargo
containers before they are loaded on ships and sent to the U.S. Then
these containers would be tracked as they made their way to their
ultimate destination to ensure that they are not tampered with en-
route. This system would be used to assist the exporters and importers
who participated in the program by significantly reducing any
processing time once the cargo reaches the U.S. border. At the same
time, on his recent trip to Mexico, Governor Ridge noted that
technology on the border is woefully outdated. Do you agree with these
assessments? How can we jointly better use technology to protect both
the border as well as legitimate trade?
Answer. Customs is in the process of expanding its layered
enforcement approach at our nation's borders. Inspectors have recently
been deployed to Canada in the port cities of Vancouver, Montreal and
Halifax, and Canadian inspectors have been deployed to the U.S. port
cities of Newark and Seattle/Tacoma. A state-of-the-art targeting tool,
the Automated Targeting System (ATS), has been provided to these
targeting teams to pre-screen sea containers arriving in Canada that
are destined for the U.S. and vice versa. In addition, Canada has begun
procuring advanced inspection equipment such as the Vehicle and Cargo
Inspection System (VACIS) to assist in the inspection process. The U.S.
ports mentioned above currently have this equipment and are utilizing
it to inspect both United States-and Canadian-bound sea containers.
Customs has deployed over 80 non-intrusive inspection (NII) systems
around the country to protect our nation's borders and facilitate
legitimate trade. These X-ray and gamma ray based systems are state-of-
the-art and are capable of screening sea containers, trucks, rail cars
and cargo in a matter of minutes. It would take hours to search each of
these inspections by hand. In addition to the NII systems, Customs is
testing and deploying a number of other new technologies aimed
specifically at radiation detection. Pager-sized, hand-held devices or
portals capable of scanning a truck or container are either on the job
or being tested. In addition, the Customs Handheld Acoustic Inspection
System (CHAIS) is being developed to identify suspicious liquid and
gaseous compounds without having to open the item.
Customs currently uses technology throughout its layered
enforcement approach to target, screen and conduct intensive
inspections. Technology that we use has been shared with Mexico and
Canada. In addition to the Canadian NII system, Mexico has deployed a
number of NII systems, both X-ray and gamma ray based, to screen and
inspect commercial trucks and railcars. Customs continues to work
closely with Mexican authorities on plans for the deployment and
utilization of this type of equipment.
Currently, the majority of land border shipments arriving from
Mexico by truck are cleared by Customs using the cargo selectivity
system or the Border Release Advanced Selectivity and Screening (BRASS)
system. Both of these systems are paper-based for the most part on the
land border and could benefit from new technologies available.
There is, for instance, no automated truck manifest system
available yet in Customs Automated Commercial System. A system of pre-
filed information from the carrier about the conveyance, driver and
carrier's knowledge of the shipments would serve as a valuable
targeting tool. This is planned as one of the first deliveries of the
Automated Commercial Environment, with an expected delivery by the end
of 2003. The National Customs Automation Program prototype release
program available now only in the port of Laredo does offer some
manifest information on conveyance and driver, but it is limited to
restricted importers and merchandise.
The targeting capabilities of the major release systems, cargo
selectivity and BRASS, are not as wide ranging and flexible as those of
the Automated Targeting System, but many of the selectivity entries can
be piped into ATS provided the data is received in advance of truck
arrival. Future changes to ATS or any new targeting provided in ACE
will provide these capabilities in all release systems.
Additionally, inspectors working in areas away from the office, in
railroad marshalling yards and at bonded facilities in the port could
be supplied with computers capable of remote access. This would provide
them the capability of querying the available targeting, enforcement
and reference databases, while performing their work away from the port
office.
earned income tax credit program
Question. Late last month, the Treasury Department and the IRS
announced the formation of a new task force to examine the Earned
Income Tax Credit (EITC) program. This popular program which benefits
low-income workers has been the target of what I believe to be unfair
criticism in some small, but vocal, quarters. While there have been
some difficulties with the program, an IRS report found that the $716
million we have appropriated for the program resulted in the collection
of $5 billion in EITC funds over 5 years. Do you support the EITC
program? What steps can we take together to ensure that the goals of
the program are being met?
Answer. The Administration supports the goals of the EITC as set
out by the Congress. In addition, EITC receives a separate
appropriation from Congress, and therefore, the Department is directed
to apply increased attention to this program. The EITC is intended to
reward work and help families out of poverty. But an error rate of 27
to 32 percent is unacceptably high, and as a result, the EITC has been
consistently listed among the Federal programs most vulnerable to waste
and error. Fortunately, we are already taking steps to control the
error rate.
The Economic Growth and Tax Relief Reconciliation Act of 2001
simplified the income and child definitions used to determine EITC
eligibility. These rules will take effect on tax year 2002 returns
filed next year. The Department is in the process of developing a
proposal for a uniform definition of ``qualifying child''. The proposal
would reduce confusion and the potential for duplicate and erroneous
claims by standardizing the definition of child used for the EITC and
for four other tax benefits (the dependent exemption, child tax credit,
child and dependent care tax credit and head of household filing
status).
Finally, as you know, Treasury and IRS are working now to further
improve the integrity of the program while maintaining its key
benefits. The Treasury/IRS task force will be making recommendations to
me this summer. In the meantime, I ask that you continue to support the
IRS compliance activities that have collected $5 billion between 1998
and 2002. I would also add that we need to be looking at compliance in
the tax code as a whole, and not just in the EITC. IRS is moving in
that direction through the new National Research Program. I encourage
the Congress to continue to support this new research.
information systems security
Question. According to a recent review by the Inspector General, 82
percent of the Department's information systems are not accredited for
security. Proper safeguards and secure operations have been a mandate
since the Computer Security Act of 1987, and this is a failing grade
for the Department of Treasury. Not only is information security even
more important now, but given the information under the jurisdiction of
the department, it should have been a top priority all along. What are
you plans to correct this situation, especially in relation to the
major modernization projects at agencies like the IRS and the Customs
Service?
Answer. Treasury's Office of Information Systems Security (OISS)
has initiated a very aggressive Department-wide strategy to address
security accreditation. This strategy includes comprehensive site
visits Department-wide, thereby providing OISS senior staff an
opportunity to ensure that Treasury policy and guidance are followed
regarding all facets of IT Security.
As part of an ongoing partnership with the National Institute of
Standards and Technology (NIST), Treasury has actively assisted NIST in
drafting Federal Certification and Accreditation Guidelines. It should
be noted that prior to the recent review by the Inspector General, OISS
established a Department-wide performance measure to address the
certification and accreditation of Information Technology systems with
a goal of having 100 percent of the Department's systems certified and
accredited for operation by fiscal year 2004. OISS has created a
compliance program to monitor bureau progress in achieving this
performance objective.
As a result, there is a renewed emphasis Department-wide on this
vital component of IT security. Earlier this fiscal year, the Customs
Service awarded a contract to accelerate the certification and
accreditation process for their systems. The goal is to reach 100
percent certification and accreditation of all Customs Service systems
by the end of fiscal year 2003. The Internal Revenue Service has also
awarded multiple contracts relating to certification and accreditation
of their systems, and has purchased an automated tool to assist with
part of the certification and accreditation process. The goal is to
reach 100 percent certification and accreditation of all Internal
Revenue Service systems by the end of fiscal year 2004.
tax-exempt bonds financing of recycling facilities
Question. Last year, you were before this committee and indicated
that you had undertaken a review of the Department's policy in this
area and that you would be getting back to us after meeting with
industry groups. It is my understanding the National Association of
Bond Lawyers has submitted comments and a detailed proposal for
changing regulations to clarify the issue of when something is waste
and thus qualifies for tax-exempt financing and when it does not.
Please provide an update about your discussions with the affected
parties and give us the status of your review.
Answer. Existing law permits tax-exempt financing for solid waste
disposal facilities, including certain recycling property, even if the
property is owned and operated by a private business. The Treasury
Department has received a number of comments requesting clarification
of the existing regulatory definition of ``solid waste disposal
facilities,'' particularly as it applies to recycling facilities.
Treasury personnel considered these comments, and met with industry
groups, and have concluded that additional clarification on this issue
is necessary. Accordingly, the Treasury Department's Office of Tax
Policy intends to undertake, as part of its Priority Guidance Plan for
the period July 1, 2002 through June 30, 2003, a guidance project to
address the definition of solid waste disposal facilities. As part of
this process, the Treasury Department will solicit additional comments
from interested parties.
tax shelters
Question. Mr. Secretary, in addition to the report that you said
during the hearing you would provide to me on what the Department is
doing regarding tax shelters, I would appreciate responses to the
following questions.
Answer. The Department will soon be releasing Enforcement Proposals
for Abusive Tax Avoidance Transactions, which will be sent to the
Committee as soon as it is available. In addition to detailing a
comprehensive set of administrative and legislative proposals to
address the problem of abusive tax practices, these Enforcement
Proposals will also describe the Treasury Department and IRS' recent
experience with the current enforcement regime, the current actions
being taken to combat abusive tax avoidance transactions at all levels,
and the reasons why the Treasury Department believes that its proposals
will materially improve the Treasury Department and IRS' ability to
combat these types of transactions. The Department is already working
with the IRS and Congress to move these proposals forward.
Question. What kinds of tax shelters are you aware of that are
currently being used by taxpayers to avoid their tax responsibility?
What tax shelters is the Treasury Department most concerned about at
this time?
Answer. The Treasury Department is concerned with all tax avoidance
transactions that are structured to obtain unintended tax benefits, as
well as with tax scams typically targeted at individuals and small
businesses. The sophistication of these transactions and scams varies
considerably, ranging from very complex transactions designed to
satisfy technical rules while yielding unintended tax benefits, to
patently fraudulent arguments and positions that tax is not due. Many
of these transactions and scams will be discussed in the Treasury
Department's Enforcement Proposals.
The Treasury Department, however, is most concerned about the
transactions and schemes that we do not know about. The current
enforcement regime requiring disclosure, registration, and customer-
lists for questionable transactions must be made clearer and broader so
that questionable transactions can be identified and scrutinized.
Unfortunately, too many taxpayers and promoters are reading the
requirements narrowly and construing the exceptions broadly to avoid
maintaining customer lists and disclosing and registering transactions.
Therefore, we will be proposing a comprehensive set of
administrative and legislative proposals that will significantly
simplify and broaden the existing enforcement regime and add new and
increased penalties for the failure to comply with these rules. We
believe that early and vigorous scrutiny will allow the Department and
the IRS to address questionable transactions quickly through published
guidance or by proposing legislation, and to develop the best cases for
litigation when appropriate.
Question. Would you please tell us what major legislation, if any,
the current Administration has proposed in its fiscal year 2003 budget
submission to deal with the tax shelter problem?
Answer. The Administration's proposed fiscal year 2003 budget
contains two proposals targeted at abusive tax practices. The first
would increase the frivolous return penalty and extend the penalty to
cover other frivolous submissions made to the IRS. The second proposal
would give the IRS the authority to treat false claims for refundable
credits as nullities not subject to existing deficiency procedures.
Question. Do you anticipate that the Administration will be
recommending any legislation in the future?
Answer. As noted above, the Treasury Department will soon be
releasing a comprehensive set of administrative and legislative
proposals for combating the problem of abusive tax avoidance
transactions. The legislative proposals will include new penalties on
taxpayers for the failure to disclose questionable transactions,
increased penalties on promoters who fail to register questionable
transactions and maintain customer lists, SEC reporting of penalties
relating to identified tax avoidance transactions, expanded injunction
authority for promoters who repeatedly disregard the registration and
customer-list requirements, and two substantive law changes to stop
specific types of abusive transactions that have been identified.
Question. Are there regulation projects underway at the Treasury
Department or IRS notices to curb the use of tax shelters?
Answer. The Treasury Department and the IRS are closely working
together to identify new transactions to be identified in notices as
tax avoidance transactions that are required to be disclosed on a
return, including new transactions that have been identified in
response to the IRS' recent disclosure initiative (Announcement 2002-
2).
The Department and IRS are also working to implement the regulatory
actions which will be outlined in the Treasury Department's Enforcement
Proposals, including significant revisions to the regulations for the
disclosure, registration, and customer-list requirements. These changes
will increase transparency and allow the Department and the IRS to
evaluate questionable transactions early in the process and determine
whether regulatory or legislative responses are required.
Question. Is the IRS effectively imposing monetary or other
penalties in the tax shelter cases they uncover? Do you know the number
of times the IRS has imposed additional penalties in tax shelter cases
and actually how much in tax shelter-related penalties the IRS has
sustained in dollar terms?
Answer. The Department and IRS must work continually to ensure that
all penalties are fairly, impartially, and consistently applied.
Ensuring the consistent and judicious application of penalties often
requires clear guidance coupled with experienced oversight. For
example, the IRS' Large and Mid-Size Business Division (LMSB) recently
issued guidelines for the application of the accuracy-related penalty
on potentially abusive tax avoidance transactions. This policy includes
instructions to examiners regarding the development and imposition of
the penalty as well as executive oversight by the Directors of Field
Operations (DFOs), who have the final decision-making authority
regarding the imposition or non-imposition of penalties. These
guidelines are also a clear signal to taxpayers that penalties will be
developed and considered in appropriate cases.
With respect to specific data regarding the assertion of penalties,
I have asked the Department and IRS to review the existing data, and I
will forward any information responsive to your specific question when
it becomes available.
Question. What is the Administration doing to allow our tax
officials to get the information they need for examinations from these
tax-haven countries?
Answer. In July 2001, I made a public commitment to significantly
expand our network of tax information exchange agreements, with a
particular focus on achieving such agreements with significant offshore
financial centers that have not been interested in cooperating with us
on tax matters in the past. We are very pleased to have signed new tax
information exchange agreements with the Cayman Islands, Antigua and
Barbuda, the Bahamas, and the British Virgin Islands.
These new tax information exchange agreements contain the elements
that are critical to the effective exchange of information. They cover
both civil and criminal tax matters, and ensure that bank secrecy and
other rules will not stand as a bar to access needed information. They
also provide for essential protections with respect to the privacy and
confidentiality of the information to be exchanged.
We believe these new relationships will prove to be very valuable
in our efforts to ensure full and fair enforcement of our tax laws. We
also believe that these new agreements will help us to encourage other
jurisdictions to establish information exchange relationships with us.
I remain committed to broadly expanding the U.S. network of tax
information exchange agreements, and expect to be able to announce
additional agreements in the coming weeks.
Question. Does the Administration support the OECD's current
initiative to force tax havens to cooperate with international tax
enforcement efforts and what are you doing specifically to support the
OECD's effort?
Answer. After a careful review of the OECD harmful tax practices
project early last year, I concluded that the United States must
attempt to refocus the OECD project on its core element--the need for
countries to be able to obtain specific information from other
countries upon request in order to prevent noncompliance with their tax
laws.
I was concerned that unrelated elements of the OECD project, which
had the potential to encroach on the sovereign rights of all countries
to determine their own internal tax and economic policies, were
distracting from and interfering with progress in the important area of
effective tax information exchange.
Working together with other OECD member countries, we have made
substantial progress in focusing the OECD initiative on encouraging tax
haven jurisdictions to improve their transparency and information
exchange practices. We are very pleased with the progress that has been
achieved because of this refocusing, which has allowed the project to
proceed with considerably less resistance than it was encountering 12
months ago. Indeed, more than 20 jurisdictions have committed to
achieve transparency and effective information exchange since the
project was refocused. We look forward to continuing to work together
to achieve real advances in this critically important area.
______
Questions Submitted by Senator Jack Reed
gun shows
Question. In a January 1999 report, ``Gun Shows: Brady Checks and
Crime Gun Traces,'' the Department of the Treasury concluded that ``a
review of ATF's recent investigations indicates that gun shows provide
a forum for illegal firearms sales and trafficking.''
Do you support legislation to close the ``gun show loophole'' that
exempts private sales at gun shows from the Brady background check
requirement that applies to sales by licensed dealers?
Answer. The Administration supports, in principle, amending the
Brady Act to require background checks for all firearms transactions at
gun shows. We must ensure that terrorists and other criminals are
prevented from purchasing weapons at gun shows through an instant
criminal background check that does not unduly burden the law-abiding
gun buyers at these events.
Question. I met with staff from the Treasury Department's Bureau of
Alcohol, Tobacco and Firearms and the Department of Justice last
November and was told that in the immediate aftermath of the September
11 attacks, FBI officials compared the audit log of approved gun sales
under the NICS to the government's terrorist watch lists based on a
request from ATF. We later read about inspection of the audit log in
the New York Times. So it was clear that these NICS records contained
important information for investigators. But since then, the Department
of Justice has suggested that Federal law prohibits NICS records from
being used in terrorism investigations. Since the request came from
your Department, what are your thoughts on DOJ's decision, and do you
support legislative efforts to make audit log records available for
anti-terrorist investigations?
Answer. As a point of clarification, ATF made the request to the
FBI to compare the audit log of approved gun sales under the NICS to
the government's terrorist watch list in response to a request for
information from the Joint Terrorism Task Force (JTTF). It is our
understanding that the Department of Justice interprets its current
regulations to prohibit the use of the NICS audit log for this purpose.
To the extent that legislation would be necessary to make audit log
records available for anti-terrorist investigations, the Department
would review such legislation in consultation with others in the
Administration.
use of atf databases for firearms tracing
Question. In a written response to my inquiry about cooperation
between the Department of Justice and ATF on anti-terrorist issues, the
Attorney General stated that ``Following the September 11 attack, the
FBI requested that the Bureau of Alcohol, Tobacco and Firearms (ATF)
compare ATF databases relating to multiple sales, stolen firearms and
traced crime guns with the [terrorist] watch list arising out of the
investigation. The FBI was advised there were 6 matches from this
comparison.''
How many and what types of weapons were involved, i.e. were they
assault weapons, handguns, etc.?
Answer. The names of 8 individuals from the terrorist watch list
matched the names of individuals found in records of 47 previously
traced firearms or 2 multiple sales reports. These records included
traces of 32 pistols, 10 rifles, 5 shotguns and 2 revolvers.
policy for importation of firearms
Question. The Bureau of Alcohol, Tobacco and Firearms has the
authority under 18 USC Sec. 925 (d) to exclude from import firearms
that are not ``generally recognized as particularly suitable for or
readily adaptable to sporting purposes. . . ''
What is the policy of the Department, and specifically the Bureau
of Alcohol, Tobacco and Firearms with respect to the importation of
weapons that have significant potential for terrorist use?
Specifically, what is ATF's policy with respect to the importation of
.50 caliber sniper rifles? These weapons have been identified by the
RAND Corporation as posing a significant and real threat to the
security of air force bases because they have the capability to disable
aircraft. Moreover, the Violence Policy Center has documented that 25
of these long-range, high-caliber weapons were transferred to Osama bin
Laden. Would it be the policy of the Department to exclude the
importation of such weapons on the grounds that they would fail the
``sporting purposes'' test since they pose a threat to national
security?
Answer. The Bureau of Alcohol, Tobacco and Firearms has determined
that a .50 caliber rifle is importable as a sporting firearm because it
is particularly suitable for, or readily adaptable to, sporting
purposes. Specifically, ATF's longstanding interpretation of ``sporting
purposes'' includes competitive shooting events. In the United States,
there are numerous organizations that sponsor competition in silhouette
and target shooting events for .50 caliber rifles.
elimination of corrupt gun dealers
Question. In a June 2000 study, ``Following the Gun: Enforcing
Federal Laws Against Firearms Traffickers,'' the Department identified
federally licensed firearms dealers (FFLs) as the single largest source
of illegally trafficked firearms.
What steps have been taken, or are planned, to identify and
eliminate corrupt gun dealers?
Answer. The Bureau of Alcohol, Tobacco and Firearms (ATF) focuses
its inspection resources on dealers who have potential firearms
trafficking indicators associated with their businesses. ATF's
comprehensive focused inspection program targets certain dealers based
on firearms tracing data and information about their compliance
history. During these inspections, ATF examines the dealers'
recordkeeping procedures, their compliance with the Brady law, and any
inventory discrepancies.
When warranted, ATF opens criminal investigations of licensees.
During fiscal year 2000 and 2001, the Bureau initiated criminal
investigations of 39 licensees for various violations, including the
sale of illegal weapons and transactions with prohibited individuals.
In addition to criminal prosecutions, when willful violations by
Federal firearms licensees are discovered, ATF moves to revokes those
licenses. In fiscal year 2000 and fiscal year 2001, nearly 70 dealers
had their licenses revoked for willful violations of the Gun Control
Act.
Question. Is the balance of resources sufficient to perform the
required increase in explosives investigations and inspection due to
the events of 9/11 without shifting resources away from firearms
enforcement, the GREAT grant program, and all other mandates of the
BATF?
Answer. Shortly after September 11, 2001, ATF directed that all
field divisions conduct inspections of the vast majority of explosive
licensees and permittees. These inspections were recently completed.
During these inspections, ATF re-emphasized the importance of promptly
reporting the theft or loss of explosive materials, as well as the
importance of reporting any suspicious activity, attempted break-ins,
and suspicious purchase attempts. ATF believes it is important to fully
investigate every incident of the theft or loss of explosive materials
and to conduct compliance inspections on all explosives licensees and
permittees. With the level of inspector resources as they currently
exist, we plan to inspect 50 percent of this total population on an
annual basis. Our policy will be to first follow-up on problems we
found during our post September 11 explosives field program. To
continue our explosives inspection program at post September 11 levels
would require additional resources or a reallocation of existing
resources.
automated commercial environment
Question. As you have mentioned in your testimony, the Customs
Service is in the third year of funding for its modernization effort,
specifically replacing the outdated Automated Commercial System (ACS)
with the Automated Commercial Environment (ACE).
Is the Department pleased with the progress of this modernization
effort? In light of the dramatic increase in imports to our nation's
ports, and the increased chance of illegal products coming into the
country for possible terrorist actions, does the Department feel that
there should be a further increase for Customs to assist in their
monitoring of our ports of entry? Should the ACE modernization project
be sped up?
Answer. Customs Modernization has gained great momentum since the
systems integration contractor began work on the Automated Commercial
Environment (ACE) in August 2001. The Department is satisfied with the
progress of ACE and recognizes its critical role in the foundation of
Customs-wide modernization. Additionally, the Department monitors the
progress of ACE through its oversight role on the Joint Capital
Investment Review Board (J-CIRB). As the project progresses,
capabilities will be improved and expanded to all modes of
transportation and trade partners, creating national accounts for
brokers, carriers, sureties, exporters, and government agencies. The
infrastructure built for ACE will also serve as the foundation for
modernization projects in Customs enforcement and administration areas.
The benefits of ACE have become even clearer in light of the recent
terrorist attacks. In addition to reforming the way Customs conducts
business with the trade, ACE will provide the tools, information, and
foresight needed to both expedite trade, and through quicker more
effective targeting, prevent cargo from becoming an instrument of
terrorism. ACE is an important project for our country, Customs, the
business community, and for the future of global trade.
Consideration of any acceleration of ACE funding beyond the
requested $312.9 million level (including funding for the International
Trade Data System) will be part of the Administration's Fiscal Year
2004 budget development, and will take into consideration the pace of
spending approvals and procurements as the project progresses. Treasury
will also continue to derive guidance from GAO and from communications
issued by the Appropriations Committees in their review and approval of
requests for release of already appropriated funding. The most recent
such communication from the House Appropriations Committee continues to
counsel caution, and that care be taken to assess the risks and their
acceptable mitigation in any acceleration of development of such a
complex project as ACE.
modernization and improvement of irs systems
Question. You have outlined in your testimony the continued efforts
of the Department and the IRS to modernize the Service's systems as
well as to improve its taxpayer service and compliance, and I laud your
efforts in this area.
What other areas do you see that need increased efforts at
improvement? What are the levels of complaints lodged against the
Service by taxpayers over the course of the modernization effort? I was
wondering too if you could expand a bit more about the IRS' plans to
encourage electronic filings, and particularly how this might conflict
with private sector efforts in this area?
Answer. The IRS Oversight Board has stated that ``service to
taxpayers is inadequate.'' In spite of the short-term gains the IRS
achieved, they are still not consistently providing service to
taxpayers at a level they expect and deserve.
The IRS received 108 million telephone calls, covering a very wide
range of subject matter. The quality of that telephone service, while
continually improving, is still not on a level with the services
received in the private sector.
Not only must the IRS continue to improve taxpayer access to toll-
free lines, but they must also improve the accuracy of the responses
given to tax law and account questions. Unfortunately, this problem is
not confined to telephone assistance. The IRS also has a steep learning
curve at taxpayer assistance centers. The GAO testified in April 2001
that ``walk-in sites are continuing to provide poor tax law
assistance.''
The IRS is not providing adequate service in other areas. For
example, employers, particularly first-time employers, are often
discouraged by the delays and difficulties in obtaining an Employer
Identification Number (EIN).
The IRS is currently administering 71 taxpayer rights provisions
resulting from the Restructuring and Reform Act of 1998 (RRA 98). Many
of the provisions, such as innocent spouse protection, due process in
collections and offers in compromise, would individually be considered
major projects. Collectively, they represent a challenge of learning
new ways of doing business for nearly every one of IRS' 100,000
employees. During this process, the IRS encountered a number of
problems and demands that are still being addressed.
The Administration proposes in its budget submission ``an easy, no-
cost option for taxpayers to file their tax returns online.''
Unfortunately, there has been some confusion regarding this proposal.
The Administration's proposal to give taxpayers the option to file
their tax returns on-line without charge is based on two principles:
(1) that no one should be forced to pay extra just to file his or her
tax return; and (2) the IRS should not get into the software business.
The IRS is working with private industry representatives who have
proven expertise and experience to develop these options.
As I stated on January 30, 2002, ``I don't intend for the IRS to
get into the software business, but rather to open a constructive
dialogue with those who already have established expertise in this
field. In the end, this effort should come up with a better way to save
time and money for both taxpayers and the government.''
______
Questions Submitted by Senator Ben Nighthorse Campbell
business strategy adjustment
Question. Just about every account within Treasury has been asked
to examine their operations to achieve improved effectiveness in
business practices. As you can imagine, this idea has raised some
concerns and I would like to explore the proposal just a bit:
What is the nature of the Business Strategy Adjustment?
Answer. The business strategy adjustment reflects Treasury's
expectation of reasonable savings from better business practices. Each
bureau is expected to review all programmatic efforts on a continual
basis and reduce or remove those producing little or no programmatic
value.
Question. How were the amounts determined?
Answer. The adjustment for each Bureau was 25 percent of the total
mandatory costs of the proposed pay raise and non-pay inflation factor,
developed historically using OMB economic assumptions. However, when
the Administration revised the non-pay inflation factor downward from
2.1 percent to 1.8 percent, Bureaus were allowed to keep the 0.3
percent savings from this downward revision. Consequently, each
Bureau's adjustment is now slightly less than 25 percent of their total
mandatory inflationary costs.
Question. Why wasn't the Departmental Offices account asked to come
up with these savings?
Answer. It was determined that given the funding denied for the
Departmental Offices (DO) for fiscal year 2002, they could not manage
another absorption in fiscal year 2003. DO was denied most of the
requested funding to make the base whole in fiscal year 2002, as well
as an initiative to provide secure LAN services, totaling $9.743
million in absorbed costs. These absorbed costs included: (1) $3.8
million for unavoidable inflationary increases to IT contracts and DTS
communications costs; (2) $0.7 million in non-pay inflation, which was
only a 50 percent restoration of non-pay inflation compared to other
bureaus, and means the absorption of inflationary costs of GSA rent,
equipment contracts, and facility related contracts, etc.; (3) $3.0
million for Treasury Secure Data Network (TSDN), which must be
installed to meet security requirements; and (4) as a result of
receiving only a partial amount of the $5.6 million for the Labor Cost
Infrastructure project, DO had to reduce its authorized FTE ceiling by
65. Over the past few years DO has carried a higher FTE count than it
could sustain. It was hoped that the labor cost increase would help to
better manage the FTE authorization level. The net effect of all these
absorptions is a very tight management of costs and staffing changes,
all of which are under very close review before moving forward.
Question. Can you give us some examples of what bureaus can do to
achieve these savings?
Answer. I believe that every organization's financial planning must
include expectations of continuous productivity improvement. This
adjustment is not about cutting back programs and services due to a
lack of resources. This adjustment is about re-engineering processes
and the judicious use of new technology to maintain or increase
performance at lower cost. Every bureau will approach this challenge
differently, but they all should be: (1) reviewing business processes
throughout their organizations to remove roadblocks that are costly and
hinder performance; and (2) continually reviewing programmatic efforts
to reduce or remove those producing little or no programmatic value.
For one bureau that might be an unwieldy procurement process. For
another bureau it might be a program that does not support its core
mission and is not producing results that justify continued
expenditures. I have empowered each of my bureau heads the freedom to
make these determinations in the best interest of their bureau and am
more than happy to work with them in achieving this improvement.
office of foreign assets control
Question. Lately there have been numerous news reports about Cuba
sanctions and travel to Cuba. For example, there was a Washington Post
article on March 6, 2002 about the Office of Foreign Assets Control
(OFAC) secretly settling more than 100 enforcement actions from 1998 to
2000 against corporations, banks and other entities for violating trade
embargoes with rogue nations and there was some concern expressed that
this was not disclosed to the public.
Are there specific guidelines OFAC uses in deciding whether to
disclose these cases?
Answer. In the past, OFAC did not typically release the names of,
or information concerning, companies or individuals who settled cases
of alleged sanctions violations through the payment of a negotiated
settlement amount, unless it served the purpose of enhancing
enforcement of the embargo.
These settlements typically occur after OFAC informs the respondent
through the issuance of a pre-penalty notice of the alleged violation
and OFAC's intent to assess a fine. The respondent is then afforded 30
days to refute the allegation, plead mitigating circumstances and/or
enter into settlement negotiations. These negotiations often result in
an offer by the respondent to pay an agreed upon amount to the U.S.
Government in settlement of the allegation. In these instances there is
no admission or formal agency finding of guilt, so OFAC traditionally
has not released the names of the alleged violators.
OFAC is carefully reviewing this disclosure policy and will soon
issue a Federal Register Notice soliciting public comment on proposals
to release certain settlement information.
Question. Why were the cases referred to in the Washington Post
article not disclosed earlier?
Answer. As noted above, it was not OFAC's policy to disclose such
information. The cases referred to in the Washington Post were released
pursuant to the Freedom of Information Act.
Question. Who is responsible for determining which cases are
disclosed and when the cases are disclosed?
Answer. The Director of OFAC has made these determinations in the
past, after consultation with other relevant U.S. Government officials,
in accordance with the policy described above.
Even though OFAC is an entity of the Departmental Offices, we have
a hard time getting specific information about funds allocated to that
office for fiscal years 2000, 2001 and 2002.
Question. What is the total number of full time employees at OFAC?
Answer. The numbers of full-time employees (FTEs) for OFAC in
fiscal year 2000, fiscal year 2001 and fiscal year 2002 are as follows:
--Fiscal year 2000--68 (actual usage)
--Fiscal year 2001--75 (actual usage)
--Fiscal year 2002--129 (authorized ceiling)
In addition, provided as Attachment 1 is a chart from the
Departmental Offices Congressional Justification on Enforcement funds
for fiscal year 2000 through fiscal year 2003.
DEPARTMENT OF THE TREASURY--DEPARTMENT OFFICIES--DISPLAY OF ENFORCEMENT POLICIES AND PROGRAMS
[Dollars in thousands]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fiscal year
-------------------------------------------------------------------------------------------------------------
2000 actuals 2001 actuals 2002 enacted 2002 fin plan 2003 proposed
-------------------------------------------------------------------------------------------------------------
Dollars FTE Dollars FTE Dollars FTE Dollars FTE Dollars FTE
--------------------------------------------------------------------------------------------------------------------------------------------------------
Office of Enforcement: \1\
11.0 Personnel Compensation........... $3,681 51 $4,038 46 $4,278 48 $4,417 48 $4,556 48
12.0 Personnel Benefits............... 718 ......... 763 ......... 958 ......... 609 ......... 639 .........
21.0 Travel........................... 238 ......... 259 ......... 295 ......... 259 ......... 259 .........
22.0 Transportation of Things......... 0 ......... 0 ......... 0 ......... 0 ......... 0 .........
23.0 Communications, Utilities & Misc. 23 ......... 23 ......... 25 ......... 24 ......... 24 .........
25.0 Other Services................... 164 ......... 3,018 ......... 3,051 ......... 2,929 ......... 2,991 .........
26.0 Supplies......................... 6 ......... 17 ......... 23 ......... 22 ......... 22 .........
31.0 Equipment........................ 3 ......... 27 ......... 9 ......... 9 ......... 9 .........
91.0 Confidential Expenditures........ 5 ......... 7 ......... 0 ......... 0 ......... 0 .........
-------------------------------------------------------------------------------------------------------------
Subtotal, Office of Enforcement..... 4,837 51 8,152 46 8,639 48 8,269 48 8,500 48
Legislative Proposal on Full Costing of ......... ......... 402 ......... ......... ......... 435 ......... 451 .........
Benefits.................................
Executive/Administrative Support \2\...... 2,681 12 4,684 21 5,111 21 5,211 21 5,306 21
-------------------------------------------------------------------------------------------------------------
Total, Office of Enforcement........ 7,518 63 13,238 67 13,750 69 13,915 69 14,257 69
=============================================================================================================
Office of Foreign Assets Control: \1\
11.0 Personnel Compensation........... 4,401 68 5,605 75 9,928 129 7,853 129 8,799 141
12.0 Personnel Benefits............... 1,048 ......... 1,208 ......... 2,774 ......... 1,725 ......... 2,000 .........
21.0 Travel........................... 238 ......... 313 ......... 663 ......... 663 ......... 717 .........
22.0 Transportation of Things......... 0 ......... 24 ......... 914 ......... 119 ......... 122 .........
23.0 Communications, Utilities & Misc. 16 ......... 17 ......... 205 ......... 129 ......... 168 .........
25.0 Other Services................... 336 ......... 2,928 ......... 3,940 ......... 4,959 ......... 6,672 .........
26.0 Supplies......................... 25 ......... 70 ......... 517 ......... 547 ......... 563 .........
31.0 Equipment........................ 48 ......... 1,010 ......... 791 ......... 2,171 ......... 2,611 .........
91.0 Confidential Expenditures........ 0 ......... 0 ......... 0 ......... 0 ......... 0 .........
-------------------------------------------------------------------------------------------------------------
Subtotal, Office of Foreign Assets 6,112 68 11,175 75 19,732 129 18,166 129 21,652 141
Control............................
Legislative Proposal on Full Costing of ......... ......... 656 1,170 1,286 .........
Benefits.................................
Executive/Administrative Support \2\...... 3,574 16 7,605 35 13,735 56 14,004 58 15,146 61
-------------------------------------------------------------------------------------------------------------
Total, Office of Foreign Assets 9,686 84 19,436 110 33,467 185 33,340 187 38,084 202
Control............................
=============================================================================================================
Total, Enforcement Policies and Programs:
11.0 Personnel Compensation........... 8,082 118 9,643 121 14,206 177 12,270 177 13,355 189
12.0 Personnel Benefits............... 1,767 ......... 1,971 ......... 3,732 ......... 2,334 ......... 2,639 .........
21.0 Travel........................... 475 ......... 572 ......... 958 ......... 922 ......... 976 .........
22.0 Transportation of Things......... 0 ......... 24 ......... 914 ......... 119 ......... 122 .........
23.0 Communications, Utilities & Misc. 39 ......... 40 ......... 230 ......... 153 ......... 192 .........
25.0 Other Services................... 500 ......... 5,946 ......... 6,991 ......... 7,888 ......... 9,663 .........
26.0 Supplies......................... 30 ......... 87 ......... 540 ......... 569 ......... 585 .........
31.0 Equipment........................ 51 ......... 1,037 ......... 800 ......... 2,180 ......... 2,620 .........
91.0 Confidential Expenditures........ 5 ......... 7 ......... 0 ......... 0 ......... 0 .........
-------------------------------------------------------------------------------------------------------------
Subtotal, Enforcement Policies and 10,949 118 19,327 121 28,371 177 26,435 177 30,152 189
Programs...........................
Legislative Proposal on Full Costing of 0 ......... 1,058 ......... ......... 1,605 ......... 1,737 .........
Benefits.................................
Executive/Administrative Support.......... 6,255 28 12,289 56 18,846 77 19,215 79 20,452 82
-------------------------------------------------------------------------------------------------------------
Total, Enforcement Policies and 17,204 146 32,674 177 47,217 254 47,255 256 52,341 271
Programs...........................
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ If sufficient funds become available the Office of Enforcement may staff up to 58 full time equivalent positions and OFAC up to 138 full equivalent
positions.
\2\ Administrative Support distribution only and the methodology used to distribute these costs is based on thepervious activity structure.
Question. How much money was spent by OFAC and how were those funds
used?
Answer. OFAC's expenditures for the fiscal years 2000, 2001, and
2002 are as follows:
--2000: $6.1 million
--2001: $11.2 million
--2002: $25.7 million (includes No-Year funds for Plan Colombia and
fiscal year 2001 Emergency Supplemental)
OFAC currently administers 24 economic sanctions programs, most
commonly imposed by the President under authority of the International
Emergency Economic Powers Act, the Trading with the Enemy Act, the
United Nations Participation Act or mandated by Congress under specific
statutes, such as the Foreign Narcotics Kingpin Designation Act. OFAC
currently has offices in Washington, Miami and Bogota. OFAC's expenses
consist primarily of personnel, travel-related costs, and other
services and equipment as shown in the table below.
[In dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fiscal year 2002 financial plan
Fiscal year Fiscal year ---------------------------------------------------
2000 2001 Drug Emergency
actuals actuals SE kingpin suppl. Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Office of Foreign Assets Control:
11.0 Personnel compensation........................................... 4,402 5,605 7,852 1,045 750 9,637
12.0 Personnel benefits............................................... 1,048 1,208 1,726 386 174 2,286
=============================================================================
21.0 Travel........................................................... 236 313 663 22 48 733
22.0 Transporation of things.......................................... 0 24 119 0 0 119
23.0 Communications, utilities & misc................................. 16 17 179 0 610 789
25.0 Other services................................................... 336 2,928 5,494 0 3,631 9,125
26.0 Supplies......................................................... 25 70 547 0 14 561
31.0 Equipment........................................................ 71 1,010 2,121 0 324 2,445
-----------------------------------------------------------------------------
Subtotal, Non-Pay................................................... 684 4,362 9,123 22 4,627 13,772
=============================================================================
Total, Office of Foreign Assets Control............................. 6,134 11,175 18,701 1,453 5,541 25,695
--------------------------------------------------------------------------------------------------------------------------------------------------------
Question. What happens to the fine money paid by those who have
violated the embargo?
Answer. Both agreed upon settlements and assessed fines are paid
into the General Fund.
irs resource requirements
Question. It sometimes appears to us that the needs of the Internal
Revenue Service (IRS) are never ending. For example:
In fiscal years 2001 and 2002 Congress provided for additional
full-time employees to restore customer service and enforcement levels.
So, why does IRS need additional staffing for compliance workload in
fiscal year 2003?
Answer. Despite fiscal year 2001 hiring of nearly 1,500 new
employees in these field compliance programs, losses from attrition and
internal migration totaled 2,500 employees. The recent hiring
represents the first substantial recruitment of compliance staff in
over 5 years. By way of example, in fiscal year 1995, the IRS employed
over 8,000 field revenue officers, compared to fewer than 5,800 at the
beginning of this year. Prior to this initiative, the Staffing Tax
Administration for Balance and Equity (STABLE) initiative funded the
hiring of front-line personnel, which allowed us to keep other
employees in their compliance positions.
By using STABLE funds to hire staff to perform service and
educational functions, we avoided the need to use more expensive
compliance personnel on details during the filing season. STABLE
allowed us to accomplish two objectives efficiently: increase our level
of taxpayer education and taxpayer service; and increase the number of
staff years applied to exam and collection work. STABLE did not fund
new compliance positions. The staffing losses we have suffered over the
past several years, in addition to similar losses among revenue agents
and tax compliance officers, have substantially reduced collection case
closures and audit coverage rates.
The IRS budget request for fiscal year 2003 is $482 million higher
than the fiscal year 2002 appropriation of $9.936 billion. The largest
programmatic component of this increase is $102 million for the
Customer Service, Compliance and Workload Initiative. This initiative
actually costs $260 million, but IRS has achieved internal efficiencies
through a redeployment of resources within its base budget to cover
$158 million of this initiative. During this review, the IRS found
2,287 FTE that could be re-deployed to high priority areas in customer
service and compliance. We have requested an additional $102 million
for fiscal year 2003 to supplement the savings found by the IRS for
this initiative.
irs customer service, compliance and workload initiative
Question. I understand that the IRS wants to redirect the employees
who currently handle customer service back to their regular jobs, and
then fill those positions with lower-paid employees. I thought the
purpose of the existing organization was to have experts available to
answer questions.
What is the purpose of the redirection of IRS resources for part of
the Customer Service, Compliance and Workload Initiative and how will
IRS be able to manage this redirection?
Answer. As recently as fiscal year 2000, we detailed substantial
numbers of compliance staff to support filing season customer service
programs (i.e., toll-free telephones, walk-in assistance and taxpayer
education). In that year alone, we pulled over 2,500 revenue agents,
tax auditors and revenue officers off-line to assist taxpayers--
representing over 1,000 FTE. In fiscal year 2002, we will use just over
300 FTE from these field compliance programs. Field office staffing now
includes new Tax Specialists and Tax Resolution Representatives--new
higher-graded positions designed to offer ``one-stop-service'' on a
broad range of issues that include technical tax law questions and
account-specific payment problems.
Question. What effect will this redirection have on IRS operations
and programs?
Answer. For Examination, we estimate we will forego approximately
22,000 return closures and $117 million in recommended tax in fiscal
year 2002. For Collection, we estimate the opportunity costs to be
approximately $219 million for fiscal year 2002.
The following table depicts the revenue agents, tax compliance
officers, and revenue officers FTE performing customer service duties
from fiscal year 1996 through fiscal year 2001 as well as plans for
fiscal year 2002.
----------------------------------------------------------------------------------------------------------------
Fiscal year
--------------------------------------------------------------
1996 1997 1998 1999 2000 2001 2002
----------------------------------------------------------------------------------------------------------------
Revenue Agents................................... 148 148 293 451 549 268 160
Tax Compliance Officers.......................... 34 121 158 151 209 129 59
Revenue Officers................................. 28 31 73 146 201 93 95
----------------------------------------------------------------------------------------------------------------
youth crime gun interdiction initiative program
Question. Mr. Secretary, the President's budget overview states
that $11 million will be provided to the Bureau of Alcohol, Tobacco and
Firearms in order to expand the Youth Crime Gun Interdiction Initiative
to 10 additional sites. Currently there are 50 cities in 32 States and
the District of Columbia.
What new cities will be designated YCGII sites? How were these
locations determined?
Answer. The requirements developed to qualify as a YCGII city are
(1) a minimum population of 250,000; (2) youth and juvenile crime
rates; (3) known trafficking source or market area; (4) history of
firearms tracing; and (5) the mix of city size and demographics. YCGII
is established in 50 high-density population locations nationwide. Over
the period that YCGII has existed, cities with populations of under
250,000 have indicated an interest in participating in YCGII. The 2000
Census indicates approximately 24 cities with a population currently
qualifying for YCGII. Some of these cities are located in proximity to
current YCGII cities. Therefore, if ATF is to continue partnerships to
combat youth violence, we must be flexible in considering the
population qualification.
ATF must also consider the Administration's Project Safe
Neighborhood (PSN) initiative. Since the YCGII and the PSN are part of
our overall Integrated Violence Reduction Strategy, we hope to
associate our efforts (where possible) with the Department of Justice
expansion of PSN. The level of funding and personnel resources
requested will allow the expansion of the initiative to 10 cities. If
the city selection criteria are revised to incorporate smaller
populations, then we would propose a more flexible approach to assign
personnel. Currently, a list of potential city partners has been
developed and once ATF has concurrence from the cities, they will be
announced.
gang resistance education and training (g.r.e.a.t.)
Question. As you know, I have consistently supported the Gang
Resistance Education and Training program, called GREAT. In fact, a few
years ago we invited several graduates of that program from all over
the country to testify about their experiences. The budget requests a
change in the ATF statutory language to drop the specific authority to
make grants to State and local law enforcement for this effort.
Does this mean that ATF will no longer participate in this program?
If so, what happens to the money Congress previously appropriated
specifically for this purpose?
Answer. The G.R.E.A.T. program has had a positive impact on
millions of children across the country who have been through the
curriculum. Given this success, the Administration proposes to continue
the program in fiscal year 2003. Language has been drafted to continue
the grant/cooperative agreement authority for the G.R.E.A.T. program in
fiscal year 2003. This language is part of the Administration's budget
amendment package, transmitted to Congress on March 14, 2002.
automated commercial environment
Question. Mr. Secretary, the Customs Commissioner has expressed
support for accelerated development of the Automated Commercial
Environment--ACE--project. Some concern has been expressed that
compressing the current 5-year schedule down to 4 years could be
significantly more risky--both financially and operationally. We all
want to see ACE finished but it is also important that it be an
integrated, functioning system and that takes both time and expertise.
How involved will your office be in the final decision about the
ACE schedule?
Answer. I am committed to ensuring that the ACE project, including
the accelerated development effort, be fully successful. The incredibly
rich set of improvement opportunities further underscores my commitment
towards this project. The ACE project has an effective management
structure based upon key partnerships between Customs and oversight
organizations. Project managers have developed extensive plans and
rigorous processes to ensure that cost, performance, and schedule
targets are met. ACE project managers have also collaborated with
operations and field personnel, other government agencies, and the
trade community to develop requirements and plans. Additionally, my
involvement, in concert with the Customs Commissioner, Customs Chief
Information Officer, and the Treasury Deputy Assistant Secretary for
Information Systems and Chief Information Officer will continue to be
proactive in reaching critical decisions concerning the ACE project,
including compression of the development schedule.
Additionally, the Treasury Assistant Secretary for Management and
Chief Financial Officer and the Treasury Deputy Assistant Secretary for
Information Systems and Chief Information Officer are my
representatives on the Joint Capital Investment Review Board (J-CIRB).
The Customs Modernization Office updates the J-CIRB periodically on the
status of the project. All released funds must be approved by the J-
CIRB and the Under Secretary for Enforcement prior to spending by the
U.S. Customs Service. Through our participation in the J-CIRB, we can
monitor the progress of ACE.
customs service spending plan
Question. Mr. Secretary, the Committee provided additional funding
to the Customs Service as part of the fiscal year 2002 emergency
supplemental. Before those funds could be obligated, Customs was
required to develop and deliver to you a specific spending plan for
those monies. We did receive your written comments.
Do you have any further observations or comments on the Customs
spending plan you would like to share with us today?
Answer. To achieve the most cost-effective allocation of resources,
Customs needs to continually assess its use of all resources to achieve
desired results. That is why I have asked Customs, on an ongoing basis,
to evaluate the relative effectiveness of people and technology in
different settings. This extends to looking for cost-effective results
based on whether people or technology are used first at each inspection
setting, and to reviewing the marginal return in results for each added
piece of technology or inspector compared with the previously added
one. Our goal is to seek hoped-for returns on these investments that
directly affect security and trade facilitation, and I will be looking
for Customs to seek expression of these results in measurable terms, as
part of the process of balancing these two missions. A key element of
total success of our collective objectives will be the assurance that
Customs, and other agencies recognize their relative expertise in
particular settings that calls for improved coordination to attain the
greatest overall effectiveness.
This concept is at the heart of the President's Management Agenda,
which seeks to link Congressionally authorized dollars with specific
results. The Committee and the Department can play a particularly
strong role in enhancing the Customs Service's overall performance by
making these inquiries part of the ongoing assessment of such
investments--investments which are at the heart of meeting our security
objectives. Your efforts will complement the efforts already underway
at Treasury.
The Commissioner's proposal for major investments in effective
inspection, targeting, and infrastructure technology bodes well for
long term, qualitative improvement in Customs' interdiction goals.
Every successful business in the 21 century will continually look to
technology investments to increase productivity and enable valuable and
costly labor resources to be reallocated for maximum program impact.
This is no less true of government.
In conjunction with a wise and selective use of technology, I have
also charged every Treasury organization, including Customs, to search
relentlessly for ways to work more effectively. This includes removing
obsolete rules, barriers and constraints, increasing our level of
support for programs that are yielding benefits, and decommissioning
efforts that are consuming resources with little or no programmative
value. In my experience, organizations that are quick to respond to
changing conditions and that continually make results-oriented spending
choices are key to the unparalleled success of America's economy. This
same responsiveness, and the leadership to make sometimes difficult
resource choices, must characterize successful government programs. I
am challenging the Customs Service to not view these added Homeland
Security resources in isolation, but to strive continually to achieve
improved outcomes at a lower cost throughout the organization, and to
be accountable for the results we seek.
use of the counterterrorism fund
Question.First of all, Mr. Secretary, congratulations to you and
the entire Treasury Department for the efforts to make sure that the
2002 Winter Olympic Games were safe and secure. The Secret Service put
together a comprehensive security plan, and the Treasury law
enforcement agencies contributed most of the needed manpower to be able
to implement that plan.
There were several hundred non-Treasury Federal law enforcement
personnel helping out at the Winter Games in response to the Secret
Service request for their particular expertise--from the Forest
Service, the National Park Service, the Bureau of Land Management, the
Fish and Wildlife Service and the Department of Defense. That is
exactly what Presidential Decision Directive 62 envisioned and directs.
That brings me to my question. You have requested an appropriation
of $40 million for the Counterterrorism Fund, which would be expanded
to allow for reimbursements to ``any Federal agency'' which assists the
Secret Service at a national special security event.
How do you intend to use this fund? Would you reimburse non-
Treasury agencies for the help of their personnel?
Answer. The Fund was established to enable the Department of the
Treasury to undertake activities and operations to counter, investigate
or prosecute unexpected threats or acts of terrorism. This fund has
been the means for covering the costs associated with providing
security for unanticipated National Special Security Events (NSSEs),
and other large protective events.
The U.S. Secret Service is responsible for the design, planning,
and implementation of security and security support for events
designated as National Special Security Events. As such, the Secret
Service is authorized to call on other Federal agencies to provide
security support for NSSEs as may be necessary. Given the unanticipated
nature of NSSEs, it is likely that non-Treasury agencies would not have
available resources to cover the costs associated with such support.
Under these circumstances, these agencies would be reimbursed for those
costs.
Question. If so, why? After all, if the President of the United
States instructs agencies to assist the Secret Service in the
implementation of their overall security plan, would an agency refuse
to respond?
Answer. If an agency is instructed to support a National Special
Security Event by the President of the United States, the agency would
certainly do so. However, there are major costs associated with these
events and there needs to be a mechanism available to pay these
extraordinary costs.
cobra user fee increase proposal
Question. I am told that a Customs COBRA fee advisory committee was
established in 1999 to advise the Customs Commissioner on issues
related to the performance of the inspectional services of the Customs
Service. The membership is to include representatives from airline,
cruise ship, and other transportation industries who may be subject to
COBRA fees. The meetings were intended to be a forum for discussions
about the proper number and deployment of inspectors, the level of
fees, and the appropriateness of any proposed fees.
Mr. Secretary, the fiscal year 2003 budget request again includes a
proposal to increase the COBRA fees for airline passengers and cruise
vessel passengers. What was the reaction of the members of the COBRA
Fee Advisory Committee to this suggestion?
Answer. It is my understanding that this committee has not yet met.
SUBCOMMITTEE RECESS
Senator Dorgan. The subcommittee will next convene on
Wednesday, March 20, at 1:30 p.m. in Dirksen 192 where we will
hear from the Director of the Office of Management and Budget,
Mitch Daniels.
Mr. Secretary, thank you for being with us. This hearing is
recessed.
[Whereupon, at 3:31 p.m., Thursday, March 14, the
subcommittee was recessed, to reconvene at 1:35 p.m. Wednesday,
March 20.]
TREASURY AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL YEAR 2003
----------
WEDNESDAY, MARCH 20, 2002
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 1:35 p.m., in room SD-192, Dirksen
Senate Office Building, Hon. Byron L. Dorgan (chairman)
presiding.
Present: Senators Dorgan, Reed, Campbell, and Stevens.
EXECUTIVE OFFICE OF THE PRESIDENT
Office of Management and Budget
STATEMENT OF MITCHELL E. DANIELS, JR., DIRECTOR
OPENING REMARKS
Senator Dorgan. The subcommittee will come to order.
Mr. Director, good afternoon. We are pleased with your
appearance here today. We welcome you to discuss the
President's fiscal year 2003 budget request for the Office of
Management and Budget. You are probably getting tired of
testifying before North Dakotans, having spent some time before
the Budget Committee, but that is life in the United States
Senate, I guess.
This subcommittee, as you know, is responsible for funding
the operations of the Department of Treasury and all of its
agencies, such as the IRS, Customs Service, and other agencies.
We are also responsible for funding the operation of your
agency, the Office of Management and Budget, as well as the
other component agencies which make up the executive branch of
the Presidency. It is also in this subcommittee's bill that we
carry provisions affecting the operations of all Federal
agencies. We will focus on some of those proposals today.
It has been a while since the Budget Director last appeared
before this committee and we appreciate very much your being
here. Your task of assembling and producing the budget for the
Federal Government is not an easy one. We recognize that. The
Government is an enormous entity. In order to watch over it,
one can see how some smaller tasks might fall through the
cracks from time to time, and when it happens, it gives us
pause, but nonetheless, it is a very large undertaking to run a
bureaucracy of this size and we appreciate your service.
The budget this year for the Federal Government and also
the budget for the Office of Management and Budget is something
we will discuss at some length today. Some of our colleagues
will be joining us shortly. This budget proposes to make a
sweeping change in how the government funds a significant
portion of the Federal retirement system, but it assumes
Congressional approval of that proposal in the budget numbers
submitted for each agency.
Ordinarily, this type of change would be submitted to the
appropriate authorizing committees for their consideration and
action and then be taken up by the appropriators. That is not
the case this year when it comes to the proposal for the
treatment of retirement accruals and we will visit a bit about
that. Nor is it the case for how you want the administration of
the Federal workers' compensation account treated. The
authorizers have the experience on these matters and the
expertise on these matters. These proposals really should be
submitted to them for their consideration and action, not to us
first.
Your office, I think, has not gotten the word out to all of
the agencies. We have met with some 30 agencies for which we
appropriate money. During the staff briefings with each of
them, the more than 30 agencies funded in this bill, we learned
that not all of the agencies were aware of the proposed new
treatment of either the retirement accruals or the workers'
compensation or both. Some of them did not get the word about
the proposed pay raise. Most were aware that pay disparity was
proposed in the budget, but instead of planning on a 2.6
percent pay raise, some budgeted for a 3.9 percent pay increase
or some other number in between. Their numbers did not add up,
but yet they were submitted on February 4 when the budget was
delivered.
Now, these might seem to be smaller problems, but to many
of the smaller agencies we fund, in some cases they can make a
very big difference, and that is why I think that when we take
a look at the fact sheets that your office produced and
delivered when the budget was released, we have to take a look
behind the numbers.
For example, Mr. Daniels, you suggested that there would be
an overall 5.4 percent increase in funding for the Customs
Service from 2002 to 2003, with an 18.4 percent increase for
salaries and expense accounts alone, but when you back out the
policy changes with respect to retirement accounts, the real
dollars are about 9.1 percent below 2002 levels. I hope perhaps
you would respond to that, and there is a longer list than
that.
PREPARED STATEMENT
What we want to do today is talk about your specific
budget, the Office of Management and Budget budget. I would
like to talk about a number of other policy issues and your
role in them.
[The statement follows:]
Prepared Statement of Senator Byron L. Dorgan
Good Afternoon, Mr. Director. We welcome your appearance today to
discuss the President's fiscal year 2003 budget request for the Office
of Management and Budget. You may be getting tired of testifying before
North Dakotans, but we appreciate your coming.
This subcommittee is responsible for funding the operations of the
Department of the Treasury and all of its agencies--such as the IRS and
the Customs Service. This subcommittee is also responsible for funding
the operation of your agency--the Office of Management and Budget--as
well as all the other component agencies which make up the Executive
Office of the President. It is also in this subcommittee's bill that we
carry provisions affecting the operations of all Federal agencies. We
will focus on some of those proposals today.
It has been a few years since a Budget Director last appeared
before this subcommittee. That is why we appreciate your willingness to
appear today.
Your task of assembling and producing the budget for the Federal
government is not a task I envy or one to which I aspire. The
government is an enormous entity to watch over and one can see how some
smaller tasks might fall through the cracks. But when this happens, it
gives one pause.
For instance, this budget not only proposes to make a sweeping
change in how the government funds a significant portion of the Federal
retirement system, but it assumes Congressional approval of the
proposal in the budget numbers submitted for each agency. Ordinarily,
this type of change should be submitted to the appropriate authorizing
committees for their consideration and action--then be taken up by the
appropriators. But that is not the case this year when it comes to your
proposal for treatment of retirement accruals. Nor is it the case for
how you want the administration of the Federal worker's compensation
account treated. The authorizers have the expertise on these matters.
These proposals should have been submitted to them for their
consideration and action, not to us. This troubles me.
And your office appears to have had some difficulty getting the
word out to all the agencies about these new proposals. During staff
briefings with each of the more than 30 agencies funded in this bill,
we learned that not every agency was aware of the new treatment of
either the retirement accruals or the worker's compensation proposal or
both. Some of them also did not get the word from your office about the
proposed pay raise. Most were aware that pay disparity was proposed in
the budget, but instead of planning on a 2.6 percent pay raise, some
budgeted for a 3.9 percent pay increase or some other number in
between. Their numbers did not add up, but were submitted as fact on
February 4 when the budget was delivered.
These might appear to be little problems, but to many of the
smaller agencies we fund here, they make a big difference. That is why
I was even more disturbed by some of the ``fact'' sheets your office
produced and delivered to the media when the budget was released.
In essence, your numbers did not add up. Your office claimed that
the Treasury agencies were receiving big increases compared to last
year when in fact most budgets dropped when actual dollars are
compared. For instance, the document your people delivered trumpeted an
overall 5.4 percent increase in funding for the Customs Service between
fiscal year 2002 and fiscal year 2003 with an 18.4 percent increase for
the salaries and expenses account alone. But when real dollars are
compared, Customs funding for fiscal year 2003 is 9.1 percent below
fiscal year 2002 levels. The same is true for the Federal Law
Enforcement Training Center--which you claimed was receiving a 4.9
percent increase, when in fact it faces a 14.6 percent decrease.
The list goes on. Perhaps many of these agencies do not need huge
budget increases. Perhaps cuts are justified. Perhaps Customs should
have a year to pause and hire and deploy the people it needs at the
borders before we require additional hiring.
But the fact remains that all of these indicators give me reason
for concern.
--Asking appropriators to carry sweeping authorizing language is
putting the cart before the horse.
--Not getting specific budget direction to every Federal agency is
more than careless.
--And playing semantic games with the numbers casts a larger shadow
on the veracity of the budget requests.
--Individually, they can be explained perhaps. But taken together
they are very troubling. This makes it even harder to support
requests which would further reduce the amount of information
already being provided to the Congress.
But we will dig into these issues during the questioning rounds. We
welcome you here this afternoon, but first let me turn to my Ranking
Member, Senator Campbell, for any statement he would like to make.
Senator Dorgan. Before I ask you to present your statement,
Mr. Daniels, I will ask Senator Campbell, the ranking member,
to make his statement.
STATEMENT OF SENATOR BEN NIGHTHORSE CAMPBELL
Senator Campbell. Thank you, Mr. Chairman, and welcome,
Director Daniels. I appreciate your willingness to appear
today. I notice with interest there are four people with big
thick briefcases and paperwork on the front row. Are they all
resource people for you or are you here on your own?
Mr. Daniels. They are here of their own free will. I do not
expect to call on them.
Senator Campbell. I see. I will not take much time this
afternoon. We have a lot of ground to cover.
The chairman has already mentioned a couple of things that
I am particularly interested in. The retirement accrual
proposal is one, I would like to learn the status of your
efforts to secure the necessary statutory language. I would
like to ask you a couple questions when we get going about
that. I am also interested in learning more about the Office of
Homeland Security and how you define the homeland security
items that you are going to be requesting in the budget, too.
With that, I will submit the rest of my statement for the
record, Mr. Chairman.
Senator Dorgan. Senator Campbell, thank you very much.
[The statement follows:]
Prepared Statement of Senator Ben Nighthorse Campbell
Thank you, Mr. Chairman. And, welcome Director Daniels. I
appreciate your willingness to appear before us today to talk about the
budget request for the Office of Management and Budget. I full expect
that we will also talk about other areas of the President's budget
request as well.
I won't take much time this afternoon; I know we have a lot of
grown to cover. But I would like to mention a couple of things. I am
interested in talking about the accrual proposal contained in the
budget, and learn the status of your efforts to secure the necessary
statutory language. I am also interested in learning more about the
Office of Homeland Security and how you define homeland security items
in the budget request.
Senator Dorgan. Mr. Daniels, why do you not proceed. We
will include your full statement as a part of the record and
you may summarize.
OPENING STATEMENT MITCHELL E. DANIELS, JR.
Mr. Daniels. Mr. Chairman, Senator Campbell, thanks very
much. Let me just make two preliminary comments excerpted from
the testimony that we will submit for the record.
First, I would say with regard to our budget, and I would
assert that this is so for the entirety of the budget the
President has submitted, we believe and the President believes
this is not a ``business as usual'' approach, and even though
through the valor and leadership of our armed forces and those
working on homeland security, the world looks very different
than it did 6 months ago. The President is always quick to
remind everybody this will be a very long struggle and we hope
that Congress, as it looks at this budget, will continue to
bring a mindset to their deliberations that is constantly
mindful of the differences and of the need to avoid business as
usual.
When we put OMB's budget together, we delivered to you a
dollar figure that is flat with last year. In part, this is
because we do believe we can operate more productively and do
more work with the same amount of money. In part, it is to
reflect solidarity with the policy I just talked about.
The only other comment I would make is to thank you, each
of you, for bringing up what is to some a small or obscure
item. This is the matter of full cost accounting in the Federal
budget and it is reflected in at least two ways in the budget
submissions. For example, we are proposing that the full cost
of retiree benefits be reflected in those programs for which it
is inexplicably not reflected now. For most of our retirement
programs, the FERS and the military, for instance, the full
cost is shown in the accounts where the costs are created. But
for historical reasons, not so for all accounts, and we would
like to see that done.
I appreciate your looking at this issue and mentioning it
this morning. If there was ever a year in which events have
reminded us of the value and importance of transparency in
accounting and of not having hidden costs around an enterprise,
this has been that year and we would like to get this cleaned
up.
I am a little disturbed that as I understand the resolution
being debated at this very hour by the Senate Budget Committee,
they would not accept that reform, would continue to leave the
costs hidden, and would, worse yet, take the $9 billion from
the mandatory to the discretionary side and spend it on other
purposes. So we will resist that idea and try to talk them out
of it, but we appreciate your looking at it and we hope you
will look at it sympathetically when we are done.
Senator Dorgan. Mr. Daniels, thank you very much.
[The statement follows:]
Prepared Statement of Mitchell E. Daniels, Jr.
Mr. Chairman, Senator Campbell, Members of the Subcommittee, I am
pleased to be here this morning to discuss the President's fiscal year
2003 Budget request for the Office of Management and Budget (OMB).
introduction
Let me start by noting that my colleagues at OMB and throughout the
Executive Branch have worked hard to present this Congress and our
fellow citizens with a very different budget for fiscal year 2003. I
would like to bring to the Committee's attention some new features
which I hope will now become part of your annual expectations and
deliberations.
This budget takes seriously the assessment of government
performance, and its relationship to future spending. Activities where
effectiveness can be proven are maintained and often reinforced; those
that demonstrably fail, or can make no showing of effectiveness, in
many cases are looked to as sources of funding. The days when programs
float along year after year, spending taxpayer dollars with never a
showing of reasonable results or return, must give way to an era of
accountable government. This and all future budgets must no longer be
permitted to answer only ``How much?'' They must also answer the
question ``How well?''
This innovation responds to decades of calls by good government
advocates. While long overdue, it is essential at a time when the
physical safety of Americans requires that the Federal Government take
on many additional, expensive tasks. It would be unconscionable to fund
poorly performing programs given the realities of our economy and
homeland security needs.
two-front war against terrorism
Mr. Chairman, we presented a budget for a two-front war. It
proposes substantial increases, those the President believes necessary
to deliver on the paramount duty of the Federal Government, to secure
the safety of the American people.
Last year's budget began the reconstruction of a neglected national
defense base, and that project continues now with new urgency. Funding
for the category of activities we now term ``Homeland Security'' will
double under the President's plan: airline security, first responders,
bioterrorism, border security and preventive law enforcement, are all
scheduled for major increases as recommended to the President by
Governor Tom Ridge.
We have worked closely with the Office of Homeland Security to
define and budget for these activities. We will guard against and
oppose efforts to divert funds from Homeland Security requirements or
to misclassify unrelated funding under Homeland Security's priority
status.
Winning our two-front war is not optional, and will be expensive.
As in other times of national conflict, tradeoffs will be required. We
propose a very reasonable level that allows spending not related to the
war or homeland defense to grow by around 2 percent. Within this ``Rest
of Government'' category the President proposes $355 billion in
spending. It must be noted that the activities it encompasses have
enjoyed rapid funding increases during recent years, growing by an
average annual rate of more than 8 percent since 1998.
Within this enormous sum, it is both possible and desirable to
increase high priority programs of proven effectiveness. Dozens of
programs across the government are scheduled for growth based on
demonstrated results.
measuring performance and delivering results
For decades, good government advocates have called for systematic
measurement of government's performance, and its reflection in the
allocation of resources. In 1993, Congress passed the Government
Performance and Results Act (GPRA), which was intended to implement
this reform, but the potential of GPRA has been only partially
realized. The President's budget for 2003 responds to Congress'
instruction, differentiating where the facts are available between
programs that work and those that do not. Many programs of proven
effectiveness are strengthened by shifting funds from those which can
make no proof of performance.
A serious attitude toward performance is long overdue. It takes on
special urgency at a time when the demands of national security assert
a heavy claim on our resources. We hope the findings of this budget
will trigger interest in performance assessment, and bring forth much
new information about that large majority of programs for which we have
no useful data at all.
full funding for federal retiree costs
In the interest of both accuracy and sound management, the
President's fiscal year 2003 Budget takes a major step toward full cost
accounting of programs and departments by recording the costs of health
and retirement benefits at the time and in the accounts where the costs
are borne. At long last, the true cost of these programs will be
visible, and managers will have full incentive to control the costs of
additional personnel.
This budget corrects a long-standing understatement of the true
cost of literally thousands of government programs. For some time, the
accruing costs of the Federal Employee Retirement System (FERS) and the
Military Retirement System (MRS) have been charged to the affected
salary and expense accounts, but agencies have only paid a portion of
the costs for Civil Service Retirement System (CSRS) employees and a
few other small retirement systems. A large portion of the liability
has been unfunded and the remainder hidden in OPM's mandatory accounts.
The full cost of accruing benefits should be charged to the affected
salary and expense accounts, so that choices for program managers and
budget decision-makers are not distorted by inaccurate cost
information.
To state the obvious, if Congress chooses to reject this reform,
the Administration will strongly oppose the $9 billion in requested
discretionary appropriations from being seized and spent on other
programs. These resources need to be available for Federal employee
retirements one way or another, but obviously we do not intend for them
to be spent twice.
omb budget
For fiscal year 2003, the Office of Management and Budget requests
budget authority of $73.5 million. This request is the same as the
fiscal year 2002 enacted level, adjusted for the Administration's
proposal to fully fund accruing Federal retiree costs. The OMB budget
request will provide 510 full-time equivalent (FTE) positions, 17 below
the fiscal year 2002 FTE level of 527.
The Office of Management and Budget assists the President in the
development and implementation of government-wide budget, fiscal, and
management policies. As the chief management and budget office of the
Executive Branch, we have a special obligation to adhere to budgetary
discipline and maximize productivity. As you can see from our budget
request for fiscal year 2003, OMB is committed to maintaining budgetary
restraint while funding new initiatives including emphasis on
government-wide information technology and E-Government.
As it has for agencies across government, OMB has compared its
management capabilities and organization against the standards for
success of the President's Management Agenda. The baseline evaluation
as of September 30, 2001 indicated that there is work to be done at OMB
in each of the five areas targeted by the President for government-wide
improvement. Our particular focus will be to better manage OMB's human
capital and effectively harness information technology.
consolidated executive office of the president appropriation
As you know, the Executive Office of the President (EOP), despite
the name, has never been budgeted for as a single entity and is not
currently covered under a single appropriation. As part of the fiscal
year 2003 Budget, the Administration is again requesting a
consolidation and financial realignment for the EOP. The initiative
would consolidate 15 EOP components and fund them with a single
appropriation for a total of $336.2 million.
This will give the President maximum flexibility in allocating
resources and staff in support of his office and is intended to: permit
a more rapid response to changing needs and priorities; allow the
President to address emergent national needs; produce greater economies
of scale and other efficiencies in procuring goods and services; and,
enhance accountability for performance. This initiative will allow the
President to align EOP resources to meet changing national priorities--
something he cannot do now under the current account structure.
electronic government (e-gov)
I'd like to spend a little time discussing an item that is
important to the President and is under the purview of this
subcommittee--``The E-Gov Fund.'' Let me start by highlighting the
recent Council for Excellence in Government Survey that found 70
percent of Americans favor investing in E-Government to make government
simpler and more accessible. The President is committed to addressing
this and has proposed to accelerate efforts to implement electronic
government through his Management Agenda and E-Government Strategy.
The Vice President recently launched the newly designed FirstGov
web site and the Administration released its E-Government strategy.
There are four target audiences for this endeavor, each providing
opportunities to transform delivery of services: individuals,
businesses, other governments, and Federal employees.
This strategy is primarily being implemented through 24 multi-
agency E-Government initiatives that will lead to significant
improvements in productivity. These initiatives will transform
government operations by making citizen's needs paramount. Each of
these initiatives will result in the elimination of duplicative agency
IT programs and savings could reach several billion dollars. For
example, FEMA is leading an initiative to create a one-stop portal with
information applicable to public and private organizations involved in
disaster preparedness and response. Accurate and timely data from this
project may result in saved lives and reduction of property damage; it
may also save millions of dollars by eliminating redundant programs and
agency costs.
The fiscal year 2003 Budget seeks $45 million for the second
installment of this fund, totaling $100 million over the next 3 years.
OMB would manage allocations from the fund housed in an account in the
General Services Administration. Projects will be selected that create
savings by replacing redundant efforts, and that have viable business
cases and implementation plans.
We appreciated this subcommittee's support of this initiative last
year and hope it will continue to place a high priority on funding
innovative interagency projects that would deliver services directly to
the public, or create the infrastructure to support such delivery. We
look forward to continuing to work with you and your staff in this
important initiative.
conclusion
The OMB budget request for fiscal year 2003 reflects the
President's commitment to hold down spending levels in light of our
Nation's new priorities in the war against terrorism at home and
abroad.
I want to thank you for the opportunity to meet with you today to
discuss the OMB budget request. I look forward to working with the
Committee. I would be happy to address any questions the Committee may
have on the OMB budget or other budgetary issues.
Senator Dorgan. Let me call on Mr. Reed if you have an
opening statement.
Senator Reed. I do not.
HOMELAND SECURITY
Senator Dorgan. Once again, let us thank you for appearing.
I have a series of questions.
Let me begin by asking about the Office of Homeland
Security. My colleague, Senator Campbell, indicated an interest
in that, as well. I note that the Office of Homeland Security
has asked for a substantial amount of additional money, I
believe $38 billion, in funding for this coming fiscal year.
There is also a proposal floating around, I understand from
some reports that it is now being considered by the President,
to consolidate agencies, such as the Customs and the
Immigration Services. Can you give us some information about
what is happening inside the administration in consideration of
consolidation and how that consolidation might work?
Mr. Daniels. The President has made no decision. Governor
Ridge has been, I think, very open in indicating he is
examining this issue and has studied it carefully with other
administration officials to see if there are better ways of
arranging the Federal structure to make our borders more
secure. I will not go into the deliberations except to say that
they are proceeding and I think the President is considering
some recommendations and you may hear more about it soon.
Senator Dorgan. Let me just say, I oppose the consolidation
of Customs and INS. I think that we ought not visit on Customs
the problems of the INS at this point. Last week's granting of
a visa to Mohamed Atta, or at least the mailing of the visa
received in Minneapolis for Mohamed Atta, suggests very
significant problems. We have known for some long while that,
for example, the INS, when someone flies into this country and
overstays their visa, they by and large do not have the
foggiest idea that someone is here illegally at that point, and
so we have got big problems in the INS that we have to resolve.
I do not think that it makes any sense to combine the Customs
Service with the INS at this point and I think the President
would find significant resistance in the Congress to a
suggestion of that type. I hope that you might take that back.
Also, I should say that the Customs function is very
different than the Immigration Service in many ways. Customs
raises revenue for the Federal Government, it is the second-
largest revenue raiser next to the Internal Revenue Service,
facilitates the flow of trade, and prevents illegal goods from
coming in. But I think that proposal, if recommended by the
administration, will meet with some very stiff resistance, and
justifiably so. I will be one of those that will be involved in
resisting it.
Let me ask about the full cost accounting, as you indicated
that you recommended, and you suggested that perhaps the Budget
Committee will not accept that and use the money in other ways.
But is it not the case, Mr. Daniels, that the manner in which
it was portrayed in the budget really gave us a false sense of
how you were funding agencies? Do you agree with my statement
when I started that the trumpeting of an increase in the
Customs Service is really not an increase at all when you
eliminate the change that you suggest with respect to the full
cost accounting?
Mr. Daniels. I do not think I do, but I will have to go
back and have a look. Based on the recommendations of Governor
Ridge, we provided substantial increases in the Customs Service
and I do believe they result in a true, real increase, even
absent the adjustment we are talking about, but I will go back
and have a look.
Senator Dorgan. Would it surprise you to find out that when
you take the cost accounting adjustments out, that Customs
actually will end up with less money? I mean, you indicated
that times have changed. This is not budgeting as usual, and
clearly, when you talk about homeland security, one would
expect a boost in real funding for the Customs Service, as an
example.
Mr. Daniels. I will go back and have a look. My
recollection is that the 2003 proposal recommends substantially
more agents in the Customs Service as well as new technology,
too, so I do not have the same understanding's.
ADMINISTRATION'S PAY POLICY
Senator Dorgan. Let me ask about the issue of pay parity.
Can you review with us the recommendations on pay increases for
the military and also for the rest of the Federal Government?
Mr. Daniels. Yes, sir. We looked very carefully at this,
again, recognizing that this is wartime and that everything had
to be examined in that light and determined to recommend a pay
increase of 2.6 percent for civilian employees. I would note
that this is substantially more than many Americans in the
private sector will be receiving this year. If we are coming
out of recession, that will probably still be the case. So we
thought 2.6 percent was adequate and something that, at a time
of war, civilians in Federal service would find very fair.
Then the second question became whether there should be any
premium or additional compensation for men and women in uniform
who run unusual risks for our country, and the President
decided, yes, it would be appropriate to do something
additional for our servicemen and women and that led to a 4.1
percent recommendation for them.
We think both are fair. We think 2.6 percent for civilian
employees as a general rule is fair and that some premium in
recognition of special dangers and special burdens that the
uniform personnel carry is warranted.
Senator Dorgan. Are there any problems with the retention
of Federal workers with the 2.6 percent? Are there general
retention issues in any of our Federal agencies, and if so,
what are they and do you see this recommendation exacerbating
that?
Mr. Daniels. There are some retention issues. I do not
think they center around pay at all. I think sometimes they
center around the quality of work, they center around the
severe handicaps we place on managers in Federal service who
are not permitted to manage in many of the ways that their
skills and professional aspirations would allow them to
elsewhere. So I do not see these as the same issue at all.
We have retirement issues to address in the Federal
service, large numbers of people who we are not having trouble
retaining, but they are due to retire soon, and so that may be
a larger issue.
OFFICE OF HOMELAND SECURITY
Senator Dorgan. Does Governor Ridge have operational
responsibility in the executive branch of Government, and if
so, what would that be?
Mr. Daniels. He does not. He is an advisor to the
President, certainly a coordinator in much the same way that
the National Security Advisor, for example, is a coordinator of
policy on the international side.
Senator Dorgan. So in the area of recommending funding for
homeland security, the $38 billion that Governor Ridge has been
moving around the country talking about, meeting with various
folks, speaking to the mayors, speaking to the governors and so
on, saying that the administration has developed a budget of
$38 billion, what role would Governor Ridge have had in that
recommendation?
Mr. Daniels. He would have looked at the suggestions of
individual agencies, coordinated among them on responsibilities
that they share, and where duties overlap, as, for example,
they do at the border, where we have multiple agencies all
conducting inspections, sometimes side by side, it is his job
under the Executive Order to pass judgment, to advise the
President that he can certify that the resources proposed are
adequate to the job. I think that is his prime responsibility
and that he sees that as his primary responsibility.
Senator Dorgan. So on the issue of the plan for homeland
security, because Governor Ridge is not available to testify
before the Congress, we do not have access to him to evaluate
what is the broader plan envisioned by the Governor. I assume
the President put him in charge in order to have someone in
charge, and you say it is not an operational role yet if we are
to evaluate the ``plan'' for national security, homeland
security in this case, we shall try to derive from those 50
different sources and 50 different people who will come and
testify what their piece of the plan is and aggregate that to
the $38 billion because we are not able to get the head of
homeland security to come talk about the broader plan. Do you
think that is reasonable and do you support that approach?
Mr. Daniels. It would not be if that was your only
recourse, but I think you will want to do both. Governor Ridge
has had scores of meetings with Members of Congress. He is
going to be available. I know he is very sensitive to this
question and wants to be available in a variety of formats.
Lately, as I understand it, the larger issue visible to our
people is they have been holding briefings and very few members
have availed themselves, I am told only about 18 or 20 attended
the last session that they put on.
This only resolves to a question of sworn testimony, as I
understand it, and I will refer you to the White House
Counsel's Office for the legal particulars, but it is a
longstanding policy that advisors, such as the National
Security Advisor to the President, who are not Senate
confirmed, do not come for sworn testimony. Clearly, the
Congress is entitled to understand Governor Ridge's thinking
and his views about the adequacy of these resources and I know
he is willing to make that claim to you in your office or in
groups or at the White House or elsewhere.
Senator Dorgan. Mr. Daniels, late last year we invited
Governor Ridge to come and testify before this subcommittee and
he indicated that he was not free to do so, so we actually do
not have the opportunity to have a public discussion with Mr.
Ridge about the ``plan'' of what homeland security is about,
how much it will require this year, how much it will require
next year, how we work with the administration to coordinate
that and to fund it. So, I think we are at somewhat of a
disadvantage.
I guess I do not feel that the creation of this new
position is equivalent to the National Security Advisor. It is
quite clear that Mr. Ridge is playing a very different role
with respect to homeland security than Condoleeza Rice is
playing with respect to the National Security Council.
But at any rate, I guess you have answered the question. I
do not expect you to come up here and say that you disagree
with the President and Governor Ridge. You are not wanting to
say that at this moment, are you?
Mr. Daniels. It was not my intention, no, sir.
Senator Dorgan. I have some other questions, but let me
call on Senator Campbell.
Senator Campbell. Thank you, Mr. Chairman. I would defer--
if Senator Stevens has a tight schedule here, I would be glad
to defer to him first. I do not know how your schedule is.
Senator Stevens. Thank you very much. I just had one
question for our friend, if I may, and then I think we can
defer the others, if I may. May I proceed?
Senator Dorgan. Yes. Senator Stevens?
Senator Stevens. Good afternoon. It is nice to see you.
Mr. Daniels. Hi, Senator.
FOREST SERVICE EMERGENCY FIREFIGHTING FUNDS
Senator Stevens. Last year, we provided $280 million for
the Forest Service for emergency money. Of that, $200 million
was to repay accounts from which you had to borrow to finance
the 2001 fire season, which was a bad one, and I am told that
you released those funds, OMB did, and for that we are all very
grateful.
The remaining $80 million was for fire prevention, not fire
fighting, and it was specifically addressed to reducing the
fuel loads in the national forests. I am advised that you have
indicated those will not be released until July 1, which is the
height of the fire season, particularly in my State. Included
in that $80 million was an estimated $6 million to work on the
forests of South Central Alaska and that is why I have come to
address this question to you today.
This is an area that is probably the largest of all the
forests. It is not all within the Forest Service, per se, but
it is primarily on Federal land. It is ravaged by the spruce
bark beetle. That beetle literally sucks the juice right out of
a tree. It kills it and it leaves the tree standing but dead,
just completely dead.
In the area from Homer, which is the tip of our Kenai
peninsula, to Wasila, which is right up near Mount McKinley,
there are four Federal conservation systems, the Kenai Fjords
National Park, the Kenai National Wildlife Refuge, the Alaska
Maritime National Wildlife Refuge, and the Chugach Forest,
which is the second largest national forest in the country.
This is an area of 2.5 million acres of Federal forest and it
also, however, contains half of Alaska's population. The cities
are interspersed through this magnificent forest country. The
area is four times the size of Rhode Island. It is really
larger than many States.
It literally now, because of information we have received
from the Weather Bureau, a ticking bomb. Conditions there are
very bad. We are told that the nation itself will have a near
record drought this summer and Alaska is going to be the worst
hit. The East Coast, I am told, will have the worst drought
since the depression days, but we are predicted to have an
extremely severe drought, is what it is called.
This money was not to fight fires but to prevent them.
Because the prevailing northerly winds there, if the fire
starts anywhere on the peninsula, it can come north very
rapidly. Some time ago, we had what we called the Miller's
Reach fire. I flew over it with the head of FEMA at that time
and you could tell from the helicopter that the fire was
literally following a path, the serpentine path of the dead
timber killed by the beetle.
We have an estimate that even a small fire of around 3,000
acres right now would cause $350 million damage in the
Anchorage area alone. We believe that this fire, if it starts,
can only be prevented by stepping in now and removing some of
that timber and to really cut paths so that it cannot jump the
way it has in the past.
There was 30,000 acres burned last summer. As a matter of
fact, I was there and went over and watched it, but thank God
we had a rain and that fire stopped. If we have a drought this
year, I fear that the half of our State's population that is in
the path of this fire is in jeopardy. I have come to ask if you
would consider looking at this again to see if it would be
possible to release some of the funds for fire prevention
rather than fire fighting. I am told the date that was selected
by your people was, in fact, the prediction of when the fire
fighting would start, and we do not dispute that. If a fire
starts, it will be sometime in early July, but we could act
before then and prevent a substantial amount of damage if we
got after that spruce beetle kill now.
Would you take a look at that and see if it is possible to
release some funds to fight fires? It is not a lot of money,
really, $6 to $8 million out of the $80 million. It would take
care of the initial steps that are necessary to reduce the fuel
load there. It is all Federal land. Now, this is Federal land
that we are asking that we work on. I would hope that we would
find a way to do that. That is why I would like to ask you to
take a good look at it.
Mr. Daniels. I think we will do more than that, Senator. I
think we will get this addressed quickly. I became aware of
this issue through your advocacy and also some Western
Governors recently. We did look and the news reports are
accurate, that the President will be designating the entire
amount of $346 million, including the two amounts you talked
about as ``emergency funding,'' as the statute requested. We
will move quickly on the $200 million, or immediately, I would
say, and on the $80 million or at least those parts of it that
meet the description of fire suppression like the piece you
just talked about. So I think we will have this solved for you
in short order.
Senator Stevens. I have another question that concerns the
Corps of Engineers and a specific project. I will just submit
it for the record, if I can, and ask for your reply.
Mr. Daniels. Thank you.
Senator Stevens. Thank you very much.
Thank you, Mr. Chairman.
Senator Dorgan. Thank you. Senator Campbell?
Senator Campbell. First, I would like to associate myself
with the last few comments of Senator Stevens. Out West where
we come from, believe me, it is low snow pack and some real
dangers, and if that money for prevention is not released, I,
frankly, think we are going to see millions of acres go up in
flames. I know the administration does not want that and
certainly we from the West do not want that, either.
EOP CONSOLIDATION
I want to ask you a few questions, but while Senator
Stevens was speaking, I was just reading through your written
presentation here. On page three, the administration is again
requesting a consolidation of the President's appropriations.
That did not meet with a lot of support the last time around.
You probably know that, but I thought I would mention that to
you.
U.S. POSTAL SERVICE
Let me ask you just a couple of questions here. We provided
$500 million to the Postal Service in last year's emergency
supplemental for their biohazard and remediation project. Those
funds were not available for obligation until the Postal
Service provided a comprehensive plan, which they have done on
March 7, as I understand it, but I understand that you need an
additional $87 million. Is that $87 million being requested of
this committee or going to be requested as part of the spring
supplemental?
Mr. Daniels. Senator, it is going to be part of the
supplemental. I spoke to the Postmaster General and then he
spoke also to Governor Ridge, to whom we look, again, for
guidance in these matters. Among us, we have agreed that that
is appropriate. This will allow the completion of the cleanup,
as I understand it, and the safeguarding of the mail that
became necessary after the bioterrorism events.
I think, by the way, there is a good news story here that
you probably already noticed, but hats off to the Postal
Service who took an open stance toward technology, identified,
as I understand it, a detection technology that is apparently
going to be very effective, that will allow the mail to move
more quickly without some of the problems that a total
irradiation strategy would have created, and, incidentally,
that is much less expensive. So I think they are to be
commended for that, and as I understand it from the Postmaster
General, this amount will allow us to move down that path.
HOMELAND SECURITY FUNDING
Senator Campbell. I hope so. Since you mentioned homeland
security and Governor Ridge, what was the process used to
determine funding, what funding is associated with homeland
security and what funding is to allow the agency to continue
what they were doing before September 11?
Mr. Daniels. This goes, I guess, in part to the question of
definitions. It is a very, very important question, and in our
budget we do list those things that Governor Ridge's office has
to this point defined as part of homeland security strategy.
That may evolve over time. There may be new measures or new
areas that we all agree ought to be considered part of that,
but----
Senator Campbell. How did you come up with the number of
$37.8 billion in the President's budget?
Mr. Daniels. We took what for OMB is a little different
approach, which was to say we did not start with a number and
work backwards. We did not say, make it all fit within a
certain size. The President was very clear that if either front
of this war--either defeating terror abroad or defending
Americans in their homeland--was involved, we were going to do
what it took and we were to include those things that were
reasonably related and necessary to those tasks. This just
happened to add to $38 billion, about a 111 percent increase
over even the enhanced levels of last year. Congress, of
course, strengthened homeland security during last year, pre-
and post-9/11.
So, it just came to that amount of money and Governor Ridge
and his office reviewed all of the proposals, and there were
many that were not finally included, but the Office of Homeland
Security certified that these were appropriate and sufficient
for the moment.
Senator Campbell. I see. Okay. Thank you.
FEDERAL EMPLOYEES COMPENSATION ACT (FECA) PROPOSAL
One last question, Mr. Chairman. Mr. Daniels, I would like
to know a little bit more about the proposal to require
agencies to reimburse the Department of Labor for the FECA
costs. As I understand it, this requires some legislative
change, but you want it on this bill, an appropriation bill?
Mr. Daniels. We think this is the available vehicle. What
we said earlier about seeking these changes through the
authorizing process is quite appropriate and correct. And, we
have, with regard to the other full cost accounting measures,
sought support from the authorizing committees to do that. This
proposal is very much akin to the one related to full cost
accounting for Federal retiree benefits.
We think the costs ought not be hidden, that they ought to
be visible for two reasons, one, so that we can examine them
and weigh them fairly in the open, and secondly, so that
managers have the right incentives. If you are going to add
another employee, you ought to know exactly what that employee
costs. In the case of the retiree situation, we hide about 10
percent of the cost of a GS-15. It looks like a $133,000 cost
to the manager the way we do it now--this is somebody who is
not in the FERS system. The real cost is about $148,000. In the
FECA situation, the numbers are smaller, but it is the same
principle.
Senator Campbell. Thank you, Mr. Chairman. I have no
further questions.
Senator Dorgan. Senator Reed?
LOW-INCOME HOME ENERGY ASSISTANCE PROGRAM (LIHEAP)
Senator Reed. Thank you. Welcome, Mr. Daniels. OMB
continues to withhold $300 million in LIHEAP funding,
contingency LIHEAP funding. Last September, 23 Senators wrote
to you and asked you to release this money. The majority of
Governors have contacted your office, including Governor Bush
of Florida, Governor Shaheen of New Hampshire, and many others.
We have seen at the local level an increase in
applications, and as we understand, the LIHEAP demand is a
function not just of the weather but also of the economic
circumstances of people. We are coming through a recession. The
numbers in the GNP might be turning around, but unemployment
grows, particularly affecting low-income and minority workers
who are the typical recipients of LIHEAP support, along with
seniors.
I wonder if OMB is ready and willing and able to quickly
release those funds.
Mr. Daniels. No, sir, we are not. The emergency LIHEAP
money is intended for unusual and extraordinary energy costs.
The combination of low energy prices and a mild winter has led
to an extraordinarily low energy burden this year, ranging from
the West to the East, as I recall, from 28 to 41 percent lower
energy costs per household. It is very interesting to me.
Translated to an average income or an average family, this is
about a $400 savings, for which we should all be grateful.
You are right that economic circumstances, of course, play
a role, but LIHEAP funds have never been released for that
purpose. Our view is that that would not be a useful precedent
to set. Most of all, I would say that we are very mindful that
there is a summer ahead. Energy bills can be a real problem in
a hot summer. We may have that. We would like to have that
money in reserve so we could move immediately if energy prices
spike or if energy costs go up.
Senator Reed. Well, again----
Mr. Daniels. I am sorry, Senator. Let me add one other
thing----
Senator Reed. Go right ahead, Director.
Mr. Daniels [continuing]. Because we are very alert and we
have read carefully the reports that you have brought to our
attention and to the attention of others. We have been able to
work with a number of States to allow them to use, for example,
unspent TANF or welfare funds which are available in large
amounts in, many States. And we have worked with many States to
provide the flexibility or to encourage them to use those funds
to address individual energy problems where there are pockets
of need.
Senator Reed. Mr. Director, again, I think with the growing
number of people qualifying--the applications do not depend on
the price of gasoline at the pump or heating oil going into
your home. They depend upon your economic circumstances and
whether, relatively, you are falling behind in your fuel bills,
and that seems to be a growing phenomenon, not one which is
going away. So I would ask you--you have been pretty clear, but
I would ask you to think again, if you would.
Mr. Daniels. We will do so. We are watching it all the
time.
Senator Reed. Thank you, Mr. Director.
HOUSE BUDGET RESOLUTION
Let me raise another issue. I understand that House
Republicans in doing some of their budgeting are considering a
5-year budget window for their tax cuts and a 10-year budget
window for Medicare. Regardless of the substantive arguments
about increasing or cutting taxes or increasing or cutting
Medicare, does it not make sense to have a consistent measure
to conduct this analysis?
Mr. Daniels. I think it probably does. I think that, as our
budget reflects, we believe 5 years is probably the more
appropriate window. Just because we have proven now, especially
in the last few years, that nobody can predict very accurately
even to 5 years, let alone beyond, and so we proposed a budget
at 5 years, which was the practice until about the mid-1990s.
In fact, until 1971, I think it was, we only tried to forecast
3 years in advance. But the idea of using the traditional time
frame, I think has a lot to recommend it.
Senator Reed. Thank you, Mr. Director.
ERGONOMICS RULE
A final question. It has been a year since the ergonomics
rule was legislatively repealed. The Secretary of Labor has
indicated that she has been working very hard on preparing a
rule that was announced almost immediately after the
legislative repeal was enacted. It has been many months now.
Can you give us an insight as to what the status of this
ergonomics rule is?
Mr. Daniels. I cannot tell you much more than you have just
recounted, Senator. It is certainly true that the Secretary has
worked hard on it. She has discussed its progress with others
in the administration over the last month or two. But we have
not received one for review at OMB and I do not know when to
expect it.
Senator Reed. One of the things that is difficult in terms
of estimating the progress of the rule is that the Secretary
has not as yet come up to testify before the committee. I
understand that the rule is not before OMB. You are not in a
position to testify. It seems to fall into the void.
I would hope that you might communicate to the Secretary
that it would be helpful to us if she or someone appropriately
could come formally before either this committee or the
Committee on Health, Education, Labor, and Pensions to discuss
the status of the rule. Again, I heard almost immediately from
many of the people who opposed the rule and voted for its
repeal that this rule would be forthcoming.
Mr. Daniels. I will take that back.
Senator Reed. Thank you, Mr. Director.
Mr. Daniels. Yes, sir.
EOP CONSOLIDATION
Senator Dorgan. Mr. Daniels, let me ask you about a couple
of additional items. One is the item raised by my colleague,
Senator Campbell, of consolidation. As you know, that proposal
was not met with favor last year. I was one of those who
opposed it.
You proposed consolidating 15 different components of the
Executive Office of the President and fund them with a single
appropriation of something over a third-of-a-billion dollars.
Tell us why you think that is necessary, with the backdrop of
understanding that we believe it would provide less oversight
from the standpoint of the Congress.
Mr. Daniels. Well, I think it is a little silly the way we
do it today. I mean, the Government will not come to a halt and
the sky will not fall if we continue to micromanage the Office
of the President, but to us, it is a small example of the lack
of freedom to manage that afflicts the entire government. There
are many larger examples that probably have more negative
impact.
I am sorry the committee did not support the proposal last
year. We had a lot of support, in fact, but when it came to
you, Mr. Chairman, and you have the power of life or death over
such an idea, we were unable to persuade you and I wish we
could have.
We have under secretaries and assistant secretaries all
over the Government who have greater flexibility over more
dollars than the President of the United States does, and the
idea that he does not have the ability, as circumstances
change, to pick up a head count or a few dollars from the
Council on Environmental Quality, let us say, and move it to
the Council on Economic Advisors or vice-versa, I think is a
little senseless. To us, it is just a common sense reform that
we wish you would permit, but we can muddle through if it does
not happen.
Senator Dorgan. Would it surprise you to know, when you use
the term ``micromanage,'' that there are a fair number of
agencies that suggest that is the case with OMB, micromanaging,
but I suppose that is all in the eye of the beholder.
U.S. CUSTOMS SERVICE
Let me ask about Customs user fees. You are proposing $250
million in Customs user fees and submit the budget as if the
Congress has approved them. As you know, the Congress has
traditionally rejected those fee increases. I guess the
question I would ask is, what will be the result of Congress
again rejecting it? Where will we find the money? You are
submitting the budget and anticipating that it is a done deal.
In fact, I think Congress will reject the suggestion.
Mr. Daniels. Well, that is the way we submit all our
budgets. We do assume the passage of their components and if
something is turned down, then we look to make an adjustment
elsewhere.
I guess I would say we do believe the Customs Service needs
the resources that have been suggested, the new resources to
strengthen it and help it pursue its mission.
On the user fee front, there are some legitimate questions.
These fees have not been changed in 16 years, so to go from $5
to $11, that simply tracks the inflationary difference in the
meantime. Viewed the other way, the $5 fee that Congress
thought was fair in 1986 is worth $2 today. So it was really
just looked at, I think, as a modernization of that fee, or
those fees, after a long time.
I know that, for instance, some of the airlines would say
that what was not troublesome 16 years ago looks a little
different today because Congress has put an awful lot of other
fees into the price of an airline ticket, and that is an
interesting point. But I suppose one way to ask this question
is, if bringing this fee current with inflation is a bad idea,
maybe you should not be there at all. But that would be the
explanation, at least. It was simply a way to try to modernize
something that has not been touched in a long time.
COMPETITIVE SOURCING
Senator Dorgan. Let me ask you a question on the issue of
contracting out. Can you describe the administration's views on
contracting out? You are suggesting that you need flexibility
to do more of that. Are there, in fact, savings? How do you
describe the savings and where do you achieve the savings?
Mr. Daniels. Governments all over the world at all levels
have now achieved very well documented savings from the
selective introduction of competition into areas in which the
private sector does offer the same service that we seek to buy
for taxpayers and these savings typically run from 20 to 40
percent, depending on the service in question. So good
government advocates on a bipartisan or nonpartisan basis, I
think, have been working in this direction at all levels and in
all countries for a long time.
It needs to be done carefully. It needs to be done on the
basis of competition. Outsourcing is not the goal. Competition
and a better deal for taxpayers is the goal. We have all sorts
of places and possibilities in which the Federal Government
could get a better deal for taxpayers, either because a private
vendor wins or because the incumbent government employees find
a more efficient way to meet the competition. We really do not
care who provides the service as long as the service is
provided more efficiently.
But we are doing our own laundry, we are cutting our own
grass, we are still doing an awful lot of things in the Federal
Government that somebody out there is making a specialty of
doing all day, every day, and in the right places. We ought to
be taking advantage of that for the benefit of taxpayers.
Senator Dorgan. Let me submit some additional questions to
you on the issue of outsourcing Federal jobs. I do not disagree
that in some circumstances, it can be appropriate and has been
appropriate. In other circumstances, it simply reflects a
desire by some to get rid of Federal employees because they do
not much like the Federal Government and believe everything can
be done better in the private sector, which----
Mr. Daniels. Let me just say on behalf of the President,
and I think we are very scrupulous to always make it plain,
that is not the motivation here and we would agree with you
that it ought not be.
Senator Dorgan. Mr. Daniels, let me ask you one final
question. Do you have additional questions, Senator Campbell?
Senator Campbell. Just one.
U.S. CORPS OF ENGINEERS
Senator Dorgan. Let me ask you one final question. This is
not about your budget, but the infamous letter last week. I
have no idea how it became public, but it was all over
Congress, the letter that you wrote to the White House, the
memo that you wrote to Mr. Card and then the political folks on
the Mike Parker issue. I would like to ask you a question about
that.
I want to ask you specifically a question about General
Flowers in the second paragraph. You indicate in your letter to
the White House, ``General Flowers' statements about stopping
projects and lost jobs is totally bogus. In fact, spending the
money on the existing backlog of projects would speed them up.
I can supply detail if necessary.''
Would you be willing to supply that detail to this
subcommittee?
Mr. Daniels. We would, because I think that the important
issues here really are around the merits of how we ought to be
approaching the Corps of Engineers, and we think that the
proposal that the President's budget contains is very important
on two scores. One is that we strongly believe and recommend
that the Corps ought to confine and concentrate its activities
on its historical core mission, flood control and dredging and
locks and dams and the like, and there has been a tendency over
recent years to begin to wander off around the fringes into
marinas and waterfronts and things that really are not, we
think, what the Corps is there to do.
Maybe the larger issue is that there has been a dominant
tendency over recent years to keep adding and adding and adding
new projects, new project starts, and that has the effect of
delaying the completion of the ones already on the books. We
have a $21 billion backlog of projects that are already
started. It is going to take ten or 12 years--if we did not
start another one from this day on to finish those. We would
like to finish them, get some of the best of them onstream now
so taxpayers could start receiving the benefits that were
forecast for them.
Those are the two principal issues and we would be glad to
supply you some more of our thinking on this issue.
Senator Dorgan. On that subject, let me just say that,
obviously, the administration has every right to fire Mike
Parker or have him resign or whatever happened with Mr. Parker,
but on the subject of the statements about the projects, lost
jobs, increasing costs, General Flowers is a very distinguished
three-star general, someone I have worked with a great deal. I
have great respect for him. And the implication of your
memorandum here suggests that General Flowers was, as you say,
providing statements to Congress that were just bogus. I do not
agree with that.
I think General Flowers described the circumstances with
the projects the Corps is involved with in an accurate way and
I regret very much you have decided to do this, but I hope that
if you believe his statements were bogus, I hope you will
supply the detail to us that you suggested you would supply to
the White House.
Mr. Daniels. Okay.
Senator Dorgan. Senator Campbell?
EOP CONSOLIDATION
Senator Campbell. One last thing, Mr. Chairman, and it
deals again with this consolidated account for the executive
office. It always sounds good, I think, when you talk about
streamlining and flexibility, as you have in your testimony,
but my own view, I think shared by Senator Dorgan, is that
sometimes some departments get shortchanged if they have an
important mission, perhaps a smaller voice in the
administration, and there are also certainly some
constitutional types around here that believe that it really
erodes the authority of Congress to oversee the expenditure of
funds.
I just wanted to ask one thing, though. You used the number
$336.2 million under a combined consolidated executive office.
How does that compare with the amount we appropriate for the
full 15 separate entities?
Mr. Daniels. You mean how does it compare with last year's
number? I can tell you OMB, of course, but my recollection is
that the total is about a 1-percent increase, excluding
additional homeland security requirements.
Senator Campbell. Increased by consolidating?
Mr. Daniels. Well, not by virtue of the consolidation, but
if you were to roll them all together and compare them to the
individuals from last year, I think it came to about a 1-
percent increase not including homeland security. OMB's was
zero, but some of the others were several percent. Nearly all
of the other increases were due to additional homeland security
requirements.
We did not suggest, as I recall, that you would effect a
savings by virtue of rolling them all together. That might
happen over time, but that was not really the intent. It was
simply to have a little more flexibility to shift people and
resources as good management seemed to dictate.
Senator Campbell. I understand. Thank you, Mr. Chairman.
Senator Dorgan. Mr. Daniels, it is not new for us to hear
from someone who hears a government agency the message, ``Give
me the money and get out of the way.'' That is not a new
message. But you know our interest. Our interest is in trying
to have accountability and make sure that we have oversight
responsibility that we can achieve.
My view of the consolidation has not changed at all. I
think you will admit that this subcommittee has been very
helpful to the administration on individual requests throughout
the years. As the administration needs the flexibility, we
provide flexibility. But I have not changed my view on the
question of consolidation.
Mr. Daniels. Let me say to you, Senator, that so be it. I
mean, we have made the best case we can. As I say, the earth
will not tremble if we do not get this changed. I would hope
that you would, however, or this committee would look hard at
some of the bigger questions. It would be very, very helpful--
forget the White House--across the Government if we had even a
little more ability to reprogram money within accounts, even at
the margins in order to meet the shifting circumstances that
happen in a fiscal year.
Senator Dorgan. But we do that all the time. We are always
receiving requests here and have been enormously helpful. I
mean----
Mr. Daniels. Some subcommittees are and some are not. I am
just saying that--and there are other examples I could give,
but in general, I think we do face an issue in terms of
delivering to the Congress what it rightly expects, more
efficiency and a better managed government, and also an issue
in recruiting talented people to come into Federal service
that, in many ways, the ability of managers to manage is
constrained, and this is the bigger question we would like to
work with you on as time goes forward.
Senator Campbell. If I might interject, Mr. Chairman, since
we have worked together on this committee, I do not ever
remember a time that we have refused reprogramming money when
it has been asked for, do you?
Senator Dorgan. Well, we have delayed a time or two, but we
have ultimately never refused.
Senator Campbell. Yes.
Senator Dorgan. The point is that we have been enormously
helpful to agencies, forcing them to make the case if they can,
and they have been able to make the case that here is why they
need to move some money and we have been very helpful to allow
them to do that, but I still feel very strongly about oversight
responsibility.
And again, if you will come back to us with the details
regarding General Flowers.
Let me again urge you, especially with people like General
Flowers, who I think is a very distinguished person, the
implication of this letter is to throw him into a political
basket someplace in terms of the convivial attitude you
suggest. I hope you will not do that. That is----
Mr. Daniels. Let me just say, first of all, I meant no
personal disrespect to the general, whom I have not had the
chance to meet. Secondly, that note fired off in the course of
a day got out accidentally. It was never intended to embarrass
him in any way. We cannot find justification in the facts as
they were reported. All we had is what he was reported to have
said. We will show you why we have a different view, but----
Senator Dorgan. Well, you had a transcript, though.
Mr. Daniels [continuing]. We certainly meant no disrespect
to him.
Senator Dorgan. But you had a transcript. I mean, it is not
as if you were relying on third-hand reports. You fired a memo
off as a result of a transcript.
Mr. Daniels. That is right. We know what he said and we do
not find validity in it, but that is a different question than
whether we have a high regard for him.
Senator Dorgan. All right. Again, I take a different view.
I think what he said was absolutely correct with respect to the
job loss and the inability to fund the projects that the
Congress has approved. I mean, after all, Congress makes
judgments about these projects, approves them, and then
attempts to fund them, and the underfunding of these projects
in the President's budget was what was being discussed.
ADDITIONAL COMMITTEE QUESTIONS
Having said all that, Mr. Daniels, we appreciate your
willingness to come today. We do want to work with you on a
range of issues. We have common responsibilities and we look
forward to working with you this year.
Mr. Daniels. Thanks.
[The following questions were not asked at the hearing, but
were submitted to the Office for response subsequent to the
hearing:]
Questions Submitted by Senator Byron L. Dorgan
customs user fee
Question. Part of the Homeland Security budget the Administration
has been touting B the part that funds the Customs Service B is
comprised of a $250 million tax increase referred to as a ``user fee.''
Similar tax increases were requested by a Democratic President and
rejected by Republican Congresses.
--If Customs role in Homeland Security is so vital and I believe it
is why should it be funded by a tax increase instead of hard
dollars?
--To be able to generate sufficient revenues, the tax increase must
be authorized by July 1. What efforts have you undertaken with
the Finance and Ways and Means Committees to get this tax
increase authorized?
--COBRA user fees fund all Customs inspection overtime as well as
over 1,000 positions. The President's budget DOES NOT assume
the reauthorization of COBRA which is set to expire in
September 2003. What are the President's legislative
recommendations to deal with the loss of this funding?
Answer. These fees are collected from international travelers and
are used to pay overtime and other inspection costs incurred by the
Customs Service. These same travelers will pay the updated fee, and the
receipts from that fee will enhance Customs services. We view the
proposal as a well-justified update to an existing fee.
The updated fee would need to go into effect in the first quarter
of fiscal year 2003 to generate the funding assumed in the proposal.
The budget proposal assumes that the fee will be in place for a full
year, but that, consistent with the current fee collection procedures
(fees deposited with Customs one month after close of previous fiscal
quarter), only three-quarters of the year's collections will be
available for expenditure. The Administration has submitted
Appropriations language to enact the fee, and authorizing language is
currently being crafted to submit to the Ways and Means Committee. We
will work with the authorizers to enact the fee language.
The fiscal year 2003 budget does not reflect a specific
Administration position on extension of the COBRA fee, in either its
existing or proposed form beyond fiscal year 2003. Although no
decisions have been made on the issue of extension of these fees, we
expect to address this subject in the fiscal year 2004 budget, if not
sooner.
Question. OMB is proposing major changes in funding significant
portions of the Federal retirement system and the administrative costs
associated with the Federal Employees' Compensation Act (FECA) program.
Aside from the fact that not all agencies were informed of these
additional costs and will therefore have to absorb them, you are asking
the Appropriations Committee to perform the task of the authorizing
committee without even attempting that route to begin with.
Why did you choose this route? What is the status of moving these
proposals through the appropriate authorizing committees? What agency
is responsible for moving this legislation through the committees?
Answer. The Administration chose to advance its FECA surcharge
proposal through the appropriations process because it dovetails with
the Budget. Although the proposal amends FECA, it changes the program's
administrative funding mechanism, not the program itself. It does not
affect the Act's benefits, coverage, or claims provisions. The
surcharge is a change to the assignment of program administrative
costs, which will affect the budget of virtually every Federal agency
that has Federal workers' compensation costs. Where the Administration
is proposing substantive program changes, it will pursue them through
the appropriate authorizing committees. The Department of Labor, which
administers FECA, is the lead agency on the surcharge and other FECA-
related proposals.
Our fiscal year 2003 Budget policy was to include the surcharge
amount in each agency's funding level. We regret if some agencies--
particularly those with budgetary bypass--were not appropriately
informed of the surcharge. This proposal is not intended to generate
short-term Government-wide discretionary cost savings. It is, however,
expected to produce long-term mandatory savings, as it strengthens
agencies' incentives to prevent injuries and cooperate in efforts to
help beneficiaries return to work when appropriate.
Any confusion experienced this year would be eliminated once the
proposal is enacted. Under current law, agencies are billed by the
Department of Labor for FECA benefits that have been paid to their
employees, include those amounts in their subsequent budget requests,
and pay them once they have received their appropriation. If enacted,
the surcharge would be handled through this well-established process.
Question. It is my understanding that these proposals are in an
effort to show agencies the true costs of employees for the sake of
``good government.'' To that extent, the shifting of administrative
costs for FECA is supposed to encourage an agency to make the necessary
changes in its work environment resulting in a decrease of FECA cases.
If this is the true motivation behind this proposal, why has the
Administration yet again delayed the announcement of its ergonomic
policy?
Answer. On April 5 Secretary Chao announced the Administration's
comprehensive plan to reduce ergonomic injuries through a combination
of industry-targeted guidelines, tough enforcement measures, outreach,
research, and dedicated efforts to protect Hispanic and other immigrant
workers. This approach was developed based on input provided at the
Secretary's three ergonomics forums last year; relevant information
from a number of sources, including the information from the ergonomics
rulemaking record; and injury and illness data from the Bureau of Labor
Statistics. I want to assure you that no part of the Administration had
been stalling this initiative. In developing this plan, we sought to
carefully consider all options, rather than rushing to an ill-conceived
solution. The announcement last week is the product of this careful
consideration and we expect it to result in greater protection for
workers.
Question. This is not the first time this Administration has
proposed shifting the administrative costs associated with the Federal
Employees' Compensation Act (FECA) program into each individual agency.
You proposed this change in your fiscal year 2002 budget request, only
you removed the funding from the Department of Labor and did not fund
it amongst the affected agencies. Given your past performance and the
fact that many smaller agencies were unaware of this proposal during
the fiscal year 2003 budget, what assurances do we have that you will
continue to provide the necessary resources for these agencies without
forcing them to absorb these costs out of programmatic adjustments?
Answer. Our fiscal year 2003 Budget policy was to include the
surcharge amount in each agency's funding level. We regret if some
agencies--particularly those with budgetary bypass--were not
appropriately informed of the surcharge. This proposal is not intended
to generate short-term Government-wide discretionary cost savings. It
is, however, expected to produce long-term mandatory savings, as it
strengthens agencies' incentives to prevent injuries and cooperate in
efforts to help beneficiaries return to work when appropriate.
Any confusion experienced this year would be eliminated once the
proposal is enacted. Under current law, agencies are billed by the
Department of Labor for FECA benefits that have been paid to their
employees, include those amounts in their subsequent budget requests,
and pay them once they have received their appropriation. If enacted,
the surcharge would be handled through this well-established process.
border security agency
Question. Yesterday we learned that Governor Ridge and the
President's Homeland Security Council formally recommended to President
Bush that the Customs Service be combined with the INS and Border
Patrol under the jurisdiction of the Department of Justice.
Setting aside the wisdom of this proposal, and the lack of
consultation with the Congress prior to the recommendation being made,
what role did you and your office play in this discussion and
recommendation? Do you anticipate any out-year budgetary savings if
such a proposal ultimately was agreed to by Congress and created?
Answer. The Administration has not submitted a Border Security
proposal at this time. It is inappropriate for me to comment on such a
proposal before it is submitted or to speculate about the out-year
savings without reviewing a specific proposal.
office of homeland security
Question. Governor Ridge's operations are funded by this
Subcommittee as part of the budget of the Executive Office of the
President through the White House Office. The budget request for the
OHS operations is approximately $24.8 million.
Given the extraordinary function of the Governor and this office,
are these funds sufficient?
Answer. Yes. The requested funds are sufficient.
Question. Approximately $38 billion of the government-wide fiscal
year 2003 budget request is attributable to Homeland Security. Of that
total, $10.6 billion is directed to the goal of ``securing America's
borders.'' Other goals and initiatives are targeted at ``supporting
first responders,'' or ``defending against biological terrorism.''
--How was the level of $38 billion reached? Did you set the amount as
a target and then develop the various budgets to fit that
number? Or was the number reached as the various agency budgets
were submitted?
Answer. As the fiscal year 2003 Budget states, the homeland
security budget was calculated by capturing those activities that are
focused on combating terrorism and occur within the United States and
its territories. Such activities include efforts to detect, deter,
protect against and, if needed, respond to terrorist attacks. As a
starting point, funding estimates for these activities are based on
data that has been reported since 1998 in the Office of Management and
Budget's Annual Report to Congress on Combating Terrorism, and include
combating terrorism and weapons of mass destruction (WMD), critical
infrastructure protection (CIP), and continuity of operations (COOP).
Since homeland security focuses on activities within the United States,
estimates do not include costs associated with fighting terrorism
overseas. In addition, homeland security estimates include all funding
associated with border security and aviation security. The $38 billion
reflects the Federal Government-wide total for requested for these
activities.
Question. Is this the right mix of dollars to goals and targets?
Answer. The Office of Homeland Security (OHS) and OMB worked in
conjunction with individual bureaus, Agency Heads, and other White
House Offices, to ensure that the President's fiscal year 2003 Budget
supports the most immediate, high-priority needs to protect our Nation
from terrorists threats. Moving forward, in the National Strategy and
the fiscal year 2004 Budget cycle, OHS will continue to work with all
stakeholders--Federal agencies, Congress, state and local governments,
and the private sector--to articulate a longer-term, comprehensive
framework to make our homeland stronger, better, and more secure
against terrorism. OMB will lend its expertise to ensure that your
concern is addressed: that we have the right mix of dollars to goals
and targets.
Question. One aspect of Homeland Security, and a component of the
goal of ``defending against biological terrorism,'' is protection of
the mail. Four (Five?) people were killed in this country last year
because letters laced with anthrax were sent through the Postal System.
The Administration provided $175 million to initially address this
threat, and the Congress added $500 million. In a report just delivered
to us, the Postal Service has identified an additional $87 million for
this current fiscal year, and nearly $800 million in requirements to
address the biological terror threat and ensure the safety of the mail.
Yet the budget before us today has no additional funding for the Postal
Service.
--Does this mean that the safety of the mail is not a component of
homeland security or that it is a lesser priority when compared
with other threats?
Answer. The safety of the mail is an important homeland security
concern. In fact, the President included $87 million for the U.S.
Postal Service as part of his fiscal year 2002 Emergency Supplemental
Appropriations request (submitted on March 21, 2002). This $87 million
was identified by the Postal Service in its Emergency Preparedness Plan
for near-term needs.
The USPS Emergency Preparedness Plan covers 5 years and was
submitted well after the President's fiscal year 2003 Budget was sent
to Congress. The Plan, including the longer-term needs assessment, is
under review by my staff, the Homeland Security Council, and others in
the Administration.
pay parity
Question. Once again the President's budget seeks to preserve the
concept of pay disparity by establishing a pay tiering system. This is
sort of a ``some Federal employees are more important than others''
kind of approach to governing. It is a slap in the face to hard-working
Federal civilian employees who often work side-by-side with the
military. It says to the armed female Customs Service inspector manning
a one-person port of entry along the Northern Border that her work
product is valued less than that of a female paratrooper protecting her
country overseas. And it is a significant disincentive to recruiting
talented people who are thinking about a career in government.
--How can you support and justify this inequality in pay?
Answer. We strongly believe that both our military members and
civilian employees make significant contributions to the welfare of
this country every day. At the same time, we feel that the
Administration's fiscal year 2003 pay raise policy is responsible and
sensible. The proposed civilian pay raise is justified because Federal
civilian pay raises for 2002 and 2003 greatly exceeded projected
inflation and, for the past 3 years (2000-2002), also have exceeded the
Employment Cost Index (ECI). In addition, most Federal employees also
receive within-grade (or step) increases every one to 3 years.
Furthermore, civilian employees have benefited from a number of recent
enhancements to their compensation package, such as paying the Federal
Employees Health Benefits Program premiums out of pre-tax income and an
increase in the amount of tax-deferred contribution to Thrift Savings
Plan (TSP).
We are committed to setting pay at levels that will enable the
Federal Government to recruit and retain a skilled and dedicated
workforce. We are also committed to meeting this objective in a manner
consistent with prudent use of taxpayers' dollars. This Administration
will continue to review Federal pay policy annually, and evaluate
military and civilian pay raise policies on the basis of the particular
circumstances applicable to each.
office of financial assets control (ofac)
Question. I have been a strong opponent of the travel ban to Cuba.
I believe that it is a poor use of scarce resources for OFAC to be
tracking down and fining retired social workers who travel to Cuba for
a bike trip, instead of tracking down the assets of possible
terrorists. Secretary O'Neill came before this committee last week and
agreed with me on this point.
--Don't you agree that given the fiscal reality that we are now
facing and the fact that the Administration submitted a budget
with deficit spending for the first time in years, that we must
use these scarce resources for homeland security and anti-
terrorist activities? Would you support an effort to limit
OFAC's mission and prevent that office from using personnel and
money to enforce an outdated travel ban?
Answer. The President has stated that ``The Administration will
oppose any effort to loosen sanctions against the Cuban regime until it
frees political prisoners, holds free and democratic elections, and
allows for free speech.'' I fully support this policy, and have
confidence that enforcement of sanctions by Treasury's Office of
Foreign Assets Control (OFAC) is fair and fully consistent with legal
requirements.
great grant program
Question. The Administration initially proposed a fiscal year 2003
budget for the Bureau of Alcohol, Tobacco, and Firearms (BATF) that did
not include funding for the GREAT grant program. According to the OMB
passback to the Department of Treasury, ``This level does not fund
grants for the Gang Resistance Education and Training Program. Given
the elements of September 11 and the need to reorder priorities, we
assume these functions will be provided through state and local
entities or through other Federal agencies with core missions in
education and youths.''
--The Administration recently submitted a budget amendment that
amended the request to include the GREAT grant program;
however, no additional funds were included. How can the BATF
absorb the additional $13 million and still meet the challenges
they face for homeland security and the ongoing mandates and
responsibilities required under statute?
Answer. The President's Budget, initially submitted on February 4,
2002, provided $13 million for ATF's GREAT grants and $3 million for
administrative costs. The budget appendix incorrectly displayed the
language related to the GREAT program, but an amendment transmitted on
March 14, 2002 corrected the appropriation language to ensure that ATF
has the authority to implement and distribute GREAT grants.
The President's fiscal year 2003 Budget proposes $913.114 million
for ATF, $61 million or 7 percent above fiscal year 2002 enacted
(including fiscal year 2002 comparables for accruals and excluding
funding from the Emergency Response Fund). This increase includes $13
million for second-year costs related enhancements in homeland security
such as agents to participate in Joint Terrorism Task Forces and
additional canine handlers and expansion of ATF's canine training
facility in Front Royal, Virginia.
treasury counter terrorism fund
Question. The Treasury Counterterrorism Fund (CT Fund) was first
appropriated in fiscal year 1997 as a central fund to reimburse any
Treasury organization for the costs of providing support to counter,
investigate, or prosecute terrorism, including payment of rewards in
connection with these activities.
--The President's fiscal year 2003 Budget attempts to transform the
Counterterrorism Fund under the Department of Treasury into a
reimbursable account for any agency in the Federal Government
for its role in a National Special Security Event (NSSE).
Congress has cautioned the Administration on the use of this
fund to pay for events such as the Olympics and other NSSE's.
Is it your intention that this fund be used to reimburse any
agency for its participation in these events?
--Aren't you concerned that this fund will be depleted by planned
activities that should be budgeted for in all affected
agencies, rather than unforeseen events that will require the
involvement of agencies within the Department of Treasury?
Answer. The Budget proposes language that would enable Treasury to
reimburse any Federal agency that provides security at National Special
Security Events (NSSEs) (at the request and direction of the U.S.
Secret Service). The language is specific and is intended to improve
the U.S. Secret Service's ability to carry out its responsibilities
related to operational and perimeter security at NSSEs outlined in
Presidential Decision Directive 62. Each NSSE is different, and the
Secret Service requires the flexibility to call on various Federal
partners, as necessary, to assist with security operations. Given the
variation in NSSEs the Federal partners participating may change from
event to event. Providing Treasury the opportunity to reimburse other
agencies as needed will ensure uninterrupted planning and protection at
NSSEs and allow proper tailoring of security responses. This funding
mechanism mirrors the one in place for FEMA in consequence management.
Forecasting the unforeseeable is difficult and while the U.S.
Secret Service makes every attempt to plan for NSSEs, recent events
have led to a proliferation of events that are now designated NSSEs,
such as the NFL Superbowl and the United Nations General Assembly.
Currently, the Counter-Terrorism Fund is carrying balances of $64.6
million. The President's Budget provides an additional $40 million in
fiscal year 2003 for potential resources of up to $104.6 million. The
Administration, working with Treasury and the U.S. Secret Service,
believes the proposed funding levels for the CT Fund will adequately
provide for unforeseen events such as NSSEs.
omb representation account
Question. Last year your office requested B and the Congress
provided B the creation of a ``representation account'' at OMB so that
you can entertain your counterparts at official functions in your
office. We authorized the use of up to $3,000 for these purposes.
--Now that nearly half of the fiscal year is over, how much of that
fund has been used to date?
Answer. To date, no expenditures have been made from the
representation account.
scoring of small business loans
Question. The Small Business Administration provides loan
guarantees for small businesses through the 504 program. Unfortunately,
the Office of Management and Budget uses an artificially high rate of
default, higher than the actual rate of default. Because of the way
that this program is scored, fewer loans can be made. So the result of
this arcane way of scoring the program is that fewer businesses can
benefit. My understanding is that the default rate has been
extrapolated from a very small time frame and does not take into
account the full history of the program.
--Could you explain why OMB is unwilling or unable to use a more
accurate default for this program?
Answer. The Small Business Administration (SBA) provides loan
guarantees through a number of programs, including the Section 504
Community Development Company program. We disagree with the contention
that the Administration is unwilling or unable to use an accurate
default rate. OMB treats the 504 program as prescribed by the Budget
Enforcement Act of 1990. The Federal Credit Reform Act of 1990, as
amended requires that SBA estimate the subsidy cost of its loan
programs as the net present value of the expected cashflows to and from
the Government over the life of the loan(s) being guaranteed. SBA must
estimate these cash flows for each year of the loan's maturity, based
upon historical program experience (or, in the case of new program, a
suitable proxy) and incorporating performance over a variety of
economic conditions. OMB guidelines require at least a maturity's worth
of data on which to estimate the subsidy cost, although few agencies
other than SBA have sufficient, usable data to meet that requirement at
this point.
We also disagree with the contention that fewer businesses benefit
from the program because of the way the default rates are developed.
The 504 program has always met loan demand and the available loan
volume frequently exceeds demand. For instance, the President's fiscal
year 2003 budget supports a 504-program loan volume of $4.5 billion,
which is more than $2 billion above the fiscal year 2002 expected loan
demand.
With respect to the amount of data used to estimate the default
rate, we note that SBA uses all 16 years of available historical
performance data to predict future defaults and recoveries (the program
started in 1986). Using historical data to estimate default rates is
commonly used by SBA and other credit agencies and reflects actual
program performance during a variety of economic conditions. However,
some of the larger Federal credit programs are moving towards use of an
econometric model, which can incorporate the effects of programmatic
changes as well as economic variables in developing default estimates.
In fact, SBA expects to use an econometric model for its 7(a) General
Small Business Loan program in the fiscal year 2004 Budget. SBA will
then build from that effort to develop a new 504 model in future
budgets.
regulatory oversight
Question. OMB provides oversight of Federal rule-making. Recently
at a hearing in the House, the Administrator of the Office of
Information and Regulatory Affairs (OIRA) testified that since July,
OIRA has returned more than 20 proposed rules to agencies because of
``poor quality analysis.'' That is nearly one per week.
--It sounds like this Administration has a flawed process. Do you
think that the small staff at OIRA has more expertise in these
areas than the agencies who deal with these issues all the
time? Why doesn't OIRA work with the agencies on the front end
of the process, to ensure that significant amounts of time and
energy are not wasted redoing work that the agencies have done?
Shouldn't there be more of a partnership between OMB and the
agencies on developing regulations? Hasn't the repeated
rejection by OIRA of rules that have been worked on for months
by agencies substantially slowed the regulatory process?
Answer. The issuance of Presidential regulatory principles, and the
centralized review of draft regulations, has been an accepted part of
regulatory development for 30 years in one form or another. This began
with President Nixon's ``Quality of Life'' review program, and
continued in the 1970s with President Ford's requirement in Executive
Order Nos. 11821 and 11949 for agencies to prepare inflation/economic
impact statements and with President Carter's Executive Order No. 12044
on ``Improving Government Regulations.''
The OMB review process became more formalized with President
Reagan's Executive Order No. 12291, which was in effect from 1981 to
September 1993 (the Reagan and Bush Administrations and the first nine
months of the Clinton Administration). In September 1993, President
Clinton issued Executive Order No. 12866, which retained the OMB review
process in essentially the same form. The Executive Order No. 12866
review process remains in effect today.
This review process ensures that agencies, to the extent permitted
by law, comply with the regulatory principles stated in Executive Order
No. 12866, and that the President's policies are reflected in agency
rules. It also serves to ensure adequate interagency review of draft
rules, so that agencies coordinate their rules with other agencies to
avoid inconsistent, incompatible, or duplicative policies.
During the course of OMB's review of a draft regulation, the
Administrator of the Office of Information and Regulatory Affairs
(OIRA) may decide to send a letter to the agency that returns the rule
for reconsideration. Such a return may occur if the quality of the
agency's analysis is inadequate, if the regulatory standard adopted is
not justified by the analysis, if the rule is not consistent with the
regulatory principles stated in the Order or with the President's
policies and priorities, or if the rule is not compatible with other
Executive orders or statutes.
Early in this Administration, I stressed to agencies the importance
of improving regulatory impact analyses. In a memorandum to agency
heads, I stated:
``The Bush Administration is committed to improving the quality of
the Regulatory Impact Analyses (RIAs) that departments and agencies
prepare under Executive Order 12866. Improved analysis will lead to
more effective and efficient regulation by providing the public and
policy officials with better information on the effects of these
important rules. If OMB determines that more substantial work is
needed, OMB will return the draft rule to the agency for improved
analysis.'' (Memorandum to the Heads of Executive Departments and
Agencies, ``Improving Regulatory Impact Analyses'' (OMB Memorandum M-
01-23, June 19, 2001).)
Since that memorandum was issued, OIRA has returned 21 agency draft
rules. As the OIRA Administrator, Dr. John D. Graham has testified, two
of his priorities have been to establish more openness and transparency
in how OIRA does its work, and to stimulate more analytic rigor in the
process of regulatory analysis throughout the Federal government. These
return letters are publicly available, and posted on OIRA's web-site,
at ``http://www.whitehouse.gov/omb/inforeg/return__letter.html''.
Through the public posting of these letters, Dr. Graham provides any
interested party the opportunity to comment on the content of the
letters, thus allowing detailed challenge to the expertise therein
displayed.
In your question, you raise the issue of OIRA expertise. OIRA staff
are highly trained and experienced in analysis, particularly benefit-
cost analysis, and the types of review that are required by Executive
Order No. 12866. We believe OIRA can supplement and improve its already
outstanding expertise. Consequently, Dr. Graham is in the process of
hiring several new staff with backgrounds in science, including
epidemiology, risk assessment, and engineering to complement existing
expertise in policy analysis, economics, statistics, and information
technology.
You also suggest that OIRA should work, in partnership, with
agencies earlier in the regulatory development process and express your
concern about the possible delay entailed by Executive regulatory
review. We agree that OIRA should work in a cooperative manner with
agencies more at the front end of the regulatory development process,
and have been working with agencies to do this whenever possible.
Knowing that OIRA cares about the quality of agency regulatory impact
analysis appears to be encouraging agencies to invite OIRA into the
early stages of regulatory deliberations, where OIRA's analytic
approach can have a greater impact.
The return letters relate to 12 proposed draft rules, one interim
final draft rule, 6 final draft rules, and two notices. Thus, 14 of the
21 return letters raised OIRA's analytic concerns at the early stages
of agency rulemaking. Moreover, 6 of the 21 have already been
resubmitted and OIRA has concluded review. It is a measure of the
effectiveness of OIRA's return letters that agencies are able to
respond quickly and OIRA is able to conclude its subsequent review
expeditiously.
We can also assure you that the OIRA Administrator is concerned
about timeliness of OIRA's regulatory reviews. This is demonstrated by
comparing the time period for the returns (07/20/01 to 02/12/02) with
the same period for the previous year, a time period in which OIRA did
not send any return letters. During the time that OIRA returned 21
rules for reconsideration, OIRA conducted a total of 347 regulatory
reviews with an average review time of 53.7 days. This compares to 489
reviews with an average review time of 66.4 days for the previous
year--close to a 20 percent decrease in review time.
federal accounting standards board
Question. For more than 10 years, the Federal Accounting Standards
Board has been tasked with working with agencies to ensure that they
all use uniform accounting standards. This is an important role because
it allows agencies to provide financial statements as required by the
Federal Chief Financial Officers Act. Because FASAB creates standards
for Federal agencies, it has had predominantly Federal officials on it,
including OMB, Treasury, GAO and CBO.
Recently, OMB and Treasury announced that the make-up of FASAB
would be drastically changed. Of the 9-member board, representation
from Federal agencies will be slashed in half: from 6 to 3.
Representation from the private sector will increase from 3 to 6. This
seems illogical given the mission of FASAB. While there may be value in
having private sector input, the previous make-up of one-third from the
private sector seems to me to be sufficient. Clearly, Federal agencies
have unique circumstances compared to the private sector and a Board
with Federal perspective is more helpful than one that is heavily
weighted toward the private sector.
--What is the rationale for having this board which governs Federal
agencies so heavily weighted with private sector
representatives? Don't you agree that Federal agencies have a
unique contribution to make to the process that the private
sector cannot add?
Answer. At the August and October 2001 Joint Financial Management
Improvement Program (JFMIP) Principals' meetings, the three Principals
addressed concerns about the independence of the Federal Accounting
Standards Advisory Board (FASAB), which was raised in 1999 by the
American Institute of Certified Public Accountants (AICPA) when it
recognized FASAB as the body designated to establish generally accepted
accounting principles (GAAP) for Federal Government entities. The AICPA
said it would review its position in 5 years, and expressed a concern
that the Board, which at that time consisted of six Federal and three
non-Federal members, did not possess sufficient independence because of
the predominance of Federal members. The Principals agreed that
revising board membership to consist of three Federal and six non-
Federal members would address the AICPA's concern. In addition, they
agreed to lengthen the terms of the non-Federal members to ensure
continuity on the Board. The Principals believed that these changes
would improve the FASAB's consideration and development of accounting
standards as well as enhance the Board's independence. The FASAB
Memorandum of Understanding (MOU) was revised accordingly, and signed
on January 11, 2002, to implement the Principals' decisions.
Certainly Federal agencies have made and can continue to make
unique contributions to the FASAB process. Nothing in the new structure
will prevent Federal entities from presenting views and suggestions to
FASAB either through its Principals (OMB, Treasury, and GAO) or through
FASAB's formal, structured due process for vetting all of its
proposals. It is important to note that, under the revised MOU, each of
the Principals would still retain his or her right to veto any FASAB
proposal. Also, non-Federal appointments would still be vetted through
an appointments panel which includes representatives of the JFMIP
Principals as well as non-Federal members. All FASAB appointments must
be approved unanimously by the JFMIP Principals. We believe that the
new FASAB structure addresses the AICPA's concerns and continues to
provide ample opportunity for all Federal entities to contribute to the
deliberative process.
Question. Also, under the previous make-up of the FASAB, the 6
Federal representatives included 2 from the legislative branch. With
the elimination of CBO as a representative, the legislative branch's
input has been drastically cut. In addition, I understand that CBO was
never consulted about this change and in fact, that Director Dan
Crippen resigned in protest.
--Why was there no consultation of the other Federal members of the
FASAB before they were removed from the board? Also, please
explain why you have chosen to marginalize the legislative
branch by cutting its representation in half.
Answer. The issue of FASAB independence has been discussed publicly
since AICPA raised concerns about the Board's independence in 1999 when
it recognized FASAB as the body designated to establish GAAP for
Federal government entities. The JFMIP Principals debated the issue and
chose to move quickly to address AICPA's concerns and thus remove a
potential distraction from their efforts to improve Federal financial
performance.
The decision to reconstitute FASAB by increasing the non-Federal
memberships and reducing the Federal membership was made to address the
AICPA's concern that the Board, which at that time consisted of six
Federal and three non-Federal members, did not possess sufficient
independence because of the predominance of Federal members. The AICPA
said that this issue would be considered when it reviewed its position
in 5 years. This action will not marginalize the Legislative Branch of
the government. The Comptroller General of the United States, an
official of the Legislative Branch of the government and the current
chair of the JFMIP, strongly supported the reconstitution of the FASAB
to three government members. Moreover, the Legislative Branch retains
the same proportional representation relative to the Executive Branch
as the original FASAB make-up.
Representatives from the CBO and the other two Executive Branch
agencies have made important contributions to the Board's deliberations
since 1990, and still have the opportunity to do so through the
Principals or the formal due process for vetting all FASAB proposals.
The Department of Defense (DOD), which has provided the member from the
defense/international agencies since FASAB was established in 1990,
accepted the Principals' offer to remain involved in FASAB proceedings
as an observer. The Principals would be pleased to welcome a CBO
representative under an informal ``observer status'' which would allow
CBO to participate with DOD, but without voting privileges.
the president's management agenda
Question. The President's Management Agenda proposes to use the
budget process to discipline agencies who do not ``get to green'' on
the five scorecard items related to the President's management goals.
Tell us what that means.
--Please explain how the Administration's authority to do so relates
to, and does not conflict with, the role of Congress in
authorizing and appropriating funds to achieve statutory
missions of Federal agencies?
Answer. The President's Management Agenda (PMA) has the shared
Congressional goal of improving the performance of Federal programs
across government. Changes in the management of programs that require
modifications to existing law or to agency budgets will be proposed as
a part of the President's Budget or as legislative changes.
In fact, the GPRA (Government Performance and Results Act of 1993)
specifically calls for a more focused and serious approach to measure
the effectiveness of Federal programs and most importantly to use
performance based budgeting to accomplish this objective. The PMA is a
focused initiative to address the most glaring government-wide problems
and fix them. The role of Congress and the Executive in this initiative
is one of mutual cooperation and a shared goal-the efficient use of
taxpayer dollars. The PMA will over time help Congress in identifying
the most effective programs and the worst performing programs to best
allocate tax dollars.
government's human capital crisis
Question. How and where does the President's budget identify and
request the funds necessary to pay for the expenses that agencies must
face to in response to the Federal ``human capital crisis''?
Just to name a few of the cost considerations that are not visible
in the budget but which are critical to the functioning of the Federal
government:
--retirements which are expected to include approximately one-third
of the regular Federal workforce, and about half of the SES by
2004.
--buy outs and early outs
--massive recruiting
--the need for competitive salaries and positions among technical and
scientific specialists and experts
--retention strategies including pay increases, promotions Y
--training for the next generation of entry level employees and
training for the new wave of managers
--systems to provide agencies with better knowledge management of
their own people, competency needs, skills, and accountability.
Answer. OMB Circular A-11 provided guidance to agencies on
preparing their fiscal year 2003 budget requests and annual performance
plans. Agencies were instructed to prepare a five-year workforce
restructuring plan, which identified the specific organizational
changes the agency is proposing to make the government more citizen-
centered. The plan also was to include the human resources tools and
flexibilities needed to implement the plan. Decisions on these plans
were made on an agency-by-agency basis and are included in each
agency's budget request. Integrating human capital strategies into
agency strategic and budget processes is essential to building,
sustaining, and effectively deploying a high-performing workforce to
meet the needs of the nation. OMB will continue to evaluate future
agency budget requests to ensure that they are linked to the achieving
the President's vision to make Government more citizen-centered,
results-oriented, and market-based.
outsourcing federal jobs
Question. The Administration and OPM are advocating using the
President's support of increased outsourcing to include Federal jobs.
This has been the subject of heated discussion in the Senate
Governmental Affairs Committee, as recently as a hearing on March 6,
2002.
--What are the budgetary implications and estimates for such an
effort?
Answer. We were pleased to help update the Senate Government Reform
Committee on March 6 on the Administration's progress in implementing
our competitive sourcing program. Almost every Cabinet agency and
several smaller agencies have submitted competitive sourcing plans to
us. Some agencies are obviously further along than others. In addition,
OMB is providing staff assistance to every agency that requests the
help, especially important since most civilian agencies have never
conducted a public/private competition before.
Additionally, through the management scorecard and progress
reports, we're holding each agency accountable for implementing the
President's competitive sourcing initiative. These competitions are
often lengthy and that's why we're hoping to streamline them and will
oppose efforts to add hurdles. We're focusing on having agencies build
the infrastructure for public/private competitions.
Regarding the budget implications, DOD has achieved and continues
to estimate future savings. Without service or logistical support
reductions, these funds will be available for redirection into other
DOD priorities.
Question. What cost estimates do you have to support that it will
be more cost effective or as accountable as necessary once these
positions are outsourced?
Answer. One of the key benefits to competitive sourcing is the
savings to the taxpayer. Savings have been documented by every group
that has ever seriously studied this issue. Organizations such as the
GAO, the Center for Naval Analysis, and RAND have all documented
significant savings. On March 6, 2002, GAO testified to the significant
cost savings from A-76 competitions. On average, the statistics show a
20-30 percent savings, regardless of whether the public or private
sector wins the competition. Some studies, such as the 1998 Center for
Naval Analysis (CNA) analysis of 44 competitions indicate a 42 percent
cost savings. These savings have been achieved without service
reductions, terminations or arbitrary FTE ceiling reductions.
Question. What happens when the company providing the outsourcing
decides that the government's business isn't as profitable a market as
it would like?
Answer. Only the firm itself can decide if it is interested in
renewing its contract with a client, whether that client be government
or private. If the firm no longer sees it as profitable, it is under no
obligation to participate in a re-competition.
government downsizing
Question. Government downsizing in the 1990s led to significant
skill and structural imbalances, as well as agencies not positioned to
fulfill their mission. Nonetheless, the Administration is pursuing
continued downsizing and several agencies appear to be ready to offer
early outs and buy outs to agencies.
--What is the Administration doing to ensure that the downsizing
going on now won't repeat those problems? Are the early outs
and buy outs allowing the government to distinguish between the
talent they need to keep and others who may lack the skills,
knowledge, and experience to assist the agency now and into the
future?
Answer. The Administration recognizes the numerous challenges
facing the government now and in the future, such as the growing
percentage of the workforce that is eligible to retire over the next 10
years; competing for talent with the private sector; and closing skill
gaps created by past downsizing. In response, the President has placed
Strategic Management of Human Capital on his list of government-wide
management initiatives. The U.S. Office of Personnel Management (OPM),
together with OMB, will work very closely with Federal agencies to
implement human capital strategies to attract and retain the right
people, in the right places, at the right time; make high performance a
way of life in the Federal service; and deliver high quality services
the American public deserves. The President's approach is not driven by
arbitrary numerical goals and is intentionally flexible and aligned
with other initiatives to ensure that numbers do not drive good
management strategy.
In addition, I will work with others within and outside of the
Administration to help advance the Managerial Flexibility Act, which is
an important step toward achieving the President's vision to make
Government more citizen-centered, results-oriented, and market-based.
This proposal would give every Federal manager increased discretion and
flexibility in attracting, managing, and retaining a high quality
workforce. Furthermore, it would empower Federal agencies to determine
when, if, and how they might offer new employee incentives, and it
enhances the agencies' authority to use recruitment, retention, and
relocation bonuses to compete better with the private sector. It would
also enable managers to offer early outs and buyouts for downsizing
and/or restructuring, which would allow agencies to target buyouts
based on a number of factors, including skills, knowledge and
abilities, geographic location, organizational unit, and occupation to
assist in agency workforce planning efforts.
shared responsibilities with congress
Question. In the Budget, the President notes that ``getting to
green'' is a shared responsibility of the Congress and the Executive
Branch. If true, transparency will be essential to make that
meaningful. What information about agency evaluations, plans, progress,
and strategies to address their management deficiencies will be made
available to Congress and, if requested, to the General Accounting
Office?
Answer. Status reports on agency progress toward ``getting to
green'' on the management scorecard will be regularly made available in
the President's budget and the Mid-Session Review.
ridge testifying on capitol hill
Question. In the March 20 Washington Post, columnist David Broder
suggests that--just as you have significant jurisdiction over agency
budgets and are required to testify before Congress--Homeland Security
Director Ridge also should testify on the Hill because of the
substantial sway he holds over the development and targeting of agency
budgets.
Do you think that it would help improve the dialogue between the
White House and the Congress if Gov. Ridge did testify in a mutually-
agreed upon setting?
Answer. As I mentioned in my March 14th testimony, while this is
not my area of responsibility, I know that Governor Ridge wants to
communicate as openly and effectively as he can with this Congress.
risk analysis
Question. In the March 20 Washington Post, there is an article that
discusses efforts at OIRA to make risk analysis more scientific. Part
of this effort will be to analyze risks and benefits on the basis of
``life years'' instead of ``lives'' saved. I am troubled by this type
of analysis because it seems to put a lower value on the elderly.
--Under this formulation, isn't it true that a regulation that would
save lives of the people in their 60s would be considered less
beneficial than one that saved lives of teenagers? Doesn't this
type of ``scientific'' analysis create all sorts of moral
hazards? More importantly, doesn't this proposal underscore the
problem of trying to quantify risks and benefits when lives are
at stake?
Answer. The March 20 Washington Post article refers to the release
of OMB's 2002 draft report to Congress on the Costs and Benefits of
Federal Regulations. The draft report states that OIRA has initiated a
process to refine its formal analytic guidance documents. As a part of
that initiative, the draft report requested public comment on several
specific issues, including: ``The methods employed to evaluate the risk
of premature death, particularly the relative advantages and
disadvantages of differing statistical approaches including the
quality-adjusted-life year (QALY) approach.'' We decided to address the
difficult issues involved in valuing premature death by the ``life
year'' approach instead of the ``lives saved'' approach in response to
several comments on OMB's draft cost-benefit report to Congress
published in the Federal Register on May 2, 2001, received from several
government agencies and interest groups (e.g., the Children's
Environmental Health Network). We recognize that there are a variety of
important factors that must be considered in the evaluation of risk
reducing measures and that no single approach may be sufficient. The
QALY approach is widely used in the medical literature and has recently
been recommended for use in analysis by an expert panel assembled by
the U.S. Department of Health and Human Services. We believe that this
approach deserves careful review and we look forward to the public
comments on the role this approach (and similar approaches) might have
in regulatory analysis.
Question. The article also indicates that OMB plans to hire more
scientists at OIRA. It was my understanding that OIRA is already
stretched very thinly, given the increased interest in information
policy.
--What areas of staffing are you planning to cut in order to make
room for the scientists at OIRA? What role is it that they will
fill? Conversely, do you plan to seek additional funds to
adequately pay for these new hires without cutting on-going
programs?
Answer. In developing a vision of how to make OMB more effective, I
have made OMB's ability to analyze regulations a management priority. I
am therefore implementing a staffing plan that will reverse a twenty-
year decline in OIRA staffing while enhancing our analytic capabilities
in a number of scientific disciplines, such as engineering, toxicology,
public health, risk assessment, and health economics. These new staff
resources will help OIRA adapt to the changing focus of Federal
regulatory policy, occasioned by economic deregulation and an expansion
of social regulation in science-related fields.
Historically, OIRA's staff has possessed significant expertise in
economics, policy analysis, statistics, and information technology.
OIRA's new staff specialists will have scientific backgrounds that will
complement OIRA's institutional strengths by enhancing its ability to
analyze regulations concerning public health, safety, and the
environment. Specifically, the new staff will be involved in the review
of agency regulatory analyses that raise complex technical issues
(e.g., human health risk assessments based on toxicology and public
health science). This, in turn, should stimulate a greater focus on
science in the regulatory agencies.
In deciding to devote some of OMB's existing vacancies to new
specialist positions that will strengthen OMB's ability to review
regulations, I consulted extensively with OIRA and OMB's other
divisions. OMB will thus not be seeking additional funds or FTE. For
details on OMB's proposed fiscal year 2003 budget, please see the
President's February budget submission to Congress.
general flowers
Question. As you offered to do during the questions today, please
provide the subcommittee with the specific details referred to in your
memo of why statements made by General Flowers ``about stopping
projects and lost jobs'' are ``bogus.''
Answer. General Flowers stated that the Budget would result in a
job loss that could be ``in the neighborhood'' of 45,000 jobs. I
understand that the Army Corps of Engineers has requested that the
Senate Budget Committee change the hearing transcript to indicate that
the General now estimates an impact of 4,500 jobs, an order of
magnitude less than the figure used at the hearing. This correction
confirms OMB's assessment that the job loss claims as stated in the
original transcript were inaccurate.
At the time I sent the memo to which you refer, my staff had ample
reason to believe that the agency's estimates were greatly overstated.
Later, OMB staff reviewed material that the Army Corps of Engineers
provided after I sent the memo. That review, and the Corps's own re-
examination, both confirmed OMB's initial assessment.
The Corps' modification of its testimony speaks for itself.
However, even with this revision, the revised Corps' estimate of job
losses at projects funded in the budget is based on several
questionable assumptions.
First, the Corps estimate fails to account for job increases that
would result at projects where the Budget proposes increases in
funding, such as the Olmsted Lock and Dam in Illinois and Kentucky,
which would receive a $37 million (90 percent) increase in funding over
the fiscal year 2002 enacted level. The Corps estimate is not a net
figure.
Second, the Corps estimate assumes that there will be no effort to
reduce potential job losses by managing current and future contract
schedules. It assumes, for example, that the Corps would award new
contracts in August 2002 even in the face of knowing there would be
inadequate funds to support such new contracts in the next fiscal year.
Third, the Corps estimates assume that all fiscal year 2002
construction contracts will be awarded on schedule and that all work
under these contracts will proceed throughout fiscal year 2002 and 2003
on schedule. Historically, many projects do not stay on schedule. The
Corps often encounters construction delays that are unrelated to the
availability of funds. Schedule delays lower the likelihood of contract
termination and job loss.
Fourth, the Corps assumes that no one else will step into the
breach. Local project sponsors can advance funds to continue contracts
(and receive credit against their future cost``)share, where
applicable); the contractor could continue to work and qualify for
reimbursement plus interest, subject to the future availability of
funds; or the Corps could cover the shortfall by reprogramming funds
from other projects.
Regardless, we recognize that there would be some termination costs
under the Budget proposal. This is true especially for projects that
are outside the Corps' three principal missions and other objectionable
projects that the Budget does not fund. However, terminating these
objectionable projects would yield substantial savings to taxpayers. As
noted in the Budget, it would require about $5 billion to complete all
the projects added by the Congress that are inconsistent with Corps
policies--that's $5 billion diverted from nationally important
priorities, including commercial navigation, flood damage reduction,
and environmental restoration projects that are already underway.
The alternative proposed in the Budget is to focus the Corps on
reducing the backlog of ongoing construction projects that fall within
its primary missions. This approach would ensure that these projects
are completed and their expected benefits realized sooner than would be
possible under current spending tends.
veterans
Question. Clinics in North Dakota are turning away patients because
they are so full and the Department of Veterans Affairs has decided
that they will not open a new clinic in Dickinson, North Dakota due to
lack of funds. Veterans in my home state can wait up to 10 months and
have to drive up to 12 hours one-way to receive a routine medical
visit. I believe that taking care of our veterans is part of the cost
of our national defense. Yet, the even though the budget included a $48
Billion increase for Defense, it did not include sufficient funds to
serve all veterans.
--What is your explanation for this oversight? Don't you agree that
we must keep our promises to our veterans if we want to recruit
and maintain a strong military? What should I tell veterans in
North Dakota who have been turned away from community based
outpatient clinics because the Administration has not requested
sufficient funds?
Answer. The Department of Veterans Affairs is committed to ensuring
that all veterans seeking medical care at VA this year have access to
the system. New VA patients in areas of high demand may have to travel
to VA hospitals (instead of using the community outpatient clinics).
This ensures that the local clinics in these areas can continue to
handle current patient load as well as all emergencies.
The influx of new patients, particularly PL 7 veterans, into the VA
system has resulted in higher than expected demand--varying
significantly throughout the country. Prior to 1996, only 2 percent of
patients were PL 7 veterans. Today, that number is 21 percent and it is
projected to be 42 percent by 2010.
In January 2002, Dr. Robert Petzel, Director of VA Upper Midwest
Health Care Network (covering North Dakota, South Dakota, Minnesota,
and small parts of Iowa and Wisconsin) issued a letter to County
Veterans Service Officers and Congressional Offices stating its new
policy: ``Veterans seeking care at community clinics where workload is
projected to exceed the capped level [September 30, 2001 levels], will
be referred to our [five] VA medical Centers.'' In response to
questions, Dr. Petzel released a clarifying letter stressing his
commitment to community clinics for veterans and his plans for the
current fiscal year. He supported the goal of bringing quality care
close to where veterans live, but does not want to compromise the
quality and timeliness of care.
Since many of the clinics in this Network have exceeded their
planned capacities, new patients can only be added to the clinics as
space becomes available. In the meantime, new patients will be offered
appointments at the VA medical centers. Veterans who have emergency
needs are being seen or scheduled for an appointment immediately.
Question. I understand that the supplemental that you intend to
send up to Congress will include an additional $12 Billion for the
Department of Defense and an additional $142 million for veterans. I am
told that the VA funds, if provided, would prevent further reductions
in service from being implemented but would do nothing to improve the
level of service or allow additional enrollees. I am surprised that the
Administration has put such a low priority on our veterans during this
period of increased military activity.
--Why isn't the Administration doing more to ensure that the veterans
who are eligible for health are able to access it? When the
Administration had the opportunity to address this problem in
the supplemental, why did veterans get only one percent of the
requested funds that DOD received?
Answer. The fiscal year 2002 Supplemental request that was
transmitted to the Congress on March 21, 2002, includes an additional
$142 million to provide sufficient funding for the VA to take care of
all veterans who wish to enroll for VA health care benefits in fiscal
year 2002. VA estimates that this amount of funding will ensure that
all requesting care will be treated.
corps of engineers
Question. The Corps of Engineers was dramatically underfunded in
the President's budget request. Just in my state, there were several
projects that were funded below capability by tens of millions of
dollars. The Grand Forks Flood Control project, for example, was funded
at less than half of the level necessary to keep the project on
schedule. If this project is not substantially completed by December
2004, the city has been told that FEMA will spend money to remap the
100 year floodplain, which would include over 90 percent of Grand Forks
and East Grand Forks and thousands of new properties, forcing residents
to pay between $10-$15 million annually in additional flood insurance.
This mapping will need to be redone a year or two later when the flood
control project is complete. Mapping this area twice in the course of a
couple of years seems like a huge waste of Federal dollars and would be
totally unnecessary if the Corps of Engineers' budget wasn't so
severely underfunded.
Grand Forks is just one example of the additional costs involved in
underfunding projects currently underway at the Army Corps of
Engineers. All across the country, this underfunding causes overall
costs to rise because the projects are drawn out and not built on the
most efficient schedule. In addition, it leaves tens of thousands of
people vulnerable to flooding for years beyond the original deadline
goal.
--Why wouldn't the Administration pursue a policy of finishing
projects on the most efficient time frame?
Answer. The Budget does give priority to completing ongoing
construction projects that are within the Corps' primary missions--
commercial navigation, flood and storm damage reduction, and
environmental restoration. The Grand Forks/East Grand Forks project is
an ongoing construction project to provide flood damage reduction for
these two cities. The project reflects an innovative solution that
combines traditional levee work with non-structural activities,
including removing a substantial number of structures from the most
flood-prone areas of this project. The fiscal year 2003 funding of $30
million that the Administration proposes would enable the Corps to
build the project more quickly, so that this area does not experience a
repeat of the devastating floods of 1997.
Question. Earlier this month, the press reported on a memo from you
to Andrew Card, Josh Bolton and Karl Rove about Mike Parker's colloquy
with Senator Conrad and General Flowers. In this memo, you describe
General Flowers' statements about stopping Corps projects and losing
jobs as a result of underfunding of Corps projects as ``totally
bogus.''
I have a few Corps projects in my state, like the Grand Forks Flood
Control project, that were dramatically underfunded in your budget and
the result of your budget will very clearly be work stoppage and
subsequent layoffs. I sympathize with General Flowers' concerns and
really regret the Administration's decision to fire Mike Parker based
on his testimony to the Senate Budget Committee. In my estimation, I
think he was just giving a straightforward assessment of the result of
your budget. As you know, a number of my colleagues from both sides of
the aisle agree with me.
--My question is whether you still believe that the testimony given
by the Corps about the dangers of underfunding of Corps
projects is ``totally bogus?''
Answer. I understand that the Army Corps of Engineers has requested
that the Senate Budget Committee modify the hearing transcript to
indicate that the General said that the funding impact was 4,500 jobs
rather than ``in the neighborhood of 45,000 jobs.'' I believe this
confirms OMB's assessment that the job loss claims as stated in the
original transcript were inaccurate by an order of magnitude. Even with
this revision, the Corps estimate of job losses is overstated for
reasons explained in my answer to your previous question.
transportation funding
Question. The President's budget included a cut in highway funding
of more than $8 Billion. For North Dakota alone, this would mean a
reduction in highway construction funds of $45 million and the loss of
nearly 2,000 high paying jobs. It seems ironic that at a time when the
Administration was pushing hard for an economic recovery package, OMB
was proposing a budget that would eliminate thousands and thousands of
jobs and would drastically reduce important stimulative construction
projects.
--The Senate Budget Committee has wisely added back over $4 Billion
in highway construction funding. Will the Administration
publicly support this increase?
--How can you reconcile the seemingly inconsistent policy of asking
for an economic recovery package while making huge reductions
in highway spending?
--Why would the Administration blindly follow an arbitrary formula
which prevents funds already collected from being used [the
TEA-21 formula] instead of providing some discretionary funds,
given the economic situation?
Answer. The Administration is committed to working with Congress to
ensure a process exists that adequately funds highway programs
One of the guiding principles behind Transportation Equity Act for
the 21st Century (TEA-21) was ensuring that highway funding levels
track actual and anticipated revenue into the Highway Trust Fund, and a
mechanism (RABA) was included in that legislation to set guaranteed
funding levels accordingly. In fiscal year 2000-2002 this
Administration and the last adhered to this principle when revenue into
the Highway Trust Fund was higher than what was anticipated in TEA-21
and provided States with an additional $9 billion to support the
Nation's highway infrastructure. In fiscal year 2003 actual and
anticipated revenue into the Highway Trust Fund are lower than what was
anticipated in TEA-21. Our fiscal year 2003 budget request reflects
this decline in receipts.
On the eve of the reauthorization of TEA-21 it is important that we
not abandon the principle of linking highway funding levels to revenue
coming into the Highway Trust Fund. We will however work with Congress
to address the wild swings in funding created by the RABA mechanism in
a manner consistent with TEA-21 principles and fiscal restraint.
agriculture and payment limits
Question. One of OMB's responsibilities is to coordinate and issue
Statements of Administration Policy (SAP) and to approve letters from
agencies that state Administration policy. During the debate on the
Farm bill there have been some confusing messages included in the
Administration's SAPs, and some troubling omissions as well.
Specifically, the Administration has never taken a position on the
payment limitation amendment that Senator Grassley and I successfully
offered to the Farm Bill.
The amendment appears to me to address the very concerns that the
Administration has raised. You yourself have said that there were
objections to legislation that would direct ``all the money to rich
farmers and leave large sectors of the farm economy unattended.'' The
Department of Agriculture has raised similar concerns. It seems that
the Administration would embrace our efforts to limit payments and
close the loopholes so that payments are more targeted to family
farmers. And yet, OMB has declined to comment on the amendment or to
publicly endorse the Dorgan-Grassley amendment; and a recent letter
from Secretary Veneman which was presumably cleared through OMB is
oddly silent on the issue.
--Can you explain this inconsistency?
Answer. The Administration shares your concern raised here and in
your February 14, 2002 letter to the President about providing too much
Federal assistance to those producers least in need. We believe that
the policies articulated in Secretary Veneman's March 13th letter to
Chairman Combest will best address this issue by broadening the types
of farm support and more effectively targeting limited funds. Key
points in the Secretary's letter include:
--Adhere to the Congressional Budget Resolution funding limits and
avoid frontloading funding in the first 5 years, thereby
placing farm programs in jeopardy in the second 5 years;
--Support farmers without encouraging overproduction and further
depressing farm prices through overly high loan rates;
--Maintain compliance with our international trade obligations
through ``circuit breaker'' language and use of ``green box''
payments such as the House bill's fixed decoupled payments;
--Provide new risk management tools to help non-program crop
producers and others through use of farm savings accounts.
--Support a strong conservation title that also bolsters farm and
ranch income.
We appreciate your concerns and look forward to working with you to
develop programs that will better target agriculture assistance to
those who need it.
defense
Question. Last year in the DOD Authorization bill, the Congress
included language that permitted the Administration to implement so-
called ``concurrent receipt.'' This allows disabled veterans to receive
both disability compensation and military retirement pay without being
penalized with an offset. Unfortunately, the Administration did not
take the steps necessary to implement concurrent receipt. Even though
there was a $48 Billion increase in the defense budget, the
Administration was unable to identify funds that would finally allow
this problem to be corrected.
--Why did the Administration choose not to make this change?
--Why do you think military retirees should be penalized with an
offset when other retirees are not?
Answer. Many veterans have served this country long and faithfully
and subsequently suffered from illness or injury. The Administration
deeply appreciates their service and sacrifice. The principle behind
the statutory prohibition of concurrent receipt of military retirement
and VA disability compensation benefits is the idea that no one should
be able to receive concurrent retirement benefits and disability
benefits based upon the same service. This is because all Federal
employee-benefit systems aim for an equitable percentage of income
replacement in the case of either work-related injury or retirement.
Compensating for both simultaneously over-compensates the individual
and the Administration opposes repeal of the current prohibition on
concurrent receipt.
A retired civil servant, for example, may not receive civil service
disability benefits or workers' compensation benefits in addition to
civil service retirement benefits. A similar ban exists against
concurrent payment of retirement and disability benefits by the Social
Security Administration. Within the military retirement system,
retirees can receive up to 75 percent of basic pay based on years of
service or percentage disability rating, whichever gives them the
greatest benefit, but not both. With regard to veteran survivor
benefits, survivors cannot receive annuities under VA's Dependency and
Indemnity Compensation (DIC) and military retirement survivor benefits
without offset either. If we reverse our approach on veterans, the
principle would have to be reconsidered for civil servants as well.
If a VA disability compensation recipient (based on military
service) qualifies for Federal civilian retirement (based on civil
service), there is no offset because civilian retirement is a benefit
for civil service. Similarly, an individual receiving Federal workers'
compensation benefits (based on work-related injuries in a Federal
civilian job) incurs no offset from military retired pay, since the
retirement benefits were earned for military service.
Recently, VA and DOD evaluated the impact of lifting the
restrictions on veterans receiving both retirement pay and disability
compensation. Over a ten-year period the costs would be nearly $58
billion. Moreover, this expansion would stress the Department of
Veterans Affairs' ability to meet its current responsibilities to
veterans, requiring the Department to process over 800,000 new or
reopened claims over the next 5 years.
Section 641 of the National Defense Authorization Act for Fiscal
Year 2002 requires that the $58 billion cost of this proposal be
offset. As we wage the war against terrorism, our highest priority must
be to provide the resources the Department of Defense needs. We must
take a hard look at every issue. Undoing the principle underlying the
law creates a $58 billion impact on the budget, and potentially impacts
the Department of Veterans Affairs' ability to serve our veterans.
renewables
Question. The Renewable Energy and Energy Efficiency office at the
Department of Energy conducted a strategic review of its programs last
year, and this review is being held up and has not been released to
Congress.
--What is the status of this review?
--Has completed the OMB process, which agency currently has the
document and at what stage of review, and why it has not yet
been released?
--If this review is used for the RE/EE Office to develop its budget
proposal, how are we supposed to evaluate that proposal and the
rationale for some of the budget cuts we are seeing, without
the benefit of having seen this review document, in its
original form? When can we expect to see this important
document?
Answer. DOE's Office of Energy Efficiency and Renewable Energy
(EERE) conducted the Strategic Program Review (SPR) review throughout
the summer of 2001. DOE submitted the draft SPR for OMB review in
December 2001. OMB carefully reviewed the draft document and worked
closely with EERE to ensure that all comments (which largely dealt with
internal inconsistencies) were addressed. On March 25, OMB approved the
SPR. DOE has posted the SPR on its web-site (www.eren.doe.gov/ee.html)
and expects hard copies to be available by mid-May.
The President's budget reflects some--but not all--of the SPR
recommendations due to the timing of the review of the draft SPR. It is
important to note that many of the SPR recommendations are not budget-
related and will not be accomplished overnight (e.g., implementation
across programs of ``best program practices'' that the SPR identified).
______
Questions Submitted by Senator Mary L. Landrieu
army corps of engineers
Question. The President's budget reduces the Army Corps of
Engineers Civil Works projects from $4.486 billion in fiscal year >2002
to $4.026 billion for fiscal year >2003, a reduction of 10 percent. I
am particularly concerned with how these cuts will affect the Corps'
work in Louisiana. The Army Corps of Engineers is currently building
flood control systems on the Comite River and hurricane protection
systems around Lake Ponchartrain, as well as improving the Inner Harbor
Navigation Canal Lock where the Inter-Coastal Waterway meets the
Mississippi River. Flood control and hurricane protection are life and
death issues in Louisiana. That lock on the Inter-Coastal Waterway and
the Mississippi means jobs and economic development in the region.
I also noticed in the budget that the Corps was rated ``Moderately
Effective'' or ``Effective'' in 7 out of 9 of its program areas,
including ``Effective'' ratings for: 1) Flood Control and Storm Damage
Reduction and 2) Emergency Response, as well as a ``Moderately
Effective'' rating for its work on Inland Waterways.
What is the justification for cutting the Corps given the essential
and important nature of the work it does and its record of
effectiveness?
Answer. The President's proposal must be viewed in the context of
the need to target resources to winning the war against terrorism, and
improving the Nation's homeland and economic security. For this reason,
funds are redirected in the President's Budget. The Budget for the
Corps is $4.175 billion, excluding the government-wide retirement
funding proposal. This represents a reduction of seven percent from the
fiscal year 2002 level of $4.486 billion. Most of this reduction is due
to excluding projects added by Congress in fiscal year 2002 that are
outside the Corps' primary missions (commercial navigation, flood
damage reduction, and environmental restoration), are not economically
justified, or are inconsistent with long-standing Corps policies. In
light of the existing $21 billion backlog of ongoing construction
projects, and the aforementioned national security needs, the Budget
proposes to use available funds to accelerate the completion of
priority, ongoing construction projects. This acceleration will allow
the Nation to realize sooner the benefits of these projects.
In addition to completing construction of ongoing projects, the
budget focuses on increasing overall effectiveness of Corps programs.
While it is true that the Corps was rated ``moderately effective'' or
``effective'' in seven out of nine out of its program areas, it was
only rated effective in two of these areas. Whether the funding level
for a program needs to change to improve performance will depend on the
specific circumstances of that program.
For example, the budget rates the Corps' Inland Waterways program
as ``moderately effective,'' primarily because some segments of the
inland waterway system operated by the Corps provide few commercial
benefits to the Nation. To improve the performance of this program, the
Budget targets funds to those waterways that provide the greatest
economic return, and substantially reduces funding for those that
provide minor commercial benefits to the Nation. For other Corps
programs, additional funding was requested to improve performance. For
example, the Budget proposes to increase funding of the Hydropower
program, which is also rated ``moderately effective'' by allowing the
Power Marketing Administrations to directly finance from power revenues
the Corps' costs to operate and maintain its hydropower facilities.
This change would enable the Corps to reduce facility downtime and
increase power production.
office of homeland security
Question. The Administration request for the White House Office is
$84.6 million, an increase of nearly $30 million, or 55 percent over
last year. The bulk of this increase, according to the budget, is for
the Office of Homeland Security and 40 full time equivalent employees.
That is a significant investment for what I consider to be an area of
national concern. Given the importance of this office, I encourage
Governor Ridge to appear before Congress to report on his vision for
the Office of Homeland Security.
How many employees does the Office of Homeland Security currently
have? How many of those employees are working in that office on detail
from other agencies?
Of the 40 FTE you are planning to hire for the Office, what roles
will those employees play? How many will be experts in law enforcement
and/or counter terrorism? How many of these employees will be support
personnel? How many will be involved in public affairs, press
relations, and outreach efforts? Will these positions be filled from
outside of the Federal Government or from within the Federal
Government?
Will the Office of Homeland Security be entering any contracts for
consulting or other services as part of its work? Are there any
contracts in place at this time? Can you provide the Subcommittee with
an accounting of any contracts, their cost, and the type of consulting
work being performed as part of those contracts.
Answer. It is our understanding that the Office of Homeland
Security currently employs 91 personnel, of whom 62 are detailees.
The Office of Homeland Security does plan to hire 40 FTE who will
work in the areas that you describe. We do not have an exact breakdown
of their fields of expertise at this time.
It is our understanding that OHS expects that the contracts it
executes will fulfill the following needs:
--Review and assess the adequacy of the Federal emergency response
plans.
--Develop criteria for reviewing security measures for critical
infrastructure, e.g., energy production, telecommunications,
utilities.
--Ensure coordination of public health preparedness.
--Design and review programs to facilitate incident response and
exchange of information by and among Federal, State and local
agencies as well as private entities.
None of these contracts has been executed to date.
child care and adoption
Question. As the largest employer in the United States, the Federal
Government has a unique responsibility to serve as a leader in
developing policies that address certain quality of life that are not
only important to their employees but also society as a whole. In
particular, the provision of affordable, accessible high quality child
care and equity in workplace benefits for employees who adopt. In
fiscal year 1999, I proposed that language be inserted into the
Treasury Postal Appropriations bill that allowed for Executive agency
funds to provide child care services for their employees. I fought very
hard to ensure that the child care that was provided with these funds
was high quality, affordable care that was accessible to the families
in need. While this was a success, lack of child care remains a
critical issue for hundreds of thousands of Federal employees. Members
of my own staff have tried unsuccessfully to get access to these
services and have found there are very long waiting lists. What is OMB
doing to address this issue?
Answer. The fiscal year 2000 Treasury General Government
appropriations bill authorized the use of certain appropriated funds to
provide child care services for Federal civilian employees. This
authority was made permanent on November 12, 2001. The Office of
Personnel Management (OPM) issued the ``Guide for Implementing Child
Care Legislation,'' which provides information to Federal agencies,
Federal employees, child care providers, and child care governing
boards on how to develop and implement child care programs for lower
income employees. The guide contains various tuition assistance models
to help agencies choose a model that suits their needs.
Furthermore, GSA supports the national commitment to provide
quality child care as an essential component of a quality work
environment. GSA has over 110 Child Care Centers across 32 states and
the District of Columbia. Federal agencies have the authority to
establish child care centers for Federal families with the requirement
that at least 50 percent of the children enrolled in a child care
center must be children of Federal employees.
OMB's role in this process is to evaluate agency budget requests in
the context of their overall program priorities and human capital
strategy. We will look to agencies to demonstrate, as a part of their
annual performance plans and performance reports, how their human
capital strategies, including work/life programs, are linked to the
accomplishment of agency mission requirements.
Question. In the past, Senator Bond and I have worked to pass a
piece of legislation entitled, the Federal Adoption Assistance Act to
provide $2,000 in reimbursement for adoption expenses. We are again
working to pass this legislation, what if anything, is the OMB doing to
ensure that there is equity in the benefits offered (paid leave,
reimbursements, etc.) to employees who adopt versus those who give
birth to a child?
Answer. The Administration has proposed substantial assistance for
all taxpayers seeking to adopt children. In the past, families who
adopt children were provided a nonrefundable tax credit of 100 percent
of the first $5,000 per adoption. Building on a proposal in the
President's fiscal year 2002 budget, Congress included a provision in
the Economic Growth and Tax Relief Reconciliation Act of 2001 to
increase this credit to $10,000.
In addition, the Federal Government already has an impressive and
flexible array of family-friendly leave options that support Federal
employees' family responsibilities and enhance the productivity of its
workforce. The two most notable laws for adoptive parents are the Sick
Leave for Adoption Act and the Family and Medical Leave Act (FMLA). The
Sick Leave for Adoption allows Federal employees to use sick leave for
absences relating to adopting a child. The FMLA ensures that family and
medical leave is available on a gender-neutral basis to both male and
female employees and mandates job security for employees who take
leave. In addition, it entitles an eligible Federal employee to 12
workweeks of unpaid leave during any 12-month period for certain family
and medical needs. Furthermore, Federal employees may cover a legally
adopted child or a foster child under their Federal Employees Health
Benefits family enrollment upon showing proof of the child's
eligibility as a family member.
improving the current federal budget
Question. In several speeches on the budget, you have clearly
outlined the goals of your agency and the Bush Administration for
improving the current Federal budget.
Among these goals you include the following principles:
--Eliminating ``pork projects'' or ``earmarks'' so as to preserve our
limited national resources for national programs and
priorities.
--A move away from Federal programs and toward a greater use of
performance based block grants with broad goals and greater
state and local flexibility.
--An effort to rate the performance of programs funded and to fund
only those found to be ``effective.''
While I appreciate these goals and in a theoretical sense would
support them, I am curious as to how in reality these goals would be
applied and what effect they would have on certain important ongoing
national priorities such as education and health care. As you may know,
in almost every case, when programs are shifted away from a line item
and into a block grant, it almost always results in a gradual decline
in funding. What's more, outcomes for programs such as child abuse
prevention, prenatal health care, and education reforms may be hard to
quantify and a poorly constructed rating system may not reflect the
real success of a more subjective program.
Could you better explain how you see these goals being incorporated
into this and future budgets?
Answer. For years, serious advocates of public policy have sought
to better link information on program performance with budget decision
making. The major reason for doing so is precisely to better address
important national priorities such as education and health care. For
too long, regular spending increases for programs has been the measure
of success in how well the public is served. Less attention has been
paid to how well these programs have been achieving their objectives.
We propose to transform this equation by better linking information on
program performance to the decisions that are made on the budget.
Evaluations of the effectiveness of programs are only one of many
factors that go into decisions on spending. Policy makers must also
consider priorities, the proper role of the Federal government, and
many other factors. But surely there is no argument with a proposition
to better inform budget decision making with the best possible
information on program performance. This information will be used to
highlight areas that require management attention, and also to inform
budget decision making to reward good performers, and reform, curtail,
or terminate activities that are not producing good results.
As a way to expand the use of information during the coming year,
we will increase the use of the effectiveness ratings that were used in
last year's budget, and report on selected crosscutting common
performance measures in some program areas. Agencies will be expected
to provide information on the effectiveness of their programs as a part
of their September budget request to OMB. Where that is lacking, the
OMB staff will review the information that agencies prepare as a part
of reporting on the Government Performance and Results Act. OMB will
also be working with the agencies to develop other specific information
on program effectiveness, and in selected areas to compare measures of
performance across programs. To supplement information provided by
agencies, the OMB staff will be reviewing evaluative information
provided by the General Accounting Office, the Congressional Research
Service, and other analyses of program effectiveness produced by
entities in and out of government. To the extent practicable, OMB staff
will spend time in the field learning at first hand the operation of
agency programs. All of this information will be used to support OMB
budget decisions based on program performance.
As we expand the use of performance related information in the
budget, we will continue to hold a dialogue with the Congress--we are
very interested to hear congressional views.
______
Questions Submitted by Senator Jack Reed
liheap
Question. Your Office continues to withhold $300 million in LIHEAP
contingency funds appropriated last year to help low-income families
and senior citizens pay their energy bills. In September, 23 Senators
sent a letter to you requesting release of the funding due to last
winter's high energy prices and the significant increase in utility
disconnections. In addition, a majority of our nation's Governors,
including Governor Bush of Florida and Governor Shaheen of New
Hampshire, requested release of these funds. The only response we
received from the Administration is that the contingency funding
remains available in case of an emergency. The statute defines an
emergency to include a significant increase in home energy
disconnections, a significant increase in participation in a public
benefit program or a significant increase in unemployment, layoffs, or
the number of households with an individual applying for unemployment
benefits. Please explain why the Administration does not believe that
working low-income families and senior citizens going without adequate
heat or food or medicine because they cannot pay their energy bills
does not constitute an emergency? And why the current recession which
is causing an increase in individuals applying for unemployment
benefits and other public benefit programs does not constitute an
emergency as defined by the statute?
Answer. LIHEAP emergency funds have traditionally been used to
assist states experiencing unusually sever weather or high home energy
prices. By any measure, the current situation does not meet previously-
used standards for emergency assistance. We were very fortunate this
past winter to have record high temperatures and lower fuel prices. In
fact, the Northeast and Midwest experienced their warmest winter since
the government began keeping records in 1895.
The combination of warmer weather and low fuel prices means that
heating costs will be invariably lower than last year. The Department
of Energy recently updated its estimate of household heating bills for
selected fuels. DOE's calculations show the following expectations for
the six-month period ending March 31 compared to the 2000-2001 heating
season: a 42 percent reduction in average natural gas heating bills per
gas-heated household in the Midwest, a 36 percent falloff in oil-heated
household heating costs in the Northeast, and a 37 percent decline in
comparable expenditures for households using propane for heating in the
Midwest.
These conditions can change quickly, which makes it all the more
important to ensure resources are available when a crisis emerges. We
plan to continue to carefully monitor energy needs in the weeks and
months ahead with this in mind.
ergonomics
Question. Over a year ago, after repealing the ergonomics
regulation, the President promised to ``pursue a comprehensive approach
to ergonomics.'' Unfortunately, there has been no substantive action
over the past year by the Administration to protect America's workers
from the leading cause of workplace injury. In fact, the Department of
Labor has not yet even put forward an action plan on the issue despite
repeated deadlines for doing so. Apparently, the release of the
Administration's plan is now held up at the Office of Management and
Budget. Why is this process taking so long and why is this Department
of Labor initiative stalled at OMB? What kind of regulation to protect
workers from ergonomic injury would OMB support?
Answer. On April 5 Secretary Chao announced the Administration's
comprehensive plan to reduce ergonomic injuries through a combination
of industry-targeted guidelines, tough enforcement measures, outreach,
research, and dedicated efforts to protect Hispanic and other immigrant
workers. This approach was developed based on input provided at the
Secretary's three ergonomics forums last year; relevant information
from a number of sources, including the information from the ergonomics
rulemaking record; and injury and illness data from the Bureau of Labor
Statistics. I want to assure you that no part of the Administration had
been stalling this initiative. In developing this plan, we sought to
carefully consider all options, rather than rushing to an ill-conceived
solution. The announcement last week is the product of this careful
consideration and we expect it to result in greater protection for
workers.
______
Questions Submitted by Senator Ben Nighthorse Campbell
Question. Presidential Decision Directive 62 provides authority for
Federal agencies to make sure that National Special Security Events are
safe and secure. The Secret Service is responsible for putting together
a comprehensive security plan and enlisting the assistance of other
Federal agencies for law enforcement personnel to carry out that plan.
Although budgets have been tight, the majority of Federal law
enforcement agencies have provided the necessary support B because
that's what the PDD-62 envisioned.
The President's fiscal year 2003 budget includes a request for $40
million for the Treasury Counterterrorism Fund, and specifically
requests statutory language which would allow payments from this fund
to ``any Federal agency'' which provides assistance to the Secret
Service at these events.
--Are we rewarding inappropriate behavior by providing reimbursement
to Federal agencies which have a track record of refusing to
cooperate with a Presidential directive without additional
funding? What message does this send to those agencies which
have consistently responded to the call?
--If such a fund is the appropriate way to go, should it rest within
the Treasury Department? Wouldn't it make more sense to have
the funding reside with the entity which is responsible for
making the initial NSSE designations?
--I assume that under the current review process, consideration is
given to the need for this high level of security. What
consideration, if any, is given to the cost of such a
designation? I would appreciate it if you could outline for me
exactly what process is followed in making these
determinations.
Answer. Due to the events of September 11, the frequency of NSSE
designations has increased. After September 11, the annual United
Nations General Assembly meeting and the Superbowl were designated
NSSEs for the first time. Security measures at the Winter Olympics (an
NSSE) were also increased. The expected increase in NSSE designations
as well as the unpredictability of the NSSE designation process (i.e.
which agencies will be asked to help at which event) make planning and
implementation of a Secret Service security plan at future NSSEs much
more difficult. A Counterterrorism Fund with wider eligibility covering
both Treasury and non-Treasury entities will provide the flexibility
necessary for the Secret Service to complete its mission under
Presidential Decision Directive (PDD-62).
PDD-62 gave the Secret Service the responsibility of planning and
designing operational and perimeter security at NSSEs, the FBI the
responsibility for crisis management, and FEMA the responsibility of
consequence management. Funding for the Secret Service to carry out its
responsibilities as described in PDD-62, which may include enlisting
assistance of Treasury and non-Treasury entities, appropriately rests
within the Treasury Department just as funding for FBI and FEMA, Secret
Service's partners in carrying out PDD-62, lies in their respective
agencies.
The Office of Homeland Security currently considers requests for
NSSE designation, in consultation with the Secret Service, FBI, and
FEMA. Consistent with section 3(e)(iv) of Executive Order 13228, the
Assistant to the President for Homeland Security is responsible for
recommending to the Attorney General and the Secretary of the Treasury
whether events should be designated as NSSEs. The primary factors taken
into account when making an NSSE designation are the scope of the
event, jurisdictional and local public safety agency concerns, and
threat considerations.
______
Question Submitted by Senator Ted Stevens
Question. I have been informed that OMB budget examiners are
beginning to examine Corps of Engineer infrastructure projects using an
internal OMB cost-benefit analysis. This is after the Corps has
completed a Chief's Reports with well grounded cost-benefit analysis,
Congress has authorized the project and Congress has funded the
projects.
This is happening in the case of Seward and Wrangell Harbors. Both
were authorized and funded after the Corps of Engineers found a
positive cost-benefit ratio associated with the projects. Why is OMB
second guessing the work performed by expert engineers who actually
visit the sites and meet with local leaders thousand of miles from
D.C.? This threatens to create an even larger backlog of Corps
projects.
Answer. OMB examiners do review the Assistant Secretary of the
Army's recommendations for the disposition of Chief's reports that he
is sending to Congress. Executive Order 12322 directs OMB to review all
agency water projects for consistency with the polices and programs of
the President and with Federal guidelines for water resources projects,
which are supposed to be followed by the Chief in preparing his
reports. This executive order was issued by President Reagan in 1981.
The OMB review does not add to the backlog. Rather, this review ensures
that only the best projects are eligible for construction.
______
Question Submitted by Senator Christopher S. Bond
Question. Please supply the Subcommittee with the number of program
examiners at OMB who work on budget, management, and other issues
related to programs administered by each of the following agencies: the
U.S. Army Corps of Engineers, the Department of Commerce, the
Department of the Interior, the Department of State, the Environmental
Protection Agency, the Federal Emergency Management Agency, and the
National Science Foundation.
Answer. OMB currently has: 4 full-time and 1 part-time staff with
primary responsibility for oversight of the Corps of Engineers civil
works programs; 4 examiners working on Department of Commerce issues; 9
examiners with primary oversight for the Department of the Interior and
its bureaus and programs (8 are in the Interior Branch and 1 is in the
Water and Power Branch); 8 program examiners for State Department
programs; 8 program examiners who work on budget, management, and other
issues related to programs administered by the Environmental Protection
Agency; 2 full-time examiners with responsibility for FEMA programs;
and, 1 full-time staff person with primary responsibility for oversight
of the National Science Foundation programs.
______
SUBCOMMITTEE RECESS
Senator Dorgan. This hearing is recessed.
[Whereupon, at 2:30 p.m., Wednesday, March 20, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]
TREASURY AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL YEAR 2003
----------
WEDNESDAY, APRIL 17, 2002
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 1:30 p.m., in room SD-192, Dirksen
Senate Office Building, Hon. Byron L. Dorgan (chairman)
presiding.
Present: Senators Dorgan, Reed, and Campbell.
DEPARTMENT OF THE TREASURY
Office of Enforcement
STATEMENT OF JAMES GURULE, UNDER SECRETARY FOR
ENFORCEMENT
OPENING REMARKS
Senator Dorgan. We will call the hearing to order today.
This is the Subcommittee on Treasury and General Government of
the Senate Appropriations Committee. We welcome our witnesses
and also the guests.
I would like to mention I am joined by the ranking member,
Senator Campbell. After we had scheduled this hearing,
Secretary Rumsfeld has now scheduled a top secret briefing
beginning at 2:30 in the Capitol building, and so because of
that--that will deal with the war in Afghanistan, and because
of that, I want to try to expedite this hearing so that we
might be able to access the information that Secretary Rumsfeld
is going to provide to the Senate this afternoon.
We will ask witnesses to put their entire statement in the
record by consent and ask that they limit their oral statements
to 5 minutes each.
I also want to note that each of the law enforcement
agencies here will be represented at the annual Law Enforcement
Technology Show April 30 in SD-106, right around the corner.
That is something that my colleague, Senator Campbell, started
some while ago and I was pleased to participate with him. We
are continuing that tradition and we appreciate the cooperation
of the agencies to do that.
Let me make a very brief statement and then call on my
colleague, Senator Campbell. This afternoon, we continue our
series of hearings on President Bush's fiscal year 2003 budget
request for agencies under the jurisdiction of this
subcommittee. Today, we will receive testimony from the Under
Secretary for Enforcement as well as the Director of the Secret
Service, the Director of the Bureau of Alcohol, Tobacco and
Firearms, the Director of the Financial Crimes Enforcement
Network, and the Acting Director of the Federal Law Enforcement
Training Center.
Because of the size of its budget and the specific homeland
security issues it faces, we will have a second Treasury law
enforcement hearing tomorrow afternoon with the U.S. Customs
Service. There are other issues that relate to the Customs
Service with respect to reorganization and so on and we will
have a second hearing tomorrow.
The events of September 11 have focused the attention of
this Nation on its ability to protect itself as never before.
We witnessed the heroism of our first responders, the fire
fighters, police, and EMS workers as they rushed to rescue
innocent Americans at the World Trade Center and the Pentagon
and also in Pennsylvania. We cheered the rescuers and we
grieved with the families of those who made the ultimate
sacrifice in the line of duty.
Our Nation has begun to learn the extent to which the men
and women who serve our country in various Treasury law
enforcement bureaus represent us and contribute to our homeland
defense. Although we repeat it every year, few people realize
that the Treasury Department agencies comprise about 40 percent
of all Federal law enforcement.
With respect to all of the agencies that are here today, I
want to say on behalf of my colleagues in the Senate that the
men and women who work in your agencies, who serve our country
in times of great difficulty, have the admiration and deep
respect of the American people for their service and we hope
that the manner in which we work with you and the manner in
which you work with the men and women who serve under you would
allow that understanding to exist among all those who serve our
country in these times.
I am going to put my entire statement in the record. It is
probably clear to all of us that we face significant budget
problems this year. The President has requested a $49 billion
increase for national security at the Pentagon for funding
requests for armed forces. About a $35 billion request is made
for homeland security. Some of that affects your agencies. I
believe that Congress will react favorably to most of those
requests.
PREPARED STATEMENT
It is clear to every American that we face very serious
challenges in all of these areas. Your agencies, in many
respects, are at the front line of the search for terrorists,
the search for homeland defense that will be impenetrable to
would-be terrorists, and it is very important to us that you
have the resources and the men and women who work for you and
with you have the resources to do their job that our country
needs doing at this point.
So with that, I will put my entire statement in the record.
[The statement follows:]
Prepared Statement of Senator Byron L. Dorgan
This afternoon we continue our series of hearings on President
Bush's fiscal year 2003 budget requests for agencies under the
jurisdiction of this Subcommittee.
Today we will receive testimony from: Under Secretary for
Enforcement, Jimmy Gurule; Director of the Secret Service, Brian
Stafford; Director of the Bureau of Alcohol, Tobacco and Firearms,
Bradley Buckles; Director of the Financial Crimes Enforcement Network,
James Sloan; and Acting Director of the Federal Law Enforcement
Training Center, Paul Hackenberry.
Because of the size of its budget and the specific homeland
security issues it faces, we will have a second Treasury law
enforcement hearing tomorrow afternoon with the United States Customs
Service.
The events of September 11 have focused the attention of this
Nation on its ability to protect itself as never before. We witnessed
the heroism of our first responders--the firefighters and police and
EMS workers--as they rushed to rescue innocent Americans at the World
Trade Center and the Pentagon. We cheered the rescues and we grieved
with the families of those who made the ultimate sacrifice in the line
of duty.
Similarly, the Nation has begun to learn of the extent to which the
men and women who serve the country in the various Treasury law
enforcement bureaus represented here today are part of our homeland
defense. Although we repeat it every year, few people realize that the
Treasury Department agencies comprise approximately 40 percent of all
Federal law enforcement.
--The Secret Service has taken the lead in designing and implementing
protective plans for major public events such as the Winter
Olympics in Salt Lake City and the Super Bowl in New Orleans.
--The ATF has been charged with preventing terrorists from obtaining
the firearms and explosives with which they can carry out acts
of terrorism.
--FinCEN is a major player in the efforts to unravel the
international web of terrorist financing for groups such as al
Quaeda.
--And FLETC is agency whose sole responsibility it is to train almost
all Federal law enforcement employees--not just those of the
Treasury Department.
Together, these agencies provide a strong foundation for the
protection of the Nation.
Unfortunately, while claiming increases in funding over the current
fiscal year for these agencies, the President's budget shortchanges the
vital activities of nearly all Treasury law enforcement agencies.
The President's budget claims to increase funds for these agencies
because the budget chose not to include the Supplemental appropriations
for homeland security added for most agencies' activities post-
September 11. The OMB director was quoted as recently as Monday stating
that much of the homeland security funding was a one-time expense. That
may be true for the National Institutes of Health or the Department of
Agriculture, but that is not the case at Treasury. Much of those costs
were associated with hiring additional agents and other law enforcement
personnel to protect the homeland. They are not hired for one-year and
then let go. They become important, and hopefully, long-term Federal
employees. Thus a true, apples-to-apples comparison in funding between
Fiscal year 2002 and the request for fiscal year 2003 reveals that:
--FLETC faces a 4.6 percent cut in its salaries and expenses account
at a time when it is being tasked to train one of the largest
group of law enforcement hiring classes in the history of its
operation and
--The Secret Service faces a 4.4 percent funding reduction at a time
when the number of people it protects has more than doubled and
when it is being stretched thin in protecting the integrity of
our currency.
To be fair, FinCEN and ATF would receive modest increases under the
President's budgets, but not without making difficult cuts to meet what
appears to be an arbitrary bottom-line.
We will explore these requests, and the additional needs of each of
these agencies, during the hearing. This will be a difficult year to
find additional and much needed funding for our law enforcement
agencies. We are waging a war overseas and face a weak economy at home.
This subcommittee fully supports each of the agencies testifying today
and commends the hard work that the women and men perform for the
Nation each and every day.
We look forward to your testimony and will make your complete
statements part of the record. Before we hear from our witnesses,
however, I call upon the Ranking Member, Senator Campbell, for his
remarks.
Senator Dorgan. Let me call on our ranking member, Senator
Campbell.
STATEMENT OF SENATOR BEN NIGHTHORSE CAMPBELL
Senator Campbell. Thank you, Mr. Chairman. With your
permission, I will also put my written statement in the record.
I know we will be short of time and I believe every one of the
people that are on this panel have been in to speak to me, as
they have you, about their needs this year, so we are pretty
well aware of what you want us to do.
I would like to associate my comments with yours, too. This
is a new kind of war, and certainly the gentlemen that
represent their agencies here today are on the front line of
that new kind of war. As I saw the reaction, not only from
September 11 by your agency and the ongoing things, such as the
terrific job that you did at the world Olympic Games in Salt
Lake City, I am well aware that even though we do not have a
surplus anymore--that sort of disappeared after September 11--
that the priorities that you need are going to be important to
all of us in the Nation.
I cannot imagine anything worse than not funding this
agency at the highest level we can, and then having something
terrible happen, as we were told just recently by former Prime
Minister Netanyahu when he gave us a briefing about the Middle
East crisis, he said it is only a matter of time. ``It is only
a matter of time before you are facing the same thing we are,''
i.e., Israel with terrorist attacks of suicide bombers and so
on. I cannot imagine anything worse than us not taking action
and funding these agencies as well as we can and then having
that happen.
PREPARED STATEMENT
So, I just want to tell the men that are here at this
table, that I am certainly going to do everything I can within
the limits of what we have to spend to make sure that you are
well taken care of in our appropriations bill.
Thank you, Mr. Chairman.
Senator Dorgan. Senator Campbell, thank you.
[The statement follows:]
Prepared Statement of Senator Ben Nighthorse Campbell
Thank you, Mr. Chairman. And, thank you for scheduling this hearing
on Treasury Law Enforcement. We should have an interesting afternoon.
The events of September 11 will forever remain in the psyche of all
americans, but even more so for law enforcement officers whose jobs
have taken on even more urgency.
The responsibilities of Treasury agencies touch just about every
aspect of Federal law enforcement--tracking terrorist financing,
blocking access to assets, training, keeping firearms out of the hands
of criminals, border security, and protection of our Nation's leaders.
But, Mr. Chairman, you know as well as I do that there is more to
our Treasury Law Enforcement agencies than that.
We all tend to think of the individual protection responsibility
when someone mentions the Secret Service but that is only a part of
their duties. They also investigate things such as computer and other
electronic crimes, identity theft which has become a huge problem in
our country, and counterfeiting which requires a global presence to
name a few.
Most people instinctively think of guns when talking about the
bureau of alcohol, tobacco and firearms but there is so much more to
that agency. They protect the American public by making sure that
alcohol products are safe for legal consumption, that explosives are
properly stored. They also collect close to $15 billion in revenue from
the alcohol, tobacco, firearms, and explosives industries.
The Financial Crimes Enforcement Center or FinCEN has been working
at top speed since Septemer 11 doing what they do best--tracking the
money. While they are currently mainly focused on terrorist assets,
they are still providing support to investigations into money
laundering and other financial crimes.
And, border security is only part of what the customs service does.
We will talk more about them tomorrow afternoon.
However, one of the most important agencies is one which works
behind the scenes to provide comprehensive and consistent basic
training to about 85 percent of all Federal law enforcement officers--
the Federal Law Enforcement Training Center. FLETC was the quiet
workhorse of treasury law enforcement prior to September 11 and they
have been called upon to do even more since that time.
Mr. Chairman, I am looking forward to talking with the
representatives of these agencies this morning to learn what they are
doing during fiscal year 2002 and what resources they need in fiscal
year 2003. Thank you.
Senator Dorgan. Senator Reed?
Senator Reed. Mr. Chairman, I just want to commend the law
enforcement professionals that are here and your colleagues who
protect us so well. I associate myself with the comments of the
chairman and ranking member and yield back my time.
Senator Dorgan. Senator Reed, thank you.
The Secret Service this year took the lead in designing and
implementing the protective plans for the major public events,
the Winter Olympics and the Super Bowl, among other things. ATF
has been charged with preventing terrorists from obtaining
firearms and explosives with which they can carry out acts of
terrorism. FinCEN is a major player in the efforts to unravel
the international web of terrorist financing for groups such as
al Qaeda. And FLETC, of course, is the agency whose sole
responsibility it is to train almost all Federal law
enforcement employees, not just those of the Treasury
Department. So this is a very important hearing and the budget
issues here are paramount these days in terms of their
importance with what we are doing in Congress, dealing with
terrorism.
Let me call on Jimmy Gurule, who is the Under Secretary for
Enforcement at the Treasury Department. Mr. Gurule, why don't
you proceed.
OPENING REMARKS FROM UNDER SECRETARY JIMMY GURULE
Mr. Gurule. Thank you. Chairman Dorgan, Ranking Member
Campbell, and Senator Reed, I am privileged to be here today to
introduce the President's 2003 budget request for the
Department of the Treasury's Office of Enforcement. Each of the
bureau directors is certainly prepared to answer any questions
that you have with respect to their programs and initiatives,
but I would like to take the limited time that I have and just
highlight a couple of key areas, beginning first with the
budget overview.
FISCAL YEAR 2003 BUDGET REQUEST
The President's fiscal year 2003 budget request seeks a
program level of $5.497 billion and 31,847 FTEs for Treasury
Enforcement. This level is significantly higher than the
President's initial fiscal year 2002 request. It is due in
large part to the response to the horrific events of September
11. The request is 20 percent above the President's initial
fiscal year 2002 budget request for Treasury Enforcement and it
provides an increase of 2,403 FTEs for Treasury Enforcement.
The resources that are requested in this budget are
essential to ensure that Treasury Enforcement is able to
continue the efforts that it has undertaken since September 11
to combat terrorism and specifically terrorist financing. As I
am sure you are well aware, since September 11, under Secretary
Paul O'Neill's leadership, the Treasury Department's
enforcement bureaus have launched a number of new initiatives
to identify, disrupt, and dismantle the financial networks of
the terrorist organizations that are responsible for the
attacks on the World Trade Center and the Pentagon.
I am pleased to report to the subcommittee today that
Treasury has named 192 individuals and entities as financiers
of terror and has blocked over $34 million in assets
domestically. Our coalition partners have blocked an additional
$70 million, for a total of approximately $104 million.
The resources that are set forth in this budget will enable
the Treasury Enforcement offices to continue in a very
aggressive way to go after the funds, to block the funds, and
bring the perpetrators of acts of terror and the would-be
perpetrators (the conspirators) to justice. This effort has
truly been a cooperative intra-agency and interagency effort.
OFAC has been at the forefront of this effort with respect to
investigating and providing the financial profiles for the
organizations and entities that we have blocked.
OPERATION GREEN QUEST
In October of last year, Treasury Enforcement established a
new multi-agency task force, Operation Green Quest. It brings
together, in a very coordinated way, the best of Treasury
Enforcement, the extensive expertise that exists in the
Treasury Department with respect to investigating complex
financial crimes, including, of course, IRS-CI, Customs agents,
FinCEN, OFAC, as well as our interagency partners in the FBI
and the Department of Justice. The Secret Service has also been
an important player in Green Quest, as has been ATF with
respect to some investigations that they have conducted.
Additionally, this strategy is an international strategy.
It requires international cooperation. At the forefront of the
international cooperative strategy has been the Financial
Action Task Force. We have tasked FATF to move its multilateral
organization that is focused on money laundering to kind of
refocus and target on terrorist financing. As a result of an
extraordinary plenary session that was held in Washington,
D.C., in October, FATF announced for the first time eight
international standards on terrorist financing. So this work is
important. The resources that we are requesting are essential
to continue this work and to upgrade our efforts.
2002 WINTER OLYMPICS
As you stated, Senator Campbell, we have also been involved
with respect to preventing terrorism, and one specific case, of
course, is the Winter Olympics. I think that is a model example
of how Federal law enforcement agencies, as well as State and
local agencies, can work together in a cooperative way, and
when we do, you see the results.
This was a model for the world of what law enforcement can
do to prevent, protect, and deter terrorist attacks, and to
that end, clearly, my hat is off to Director Stafford. The work
of the U.S. Secret Service was exemplary. Customs was an
essential player in this, as was BATF (the Bureau of Alcohol,
Tobacco and Firearms).
BORDER SECURITY
And finally, and I will close on this point, border
security. I know that we will have an opportunity to get into
this in greater detail tomorrow, but that is one other top
priority for the Treasury enforcement office. Of course, there
are important terrorism implications with respect to enhancing
security at our border. We have undertaken efforts to do that
with respect to multiple, diverse components, including
increasing inspectors at the border, increasing the
distribution of technology at the border, working very closely
with our law enforcement counterparts in Mexico and Canada,
sharing of information, and now a new program, the Customs
Trade Partnership Against Terrorism program that was announced
at the Ambassador Bridge yesterday, which involves the trade
community. So we are doing a lot to ensure that our borders are
safe.
PREPARED STATEMENT
Thank you for the opportunity to provide an overview of the
President's fiscal year 2003 budget request and to highlight
some of the efforts of the Office of Enforcement. I look
forward to answering any questions that you may have.
Senator Dorgan. Mr. Gurule, thank you very much.
[The statement follows:]
Prepared Statement of Jimmy Gurule
Chairman Dorgan, Ranking Member Campbell, and Members of the
Subcommittee, I am privileged to be here today to introduce the
President's fiscal year 2003 budget request for the Department of the
Treasury's law enforcement bureaus and offices. It is indeed an honor
to appear before you this week to represent the more than 31,000
dedicated men and women who quietly and selflessly serve their country
every day--often at great personal peril and sacrifice.
Testifying with me this afternoon are Bradley A. Buckles, Director
of the Bureau of Alcohol, Tobacco and Firearms (ATF), James F. Sloan,
Director of the Financial Crimes Enforcement Network (FinCEN), Brian L.
Stafford, Director of the United States Secret Service (USSS), and Paul
Hackenberry, Acting Director of the Federal Law Enforcement Training
Center (FLETC). Tomorrow, I will be joined by Robert C. Bonner,
Commissioner of the United States Customs Service (Customs).
I am pleased to note that this week's hearings are the first time
this Subcommittee will hear from five, rather than four, Treasury
Enforcement bureaus, since FinCEN recently was authorized as a bureau
within Treasury Enforcement with enactment of the USA PATRIOT Act. I
take this opportunity to thank the members of this Subcommittee for
your support of this provision and the many new tools which the USA
PATRIOT Act provided to the Treasury Department to fight terrorism and
dismantle and disrupt terrorist financing.
The President's fiscal year 2003 budget seeks a program level of
$5.497 billion and 31,847 FTEs for Treasury Enforcement. This level is
significantly higher than the President's initial fiscal year 2002
request largely due to additional resource needs associated with the
horrific events of September 11 and the overall support of this
Subcommittee. The request is 20 percent ($879 million) above the
President's initial fiscal year 2002 budget request for Treasury
Enforcement, and it provides for an increase of 2,403 FTEs for Treasury
Enforcement. The 2,403 FTE increase includes 1,779 FTE for Customs; 381
FTE for the Secret Service; 124 FTE for ATF; 94 FTE for FLETC; and 25
FTE for FinCEN. Furthermore, the fiscal year 2003 budget request
indicates a staffing level of 48 FTE for the Office of Enforcement,
with the provision of staffing up to 58 FTE within the Office's
appropriated level--the same level for the third consecutive year.
In response to the terrorist attacks of September 11, Congress
provided essential fiscal year 2002 emergency appropriations of $674.1
million to the Treasury Enforcement bureaus: approximately $428.6
million to Customs; $141.5 million to the Secret Service; $31.4 million
to ATF; $31.5 million to FLETC; and $1.7 million to FinCEN. Much of
this emergency funding was for one-time, non-recurring costs. I am
pleased to inform the Subcommittee that the recurring costs from the
Terrorism Supplemental have been annualized and incorporated in the
President's budget request.
When the President submitted his budget request on February 4,
2002, he indicated it ``recognized the new realities confronting our
Nation, and funds the war against terrorism and the defense of our
homeland.'' To implement this objective, the President's fiscal year
2003 request contains $159 million in new funding for Homeland Security
program initiatives for Customs ($158 million) and FinCEN ($1 million).
The fiscal year 2003 budget request includes $29.2 million for other
program initiatives--$21.7 million for ATF and an additional $7.5
million for the Customs Automation Modernization programs. The budget
request also includes $8 million in additional resources for Secret
Service protection services to begin preparation for the 2004
Presidential campaign.
The fiscal year 2003 Budget includes inflation type increases and
Homeland Security annualizations of $259.2 million. Although the
immediate Office of Enforcement ($8.5 million) fiscal year 2003 budget
request is $231,000 more than the fiscal year 2002 Financial Plan, it
is $139,000 less than the ($8.6 million) fiscal year 2002 Enacted. As I
mentioned, the staffing level remains the same.
Over the next 2 days, the Subcommittee will hear from the Treasury
Enforcement Bureau Directors regarding their respective bureaus' new
initiatives and programs. Therefore, I would like to take this
opportunity to provide the Subcommittee with an overview of the newest
challenges facing the men and women in Treasury law enforcement and the
exemplary manner in which they have responded. That they have been able
to do so effectively is due, in large part, to the support that this
Subcommittee and the Congress have provided us both before and in the
aftermath of September 11.
We have all been deeply affected by the horrific acts of that day.
We at Treasury lost a respected member of our law enforcement family,
Secret Service Master Special Officer Craig Miller, who perished in the
World Trade Center. And of course, the New York offices of Customs,
Secret Service, and ATF were destroyed.
Combating terrorism has become the Nation's primary agenda. As you
are aware, on September 24, 2001, President Bush stated, ``We will
direct every resource at our command to win the war against terrorists,
every means of diplomacy, every tool of intelligence, every instrument
of law enforcement, every financial influence. We will starve the
terrorists of funding.'' Under Secretary Paul O'Neill's leadership, we
in Treasury Enforcement have devoted extensive resources and expertise
to fulfill this mandate.
We have worked, and continue to work, in close coordination with
the Justice Department, the Federal Bureau of Investigation (FBI),
State Department, the intelligence community and the Defense
Department. Specific examples of our close cooperation include joint
activities in the September 11 investigations and on the Financial
Review Group (FRG). In these investigations, Treasury has added its
investigative expertise and access to unique databases to support the
U.S. Government's efforts.
Our war against terrorist financing extends to financial
intermediaries and facilitators who infuse terrorist organizations with
money, materiel, and support. We have come to clearly appreciate and
understand that terrorism has been nourished by ample funding channeled
from a plethora of sources, including banks, charities, hawalas,\1\
narcotics traffickers, and money launderers.
---------------------------------------------------------------------------
\1\ Hawala is a type of alternative remittance system that is
common in many parts of the world, including the Middle East and Far
East.
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disrupting and dismantling terrorist financing
Since September 11, Treasury Enforcement, including its component
bureaus, has launched a number of new initiatives to identify, disrupt,
and dismantle terrorist financial networks both domestically and
abroad. I am pleased to report to the Subcommittee this morning that
Treasury has named 192 individuals and entities as financiers of
terrorism, and has blocked over $34 million in assets. Our Coalition
partners have blocked another $70 million. A portion of that amount has
since been unblocked for the new Afghan Interim Authority to assist in
its critical period of rebuilding. This is truly a global effort--196
Nations have expressed support to disrupt terrorist financing and 149
Nations can block terrorist assets.
We are grateful that you and your colleagues made significant
improvements in the laws that allow us to tackle the issue of terrorist
financing in a more unified, aggressive manner. Of particular
importance to our counter-terrorism efforts is the USA PATRIOT Act that
clarifies the law enforcement and intelligence communities' authority
to share financial information regarding terrorist investigations.
These provisions are already being utilized and are bearing fruit in
disrupting financing networks.
Office of Foreign Assets Control
The Office of Foreign Assets Control (OFAC), an office within
Treasury Enforcement, plays a key role on the inter-agency working
group, chaired by Treasury, that has been targeting and listing
individuals and entities pursuant to Executive Order 13224 which
President Bush signed on September 23, 2001. In this process, we have
identified, among other entities, front companies, charities, banks,
and a hawala conglomerate that served as the financial support networks
for al-Qaeda and other global terrorist groups. We have shut down the
operations of these entities in the United States and abroad. Foreign
countries have been remarkably cooperative in this process.
OFAC has widely disseminated the names of new designated terrorists
to the business and financial communities through websites, Fedwire
Alerts, CHIPS system notices, communications to Federal and State
regulators, and electronic broadcasts to 175 key industry groups.
Information on terrorist designations is also distributed to the public
by way of Customs, the Government Printing Office, and other agency
networks.
As you will recall, the Foreign Terrorist Asset Tracking Center
(FTAT) was in the process of being organized and staffed when the
terrorist attacks of September 11 occurred. In fact, the Financial
Crimes Enforcement Network (FinCEN) had already been staffed for the
purpose of providing analytical support to the interagency FTAT and was
supplying the product of that staffing to the Office of Foreign Assets
Control (OFAC). Immediately following the attacks, the Treasury
Department helped to accelerate the development of the interagency FTAT
by establishing a temporary operational presence within the secure
environment of FinCEN. The unit quickly began to serve as an analytical
center for combating the problem of terrorist financing.
Section 906 of the USA PATRIOT Act requires that the Director of
the CIA, the Attorney General and the Secretary of the Treasury jointly
file a report on the ``feasibility and desirability'' of reconfiguring
FTAT. This matter was reviewed by senior Government officials,
including the Principals Committee of the National Security Council.
Based on that review, a decision was made to move and reconfigure FTAT
to ensure it was fully integrated into the ongoing terrorist financing
activities of other agencies. Treasury will continue its support of
FTAT and its broader efforts to disrupt and dismantle terrorist
financing.
Blocking Assets
One of the higher profile results of OFAC analysis was the
identification of Al-Barakaat as a major financial operation that
supported terrorist organizations. The Al-Barakaat case is a good
example of model coordination between the Treasury Department, the FBI,
and other enforcement agencies both domestically and abroad.
Al-Barakaat is a Somali-based hawaladar \2\ operation, with
locations in the United States and in 40 countries, that was used to
finance and support terrorists around the world.\3\ The investigative
work of the FBI, Customs, and IRS-Criminal Investigation, along with
analysis by OFAC, FinCEN, and the intelligence community, identified
Al-Barakaat as a major financial operation that was providing material,
financial, and logistical support to Usama bin Laden and other
terrorist groups.
---------------------------------------------------------------------------
\2\ A hawaladar is an entity that engages in hawala transactions.
\3\ Some individuals may have used Al-Barakaat as a legitimate
means to transfer value between individuals in different countries
without passing through the formal international banking system.
---------------------------------------------------------------------------
Treasury, along with the Department of Justice, coordinated efforts
to block assets and to take law enforcement actions against Al-
Barakaat. On November 7, 2001, Federal agents executed search warrants
in three cities across the country--Boston, Columbus, and Alexandria--
and shut down eight Al-Barakaat offices across the U.S., including
locations in the following cities: Boston, Massachusetts; Columbus,
Ohio; Alexandria, Virginia; Seattle, Washington; and Minneapolis,
Minnesota.
As part of that action, OFAC was able to freeze approximately
$1,100,000 domestically in Al-Barakaat-related funds. Treasury also
worked closely with the United Arab Emirates (UAE) to enable the UAE to
block Al-Barakaat's assets at its financial center of operations in
Dubai. Disruptions to Al-Barakaat's cash flows, resulting from OFAC's
designation actions and international cooperation, are estimated to be
in excess of $65 million from the United States alone. In addition, the
combined work of OFAC, Operation Green Quest, and law enforcement had
led to additional leads in the Al-Barakaat investigation.
This is an example of what our combined efforts can accomplish when
we join our resources and our expertise to fight the common scourge of
terrorist financing.
Joint Designations
On March 11, on the 6 month anniversary of the September 11
attacks, the Treasury Department, joined by the Saudi government, took
a new step in the war on terrorist financing by making its first joint
designation of a financial supporter of terrorism. Prior to that date,
Treasury received significant cooperation from other countries in
blocking accounts of those named by the United States, and our European
allies have made designations of their own. The joint blocking action
on March 11 is especially significant for it is a sign of the growing
strength of the anti-terror coalition and marks a new level of
international coordination and cooperation.
Treasury and the Saudi government blocked the accounts of the
Somalia and Bosnia-Herzegovina branches of the Saudi Arabia-based Al-
Haramain Islamic Foundation. While the Saudi headquarters for this
private charitable entity is dedicated to promoting Islamic teachings,
Treasury and our Saudi Arabian allies determined that those specific
branches of Al-Haramain have been engaged in supporting terrorist
activities and terrorist organizations such as al-Qaeda, AIAI (al-
Itihaad al-Islamiya), and others.
Last month, Treasury Secretary O'Neill visited the Persian Gulf
region, where he had the opportunity to meet with King Fahd and Crown
Prince Abdullah, others in the Saudi government, and the leadership in
Bahrain, Kuwait and the UAE. Throughout the region, the Secretary
encountered a clear understanding that the September 11 attacks were
not only an attack on the United States, but were an attack on the
civilized world. These Governments' leaders assured Secretary O'Neill
that they, like others in the world, are doing what they can to cut off
terrorists' access to funds, wherever those funds are found.
This action also highlights the special need to safeguard
charities, so that well-intentioned donors can be assured that their
donations will be used only for their intended good purposes, and not
for acts of terrorism. During his trip to the Gulf, Secretary O'Neill
underscored that misusing charity funds to support terrorism harms the
people who gave the donation, harms the people who should have received
it and is dangerous to us all. The Treasury Department is committed to
finding those organizations that use charities to fund terrorists or
terrorist acts, exposing them, and shutting them down.
Operation Green Quest
On October 25, 2001, Treasury created Operation Green Quest
(``Green Quest''), a new multi-agency financial enforcement initiative
designed ``to augment existing counter-terrorist efforts by bringing
the full scope of the Government's financial expertise to bear against
systems, individuals, and organizations that serve as sources of
terrorist funding.'' This task force is led by the Customs Service and
includes the Internal Revenue Service, the Secret Service, ATF, OFAC,
FinCEN, the Postal Inspection Service, the FBI, the Department of
Justice, and the Naval Criminal Investigative Service. Operation Green
Quest also receives support from Interpol's National Central Bureau,
based in Washington, D.C. Green Quest brings together the extensive
financial expertise of the Treasury Enforcement bureaus along with the
exceptional experience of our partner agencies and departments to focus
on terrorist financing.
Green Quest has complemented the work of OFAC in identifying
terrorist networks at home and abroad, and it has served as an
investigative arm to aid in blocking actions. Green Quest's work has
led to 12 arrests, 4 indictments, the seizure of nearly $4 million, and
bulk cash seizures--cash smuggling--of over $11 million. Green Quest
agents, along with those from the FBI and other Government agencies,
have traveled abroad to follow leads, exploit documents recovered, and
to provide assistance to foreign governments. In this effort, Green
Quest has made full use of its overseas Customs Attaches to investigate
suspect networks and to gather information for its own use and the use
of OFAC. The work of these financial experts is just starting as they
have opened well over 200 terrorist financing investigations and are
following leads on a daily basis. Green Quest's work, in combination
with the work of OFAC, serves as a seminal part of our enforcement
efforts.
International Cooperation
Our efforts will not have the greatest success if prosecuted
unilaterally, and may ultimately fail if we cannot obtain the
cooperation of other ations. To date, all but a handful of countries
have expressed their support for the international fight against
terrorist financing. Currently, 149 countries and jurisdictions around
the world can block terrorist assets. The Office of Enforcement, in
concert with other Federal agencies, is providing technical assistance
to a number of countries to strengthen their capacity to freeze
terrorist funds. Daily, we are in contact with foreign financial
officials and are engaged in bilateral and multilateral discussions
regarding international cooperation and action against terrorist
activities and financing.
The Office of Enforcement has also helped coordinate the deployment
of financial ``jump teams'' consisting of experienced accountants, bank
examiners, and other financial experts from OFAC, the Customs Service,
IRS, FinCEN, the FBI, and other agencies. These experts review business
records and possible links to money associated with bin Laden's al-
Qaeda network.
Treasury has engaged in numerous international fora, including the
G-7, G-8, G-20, the Financial Action Task Force (FATF), the Egmont
Group--the global network of Financial Intelligence Units (FIUs) of
which FinCEN is a key member--and the international financial
institutions to combat terrorist financing in a global, systematic way.
The Treasury Department, in conjunction with the Departments of
Justice and State, hosted an Extraordinary Plenary session of the
Financial Action Task Force in Washington, D.C., at the end of October
2001 to address terrorist financing. This meeting was immediately
followed by a meeting of the Egmont Group to discuss information
sharing and terrorism. At the plenary session, FATF established eight
Special Recommendations regarding terrorist financing which represent
an important step to establishing a global regime to cut terrorists off
from the international financial system.
These new Recommendations were endorsed by countries throughout the
world at a special FATF Forum on Terrorist Financing held in February
and attended by over 55 jurisdictions. Moving forward, FATF, with the
strong support of the U.S., is now leading a global effort to bring all
countries in compliance with these new standards. The U.S. has recently
completed a self-assessment questionnaire against these standards,
which is posted on the Treasury web site. In June, FATF will begin to
consider a process with respect to countries that are not cooperating
in the international effort against terrorist financing.
While countering terrorist financing is a Treasury Enforcement
priority, we are also committed to preventing terrorist acts on U.S.
soil and against U.S. interests abroad, and to reducing violent crime
here at home.
preventing terrorism and reducing violent crime
Not only is the mission of Treasury law enforcement uniquely suited
to combating terrorist financing, but we play a leading role in
homeland security efforts--from protecting the Nation's borders to
protecting its leaders, to ensuring the integrity of our financial
institutions and critical infrastructures. The President's budget
request will ensure that Treasury bureaus can continue to effectively
fulfill missions that are integral to protecting the homeland.
U.S. Secret Service
The U.S. Secret Service protects the Nation's top leaders, combats
financial fraud, protects the integrity of the financial systems
against cyberattacks, and leads the effort to ensure the safety of
thousands of citizens participating in designated National Special
Security Events (NSSEs). We have seen the stellar work of the Secret
Service in providing security for two recent NSSEs--the Super Bowl and
the Winter Olympic Games in Salt Lake City. The complexity of these
security events highlighted the special expertise and professionalism
of the Secret Service. The dedicated men and women of the Secret
Service are to be commended for their outstanding work at protecting
thousands of spectators, employees, and athletes at these events. The
President's budget request will allow the Secret Service to strengthen
its efforts in an increasingly complex and threatening environment.
U.S. Customs Service
The U.S. Customs Service also played a key role in security for the
Salt Lake City Olympic Games. The Customs Service role included
providing air surveillance in restricted air space, ground support to
the United States Secret Service, increased presence at the Northern
Border, and screening general aviation aircraft and their passengers
and pilots. A total of 500 Customs officers were committed to day-to-
day oversight of the Games.
The Customs Service is the vanguard agency in protecting the
country against weapons of mass destruction as it monitors travelers
and cargo crossing the northern and southern borders and through the
Nation's seaports and airports. Last November, Secretary O'Neill,
Commissioner Bonner, and I met with our Canadian counterparts in
Ottawa, Canada, to discuss cooperative efforts between the U.S. and
Canada along our shared border. We have since been engaged in a number
of new collaborative initiatives to strengthen security along our
shared border, while working on ways to expedite the flow of trade.
Commissioner Bonner and I also are working with the Office of Homeland
Security to help implement the 30-point Action Plan announced in
December by Governor Ridge and Deputy Prime Minister John Manley. The
``Action Plan for Creating a Secure and Smart Border'' has four
pillars: (1) The secure flow of people; (2) The secure flow of goods;
(3) Secure infrastructure; and (4) Coordination and information
sharing. I can assure this Subcommittee today that the coordination and
cooperation among Federal border agencies and their Canadian
counterparts has never been stronger.
A similar Smart Border Accord is now in place for the U.S.-Mexico
border. On March 22, 2002, President Bush and President Fox announced
in Monterrey, Mexico, a 22-point agreement to build a smart border for
the 21st century between our two countries. In their joint
announcement, President Bush stated, ``President Fox and I are
determined to make our shared border modern, efficient, and secure. The
Smart Border Declaration our countries have just signed will move us
toward this important goal. Our common border must be closed to drugs
and terrorists, and open to trade and legitimate travel.'' The U.S.
Customs Service and the Treasury Department will play a key role in
implementing this important Smart Border Accord.
Bureau of Alcohol, Tobacco and Firearms
The President's budget request will ensure that the Bureau of
Alcohol Tobacco and Firearms will be able to expand its training
capacity at the Canine Training Facility in Front Royal, VA, increase
ATF Canine Handler teams, and expand ATF's participation in critical
Joint Terrorism Task Force activities. ATF has developed the most
respected program in the world for detection of explosives and
accelerants. This expertise is vital in our war on terrorism, in which
explosives is the terrorists' weapon of choice.
ATF also played a significant role in the security of the Winter
Olympics. For several years, ATF worked with its law enforcement and
public safety partners on a comprehensive and integrated Olympic
security plan. ATF committed over 330 special agents and support
personnel to support security for the Olympic Games. ATF Special Agent
Certified Explosive Specialists, Explosive Enforcement Officers,
Explosive Detection Canines/Handlers, and National Response Team
members were assigned to the Olympic Bomb Management Center. These
experts were available to respond to any critical incident, explosive
or suspected device at any of the venues. At these Olympic Games,
unlike at the Atlanta Olympics, ATF had a new mobile crime laboratory
with state of the art detection and analysis equipment on-site. The
crime lab could identify explosives and other evidence within minutes,
which would provide immediate leads to investigators on the ground.
Federal Law Enforcement Training Center
The Federal Law Enforcement Training Center, known as FLETC,
conducts the training for the vast majority of the Federal Government's
law enforcement personnel. FLETC is projecting the greatest increase in
training requirements in its history as it responds in full measure to
the September 11 attacks.
In the days following September 11, representatives of the U.S.
Department of Transportation's Federal Air Marshal Division reached out
to FLETC regarding increased training needs for the Federal Air Marshal
Program (FAMs). These requests have resulted in an increase of over
20,000 student weeks of training. In October, the FLETC and the FAA
developed a 5-week integrated basic training program and a 3-week
agency specific basic follow-on training program.
In January, Transportation Security Administration (TSA)
representatives met with FLETC staff to identify resources needed to
develop a training curriculum for the TSA Security Screeners. FLETC
subject matter experts then met with TSA and FAA representatives to
develop that training curriculum. The result was a pilot TSA Basic
Screeners training program conducted at FLETC in February. The TSA
Management Team continues to meet with FLETC personnel to determine the
extent to which the FLETC will be asked to further assist the TSA in
training Federal Law Enforcement Officers/Agents within a very short
time frame. The quality of training developed and delivered by FLETC
will set the standard for our level of protection in the air for years
to come.
FinCEN
The increased funding in the President's request for the Financial
Crimes Enforcement Network will strengthen FinCEN's law enforcement
investigative support efforts to enforce the Bank Secrecy Act, combat
money laundering and other financial crimes, and implement its new
responsibilities under the USA PATRIOT Act of 2001.
Immediately after the tragedy of September 11, FinCEN redirected
approximately 30 percent of its resources to the initial investigation
of the terrorist attacks. Those efforts included: establishing a 24-
hour operation center to enhance liaison with the FBI Counter-terrorism
Center; establishing a telephone hotline for financial institutions to
report suspicious activity; facilitating a multi-agency effort using
their specialized tools and secure facility; and developing valuable
investigation referrals and financial lead information by redirecting
100 percent of its intelligence liaison office to that effort.
On November 7, 2001, President Bush, Treasury Secretary O'Neill,
Secretary of State Powell and Attorney General Ashcroft visited the
FinCEN offices where the President thanked all of the FinCEN employees
for their work on the front lines in the war against terrorist
financing. At that time, the President stated: ``We put the world's
financial institutions on notice: if you do business with terrorists,
if you support them or sponsor them, you will not do business with the
United States of America.'' FinCEN plays a critical role in this effort
and will continue to provide this invaluable service to our Nation.
IRS Criminal Investigation
While the Office of the Under Secretary for Enforcement does not
have direct oversight authority over IRS-Criminal Investigation, we do
provide policy guidance for IRS-CI criminal investigators. These
investigators offer a unique blend of accounting and enforcement
expertise that is invaluable in perfecting complex financial
investigations, including cases involving leaders and members of
extremist groups who have committed tax, money laundering, or currency
violations and individuals engaged in fundraising activities to support
terrorism, especially if tax exempt organizations are being used. In
the aftermath of September 11, IRS criminal investigators have played
critical roles in the Strategic Information Operations Center; the
Joint Terrorism Task Force; Operation Green Quest; the Office of
Foreign Assets Control; the Anti-Terrorism Task Forces throughout the
country; the High Intensity Money Laundering and Related Financial
Crime Area Task Forces, and the Air Marshal Program.
combating money laundering
The Office of Enforcement is currently developing the 2002 National
Money Laundering Strategy, as well as overseeing the implementation of
the 2001 Strategy. The main focus of the Strategy is on enforcement and
investigation of money laundering enterprises and sophisticated
networks. This work has been significantly impacted by the passage of
the USA PATRIOT Act. We have been working with the Treasury General
Counsel to draft timely implementing regulations for the various
provisions of the USA PATRIOT Act, such as the provision that
terminated the relationship between U.S. financial institutions and
shell banks.
The Office of Enforcement is overseeing the progress and
development of the six High Intensity Money Laundering and Related
Financial Crime Area (HIFCA) Task Forces. The six HIFCAs are now
focused on operational activities, in addition to gathering
intelligence which is useful in money laundering investigations. I am
confident the HIFCAs will play a significant role in our anti-money
laundering efforts.
At this point, I take the opportunity to highlight for the
Subcommittee the recent success of Operation Wire Cutter, a 2\1/2\-year
joint DEA/Customs undercover operation targeting the largest Colombian
Black Market Peso Exchange (BMPE) money brokers. These brokers are
professional money launderers who sell their services to the Colombian
drug cartels.
On January 15, 2002, U.S. and Colombian officials arrested 37
people in the U.S. and Colombia and seized over $8 million in cash,
over 800 pounds of cocaine, and a total of over 1,000 pounds of
narcotics. One suspect tried to evade arrest in New York City by
throwing a suitcase with $400,000 in cash out of his apartment window.
The El Dorado Task Force, operating out of the office of the U.S.
Customs Service Special-Agent-in-Charge in New York, played an
important role in this law enforcement operation.
The Multinational Black Market Peso Exchange (BMPE) Experts Working
Group (Colombia, Aruba, Panama, Venezuela, and the United States), led
by the Office of Enforcement, has produced a report that recommends
BMPE initiatives to participating Governments to improve international
cooperation in efforts to combat and dismantle the BMPE. Last month a
joint statement was issued embodying the conclusions and
recommendations of this Working Group. We are also working closely with
senior executives of major trade associations and corporations
operating in the United States whose products are vulnerable to being
involved in BMPE transactions.
Treasury Enforcement also works closely with the Department of
Justice's Bureau of Justice Assistance to oversee the Financial Crime-
Free Communities Support Program (C-FIC) which awards anti-money
laundering grants to State and local law enforcement agencies and
prosecutors' offices through a competitive grant award program.
Treasury has awarded approximately $4.2 million in grants to 17
recipients in the first 2 years of this program.
reducing firearms violence
One of the top priorities of the Bush Administration is to make a
lasting reduction in the gun crime rate in America. Last May the
President announced Project Safe Neighborhoods, a comprehensive
approach that targets violent offenders and crime guns.
Project Safe Neighborhoods has been implemented by U.S. Attorneys
across the country, working in partnership with communities and State
and local law enforcement. The strategy has five components: (1)
Partnership/Coordination; (2) Strategic Planning; (3) Training; (4)
Community Outreach and Public Awareness; and (5) Accountability.
Stronger relationships among Federal prosecutors and agents with their
State and local counterparts has strengthened their ability to
identify, investigate and prosecute gun violence.
The Treasury Department, through its Bureau of Alcohol, Tobacco and
Firearms, plays an integral role in implementing Project Safe
Neighborhoods through its Integrated Violence Reduction Strategy
(IVRS). The strategy provided additional resources to ATF to add new
agents, inspectors and support staff to enhance its enforcement and
investigation of firearms violations and efforts to reduce violent
crime. Under IVRS/Project Safe Neighborhoods, ATF has a broader impact
in target cities by educating police departments about the
effectiveness of crime gun tracing and firearms trafficking. ATF
supports Project Safe Neighborhoods through the excellent work of its
National Tracing Center, which performs traces of crime guns, and its
Youth Crime Gun Interdiction Initiative.
countering narcotics
One of Treasury Enforcement's highest priorities is reducing the
supply of dangerous drugs entering the United States. It is also one of
our most difficult challenges. 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.
The Office of Enforcement and its bureaus are decisively engaged as
part of the Federal Government's effort in support of Plan Colombia,
which is a comprehensive and balanced response to that nation's
multiple challenges. In addition to targeting the critical drug
trafficking problem, the integrated strategy addresses human rights,
democratization, judicial reform, social development, the economy, and
the peace process. Colombia's lawlessness, corruption, and long
internal conflict are exacerbated by the immense profits generated by
the drug trade. Ninety percent of the cocaine supplied to the United
States originates in or passes through Colombia, as does two-thirds of
the heroin seized in this country. As a result, Colombia is the central
focus of the United States' Western Hemisphere efforts to reduce the
supply of illicit drugs.
Treasury's support of Plan Colombia is an integral part of the U.S.
Government's programs aimed at strengthening the justice sector and
financial infrastructure throughout Colombia. The Emergency
Supplemental provided funding to the State Department under the
provisions of the Foreign Assistance Act, by which State transfers
authority to Treasury and its components for programs via specifically
negotiated letters of agreement (``632 agreements''). However,
sustainment of most Treasury Plan Colombia programs beyond amounts
appropriated by the Terrorism Supplemental will rely on assistance
provided by the State Department in 2002 and 2003.
We appreciate the Subcommittee's support for Treasury's role in
Plan Colombia. The Plan Colombia package passed by Congress included
programs with $71.5 million in specific line item allocations for
Treasury. These are:
--$68 million for Customs detection and monitoring aircraft radar
upgrades;
--$2 million for the Office of Foreign Assets Control;
--$1 million for banking supervision assistance (Office of the
Assistant Secretary for International Affairs/Office of
Technical Assistance);
--$500,000 for tax revenue enhancement (OASIA/OTA).
In addition to these specific allocations for Treasury components,
we have received $14.67 million for law enforcement programs from
Justice accounts in the legislation, for a total of $86.17 million. We
anticipate all Treasury programs should be completed by June 2003,
approximately 24 months from the transfer of Plan Colombia spending
authority from State to Treasury and its components in June of 2001.
enforcing tariff and trade laws
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 from 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 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 ensure
that the movement of trade across our borders is as expeditious 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.
Treasury Enforcement's Office of Regulatory, Tariff, and Trade
Enforcement performs a variety of important functions, including review
of all regulations relating to enforcement of trade laws, participation
in negotiations of international trade agreements, and management of
the private sector Advisory Committee on the Commercial Operations of
the Customs Service (COAC).
The COAC is a legislatively constituted advisory committee of 20
private sector members, which meets with Enforcement and Customs
officials quarterly. Until September 11, their advice focused on trade
facilitation. After September 11, I requested COAC's input on border
security and the role the private sector can play in increasing cargo
security. Utilization of the group's expertise provides a unique
opportunity to examine synergies between enhanced cargo security and
the private sector concern that the smooth flow of trade not be impeded
unnecessarily due to increased security concerns.
The COAC produced an excellent report in January with 60
recommendations. Many of these have already been implemented, and
others are under close examination by Customs and Treasury officials.
Three COAC members also have entered into agreements with Customs under
the new Customs-Trade Partnership Against Terrorism program.
president's management agenda
The Treasury Department's fiscal year 2003 budget recognizes the
importance of achieving the President's Management Agenda. The Office
of Enforcement is working with the law enforcement bureaus to support
Secretary O'Neill's goal of Treasury becoming a results-driven world
class organization, consistent with the President's five Presidential
Management Initiatives:
--Strategic Management of Human Capital;
--Expanded Electronic Government;
--Improved Financial Performance;
--Budget and Performance Integration; and
--Competitive Sourcing.
Only through a balance of implementing all five Presidential
Management Initiatives will the Treasury Department and its enforcement
offices and bureaus be able to achieve world class status and become an
organization that is performance-driven with specific, measurable
results linked to investment of resources. In working towards this
goal, the Department emphasizes the importance of leadership,
accountability, integrity, improving the work environment, and giving
employees the tools they need to do their jobs with excellence.
enforcement organization
The Office of the Under Secretary for Enforcement has oversight
responsibility for more than a third of all Federal criminal
investigators, including roughly 32,000 personnel and a $5 billion
operating budget. Moreover, Treasury Enforcement collects about $35
billion in revenues. When I assumed the duties of the Under Secretary,
one of my first imperatives was to ensure that the Office had an
efficient organization to be informed adequately about the day-to-day
functions and operations of the bureaus and offices it supervises. This
became even more critical in the post September 11 environment. In
coordination with the Treasury Department's leadership, we have
implemented a reorganization of the Office of Enforcement, within
existing FTE ceilings, that I am convinced will enable the Office to
achieve its mission more effectively and efficiently.
The reorganization strengthens Enforcement's ability to address
critical budgetary, resource, and training needs for the immediate
Office of the Under Secretary as well as the Enforcement Bureaus.
Additionally, the new organization also provides needed emphasis in the
major areas of Terrorism and Violent Crime and Money Laundering and
Financial Crimes.
strategic goals and performance measures
Each year, the world becomes a more complex place. The events of
September 11 only emphasize this point. As a result, Treasury's law
enforcement mission grows in complexity, scope, and impact. The
Enforcement Bureaus must continue to meet these challenges as they
perform their critical roles in advancing America's law enforcement
priorities. To provide a long range focus, the Office of Enforcement
identified six strategic goals for fiscal year 2000-fiscal year 2005:
--Combat money laundering and other financial crimes;
--Protect our Nation's borders and major international transportation
terminals from traffickers and smugglers of illicit drugs and
weapons of mass destruction;
--Reduce violent crime and the threat of terrorism;
--Protect our Nation's leaders and visiting dignitaries;
--Provide high quality training for law enforcement personnel; and
--Collect revenue due to the Federal Government.
In the aftermath of September 11, we plan to add an additional
strategic goal and supporting objectives in the next revision of the
Treasury Strategic Plan. This new goal will focus on ``Targeting,
disrupting and dismantling terrorist financing and terrorist financing
organizations.''
In addition, Treasury's law enforcement bureaus support two other
Treasury strategic goals through the following strategic objectives:
--Protect the public and prevent consumer deception in specific
regulated commodities; and
--Facilitate legitimate trade, enhance access to foreign markets, and
enforce trade agreements.
To ensure excellence in achieving these goals, and in keeping with
the spirit of the Government Performance and Results Act, Treasury
continues to engage in a strategic management process to enhance and
improve the results we deliver to the American people. To that end, the
Office of Enforcement is committed to setting long-term strategic and
annual performance goals, managing our resources and investments to
achieve those goals, instituting measures, and reporting annually on
the results of our performance.
Overall, Treasury law enforcement bureaus' achievement against
established performance targets continues to improve. For example, in
fiscal year 1999, the law enforcement bureaus achieved 64 percent of
the established performance targets. In fiscal year 2000, 77 percent of
the established targets were achieved, and in fiscal year 2001, 79
percent of all performance targets were achieved. While not every goal
was met, the results were significant.
For fiscal year 2003, the Office of Enforcement and the Treasury
law enforcement bureaus will continue to work hard to accomplish our
defined strategic goals and objectives. We will also strive to achieve
an even higher percentage of our established performance targets. Doing
so will help to ensure excellence in protecting our borders and our
Nation's leaders, disrupting and dismantling terrorist financing,
fighting terrorism and violent crime, combating money laundering and
financial crimes, and training our law enforcement personnel for the
challenges they will face in the future.
Thank you for the opportunity to provide an overview of the
President's fiscal year 2003 budget request and to highlight the
efforts of the Office of Enforcement in support of the mission of
Treasury's enforcement bureaus. I look forward to answering any
questions you may have.
U.S. Secret Service
STATEMENT OF BRIAN STAFFORD, DIRECTOR
Senator Dorgan. Next, let us hear from Mr. Stafford, the
Director of the United States Secret Service. Mr. Stafford?
Mr. Stafford. Chairman Dorgan, Senator Campbell, Senator
Reed, it is a pleasure for me to be here today and represent
the dedicated men and women of the Secret Service. With me
today are the recently appointed Deputy Director Danny Spriggs
and Assistant Directors Steve Colo and Paul Irving. With your
permission, I will highlight my statement and submit the
remainder.
SECRET SERVICE MISSION FUNDING
The fiscal year 2003 funding request recognizes the Secret
Service's commitment to enhance and strengthen the security of
our Nation. Specifically, this budget will enable the Secret
Service to satisfy our mandate of safeguarding the Nation's
leaders and visiting heads of state. This budget also provides
the resources for our historic investigative mission of
protecting the Nation's currency and financial infrastructure.
Since September 11, the Secret Service has experienced
unprecedented growth in our protective and our investigative
missions. We have assumed additional duties with new protective
assignments and we continue to adjust the depth of coverage to
enhance the Presidential, Vice Presidential, and former
Presidential details. These enhancements, coupled with the
designations of Super Bowl XXXVI and the Winter Olympics as
National Special Security Events, have had a substantial impact
on our staffing.
NATIONAL SPECIAL SECURITY EVENTS
After a thorough review of security operations at the
Olympics, I am pleased to report that the planning effort
involving unprecedented interagency cooperation among over 60
Federal, State, and local law enforcement and public safety
agencies and the military, was a complete security success; in
no small part because of the support of this subcommittee. The
Winter Olympics included 15 venues, 900 square miles, 3,500
athletes, and more than 2 million visitors during the 4-week
period. It was the largest coordinated security effort in our
Nation's history.
INVESTIGATIVE MISSION
Despite the demands of our protective mission, the Secret
Service continues to provide this Nation with a very
significant investigative program. The thrust of our
investigative efforts is to safeguard our currency, our
financial payment systems, and our critical infrastructure; all
are fundamental components of our homeland security.
CYBER-CRIME
Even though the Secret Service is our country's oldest
investigative Federal enforcement agency, the enhanced
investigative authority provided in the recently-enacted USA
PATRIOT Act has made this a landmark year. The USA PATRIOT Act
authorized the Secret Service to establish a national network
of electronic crime task forces, made permanent our statutory
authority to investigate financial institution fraud, and
expanded our existing authority with regard to computer-based
crimes.
We have entered an age where most types of financial fraud
and counterfeiting involve electronic crime committed through
the Internet. Recognizing this transformation, the Secret
Service continues to invest in the nucleus of our cyber-crime
effort, the Electronic Crime Special Agent Program. These
agents are highly trained, mobile, and qualified experts in the
preservation and analysis of electronic evidence and in the
investigation of network intrusions and database theft. In the
course of investigating cyber-crime and developing strategies
in search of the best formula, we have found prevention,
information sharing, training, and speed, to be essential
factors.
FORWARD EDGE PROGRAM
The Secret Service, in partnership with the International
Association of Chiefs of Police, has recently released our
Forward Edge program. Forward Edge represents what we believe
is a cutting-edge training program providing state-of-the-art
computer training on proper ways to secure electronic crime
scenes. It is geared for law enforcement of all levels of
jurisdiction. We have distributed more than 20,000 copies of
Forward Edge nationwide.
Mr. Chairman, the common denominator in our approach to
protection and investigations is prevention. In financial
crimes, the cost of consequence can be too high. In protection,
the cost of consequence is unacceptable.
COUNTERFEIT UNITED STATES CURRENCY
The Secret Service also works with foreign law enforcement
officials to investigate financial crimes and counterfeit U.S.
currency. In fiscal year 2001, nearly 50 percent of all
counterfeit U.S. currency passed in the United States
originated overseas, predominately in Colombia. Approximately
85 percent of all counterfeit currency seized in fiscal year
2001 was produced outside the United States. That trend is
likely to continue as other countries move to adopt the dollar
as their official unit of currency. We will continue to explore
establishing foreign offices in regions that make strategic
sense and offer the potential for a favorable return on the
investment.
MISSING AND EXPLOITED CHILDREN
I also want to mention our continued commitment in working
with the National Center for Missing and Exploited Children and
to thank you for the subcommittee's strong support of this
partnership. Protecting our children is a noble cause and we
derive enormous professional and personal satisfaction from the
analytical, forensic, and investigative support we provide to
the National Center.
WORKLOAD RETENTION AND WORKLOAD BALANCING
Finally, I want to thank you for your actions in
recognizing and providing the resources to hire and train
additional personnel for the Secret Service. This initiative,
as you know, was designed to address the excessive overtime and
quality of life issues facing our personnel. We are now in the
final phase of this initiative and I want to express my sincere
appreciation for the investment you have made in our most
valuable resource, our people.
PREPARED STATEMENT
Mr. Chairman, this concludes my statement and I am happy to
answer questions.
Senator Dorgan. Mr. Stafford, thank you very much.
[The statement follows:]
Prepared Statement of Brian L. Stafford
Chairman Dorgan, Senator Nighthorse Campbell, and distinguished
Members, it is indeed a privilege to be here today before the
Subcommittee, and to be afforded the opportunity to represent the 5,800
dedicated men and women of the Secret Service, to testify on the fiscal
year 2003 budget.
With me today Mr. Chairman is C. Danny Spriggs, who was recently
appointed as Deputy Director.
fiscal year 2003 appropriation request
The Secret Service's fiscal year 2003 funding request totals $1,048
million and 6,111 FTE, and includes funding from two sources: the
Salaries and Expenses appropriation, and the Acquisition, Construction,
Improvements and Related Expenses appropriation.
The fiscal year 2003 funding request recognizes the Secret
Service's commitment to enhance the security of our homeland by
accomplishing the goals and objectives set forth in our 5-year
Strategic Plan. Specifically, this budget will enable the Secret
Service to pursue its primary goal of protecting our Nation's leaders,
visiting heads of state, other protectees, and providing security for
events designated as National Special Security Events (NSSEs). With
regard to our investigative mission, this budget helps advance our
ability to safeguard the Nation's currency and financial infrastructure
against those who would aspire to exploit computer-based advances to
attack our critical banking, telecommunications and other financial
systems. Finally, this budget allows the Secret Service to provide a
responsive support infrastructure to meet the needs of our protective
and investigative missions.
salaries and expenses (s&e)
The Secret Service's Salaries and Expenses appropriation request
for fiscal year 2003 totals $1,044,070,000 and 6,111 full-time
equivalents (FTE). This is an increase of $89,820,000 from the level
appropriated, excluding Supplemental appropriations, to the Service for
this fiscal year. It is an increase of 120 FTE over this fiscal year's
staffing level. This budget includes: $3,527,000 in funding for the
Administration's legislative proposal on full costing of benefits;
$30,206,000 needed to maintain current program performance levels, and
cover base pay and benefits annualization costs; $8,090,000 for the
start-up costs of the protective effort relative to the 2004
presidential campaign; $19,180,000 to annualize the cost of staffing
provided in the fiscal year 2002 Budget Supplemental; and a permanent
transfer of $358,000 from the Department of Labor for administrative
costs involved with processing Federal Employees Compensation Act
claims. These increases are offset by $102,673,000 in non-recurring
costs, and $6,824,000 resulting from business strategy adjustments.
acquisition, construction, improvements, and related expenses (acire)
The Secret Service's fiscal year 2003 request for its Acquisition,
Construction, Improvements, and Related Expenses (ACIRE) account totals
$3,519,000, an increase of $62,000 from the fiscal year 2002
appropriated level of $3,457,000. This increase is to maintain current
program performance levels. There are no programmatic changes or
initiatives proposed for this account.
The past 7 months have been unlike any other period in the Secret
Service's 137-year history. The September 11 attacks left our New York
Field Office within the ruins of what used to be the World Trade
Center. Beneath the rubble was Master Special Officer Craig Miller, who
we believe was assisting in the rescue effort when the World Trade
Center towers collapsed. These attacks on our own soil have increased
both the complexity and the scope of our protective and investigative
missions.
protective program
Consistent with our Strategic Plan, the Secret Service's goal is to
protect our Nation's leaders, visiting world leaders and other
protectees, provide the safest environment to those participating in
National Special Security Events (NSSEs), and to reduce threats posed
by global terrorists and other adversaries. We perform this mission by
providing continuous protective operations that offer comprehensive
protection, as mandated by law and executive order, for our protectees
and the facilities where they work and live; and, by coordinating,
planning and implementing security plans at important events and
functions designated as National Special Security Events. Secret
Service protectees include: the President, the Vice President, their
families, former Presidents, visiting foreign heads of state and
government, as well as major Presidential and Vice Presidential
candidates and their spouses. We also provide security for the White
House complex, the Vice President's residence, and 463 foreign missions
within the Washington, D.C., area.
Last year began with an extended election cycle. This anomaly had a
direct impact on our protective workload. As we proceed in the current
fiscal year, the Secret Service continues, as a matter of practice, to
assess the threat and evaluate the application of our protective
methodologies. We have assumed new responsibilities in the form of
additional details, and we continue to adjust the depth of coverage to
enhance the Presidential, Vice-Presidential, and former presidential
details. At the beginning of this fiscal year, the Secret Service had
17 full time protectees; as a result of the September 11 attacks we now
have 39 full time protectees. Also, additional fixed posts and mobile
assignments at the White House Complex, Vice President's Residence and
other facilities have been incorporated. The necessary changes have
impacted staffing.
To provide more effective security for 39 full time protectees,
NSSEs, and facilities in a changing environment, the Secret Service has
recently incorporated the ``Counter-Surveillance'' program into our
protective methodology. The ``Counter-Surveillance'' program is
essential to all protective operations. This approach employs state-of-
the-art technology in a cost-effective manner to enhance the threat
assessment and countermeasure aspects of all protective operations.
Utilizing assessment matrices, digital photography and other tools, the
``Counter-Surveillance Team'' assesses areas of vulnerability at all
venues and motorcade routes from an ``outside-in'' perspective by
observing events in physical locations from which threats or attacks
are likely to occur. After conducting the analysis, the ``Counter-
Surveillance Team'' then recommends ways (countermeasures) to diminish
those vulnerabilities or threats. To improve efficiency while not
sacrificing effectiveness, in-progress studies are being conducted to
determine the viability of using hand held computing devices and two-
way paging devices to provide the ``real time'' flow of intelligence or
other information obtained by ``Counter-Surveillance Teams'' to command
centers, protective details or ``Counter-Surveillance'' teams
concurrently operating at different venues associated with the same
event or protective visit.
We consider the protective mission as an evolutionary process,
essential to the security of our homeland. We apply that thought
process when planning and executing security; and, we analyze the
actual and potential threats during increasingly complex protective
operations. Adapting to changing situations in a changing environment,
sound planning on all planes, and employing technology or other
applications to our advantage is fundamental to our strategy.
To further illustrate our adaptability to changing conditions, the
Secret Service in collaboration with Computer Emergency Response Team
(CERT) of Carnegie Mellon University in Pennsylvania, has recently
embarked on an 18-month project entitled, ``The Critical Systems
Protection Initiative,'' also known as the CSPI. The goal of the CSPI
is to strengthen the planning phase of the Secret Service's protective
mission by analyzing how critical information networks are related to
physical protection activities. This study is designed to:
--Find ways to identify, assess, and enhance the critical systems
upon which Secret Service protective operations rely; and
--Find ways to identify, assess and manage individuals who may have
the potential to compromise those systems. These individuals
could include past or present employees.
By virtue of this relationship between the CERT and our core of
agents specializing in computer crimes through the Electronic Crimes
Special Agent Program (ECSAP) or Electronic Crimes Task Forces, we look
to prevent network intrusions in the systems that are controlled by
computers, capable of disrupting a protective visit or NSSE in the
event of a computer attack. Those systems include: water, gas, and
electric utilities controlling venue power or plumbing; air
conditioning, heating and ventilation systems that control the intake
and quality of air; internal building operations such as elevators,
back-up generators, or fire alarm control panels; or something
seemingly inconsequential such as a scoreboard.
The Secret Service relies on the utilization of related networks
that are now essential considerations when developing and implementing
security plans. At the conclusion of the study, we plan to release the
findings in a report, and provide operational guidance on methods of
preventing network intrusions that could impact physical security. When
completed, these findings and other publications will be made available
to law enforcement and industry.
The analysis of critical systems and other forms of cyber security
were integral components in the planning and execution of the security
plans for both Super Bowl XXXVI, in New Orleans, and the 2002 Winter
Olympics in Salt Lake City, Utah.
National Special Security Events
Presidential Directive 62 (PDD-62) issued in 1998, and codified in
our authorizing statute, Title 18 United States Code 3056, names the
Secret Service as the lead Federal agency for the planning, designing
and implementation of security plans at events designated as National
Special Security Events (NSSEs). Since January 2002 the Secret Service
has implemented security for the following events designated as NSSEs:
the 2002 Winter Olympics and Super Bowl XXXVI. The actual planning and
coordinating however, is a much longer effort, sometimes months or
years. The other events last year declared NSSEs were: the 2001
Presidential Inauguration; the 56 United Nations General Assembly; and
the planned International Monetary Fund/World Bank Meetings scheduled
to be held in Washington D.C. this past fall. Within the last 90 days
the Secret Service has also been on the forefront of the security
effort for the World Economic Forum in New York, even though these
meetings were not designated as NSSEs. With the completion of the
Winter Olympics, the Secret Service coordinated and implemented
security plans for each of the thirteen events declared NSSEs, starting
with the World Energy Congress held in Houston, Texas in 1998.
I would like to acknowledge the support of the Chairman, Senator
Nighthorse Campbell and Members of the Subcommittee in recognizing,
early in the process, the amount of human and other resources required
to develop and execute a sound physical security plan for each of the
NSSEs, especially the Winter Olympics. The 2002 Winter Olympics
involved an unprecedented interagency collaboration of Federal, State,
and local law enforcement, and the military working with the Salt Lake
Organizing Committee, the Utah Olympic Public Safety Command, the
International Olympic Committee, the State of Utah, and other entities.
Security for the competition and ceremonies was provided for an
estimated 65,000 daily spectators, and 2,500 athletes in 15 protected
venues, in an area covering 900 square miles for about a 4-week period.
investigative program
As you know Mr. Chairman, the Secret Service's investigative roots
began with our creation in 1865 to suppress counterfeiting. In addition
to the demands of our protective mission, the Secret Service continues
to provide the Nation with a very productive and efficient
investigative program. The thrust of our investigative efforts and
authority is to protect our currency, and financial and banking systems
from criminal acts or from attacks used as tools of terrorism. The
financial infrastructure and confidence in that infrastructure is a
critical component of our homeland security. The Secret Service's
investigative methodology is directed at maximizing the effect of our
core areas of expertise, leveraging technology, efficiently partnering
with other Federal, local and State law enforcement, sharing
information, and avoiding redundancy caused by overlapping
jurisdiction. Our approach and investigations of counterfeiting and
computer crimes involving attacks on our financial systems are
consistent with the goals and objectives set forth in the Secret
Service's 5-year Strategic Plan. As in protection, the focus of our
energy in investigations is prevention.
Because of the new and enhanced investigative authority provided in
the recently enacted Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001, also known as the USA Patriot Act, the current fiscal year can be
described as a landmark year. The USA Patriot Act provisions applicable
to the investigative activities of the Secret Service include:
--Expansion of National Electronic Crime Task Force Initiative. This
section directs the Secret Service to develop a national
network of electronic crimes task forces, based on the model of
our operational and successful New York Electronic Crimes Task
Force. The purpose of the task forces authorized in this
section is to prevent, detect, and investigate various forms of
electronic crimes, including potential terrorist attacks
against critical infrastructure and financial payment systems.
--Permanent Jurisdiction for Financial Institution Fraud. The USA
Patriot Act re-authorized and made permanent our statutory
authority to investigate financial institution fraud and
identity theft. The amendments contained in this section
recognized the evolution of technology and the impact
technology has on traditional methods of crimes against
financial institutions. This section also expanded our
jurisdiction in computer crime under Title 18 U.S.C 1030.
--Counterfeiting Domestic Currency and Obligations. Enhancements to
the existing counterfeit statutes were made to reflect the
impact that digital and analog computer technology has had on
counterfeiting U.S. and foreign currency.
--Extraterritorial Jurisdiction. The changes in this section amend
the Access Device statute to expand jurisdiction, under certain
conditions, to persons outside the jurisdiction of the United
States.
Computer Crime
Since 1984, and with the re-authorization contained in the USA
Patriot Act, the Secret Service has been authorized to investigate
crimes committed with the use of a computer. We have entered the age
where most types of financial institution fraud, counterfeiting and
other attacks against our financial infrastructure are increasingly
supported by electronic crime occurring on-line through the Internet on
various platforms including computers, telecommunications devices,
printers, scanners and other electronic equipment. Financial crimes and
counterfeiting are inextricably linked to what is now referred to as
cyber-crime.
In realizing this transformation, the Secret Service continues to
invest in the nucleus of our cyber-crime effort--the Electronic Crimes
Special Agent Program, or ECSAP program. The ECSAP program consists of
159 agents, of which 111 are stationed throughout the country in our
field offices. These personnel are highly trained, highly mobile,
qualified experts in the preservation and analysis of electronic
evidence. They are proficient in the investigation of network
intrusions and database theft. The ECSAP agents are also trained to
examine the variety of devices utilized in furtherance of today's
criminal activity. Some of these devices include credit card
generators, electronic organizers, telecommunications equipment,
scanners, computer hard drives, and most devices manufactured or
altered to intercept or duplicate telecommunications services.
In fiscal year 2001, ECSAP agents completed over 1,168 forensic
examinations on computer and telecommunications related equipment.
ECSAP agents are known for their excellence in accuracy and efficiency;
their investigative skills are continually sought after on a referral
basis by industry and law enforcement at all levels of jurisdiction.
The development of hardware and software tools produced for the
benefit of the average consumer, small business, or large corporation
is frequently utilized, in illicit ways, with impressive quality. The
use of relatively inexpensive computers and printer equipment, often
referred to as ``desktop publishing equipment,'' has enhanced the ease
and manufacturing standard of counterfeit currency, checks, bonds,
securities, false identification and other financial instruments or
obligations.
The Secret Service works closely with stakeholders in the financial
services industry, electronics manufacturing sector, and information
services, to provide feedback regarding the misapplication of advances
in computer related products. This approach returns dividends because
industry representatives also provide valuable training to ECSAP agents
in the form of current information and material relating to
capabilities and methods that could be used for the wrong purposes.
The growth in computer-related crimes witnessed by the Secret
Service only mirrors similar trends experienced in the jurisdictional
areas of our sister law enforcement agencies within the Treasury
Department. The increasing complexity of computer crime has posed a
challenge to those responsible for investigating, collecting, analyzing
and preserving electronic evidence. The Secret Service, through the
sharing of resources and collaboration with our sister Treasury
Enforcement Bureaus has been able to optimize our ability to
investigate and solve cyber-crime. The cooperation of the Treasury
agencies, in this Departmentally coordinated effort known as the
Computer Investigative Specialist (CIS) program has resulted in an
organized program of training, equipping and facilitating
communications among special agents tasked with the analysis of
electronic evidence. The CIS program has created efficiencies and added
value to the investigative effectiveness of the Secret Service.
In the field, we have experienced that the first line of defense in
combating cyber-crime is often an agent or officer who is well trained
in methods of preserving and securing evidence at electronic crime
scenes. In recognition of the time sensitivities associated with
computer crime, the importance of properly seizing computer-related
evidence, and the increasing complexity of cyber-related crime, we
continue to see the value in promoting partnerships and training. In
the course of investigating electronic crime and developing strategies
in search of the best formula, we have found prevention, collaboration,
information sharing and timely response to be essential factors in the
equation. We have worked to advance these characteristics as a solution
to investigate computer crime.
To underscore our philosophy in this area, the Secret Service, in
cooperation with the International Association of Chiefs of Police,
recently introduced the ``Forward Edge'' training package. ``Forward
Edge'' represents what we consider to be a cutting edge training
program, utilizing state-of-the-art computer training for all law
enforcement: local, State, and Federal, with regard to securing
electronic crime scenes and safely seizing computer-related evidence.
The ``Forward Edge'' training package includes an 8-hour CD-ROM,
utilizing a three-dimensional, ``virtual reality'' interactive training
format, to provide the officer or agent with different scenarios
involving identity theft, financial crimes, network intrusion, credit
card fraud, counterfeiting, data theft and other computer-related
crimes. The ``Forward Edge'' CD also furnishes a field guide that
contains practical information such as local laws concerning computer
crimes for every State jurisdiction, along with sample search warrants
pertaining to the seizure and safe handling of computer-related
evidence, drugs and weapons. Each scenario guides the user through
crime scenes and enables him/her to interact with objects, individuals
and situations they may encounter in real life. In late fiscal year
2001, the Secret Service, through our network of field offices and
headquarters began a nationwide distribution of 20,000 copies of the
CD-ROM to local, State and Federal law enforcement agencies.
For fiscal year 2003 and beyond, we intend to follow through with
the development and implementation of additional specialized training,
and pursue recently enacted legislative authority by forming electronic
crimes task forces based on the New York Electronic Crimes Task Force
model.
Electronic Crimes Task Forces
The New York Electronic Crimes Task Force (NYECTF) continues to
grow in membership and achievements. This task force represents a
strategic alliance of more than 250 regional members or groups
including: prosecutors; local, State and Federal law enforcement;
academia; and companies in private industry with interests in banking,
financial services, brokerage, and telecommunications. The common
denominator in the NYECTF is that each member, be it law enforcement or
industry, is a stakeholder with a business or investigative interest in
preventing electronic crime. Each member adds value through specialized
knowledge or expertise in contributing to the common goal. Since its
inception in 1995, through the third quarter of fiscal year 2001, the
NYECTF has made 826 State and locally prosecuted arrests investigating
an estimated $500 million in actual and potential loss due to fraud. As
a testament to the resolve and adaptability of the agents and members,
the NYECTF resumed operations within 48 hours of the loss of its base
of operations in the New York Field Office. The NYECTF defines the
Secret Service's priority on partnerships, and demonstrates the
economies of scale inherent in the task force approach.
Based on the mission and organization of the NYECTF, the Secret
Service, beginning in fiscal year 2003, plans to establish other
electronic crimes task forces throughout the country, in locations with
significant or specialized interests in the critical financial, banking
or information infrastructures.
Counterfeiting
Technology continues to be used in illicit ways to manufacture
counterfeit U.S. and foreign currency, securities, bonds, checks and
other obligations. Despite the inclusion of enhanced security features
on the new series of Federal Reserve Notes, counterfeiting is
accomplished with varying degrees of quality on desktop printers, color
copiers, scanners, computers, software and other ``off the shelf''
desktop publishing equipment. The amount of counterfeit activity
attributed to computing devices and other electronics, as a percentage
of all counterfeit currency and obligations passed or seized, continues
to rise. For fiscal year 2001, we estimated that 40 percent of all
counterfeit currency and obligations seized was computer generated. To
prevent such attacks on our financial infrastructure, the Secret
Service sponsors awareness and education events through our field
offices and headquarters at home and abroad. We also publish and issue
brochures describing security features to educate business owners and
the public. Advances in the methods of counterfeiting have accompanied
the advances in technology, and the USA Patriot Act revisions to the
counterfeit statutes were necessary and reflected the impact of
technology on what was predominantly and historically accomplished
through an offset printing press.
We estimate that nearly 50 percent of all counterfeit U.S. currency
passed in the United States originates overseas. Recent counterfeit
plant suppressions and seizures indicate that Colombia is the leading
producer of counterfeit U.S. currency. The Secret Service maintains a
permanent office in Bogota, Colombia, our only continued permanent
presence in Latin America. While lacking jurisdiction overseas, we work
closely in an investigative assistance capacity with law enforcement
and government officials in Colombia, and the region, to provide
training and investigative support aimed at deterrence, education and
early detection.
One of the ongoing enforcement initiatives to combat counterfeit
currency at the source is the Congressionally funded ``Plan Colombia.''
In May 2001, the Department facilitated $1.5 million in funding to the
Secret Service for the purpose of working with the Colombian government
to establish specialized anti-counterfeiting units. With the funding,
the Secret Service conducted polygraph examinations to clear and
sanction candidates selected from law enforcement agencies for
participation in these task forces. We also purchased and delivered
police equipment to the units and increased our staffing in Bogota.
Less than one year in operation, ``Plan Colombia'' has disrupted crime
directed at our currency, and has yielded early successes through
several arrests, the execution of dozens of search warrants, and most
recently, resulted in the seizure of approximately $40 million in
counterfeit U.S. currency, the largest seizure of counterfeit U.S.
currency in Latin America. The Secret Service has learned through
investigation that this counterfeit currency was destined for Ecuador,
a country that has recently converted to the U.S. dollar.
With the decision of certain countries in Latin America to adopt
the U.S. dollar as their base unit of currency, the Secret Service
believes that counterfeiting activity in newly ``dollarized'' economies
will increase because of the lack of familiarity with the dollar.
Within the Latin American countries that have recently converted to the
dollar, Ecuador, El Salvador and Guatemala, the smuggling and
distribution of counterfeit U.S. currency has already been documented.
Ecuador, which shares a border with Colombia, ``dollarized'' in 2000.
During that year $3.5 million in counterfeit U.S. currency was seized
in Ecuador, compared with only $50,000 seized in 1994. Just prior to
``dollarization,'' local media estimated that 92 percent of the
population had never seen a U.S. dollar. In preparation for Ecuador's
conversion, the Secret Service provided twenty-eight training seminars
attended by over 2,600 police, Government officials, bankers, business
owners and others. We continue to receive similar requests for currency
recognition training, instruction on methods of investigation, and
liaison from other Latin American countries, Europe and elsewhere.
Financial Crime is Global
The Secret Service believes that our professional and effective
relationships with the Colombian government and elsewhere do not happen
by accident. The success there and our other eighteen foreign field
offices and resident agencies, including Interpol, can be attributed
to, in large measure, our long-term commitment in working with the host
Nation. Long-term relationships build trust and offer the benefits of
consistent and reinforced liaison, timely assistance, face-to-face
communication, and result in the sharing of information and expertise.
Where permanent assignments are not available, the Secret Service
relies on temporary overseas assignments to satisfy the requests for
participation in overseas financial crimes and counterfeit task forces.
Within the last two years alone, the impact of our work through
temporary assignments in Lagos, Bucharest and Frankfurt has resulted in
the opening of permanent offices. The temporary duty concept allows us
to conduct a survey in a specific area to determine if the cost of
opening a field office in that country is warranted.
In addition to the protection of our currency, the Secret Service's
efforts overseas, in Canada and in Mexico are directed at protecting
the integrity of our critical financial infrastructure through
responsiveness and timely assistance at the point of attack. The ease
of using of computers, the expanded use of electronic payments, and
speed of transactions has ``globalized'' our economy, but can make the
systems upon which the infrastructure relies just as vulnerable
overseas as at home. The Secret Service will establish additional
foreign offices in areas where there is a demand for our expertise,
continued requests for partnerships, and in regions that make sense
strategically and offer a high probability of a favorable return on the
investment.
Identity Theft
It remains an investigative priority of the Secret Service to work
with law enforcement at all levels in communicating and educating the
public about identity theft. The first line of defense against identity
theft is for private citizens to be equipped with the awareness and
knowledge of what identity theft is, and how they can effectively
safeguard their private information. In its purest form, the goal of
stealing one's identity is to provide criminals with the tools and
information necessary to establish good credit and obtain things of
value through illicit means. Using personal information belonging to
someone else, criminals usually establish bank accounts, obtain credit
or debit cards, or use the information to gain unauthorized access to
financial accounts or other sources of capital. It is a fact that most
financial crimes including bank fraud and credit card fraud involve
identity theft.
The basic pieces of information required to achieve the theft of
another's identity are name, date of birth and social security number.
Additional information of value includes bank account numbers, credit
card numbers, and maiden names. There are several effective first line
precautions individuals can take to safeguard their personal
information from being compromised. Some of these include:
--Protecting social security numbers at all times.
--Not providing social security numbers to requestors if at all
possible during business or non-business transactions.
Admittedly, this is not always practical when applying for
loans, leases, mortgages or similar transactions.
--Not placing social security numbers on personal checks.
--Destroying documents no longer needed that contain personal
information.
--Being judicious in providing personal information over the
Internet.
--Reviewing bank and credit card statements carefully for indications
of fraudulent activity.
The Secret Service provides identity theft presentations on a
community level to businesses, civic groups, community organizations
and other law enforcement bureaus concentrating on best practices
methods in order to raise the level of awareness regarding the impact
of identity theft. We also work closely with the financial industry to
share information on the misapplication of technology and feasible
means of deterrence.
National Center for Missing and Exploited Children
The Secret Service derives enormous professional and personal
satisfaction from our relationship with the National Center for Missing
and Exploited Children (NCMEC). Through the Forensic Services Division
(FSD), the Service will continue to provide the valuable analytical,
forensic and laboratory support, and other assistance that the Center
has benefited from in recent years.
Since the passage of the Violent Crime Control and Law Enforcement
Act of 1994, the Secret Service has provided forensic and technical
support to NCMEC. The types of support include: the use of the
Automated Fingerprint Identification System (AFIS); the Forensic
Information System for Handwriting (FISH); ink analysis and comparison;
traditional handwriting and fingerprint comparison; polygraph
examinations and consultation; visual information services such as
image enhancement, suspect drawings and video and audio enhancement;
graphic and photographic support; and age regression/progression
drawings.
In fiscal year 2001, the Secret Service conducted 35 polygraph
examinations in direct support of NCMEC's mission. The examinations for
these cases involved missing, abused and murdered children.
We actively support the Center's Operation Safe Kids initiative.
Operation Safe Kids is a national, community based awareness effort.
FSD personnel utilize a computer-enhanced application known as the
Children's Identification System (KIDS), to photograph, fingerprint and
store biographical data at public events throughout the country. To
date, we have entered more than 25,000 children into the KIDS program.
Through outreach, the Secret Service has communicated with and
provided law enforcement groups with information about our services.
Recipients of such presentations include the International Association
of Chiefs of Police, the INTERPOL Standing Working Party on Offenses
against Minors, and the Federal Law Enforcement Training Center.
Various publications and brochures have also aided in promoting FSD's
ability to provide critical forensic support in these cases. FSD has
provided the Center with an icon and a web page of information, which
has been included on the desktops of more than 1,500 computers
belonging to State and local law enforcement agencies nationwide.
The FSD staff is currently developing a Forensic Investigative
Response and Support Team (FIRST). FIRST will be composed of forensic
experts, who would be able to respond on short notice to requests for
assistance from State, local, or other Federal law enforcement
agencies. The goal would be to provide time sensitive forensic support
(handwriting analysis, ink and paper analysis, fingerprint evaluations,
polygraph examinations and other services) to requesting agencies in
cases involving missing or exploited children. In essence, when the
NCMEC is notified by a local law enforcement department of an
abduction, the Secret Service at the NCMEC's request, will launch a
FIRST to respond within the first 8 hours of abduction, to provide
computer, forensic and ``real-time'' investigative support to the
department that may lack the resources to respond in an effective
manner during that critical period.
office of protective research
Intelligence Division
The protective research and intelligence programs continue to serve
a critical role in support of the protective and investigative mission
of the Secret Service. Within the Office of Protective Research, the
Intelligence Division oversees the identification, assessment, and
management of threatening communications and incidents directed toward
Secret Service protectees and events of national significance. The
division develops threat assessments in support of domestic and foreign
protectee visits; conducts evaluations of risk potential associated
with specific and generalized threats; prepares analyses of protectee-
specific threats; maintains liaison with other law enforcement, mental
health, and intelligence agencies; plans and reviews the case
management for high risk subjects; and, through our National Threat
Assessment Center, collaborates in the design and implementation of
program evaluation studies and other risk assessment research designed
to improve our understanding of violence directed toward public
officials.
Other Intelligence Division activities during fiscal year 2001 and
fiscal year 2002 included support provided for the development and
implementation of the security plans for the Winter Olympics, Super
Bowl XXXVI, the United Nations General Assembly, the World Economic
Forum, the 2001 Presidential Inauguration, and the planned
International Monetary Fund meetings.
Prior to the September 11 attacks, the Secret Service actively
participated in Department of Justice led Joint Terrorism Task Forces
(JTTFs). We remain committed to continued representation and have
increased that representation since September 11. In addition to
collaborating in a combined and coordinated effort, the Secret Service
provides and derives the benefits of sharing information on
investigative matters that may be related to our protective mission.
The Intelligence Division coordinates our participation in the JTTFs
In addition to directing and performing such operational
activities, the Intelligence Division continues to provide leadership
for the Protective Detail Intelligence Network (PDIN), a consortium of
Washington, D.C., area law enforcement, security, and public safety
agencies with protective and security related functions. Initiated in
1999 by the Secret Service, the PDIN has emerged as an important forum
for sharing intelligence information that affects security planning
issues across agencies in the metropolitan area. Hosted on a regular
basis by the Intelligence Division, PDIN meetings include briefings and
training concerning significant and designated major security events
coordinated by the Secret Service, and they facilitate cooperative
partnerships among agencies who share protective and security
responsibilities. Through the PDIN, the Secret Service has offered
assistance in the preparation of security assessments for incoming
Cabinet members and senior officials of the administration.
National Threat Assessment Center
As part of the Secret Service's protective intelligence mission,
our National Threat Assessment Center (NTAC) continues to gain national
attention through its training, outreach, consultation, and research
efforts in the specialized field of targeted violence. Its principal
goal since its inception encompasses the spectrum of threat assessment
and targeted violence as it relates to our protective mission. As a
natural extension of our protective intelligence methodology, we have
shared our knowledge and depth of experiences by expanding the concept
and findings through outreach and training in the area of school and
workplace violence. The outreach effort has had a national impact.
Following the attack at Columbine High School in 1999, NTAC entered
into a partnership with the Department of Education and the National
Institute of Justice to apply the methodology used in our traditional
analysis of targeted violence, in the form of a study designed to
examine if similar behavior was involved in school shootings. This
study, known as the Safe School Initiative, reviewed 37 school
shootings occurring in the United States in the preceding 25 years. The
Safe School Initiative was completed in 2000.
With the support of this Subcommittee, the NTAC staff has been able
to communicate what we have learned in assessing threats on public
officials and discuss our findings in the Safe School initiative and
other assessments of school violence to those with an interest in
preventing school and workplace violence. This is accomplished in a
practical and tangible way. NTAC offers weeklong and abbreviated threat
assessment seminars attended by law enforcement, other public safety
officials, educators, and school administrators nationwide. In fiscal
year 2001 alone, NTAC conducted more than 100 seminars and forums,
attended by approximately 30,000 State and local educators, school
administrators and law enforcement personnel. We continue to provide
and participate in these events sponsored by local communities,
administration officials, Members of Congress, and former Presidents.
Following through on the success of this initiative, NTAC, in
collaboration with the Department of Education, is currently writing a
guide to suggest methods for school administrators, educators, law
enforcement personnel, and mental health professionals to conduct
threat assessments in their schools. This guide will be published and
released in the spring, 2002.
Technical Security Division
The Technical Security Division (TSD) is responsible for all
chemical/biological/hazardous materials countermeasures programs of the
Secret Service that safeguard our protectees, protect the workforce and
facilities, and mitigate the threats of terrorism.
As part of its ongoing support mission, TSD identifies and
implements ways to improve its detection capabilities in and around the
White House Complex, Naval Observatory and other protected locations.
Outside of Washington, chemical/biological/hazardous material support
is integral to any protective security plan during motorcade movements
or at fixed locations, including the recently completed Super Bowl
XXXVI and the 2002 Winter Olympics.
In addition to chemical/biological/hazardous material efforts, TSD
engineers serve on several committees within a Treasury led, multi-
agency consortium known as the Technical Security Working Group (TSWG).
The TSWG is charged, in part, with researching and developing ways to
enhance the Secret Service's protective and investigative mission
capability, by recommending methods, materials or technology that could
improve efficiency yet maintain the integrity of mission and safety of
the workforce. Some of the projects in progress include: enhancing the
capability of our armored limousine fleet; developing lighter yet
stronger ballistic glass; researching advanced generation body armor;
studying blast mitigation; and, biometrics testing in the form of
facial recognition technology and fingerprint scanning.
Information Resources Management Division
The Information Resources Management Division (IRMD) is committed
to the continuation of its objective to provide an information and
communications infrastructure to support the protective and
investigative missions of the Secret Service. To that end, IRMD will
continue to make progress to achieve its goals of upgrading and
improving efficiencies in radio, telephone and wireless communications
system-wide. In fiscal year 2001, digital narrowband system radio
upgrades were installed in ten field offices, with upgrades projected
for ten more offices by the end of fiscal year 2002. Radio
interoperability efforts are also in progress to continue to improve
communications within Secret Service entities and with other Federal,
State and local law enforcement agencies. During fiscal year 2001, IRMD
completed the issuance of wireless pagers nationwide, moving from a
regional paging system with more than 40 contracts to a single
contract. The uniform contract and service provider now enables Secret
Service users to provide alphanumeric messages through a web-based
Intranet application.
IRMD is also pursuing operational efficiencies through its
involvement with the Treasury SmartCard/Public Key Infrastructure (PKI)
Proof of Concept. In February 2002, the Treasury Chief Information
Officer Council appointed the Secret Service as the Executive Agent for
the SmartCard/PKI project. This initiative is managed and operated by a
committee consisting of representatives from the Bureau of Alcohol,
Tobacco and Firearms, the Internal Revenue Service, the Bureau of
Engraving and Printing, Treasury Departmental Offices, in addition to
the Secret Service. The Committee has developed a set of standards and
specifications governing a uniform Treasury SmartCard, which will be
designed for physical access to facilities, authorized access to
computers, property and inventory control. The SmartCards will also be
used to hold and manage PKI Certificates, which will enable Treasury
Department employees to send and receive digitally signed and encrypted
e-mail. The Proof of Concept will set the benchmark for how other
business processes can be improved within the Department.
Emergency Preparedness Program
Established in 1999, the Emergency Preparedness Program (EPP) is
responsible for coordinating the emergency preparedness programs of the
Secret Service. The EPP concentrates its efforts on program areas,
which ensure our commitment to emergency preparedness, operations
security, the continuity of Government, and critical infrastructure
protection. The EPP staff actively engages in liaison and coordination
with the White House Military Office, the Federal Emergency Management
Administration, and the CIA regarding matters involving the Continuity
of Government and emergency preparedness. Internally, EPP staff
coordinates emergency preparedness exercises and provides frequent
educational material and training to staff in all areas of emergency
preparedness, especially Operational Security (OPSEC).
human resources and training
Workforce Retention/Workload Balancing Initiative
This Subcommittee has recognized and supported my priority to
confront the declining quality of life of the workforce caused by
excessive overtime and out-of-district travel, by making the resources
available to recruit, train and hire 678 additional agents and support
personnel for field assignments. In fiscal year 2002, the Secret
Service plans to hire the final 280 men and women called for under
Phase III of the Workforce Retention/Workload Balancing initiative. The
safety, morale and job satisfaction of the entire workforce are of
paramount importance.
Diversity
It is the policy of the Secret Service to attract, develop, retain
and maximize the potential of a diverse workforce in a changing and
competitive environment. We are committed to this policy. As a means of
fully achieving and emphasizing an organizational culture that
recognizes the value added by a diverse workforce, the Service has
formalized its Diversity Management Program to fall under the direction
of a Deputy Assistant Director for Recruitment, Employment and
Diversity Programs (REDP). Through a coordinated process, the REDP
develops and implements recruitment policies with the Service's
Recruitment and Hiring Coordination Center and the Chief of the
Personnel Division. Some of ongoing and recent efforts include:
--Job Fairs and Recruiting Seminars: In fiscal year 2001 the Service
sponsored thirteen recruiting seminars attended by nearly 2,500
potential applicants for Uniformed Division and Special Agent
positions. The Recruitment and Hiring Coordination Center has
continued to maintain liaison with colleges and universities
throughout the country, including Historically Black Colleges
and Universities and Hispanic Servicing Institutions. In fiscal
year 2001 the Service participated in and/or sponsored over 100
nationwide job fairs.
--Media: The Service utilizes nationwide print, radio and electronic
media to attract qualified candidates with diverse skills and
backgrounds for all positions.
--Internet: Presently, a diversity web site is under development.
Once completed, this Internet tool will be used to inform all
employees of the diversity initiatives, conferences and
objectives. For potential applicants, the Service has conducted
outreach by advertising on public and campus career websites
targeting college students. We will continue to explore and
utilize the Internet as a valuable recruiting aid.
The Secret Service supports and encourages employee participation
in conferences dedicated to minority interests. In fiscal year 2001,
approximately 120 employees attended the following conferences: the
Women in Federal Law Enforcement Conference; the Hispanic American
Police Command Officers Association Training Conference; the National
Organization of Black Law Enforcement Executives Training Conference;
the Blacks in Government Training Conference; and the National Native
American Law enforcement Association Training Conference.
The Secret Service is committed to diversity within the
organizational and management ranks. As of January 1, 2002 twenty seven
percent of the Secret Service's GS-14 and GS-15 positions were occupied
by women and minorities. Twenty eight percent of the Senior Executive
Service positions in the Secret Service as of January 1, 2002 were held
by women or minorities.
In the past year, the Service has developed a core training course
curriculum for our Equal Opportunity Program to lay a foundation for
highly skilled and trained personnel to work in special emphasis
programs and provide EEO counseling services. Additionally, we have
established collateral duty special emphasis program manager positions
for Hispanic, African-American, Asian-Pacific Islander, Native
American, Persons with Disabilities/Disabled Veterans and Federal
Women's Program constituency groups.
Personnel Division
One of the major initiatives of the Personnel Division is H.R.
Connect, an integrated human resources information system being
developed by the Department of the Treasury. The goal of this system is
to enhance efficiency by providing access to managers and employees to
review and update human resources information, including on-line
processing of personnel actions and training requests.
James J. Rowley Training Center (JJRTC)
The staff, curriculum and facilities at the James J. Rowley
Training Center (JJRTC) continue to provide state of the art, real
world, performance based training. The emphasis for future operations
at JJRTC will be to add value to both the content of the training and
the facility as a continued center of excellence by ensuring efficient
operations and improving the management of existing resources. To
improve operations and administration at the Center, the JJRTC staff is
developing a scheduling database that will enable the efficient
scheduling and usage of all facilities within the complex.
Improvements in the area of course content and course evaluation
remain a top priority. Recently, the JJRTC staff completed a special
agent curriculum review and revision, and included a ``real-world,'' 6-
day performance based field office practical exercise involving
interactive, team oriented exercises in the areas of investigative case
work management and arrest procedures for financial crimes,
counterfeiting, and protective intelligence investigations. Further
curriculum review addressing the duplication of effort at JJRTC and the
Federal Law Enforcement Training Center (FLETC), in Glynco, GA has
resulted in an estimated savings of $24,000 per special agent class.
JJRTC is currently applying the same curriculum review and methodology
to the Uniformed Division Officer Basic Training Course.
JJRTC in collaboration with the Office of Protective Operations has
completed the development and implementation of an improved protective
methodology initiative. This course is entitled ``Counter Surveillance
Unit Training,'' incorporates greater emphasis on the identification
and utilization of surveillance skills for use during protective and
investigative assignments. The methodology is aimed at improving
performance efficiency and effectiveness in protective and
investigative operations.
Given our emerging function as the lead Federal law enforcement
bureau involved in the planning, coordination and implementation of
security plans at NSSEs, JJRTC has integrated improved training through
hands-on practical exercises, tabletop exercises and computer
simulations with local, State, other Federal law enforcement bureaus
and hosting entities.
The pursuit of academic excellence is in the best interest of the
agency and essential to the success of the training program at JJRTC. A
foundation to achieve this goal is seen in our continued partnership
and commitment with Johns Hopkins University. This relationship
incorporates management programs, validation and revision to special
agent basic training testing, policy, test automation and statistical
efficacy. Additional efforts are underway to develop advanced degree
management courses of study.
Consistent with Departmental guidance, the Secret Service, through
the innovative use of resources, continues to develop effective methods
and improve ways to train the workforce. One way this is being
accomplished is through the Distance Learning Initiative. This
initiative makes available to all employees, regardless of location,
learning tools formatted on CD-ROM, video teleconferencing, and the
Secret Service Intranet. Topics include diversity training, CPR and
first aid kit review, conflict resolution, computer applications, legal
information and other developmental courses. For the immediate future,
the Secret Service is engaged in the evaluation and design of improved
multi-media technology based applications for training to be used for
improved and expanded distance learning courses to save on the expense
of traveling to Washington, D.C. for training.
During fiscal year 2001, the JJRTC facilities were used to train
ten Special Agent Training Courses (240 students), nine Uniformed
Division Officer Training Courses (192 students), and approximately
32,000 in-service and re-qualification training visits for the
workforce. The following construction improvements were also made
during fiscal year 2001: completion of the Beltsville Field Office;
infrastructure improvements on the support generator station and sewage
lift station; security enhancements on the perimeter and inside
facilities; and repairs to JJRTC and ``off site'' firing ranges. To
ensure the continuity of operations (COOP), the Secret Service
continues to examine the viability of using JJRTC as a designated
relocation site in the event of catastrophe.
conclusion
Mr. Chairman, the Secret Service remains committed to the security
of our homeland through the daily performance of our dual mission of
protecting our Nation's leaders and safeguarding the critical financial
infrastructure and payment systems. We will continue to utilize
technology to our advantage to create efficiencies and enhance the
effectiveness of our investigative and protective operations. Through
developing partnerships and information sharing, especially in the
areas of cyber crime, we see value being achieved.
On behalf of the men and women of the Secret Service, I would like
to thank you Mr. Chairman, Senator Nighthorse Campbell and the Members
of the Subcommittee, for your leadership, vision and guidance. The
Secret Service would not be where it is today without your support.
This concludes my statement. I would be pleased to answer any
questions that you or other members of the Subcommittee may have.
Bureau of Alcohol, Tobacco and Firearms
STATEMENT OF BRADLEY BUCKLES, DIRECTOR
Senator Dorgan. Next, we will hear from the Director of the
Bureau of Alcohol, Tobacco and Firearms, Mr. Bradley Buckles.
Mr. Buckles, you may proceed.
Mr. Buckles. Thank you, Mr. Chairman, Senator Campbell,
Senator Reed. I am proud to be here today representing the
outstanding men and women of ATF. On behalf of all ATF
employees, I would like to take this opportunity to thank you
and your staff for your continuing support for our mission.
The budget request for ATF today is for $913,114,000 in
direct budget authority and 5,106 FTEs. With my full statement
submitted for the record, I will keep these remarks brief.
TERRORISM AND HOMELAND SECURITY
When I was here last year, the focus of ATF's budget
request was on violent crime. However, ATF, along with law
enforcement agencies throughout the United States, has reformed
its priorities to meet the new challenge of terrorism and
homeland security. Explosives and firearms remain the
terrorists' tools of choice and we cannot afford to
underestimate the dangers they present. As the agency charged
with enforcing Federal firearms and explosives statutes, ATF
will continue to play a critical role in the war on terrorism.
Terrorists need money to buy explosives and firearms and
otherwise fund their activities, and terrorists have found that
there is untapped illegal money in alcohol and tobacco
diversion schemes. ATF is investigating these crimes as well.
Traditional firearms and explosives work, and the
collection of $14 billion in revenue will continue to dominate
the bulk of our efforts. However, ATF's responsibilities
towards homeland security will be our top priority.
In Joint Terrorism Task Forces, National Special Security
Events, and other multi-agency endeavors, ATF is engaging in
preventing and investigating terrorist activity. For example,
through our explosives detection canine program, we have
partnered with over 450 State, local, Federal, and foreign law
enforcement agencies to help them prepare for and prevent
potential terrorist acts.
Having America safe from foreign terrorists is essential,
but it is not enough. A mother afraid to let her children play
outside because of the sound of gunshots feels terrorized, as
well. And though gun homicides are down from their peak in the
early to mid-1990s, the numbers are still chilling, at 10,000 a
year. Moreover, recent statistics report that over half-a-
million crime victims faced an assailant with a gun in calendar
year 2000. Our collective goal must be to make the criminal
with the gun the one who feels unsafe in America.
FISCAL YEAR 2003 BUDGET REQUEST
Our fiscal year 2003 request addresses the challenges of
fighting terrorism and violent crime that I have mentioned.
With respect to these items, directly related to terrorism, we
are seeking to annualize FTE funding from the 2002 terrorism
supplemental provided for canine teams and for agents to be
assigned to Joint Terrorism Task Forces.
With respect to violent crime, our request builds on a
foundation of existing initiatives to be deployed to the
President's Project Safe Neighborhoods initiative. This request
includes $11 million and 41 FTE for these continuing efforts.
Finally, we are requesting $10.7 million to support
construction of our new headquarters building. While this is a
GSA building project, these funds are needed in the ATF budget
for agency costs associated with security, technology, and
technical support for the construction.
PREPARED STATEMENT
In closing, I would again like to thank the committee and
your staff for your continued commitment to ATF and its mission
and I would be pleased to answer any questions you might have.
Senator Dorgan. Mr. Buckles, thank you very much for your
testimony.
[The statement follows:]
Prepared Statement of Bradley A. Buckles
Thank you Mr. Chairman, Senator Campbell, and members of the
Subcommittee. I welcome this opportunity to appear before the
subcommittee to report on the pivotal year just ended as well as to
present ATF's goals for fiscal year 2003.
As with all law enforcement agencies in the United States today,
ATF faces an unprecedented challenge. Our world in 2002 is very
different than it was a year ago. The magnitude and effect of the
attacks on September 11 cannot be measured, but we are committed and
united in ensuring the safety of all Americans from future attacks and
from the continuing tragedy of violent crime in our society.
In response, ATF has aligned its priorities to the current
priorities of the President and the Nation--to the fight against
terrorism and to make our communities safe from violence. ATF special
agents, inspectors, and professional support personnel are making daily
and significant contributions in the Nation's battle against terrorism.
In furtherance of the objectives of Presidential Decision Directives 39
and 62, ATF is charged with the responsibility of preventing terrorists
from acquiring firearms and explosives, the principal instruments by
which they carry out their terrorist acts. ATF's statutory mandates and
unparalleled investigative expertise places us on the forefront of the
battle against terrorism. We expect this to continue for some time, yet
we recognize that we must strike a balance between the war against
terrorism and the continuing battle of reducing armed violence in
America.
Our new national vigilance carries additional responsibilities, and
I assure you ATF is up to the task. Whether the work being done
involves investigation of a bombing or gun trafficking; participation
in the Joint Terrorism Task Forces (JTTFs) with the FBI and other law
enforcement agencies; or examination of explosives and firearms
licenses and permit applications, possible terrorist connections must
be examined and identified.
ATF has always played a lead role in the investigation of violent
crimes involving explosives, arson, or firearms, whether committed by
terrorists or other criminals, and we are more determined and committed
to our partnerships with other Federal, State, and local agencies in a
broad range of prevention efforts and direct investigative efforts.
Since the horrific events of September 11, the ATF is facing
increased demands on its resources. The battle against violent crime,
whether in the form of terrorism or otherwise, is a part of ATF's core
mission responsibility. However, the dramatic increase in the threat of
terrorism and the consequent shift in national priorities has required
ATF to direct resources to JTTFs, National Security Special Events,
inspections of explosives permittees and licensees, and other areas
essential to homeland security, while still attempting to hold the line
against violent criminals whose activities are not politically
motivated.
With the tremendous support of this committee during the past
several years, we have hired entry-level agents and inspectors to
reinvigorate our workforce. Because our mission is complex, and the
laws and regulations we enforce intricate; it will take our new
personnel 2 to 3 years of training to become proficient. The majority
of our current investigative and terrorism-specific work will require
our experienced agents, intelligence specialists, and explosives
technicians to focus a majority of their time actively pursuing
investigations with multi-agency peer partners. Therefore, even with
these new personnel resources, we must still achieve a balance between
protecting the public against further terrorist acts and ensuring that
violent career criminals are also taken off the street.
In an immediate response to the September 11 terrorist attacks, ATF
provided 500 special agents and other investigative personnel to JTTF
operations, dramatically increasing our on-going support to the
Nation's anti-terrorism efforts. Participation in the JTTFs is one of
ATF's top priorities for fiscal year 2002, and ATF continues to assign
its most experienced criminal investigators to the JTTFs. With the
support received from this Committee through supplemental funds, an
additional 28 special agents will be assigned to JTTFs in fiscal year
2002, including a full-time ATF program manager for the FBI's Counter-
Terrorism Center.
With the fiscal year 2002 supplemental funding received for our
Canine Explosives Detection Program, ATF plans to train 30 additional
special agent explosives detection handler/canine teams to provide
canine support to the National Security Special Events, JTTFs, and
other counter-terrorism efforts, but still remain involved in non-
terrorism-related investigations and activities. The additional canine
teams will be strategically located throughout the U.S. These teams
will be able to meet critical needs in the field that directly
contribute to the Bureau's goals of reducing violent crime and
protecting the public. The canine teams will augment the efforts of
ATF's field divisions, National Response Team (NRT) callouts, and
special agent and explosive enforcement officer activities. The canine
teams will establish partnerships with State and local agencies that
lack canine resources, and they will be available to assist with
counter-terrorism measures, such as searches and security sweeps at
special events. The expanded program will allow ATF to perform
diagnostic field evaluations of ATF-certified teams belonging to
Federal, State, and local agencies.
ATF is providing personnel to support Treasury's ``Operation Green
Quest,'' a task force program created to combat terrorist financing and
money laundering. ATF's expertise in alcohol and tobacco diversion and
smuggling schemes will greatly serve this task force. Illegal proceeds
from global and domestic tobacco and alcohol diversion and smuggling
are often used to further criminal and terrorist activities. We will
enhance the ``Operation Green Quest'' effort by having the ability to
identify individuals who may have ties to terrorist organizations, and
who utilize legitimate business fronts to conceal proceeds that finance
terrorist activity. In response to the national investigation, ATF
analyzed information of potential terrorists and their associates, and
focused on possible alcohol and tobacco product diversion in support of
their criminal activities.
ATF detailed 45 special agents to the FAA's Federal Air Marshal
Program for 6 to 18-month assignments.
ATF provided, and continues to provide, analytical intelligence in
support of joint Federal anti-terrorism efforts. There is important
intelligence data available from ATF's internal investigative and
regulatory databases, including the Arson and Explosives Incidents
System (AEXIS), firearms tracing, permit holders, revenue collection
and licensing. We have modified the AEXIS reporting system to interface
with the Department of Justice, allowing the FBI to use ATF reports to
identify possible terrorist connections. Additionally, numerous Bomb
Data Centers throughout the world actively contribute to ATF's Arson
and Explosives National Repository.
Following the September 11 terrorist attacks, ATF sent a letter
urging all explosives licensees and permittees to take immediate
measures to ensure the security of their explosives inventories.
Between October and December 2001, ATF field personnel conducted 7,459
inspections of explosives licensees/permittees (out of a total of
9,400). ATF personnel encouraged the proprietors to emphasize
explosives security and accountability following the terrorist attacks,
and to report thefts, losses, or suspicious activity to ATF and the
appropriate local authorities. ATF carried out these inspections in
order to gauge internal security controls and report any unusual
purchase attempts; break-ins; or any other anomalies that would
indicate a breach to security.
In connection with the 7,459 inspections, ATF uncovered over 200
instances of possible criminal violations. We also found 1,763
instances of violations in record keeping, storage and conduct of
business. Many follow-up inspections will be required to ensure that
corrective actions were taken. In one instance we issued a notice of
revocation and seized approximately four million pounds of explosives
materials that were stored in violation of Federal explosives law.
Since 1993, ATF has assigned a senior special agent as a
representative to the Central Intelligence Agency's Counter-Terrorism
Center. This ATF representative facilitated an exchange of operational
intelligence that proved critical during the investigation of the first
attack against the World Trade Center in 1993. Operational intelligence
will be an essential component in resolving the latest terrorist events
and preventing future events. On an ongoing basis, our ATF CIA
representative is involved with tracking the international movement of
U.S. manufactured firearms, explosives, and other contraband used in
terrorist operations or the financing of terrorist operations.
In addition, ATF's representatives to the FBI and CIA Counter-
Terrorism Centers coordinate their activities with ATF representatives
to the Financial Crimes Enforcement Network (FinCEN), the El Paso
Intelligence Center, and the INTERPOL National Central Bureau. In so
doing, they are able to share intelligence related to suspicious
financial transactions and other activities within ATF's purview. Most
important is the sharing of threat assessments, which focus enforcement
action.
ATF has expanded its electronic link to the intelligence community
and has initiated protocols for transmitting classified terrorism-
related intelligence from ATF Headquarters to field investigative
elements. This link includes access to State Department and Defense
Department classified data processing systems. The National Security
Agency (NSA) has established a permanent detail position within the ATF
Intelligence Division to provide ATF with real-time access to
classified intelligence, international cable traffic, and national
security information relevant to ATF's counter-terrorism efforts.
ATF special agents and intelligence research specialists have
supported security operations in numerous National Security Special
Events, including the NATO 50 celebration, the Republican and
Democratic National Conventions, the IMF/World Bank Conference, the
United Nations General Assembly Millennium Meeting, and the
Presidential Inaugural Ceremony. ATF had approximately 300 personnel
participating in the security operation for the 2002 Winter Olympics in
Salt Lake City and provided personnel and equipment throughout the
event. ATF was well represented in the joint intelligence center, as
well as the joint operational component.
ATF is also a key player in the intelligence community-based Law
Enforcement Working Group sponsored by the National Reconnaissance
Office, under the direction of the Director of Central Intelligence.
The Law Enforcement Working Group brings together representatives from
Federal law enforcement and intelligence community organizations to
focus on the appropriate and legal uses of technologies and data
collected in support of law enforcement operations.
ATF is appropriately situated and prepared to respond to the needs
of our Nation, whether in our traditional role of investigating the
criminal misuse of explosives and firearms, arson investigation,
alcohol and tobacco diversion schemes, or contributing to our Nation's
call to prevent and investigate terrorist acts. I would like to take
this opportunity to briefly describe significant investigations that
highlight ATF's integration and contribution to these efforts.
atf terrorism case examples
ATF West Palm Beach Field Office.--This investigation was initiated
as a firearms trafficking case. Foreign nationals, as well as U.S.
citizens, were involved in the illegal purchase of explosives and
firearms, including stinger missiles, on behalf of persons associated
with the Taliban in Pakistan and Afghanistan. The suspects negotiated
with an undercover ATF agent for the purchase of 200 stinger missiles,
as well as a large quantity of assault rifles, T.O.W. missiles, and
L.A.W.S. rockets. The weapons were to be transferred to members of the
Taliban for use in Afghanistan. All suspects were arrested and
indicted. ATF seized assets of individuals who had been hired to assist
in money transfers and to launder diverted foreign funds into U.S.
dollars. The funds for the purchase of the weapons came from Taliban
and/or Al Qaeda sources in the Middle East. ATF partnered with the
United States Customs Service, the FBI, the West Palm Beach Police
Department, and the Palm Beach County Sheriff's Office in successfully
investigating this case.
ATF Ft. Lauderdale Field Office.--Firearms Trafficking
Investigation: This case involved active members of the Provisional
Irish Republican Army (IRA) who illegally purchased firearms and
smuggled them into the Republic of Ireland for distribution in Northern
Ireland. The suspects purchased the firearms at various Federal
firearms licensees (FFLs) and through newspaper advertisements and gun
shows in Ft. Lauderdale and Hollywood, Florida. The firearms were
disassembled and packed into children's toys for shipment to Ireland.
Once in Ireland, they were recovered by members of the Provisional IRA.
All suspects in the U.S. were arrested, indicted and convicted of all
firearms charges and are currently awaiting sentencing. Funds for the
purchase of the firearms came from the Provisional IRA.
Our fiscal year 2003 budget request will allow ATF to continue its
efforts to reducing violent crime, contributing to homeland security,
collecting all revenue due and protecting the public. The men and women
of ATF are very appreciative of the Committee's trust and continued
support, and as you will see, your investments have paid dividends. I
now wish to highlight our accomplishments and detail our fiscal year
2003 budget request, which will enable us to build on your investment.
fiscal year 2003 budget request
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,'' through our three principal
strategic goals: (1) to reduce violent crime; (2) to collect all
revenue due to the United States; and (3) to protect the public. ATF's
unparalleled expertise in firearms, explosives, and arson makes it an
essential component of the Nation's homeland security efforts. ATF will
continue to target its resources towards preventing and responding to
crime and violent acts that threaten public safety and seek to instill
fear in Americans.
ATF's fiscal year 2003 Salary and Expense (S&E) request is
$913,114,000 in direct budget authority and 5,106 full-time equivalents
(FTE). Our request represents an increase of $30,836,000, or 3.5
percent over the total fiscal year 2002 enacted level of $882,278,000.
A share of this increase will assist in maintaining current
services program levels for mandatory payroll costs and inflation. The
remainder is required for the new ATF headquarters facility and to
enhance ATF's Integrated Violence Reduction Strategy (IVRS) efforts, of
which the Youth Crime Gun Interdiction Initiative (YCGII) is an
integral part.
A new ATF national headquarters building and relocation remain a
top priority of the Department and the Bureau to ensure the safety and
security of ATF's workforce. An increase of $10,700,000 is requested to
support the construction project. These funds are needed for one-time
agency costs associated with security-related aspects of the building,
as well as contracts for technology and agency technical support and
management.
The $11,000,000 and 41 full-time equivalents requested for IVRS
will allow ATF to apply lessons learned from the YCGII program and
institute these successful practices in smaller communities, thereby
having more of an impact on the youth crime gun problem. It will also
allow ATF to expand YCGII to 10 additional cities. This request will
enable ATF to further implement our critical role in the
Administration's Project Safe Neighborhoods initiative, which is
designed to reduce firearms violence through Federal and State and
local law enforcement partnerships throughout the Nation.
To carry out our duty to be sound stewards of the taxpayers'
resources, we will continue to focus on improving our business
practices, seeking better results at the lower cost. We will continue
to refine the integration of budget and performance and use
performance-based budgeting to determine the best way to use available
resources.
Because of your unwavering support, ATF is healthy and able to
achieve its mission goals in a more effective and productive manner. I
believe the Committee will be pleased with its investment in ATF, which
is best demonstrated through our accomplishments.
fiscal year 2001 atf accomplishments
Reduce Violent Crime
ATF initiated 15,852 YCGII, National Instant Criminal Background
Check System (NICS), and other firearms investigations in fiscal year
2001, resulting in 3,663 indictments and 4,179 convictions, which are
16 and 36 percent higher, respectively, than in fiscal year 2000.
Specifically, YCGII investigations rose 277 percent over fiscal year
2000 levels to 2,306 investigations, producing a 62 percent rise in
indictments and a 115 percent rise in convictions.
ATF initiated 881 explosive investigations in fiscal year 2001,
resulting in 271 cases being referred for prosecution, and 295
convictions. This represents an increase over fiscal year 2000 of 22
percent in investigations, 36 percent in cases referred for
prosecution, and 235 percent in convictions. Additionally, ATF
initiated 1,546 arson investigations in fiscal year 2001 and referred
222 cases for prosecution, producing 136 indictments. This represents a
23 percent increase in cases referred for prosecution and a 25 percent
increase in indictments over fiscal year 2000.
Some cases initiated in fiscal year 2001 are still ongoing and will
ultimately result in additional cases referred for prosecution and,
consequently, in additional indictments, defendants, and convictions.
I would now like to present the primary programs in our efforts to
combat violent crime and terrorism.
integrated violence reduction strategy (ivrs)/project safe
neighborhoods
IVRS focuses on investigating violent career criminals and others
prohibited from possessing firearms, as well as firearms traffickers
who are responsible for diverting firearms to criminals. While IVRS is
a national enforcement strategy, ATF recognizes that different
communities have different law enforcement concerns. Therefore, IVRS
integrates several core concepts that are adapted and applied in
varying formulas to address the specific law enforcement needs of a
community. Included in these efforts are the investigation of violators
under the Youth Crime Gun Interdiction Initiative; the comprehensive
tracing of crime guns by Federal, State, and local law enforcement
agencies; and the effective regulation of the firearms industry. ATF
also promotes community outreach through G.R.E.A.T., the Gang
Resistance Education and Training curriculum that is delivered to
middle-school students nationwide.
Fiscal year 2002 enacted appropriations provided $3 million over
the President's budget to increase the number of ATF agents to enforce
existing firearms laws in support of the Administration's Project Safe
Neighborhoods initiative. IVRS is an integral part of the President's
Project Safe Neighborhoods initiative. It is a multi-agency initiative
designed to tailor approaches to reducing gun violence to the unique
needs of communities across the country.
The following provides additional detail about several of the
programs that make up IVRS:
Armed Violent Criminal Apprehension Program
This program seeks to identify, investigate, and recommend
prosecution of a wide range of firearms offenders: career criminals who
use firearms, individuals who are actively involved in armed violent
criminal activities or armed drug trafficking, and other categories of
prohibited persons in possession of firearms (e.g., convicted felons,
fugitives from justice, illegal aliens, and individuals convicted of
certain domestic violence misdemeanors or subject to certain domestic
violence restraining orders).
National Instant Criminal Background Check System (NICS) Referrals
Since the implementation of the permanent provisions of the Brady
Law in November 1998, 276,603 referrals of firearms purchase denials
have been forwarded to ATF's Brady Operations Branch by the FBI
National Instant Criminal Background Check System (NICS). The Brady
Operations Branch, has reviewed and forwarded 70,899 of both delayed
and standard (firearms not transferred) denials referrals to ATF Field
Offices throughout the country for further investigation. Of this
number, 12,657 were ``delayed denials,'' instances where a transfer of
a firearm may have occurred.
To date, a total of 2,737 NICS cases have been forwarded to U.S.
Attorneys' Offices for prosecution, resulting in convictions of 340
defendants. From November 1998 to the present, ATF has recovered or
accounted for 7,058 firearms reported by the FBI to have been sold to
prohibited persons.
During the past fiscal year, the Brady Operations Branch initiated
a system of screening the referrals received from the FBI in order to
maximize the efficiency of limited personnel resources. These efforts
on the part of the Bureau to maximize the efficiency of the NICS
referral process greatly reduced the strain on existing resources thus
allowing more focus on anti-terrorism efforts and other law enforcement
efforts.
National Integrated Ballistics Identification Network (NIBIN)
In addition to the firearms tracing process, which helps law
enforcement officials identify the perpetrators of violent crime, ATF
provides investigative support through its leadership role in the
National Integrated Ballistic Identification Network (NIBIN), a
contributing program of the IVRS initiative. NIBIN provides for the
nationwide installation and networking of automated ballistic imaging
equipment in partnership with State and local law enforcement agencies.
This technology uses automation to compare more ballistics evidence
than would be possible using only manual comparisons. Links between
otherwise seemingly unrelated crimes are discovered, and investigative
leads are generated for police follow-up. In addition, the system makes
it possible to share intelligence across jurisdictional boundaries,
enabling State and local law enforcement agencies to work together to
stop violent criminals.
In fiscal year 2001, NIBIN equipment assisted law enforcement
agencies in finding 956 links, or ``hits.'' In each of these instances,
evidence from two or more crime scenes was identified as being
potentially connected. The evidence was then referred to a certified
firearms examiner for physical comparison and confirmation of the
links. Currently, 125 law enforcement agencies are making use of this
valuable technology, and it will be available to more than 200 agencies
by the end of fiscal year 2002. As additional agencies participate in
the program, ATF expects that greater numbers of hits will be generated
that will ultimately lead to the resolution of more violent crimes
nationwide.space
Illegal Firearms Trafficking Enforcement Program
The goal of ATF's illegal firearms trafficking enforcement is to
reduce violent crime by identifying, investigating, and arresting
individuals who illegally supply firearms to others prohibited from
possessing them and to deter the diversion of firearms from lawful
commerce into the illegal market.
Youth Crime Gun Interdiction Initiative (YCGII)
YCGII, a component of IVRS (as well as the Illegal Firearms
Trafficking Enforcement Program) focuses agent and inspector resources
on contributing to a reduction in youth violence, using the unique
assets of crime gun tracing. The goals of the YCGII are to identify and
interrupt the illegal supply of firearms to youths through enforcement
and research efforts. The initiative, which consists of partnerships
with State and local law enforcement agencies in 50 metropolitan areas,
involves the tracing of every crime gun recovered in those localities.
Through the National Tracing Center (NTC), the Bureau is able to obtain
investigative leads to develop cases against illicit firearms
traffickers who supply firearms to youths.
During the 1990's, ATF developed new information systems to
reinforce our firearms enforcement efforts. We can now use the crime
gun itself as a vital investigative and evidentiary tool by tracing it
back to its criminal user or its illegal supplier. In doing so, we are
able to identify, arrest, and refer for prosecution both armed violent
felons and those who are illegally supplying criminals and juveniles
with guns. The YCGII has been the platform for systematically
developing and managing crime gun tracing information.
During fiscal year 2001, ATF provided focused YCGII training to
7,976 ATF, Federal, State, and local law enforcement officers. ATF also
conducted two seminars for ATF YCGII coordinators and their State and
local counterparts. These seminars reached 150 law enforcement
personnel and increased the awareness of and participation in
comprehensive crime gun tracing by the attending agencies.
ATF recently submitted its first YCGII quarterly report to the
Committee, outlining the results and substantial progress made in
implementing the recommendations made by the Treasury Inspector
General.
Comprehensive Crime Gun Tracing
The Comprehensive Crime Gun Tracing Initiative that began in fiscal
year 2001 provides nationwide comprehensive tracing capability and will
provide faster trace results as technological upgrades are implemented.
Consequently, there has been an increase of approximately 11 percent of
trace requests over the year 2000, a percentage that is expected to
rise. The National Tracing Center (NTC) provides State and local
agencies with information on crime guns to support their law
enforcement efforts by conducting over 230,000 traces in fiscal year
2001 along with additional analysis. The NTC expects to receive in
excess of 240,000 firearms trace requests in fiscal year 2002. 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
multiple sales of handguns. The Firearms Tracing System (FTS) provides
data on firearms that is used by ATF special agents and inspectors to
identify illegal firearms trafficking. The NTC has established direct
electronic connectivity to transmit trace requests with over 159 law
enforcement agencies to include Mexico and Colombia to further improve
the accuracy and efficiency of firearms tracing and analysis. In fiscal
year 2001, 50 percent of the trace requests received by the NTC were
transmitted electronically using this technology. ATF is also
developing a web-based trace submission, response and analysis system
to reach a greater customer base at a substantially reduced cost with
further improvements the accuracy and efficiency of trace request
submissions.
Gang Resistance Education and Training (G.R.E.A.T.)
Another component of IVRS is ATF's Gang Resistance Education and
Training (G.R.E.A.T) program. G.R.E.A.T. is a life skills competency
program designed to provide middle-school children the ability to avoid
gangs, resist conflict, make responsible decisions and develop a
positive relationship with the law enforcement community. G.R.E.A.T. is
designed to make attitudinal changes in children that will lead to a
change in behavior. In fiscal year 2001, ATF provided funding to 200
different agencies to support their participation in the G.R.E.A.T.
Program, and 3,685 officers were certified to instruct in the
G.R.E.A.T. program. Over 1,662 agencies have over 4,875 officers
certified to teach the program. During fiscal year 2001, G.R.E.A.T.
officers around the country taught approximately 389,787 school-aged
children. Since the program began in 1992, nearly 3 million children
have been taught. In addition, the program underwent a five-year
longitudinal study by the National Institute of Justice. This study
showed that the students who received the G.R.E.A.T. curriculum
displayed less risk-seeking behaviors, showed lower rates of
victimization, more negative attitudes towards gangs, and more positive
attitudes towards police. This evaluation shows the effectiveness of
the program and ATF's commitment to reducing youth violence nationwide.
In fiscal year 2001, we continued our work with the Bureau of
Indian Affairs (BIA) in an initiative to provide tribal police agencies
training in the G.R.E.A.T. program. ATF provided two on-site training
courses to BIA officers on tribal lands. These officers in turn then
began to teach the G.R.E.A.T. curriculum to Native American children in
their localities. We have scheduled an additional on-site training
activity in fiscal year 2002 and will continue to work in a
collaborative effort with BIA through their national conference and
other conferences to promote the G.R.E.A.T. program to Native American
officers and the community at large.
Arson and Explosives Enforcement
ATF has been resourceful in addressing violent arson and
explosives-related crimes through enforcement and training. ATF's arson
and explosives programs function interactively to provide a
comprehensive proactive and reactive force in the fight to protect the
American public from the criminal use of fire and explosives. Through
these programs, ATF personnel work to thwart criminal and terrorist
activity involving explosives at nearly every level of the
implementation process. ATF's focus on arson and explosives crimes
continues to be a major Bureau priority.
Our National Response Teams (NRTs) are comprised of highly trained
and well-equipped professionals that can be deployed within 24 hours to
major bombing and fire scenes anywhere in the United States. The NRTs
were activated 26 times in fiscal year 2001 to investigate major fire
and explosives incidents. Of these 26 activations, 24 were to fire
scenes in the United States. Eleven fires were determined to be arson,
seven were determined to be accidental fires, and the causes of six
fires were undetermined. One response was to the September 11, 2001
attack on the Pentagon, and one was to an incident that was determined
to be an accidental explosion. These 26 activations involved 93 deaths,
25 injuries, and nearly $700 million in estimated property damages.
After-action customer survey results rate our NRT services at 90
percent or higher in the law enforcement community. Since its inception
in 1978, there have been 511 NRT activations.
In addition to investigating fire and explosives incidents, the
NRTs provide assistance to other Federal, State, and local law
enforcement agencies during special events. In fiscal year 2001, the
NRT provided support at the Special Olympics in Anchorage, the Asian
Bank Conference in Honolulu, the Presidential Inauguration, and most
recently, to the Winter Olympics in Salt Lake City.
ATF's International Response Team (IRT) participates with the
Diplomatic Security Service of the Department of State to provide
investigative assistance at international explosives and fire
incidents. There have been 21 IRT activations since its inception in
1991. The team has responded to vehicle bombings in Peru and Macedonia,
explosions in Argentina targeting the Israeli Embassy, and other
incidents in El Salvador, Ecuador, Surinam, Pakistan, Grenada, and
Korea. The IRT was activated three times in 2001, to assist foreign
governments in explosives investigations and fire scene examinations.
The IRT activations were as follows:
--Peru in March of 2001 following a fire in the National Bank of Peru
that occurred during civil disturbances following the
Presidential elections;
--The Federated States of Micronesia in March to examine a fire scene
in a government facility; and
--In April of 2001 to assist the Guatemalan National Police in
examining improvised explosive devices.
Also present at many of these events were ATF's explosives
enforcement officers (EEOs), or bomb technicians. In fiscal year 2001,
ATF EEOs traveled with the Department of State's Antiterrorism
Assistance Team to assess the capabilities of 10 foreign countries to
respond to terrorist or explosives incidents. In addition, the EEOs
participated in each National and International Response Team callout,
testified in criminal proceedings 24 times, rendered 237 technical
assists, wrote 389 technical statements, and performed many other tasks
in support of ATF's explosives mission.
ATF conducted 1,546 arson investigations across the country in
fiscal year 2001. ATF's highly trained special agent certified fire
investigators respond to incidents at all times of the day and night to
make an initial fire cause determination when there is evidence of
potential criminal acts warranting further investigation. Our 85
certified fire investigators are the only Federally trained fire
investigators in the government.
ATF opened investigations on 58 explosives thefts in fiscal year
2001, and ATF's Arson and Explosives National Repository Branch (AENRB)
recorded the thefts of nearly 50,000 pounds of explosives and the
recovery of over 12,000 pounds.
In 1996, Congress, recognizing ATF's expertise in the investigation
of fire/arson and explosives-related incidents, passed legislation
authorizing the Secretary of the Treasury to establish a National
Repository of information regarding arson incidents and the actual and
suspected criminal misuse of explosives throughout the United States.
Treasury's authority over this system was included in an amendment to
Title 18, United States Code, Section 846. Subsection (b) was added, as
follows:
``The Secretary is authorized to establish a national repository of
information on incidents involving arson and the suspected criminal
misuse of explosives. All Federal agencies having information
concerning such incidents shall report the information to the Secretary
following such regulations as deemed necessary to carry out the
provisions of this subsection. The repository shall also contain
information on incidents voluntarily reported to the Secretary by State
and local authorities.'' The Secretary of the Treasury tasked ATF with
establishing this National Repository.
The AENRB maintains a state-of-the-art database that now contains
detailed information on over 112,000 arson and explosives incidents.
This database, the Arson and Explosives Incidents System (AEXIS), is
used to trace stolen and recovered explosive material and military
ordnance. In addition to providing vital investigative services to law
enforcement personnel worldwide, the AENRB uses information from AEXIS
to provide threat assessment support to Federal agencies and major
event security task forces.
For example, in 2001, the AENRB played a significant role in the
investigation and subsequent conviction of a former Chicago police
laboratory evidence technician/chemist. The technician was responsible
for six bombings in Freemont, California. Targets included the chief of
police, a city councilman, a water tower, and a wealthy Taiwanese
national. The AENRB used AEXIS to compare the devices' design and
components with other device data already in the system. Based on the
comparison, AENRB personnel deemed the devices the most sophisticated
they had ever seen. After a 3-month State trial, the technician was
sentenced to 37 years to life in state prison.
In the spring of 2001, the AENRB embarked on a measured and focused
program to connect the Nation's fire and explosion investigators to the
latest in information communications and management technology. The
project, known as the Bomb Arson Tracking System (BATS), is designed to
facilitate and promote the collection and dissemination of fire, arson,
and explosives information among participating agencies. As presently
envisioned, participating law enforcement agencies and members with
established National Crime Information Center (NCIC) access will be
able to access BATS via personal computer and Internet. Once connected
to the ATF-secured and maintained extranet server, participants will be
able to enter information, query information (both locally and across
agencies), and produce relevant reports.
The AENRB coordinates explosives intelligence internationally with
12 Bomb Data Centers throughout the world and is involved in planning
and coordinating the establishment of Explosive Repository Centers in
Mexico and Colombia (Plan Colombia). In fiscal year 2001, AENRB
personnel provided presentations on the Repository's capabilities to
2,158 representatives of Federal, State, local, and foreign law
enforcement or explosives industry representatives.
ATF continues to vigorously enforce the Federal explosives laws
(which include the crime of arson) by providing state-of-the-art
training and expertise to Federal, State, local, and international law
enforcement partners. This training will be instrumental in preparing
our law enforcement partners for the fight against terrorists using
their conventional ``tool,'' explosives. AEXIS is a vital investigative
threat assessment tool used to reduce the incidences of bombings and
arsons. The value of ATF's investigative skills is demonstrated by the
fact that arsons at houses of worship have been solved at approximately
twice the commercial arson solution rate.
Explosive Detection Canines
ATF-certified arson and explosives detection handler/canine teams
support ATF's fire and explosives investigations. In fiscal year 2001,
ATF's six special agent/canine teams searched 10,356 vehicles,
buildings, or items during the execution of Federal, State, or local
search warrants or in conjunction with searches or sweeps during ATF or
Federal security details. Our canines supported preventive security
efforts at such diverse events as the response to the September 11
attack on the Pentagon, the Special Olympics, the execution of Timothy
McVeigh, the 2001 Superbowl, and many others.
The ATF Canine Training Center, located in Front Royal, Virginia,
is now open and the kennels have been completed. In a training
arrangement with the U.S. Department of State, ATF trains explosives
detection canines for foreign countries to be used overseas in the war
against terrorism, and to protect American travelers abroad. Since the
start of the program in 1998, ATF has trained and certified 94
accelerant-detection canines for State and local agencies. ATF has also
trained and certified 310 explosives-detection canine teams for
deployment in 13 countries around the world. Additionally, ATF has
trained 47 explosives detection canine teams for other Federal, State,
and local agencies, including the Federal Bureau of Investigation, the
Central Intelligence Agency, and the Internal Revenue Service. With the
funding provided in the fiscal year 2002 Anti-Terrorism Supplemental we
will be expanding the canine training center in order to meet the
increasing demand for these resources.
Explosives Study Group
ATF's Explosives Study Group (ESG) is examining the tagging of
explosive materials for purposes of detection and identification;
possibilities for rendering of common chemicals used to manufacture
explosive materials inert; 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 new prevention (explosives detection) technologies, as
directed by section 732 of the Antiterrorism and Effective Death
Penalty Act of 1996, as amended by the Omnibus Consolidated
Appropriations Act for fiscal year 1997. A report on these findings is
in the final stages of review.
The ESG has also compiled a comprehensive list of State Licensing
Requirements for the purchase and use of commercial high explosives,
and is currently consulting with State regulators and industry members
to develop recommendations for consideration by Congress that would
advance public safety.
The ESG has worked with The Fertilizer Institute (TFI) to expand
the ``Be Aware for America'' program to address areas of vulnerability
for distributors of ammonium nitrate fertilizer and agricultural
chemicals. This expansion, the ``Be Secure for America'' program (an
enhancement of the ``Be Aware for America'' program), is aimed at
ensuring the security of the transportation, storage, and manufacturing
of the agricultural chemicals produced and distributed.
Additionally, the ATF is funding promising research at the Oak
Ridge National Laboratory, including prototype development,
engineering, and training on advanced sensing technologies for
explosives detection. The ultimate objective is the development of a
portable explosives detector that will function with a short, real-time
response rate for trace amounts of explosives.
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. The
goal is to achieve 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.
Partnerships
ATF continues its tradition of partnering with other Federal,
State, and local agencies on developing protocols and partnerships that
will enable us to efficiently utilize our resources in the fight
against terrorism and violent crime. Some of the agencies we have
partnered with include the Central Intelligence Agency, the United
States Department of State, the Customs Service, the Secret Service,
the National Transportation Safety Board, the Department of Justice,
Federal Bureau of Investigation, the United States Department of
Agriculture, and the United States Chemical Safety and Hazard
Investigation Board and the new Transportation Security Administration.
Additionally, ATF has worked to establish a rapport with industry
organizations such as the International Society of Explosives
Engineers, the Institute of Makers of Explosives, the American
Pyrotechnic Association, and the National Shooting Sports Foundation.
ATF's criminal investigative analysts (Profilers), assigned to the
FBI's National Center for the Analysis of Violent Crime (NCAVC), spent
2 years conducting research and interviewing 38 imprisoned bombing
offenders. In June, they published the findings of their joint study
with the NCAVC. The study, ``Behavior and Characteristics of Bomb
Related Offenders,'' will serve as a catalyst for further research into
understanding the motivations and characteristics of subjects who use
explosives for criminal intent.
Our profilers are also assisting in our Nation's war on terrorism.
They are developing in-depth assessments of the 19 hijackers and the
individual(s) responsible for utilizing mail services to deliver
Anthrax spores, and they are working with their FBI counterparts to
conduct ongoing threat assessments.
ATF continues to serve on the United States Delegation to the
Framework Convention on Tobacco Control at the World Health
Organization and takes a lead in the negotiations on the protocol aimed
at preventing smuggling and illicit trade in tobacco products that
deprive the Government of revenues from these products. As such, ATF is
considering hosting a conference for countries to begin informal
negotiations on illicit tobacco trade later this summer.
In March 2001, ATF entered into an agreement with United States
Customs Service, the Royal Canadian Mounted Police, and the Canadian
Customs and Revenue Agency to establish a working partnership on
Contraband Cigarette Trafficking. As a first step, a Tobacco Threat
Assessment is being developed to determine the nature and scope of the
tobacco black market in the United States and Canada to gauge the
threat posed by large scale cross-border and international cigarette
trafficking.
collect the revenue due
For fiscal year 2001, ATF continued to honor its obligation to
fairly and efficiently collect approximately $14.1 billion in revenue
in accordance with current laws. In fiscal year 2001, ATF collected the
following revenue: $13.8 billion in alcohol and tobacco excise taxes;
$176 million in firearms and ammunition excise taxes; $103.6 million in
special occupational taxes; and $6 million in licensing and transfer
fees, for a total of $14.1 billion.
In fiscal year 2001, ATF collected an additional $4.2 million due
to excise tax examinations and accepted approximately $1.6 million in
penalties, interest, and offers to compromise taxes due for unpaid or
underpaid taxes, and offers-in-compromise for other violations, such as
record keeping violations.
Additionally, in fiscal year 2001, ATF opened 77 alcohol and
tobacco diversion investigations. Seizures of alcohol and tobacco
monies and real property involved in criminal violations totaled over
$1.8 million. Alcohol diversion investigations in fiscal year 2001
resulted in 10 cases with 16 defendants being recommended for
prosecution. Tobacco cases referred for prosecution were 20 with 37
defendants being recommended for prosecution. There were 39 convictions
recorded as a result of these criminal prosecutions. Several members of
organized crime groups were successfully prosecuted for alcohol and
tobacco related criminal activity.
During 2001 and 2002, ATF mailed informational notices and floor
stock tax returns to over 307,000 sellers of cigarettes for floor stock
taxes that are due in April 2002. To date, we have collected over
$980,000 in floor stocks taxes.
In August of 2001, ATF's Strategic Leadership Team approved a
proposal to establish a new ``Tax Audit Division'' within the Office of
Alcohol and Tobacco. This new division will, when fully implemented,
assume responsibility for field audits of excise taxpayers with annual
tax liability over $250,000. This organizational change is intended to
address concerns over decline in field audit activity in recent years
and to ensure adherence to audit standards in the work performed. Much
of the decline in audit activity is the result of redirecting inspector
resources to firearms and explosives programs. ATF believes that an
effective and efficient audit program is in the best interest of both
the Government and the industry.
In addition, in fiscal year 2001, ATF instituted a pilot program
under Pay.gov. For fiscal year 2001, $1.9 billion, or 13 percent of all
revenue collected by ATF, was through Pay.gov. Based on the collection
figures, we estimate a modest increase of our tax collections will be
received through the Pay.gov program in fiscal year 2002. ATF is
committed to expanding availability of Pay.gov to all excise taxpayers.
This E-gov initiative supports both the Government Paperwork
Elimination Act and the President's Management Reform Agenda.
protect the public
Firearms Regulation
As of January 2002, there were 103,358 Federal firearms licensees
in the U.S. authorized to conduct commerce in firearms. In an effort to
ensure firearms industry members fully understand the regulatory
requirements of maintaining their license, we conducted 52 seminars for
licensees in fiscal year 2001.
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, short-
barreled shotguns, silencers, and destructive devices. At the end of
calendar year 2001, the NFRTR had 1,419,220 items in the registry. 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, which will make it easier to
verify the accuracy of the data in the computerized registration
system.
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
calendar year 2001, FEIB received and processed 16,423 import permit
applications, and 300 registration applications.
In fiscal year 2001, ATF inspected approximately 4,000 licensees,
resulting in the detection of 6A,675 violations and 1,011 referrals to
law enforcement. ATF also inspected approximately 5,500 Federal
Firearms License (FFL) applicants, resulting in the detection of 182
violations and 184 referrals to law enforcement.
To supplement the general inspections, ATF continues the
implemented ``focused'' inspection policy begun in October 1998, that
directs field 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
possible illegal firearms trafficking.
Explosives Regulation
In addition to the inspections of explosives industry members after
the September 11 attacks, ATF inspectors carried a considerable
workload throughout the year in helping to ensure the lawful storage of
explosives materials. In fiscal year 2001, inspectors completed 5,364
full inspections, which encompassed both explosives applications
inspections and part of the 9,400 explosives licensees and permittees.
They identified and corrected 1,813 violations. In fiscal year 2002 we
will direct additional resources to conduct explosives inspections with
the goal of achieving a 100 percent inspection rate.
Alcohol Regulation
In fiscal year 2001, ATF processed over 81,000 applications for
beverage alcohol label approval. This represents a 10 percent increase
over the previous year. Twenty percent of these applications were
denied approval due to non-compliance with regulatory and statutory
requirements. Eighty percent of these applications were processed in 13
days.
ATF also initiated a project to develop and implement electronic
submission of applications for label approval via the Internet. This
will enhance processing time and efficiency and should increase
customer satisfaction. We are holding a series of meetings with
industry representatives to explain the system, answer their questions,
and listen to their recommendations.
ATF settled 12 cases involving alcohol beverage mislabeling in
fiscal year 2001. Most resulted in monetary settlements while one
particularly egregious case produced a 45 day suspension of winery
operations.
ATF continues to participate in various trade delegations headed up
by the United States Trade Representatives' office that relate to
global trade in the commodities that we regulate. Through this effort,
we assist in improving the conditions for international trade that
increases consumer protection and choices with respect to these
commodities. Additionally, these improvements in global trade enhance
the United States economy and the economies of our trading partners.
We have initiated a number of projects to revise forms and
regulations in the plain language style. These changes help to make
requirements easier to understand and improve compliance by more
effectively communicating legal obligations for industry members.
bureau-wide initiatives
Training for Foreign, Federal, State, and Local Authorities
ATF continues to assist other Federal, State, and local agencies in
their fight against terrorism and violent crime by providing training
based on our unique expertise. For example, ATF is the leader in
Federal law enforcement when it comes to providing training to
thousands of Federal, State, local, and international law enforcement
officers in the areas of arson investigation, explosive identification
and regulation, firearms trafficking, and post-blast investigations.
Sharing ATF expertise, technology and lessons learned helps to prepare
America's first responders for preventing, mitigating, and
investigating potential terrorist incidents, thus helping in the global
fight against terrorism.
I would now like to take a moment to highlight some of the
outstanding training we provide.
Explosives Training
For the past several years, to protect the Nation's largest
airports, the Federal Aviation Administration (FAA) and ATF have teamed
together to conduct national Seminars on Terrorism and Explosives
(SEMTEX) and field training exercises that better prepare and train
aviation, security, and law enforcement personnel in explosive
countermeasure techniques. In fiscal year 2001, ATF trained 312
personnel. ATF and FAA are currently updating this curriculum in light
of September 11. In fiscal year 2002, 300 additional personnel are
expected to be trained.
During fiscal year 2001, we delivered the Advanced Explosives
Destruction Techniques (AEDT) course 8 times to approximately 200
students. This has been one of our most successful State and local
training programs and is in great demand. The audience for this
training is State and local bomb technicians. ATF explosives experts
developed this course because more bomb technicians are injured while
trying to dispose of recovered explosive materials than performing any
other activity, including render safe operations on unknown improvised
devices discovered in the field. It is the only training of its kind in
the country. To meet the large demand we again have increased the
number of courses to be offered this fiscal year to twelve.
During fiscal year 2002, ATF in conjunction with the U.S.
Department of Education, will develop a CD-ROM training platform titled
Bomb Threat Management and Response. This training CD-ROM will provide
a standardized bomb threat management and response template that can be
used by school administrators to develop a customized response program
for their individual school. This CD-ROM will be completed in April
2002 and distributed to all school districts, local law enforcement
offices and ATF offices. It is anticipated that ATF field personnel
will be called upon by the school districts to help establish and
implement these management and response plans.
International Training
Through a continuing partnership with the Department of State, ATF
conducted 5 training sessions at various International Law Enforcement
Academies (ILEAs). We provided training to 1,031 law enforcement
officers from more than 30 countries, including courses on basic and
advanced firearms and explosives identification, firearms trafficking,
postblast investigation, serial number restoration, and alcohol and
tobacco licensing, taxation, and diversion.
Firearms Training
In support of the President's Project Safe Neighborhoods (PSN)
initiative, ATF has developed a training program that will provide
necessary tools and information to all participants. The target
audience for this training includes Federal, State, and local line
prosecutors, Federal, State, and local investigators, and uniformed
police officers and local police department managers. Last month
(January), ATF provided an intensive three-day training program in
Reno, Nevada to the U.S. Attorney's Office, the Reno Police Department,
and other State and County law enforcement and prosecutorial personnel
from the area. This training event provided nearly 300 law enforcement
officials with training that will enable them to implement the PSN
strategy in the Reno, Nevada area and make their community a safer
place for all.
Through the National Firearms Examiner Academy (NFEA), ATF
developed a unique and innovative training program that has received
much acclaim and recognition. This successful program represents a firm
partnership between ATF, State and local police departments, and the
firearms and ammunition industry. Designed to provide comprehensive
training to entry level firearms examiners from State and local crime
labs, the NFEA has developed a yearlong training curriculum that has
become an all-inclusive benchmark for education in this field. The
selection process is highly competitive and the course work demanding;
to date, ATF has graduated 18 examiners. Examiners completing this
training are skilled in the ATF NIBIN technology, which greatly
enhances the efficiency and effectiveness of ballistics evidence
analysis and gun crimes solved.
Arson Training
ATF and the U.S. Fire Administration (USFA) are redesigning and
deploying a web-based system managed by the USFA, entitled ``Fire and
Explosion Investigation Management System.'' This system will include
information on fires and fire-related explosives incidents that occur
nationwide for use by the fire and explosion investigation community.
In partnership with the insurance industry, we have finalized the
development and begun the distribution 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. To date, we have contracted to create and
distribute approximately 30,000 CD-ROMs.
To strengthen cooperation between investigators and prosecutors,
and to encourage prosecution of cases, ATF provided four Advanced Arson
for Prosecutors classes in fiscal year 2001, training 119 prosecutors
from across the country.
During fiscal year 2001, two classes were delivered in Advanced
Cause and Origin/Courtroom Techniques at the Federal Law Enforcement
Training Center. This highly advanced and technical program provided
training to 60 students from across the country. These individuals are
full-time public safety employees whose workloads are focused primarily
upon the investigation of arson-related crimes.
Human Resource Strategies and Accomplishments
fiscal year 2000 annualization of expanded programs and
supplemented by fiscal year 2001, action by the Committee created an
intensive hiring effort by ATF this past year. Expansions were made to
the IVRS and its component program, YCGII, crime gun tracing and NIBIN.
In an effort to backfill positions lost through normal attrition and
simultaneously hire hundreds of new personnel, ATF processed 367 gains
to the agent rolls, 184 gains to the inspector rolls, and 310 support
positions, totaling 861 personnel actions. These efforts supported a
489 net gain to the Bureau's rolls with 291 agents, 153 inspectors, and
45 support personnel. ATF started the year with 4,597 on duty and ended
with 5,086. Over 200 new special agents and 148 new inspectors were
provided basic training classes at the Federal Law Enforcement Training
Center.
ATF completed the second year of a pilot Treasury Demonstration
Project for Designated Critical Positions that addresses major
recruitment and retention issues. The pilot program, authorized by
Congress in 1998, allowed ATF to test new management practices designed
to improve our capacity to recruit, develop and retain a workforce of
the highest caliber. The project includes a broad banding and pay-for-
performance compensation system. Also included are other flexible
recruitment and retention options, such as expanded recruitment and
relocation bonuses, retention allowances, certification and licensure
bonuses, and education supplements. Unlike other demonstration
projects, ATF employees were given the option of participating.
Approximately 90 percent of the eligible employees (primarily in our
scientific and technical occupations) elected to participate in the
project.
We are continuing to enhance our pilot flexi-place program for
field inspectors that we established last year. Data collected during
the implementation of the flexi-place pilot for field inspectors
indicates significant interest in continuing the program. Therefore,
ATF is preparing to expand the flexi-place pilot project to include
bargaining unit employees at ATF Headquarters within the next few
months.
Internal Training Activities
Excellence in performance and programs requires continuous training
and development, and the Bureau is committed to fully developing the
individual and collective skills of its employees. ATF provides high
quality, innovative training programs, thus improving individual and
organization performance in support of ATF's Strategic Plan.
In fiscal year 2001, ATF provided nearly 9,000 training sessions
for ATF personnel. ATF provided basic training to 212 agents and 148
inspectors through the New Professional Training program (NPT). The New
Professional Training Program is designed to provide a uniform approach
to the training and development of new ATF employees. Training
initiatives enhance employee development and performance in a variety
of technical training programs, which seek to expand the base of
employee knowledge and improve skills regarding ATF's roles, missions,
and capabilities. In much of the technical training provided, there are
either pre-tests for admission or academic requirements for graduation.
In addition, lessons on ethics and integrity, customer service,
teamwork, and accountability to the American public are woven into many
of the training programs.
Physical Security and Safety Program Focus
Although we have always treated the safety and security of our
employees and assets as high priority concerns, the events of September
11 and subsequent events increased both our sensitivity to the risks
that confront us and our efforts to enhance protection and
responsiveness. Our multi-faceted response to terrorist threats
included and continues to include a range of activities. We have re-
evaluated our physical security program throughout the Bureau and have
already begun addressing areas in which we see room for improvement.
Working both as an individual bureau and as part of a Treasury-wide
effort, we have enhanced our emergency management efforts by updating
our Continuity of Operations plans, establishing an Emergency
Management Operation Center, improving employee understanding of
evacuation and relocation plans, and upgrading the functionality of our
relocation sites.
To prevent job-related injuries and illnesses, we acquired
respiratory protection equipment for all special agents and other
employees who may be exposed to hazardous materials. We made
substantial progress on an ATF hazardous material protection directive
that addresses a wide range of issues including use of respiratory
equipment, training, physical requirements, and medical monitoring of
individuals who have had exposures. The various components of our
hazardous materials protection program are of vital importance to ATF
because of our responsibilities in investigating arsons and because of
the risk of chemical and biological exposures during investigations of
terrorist activities. That directive will be issued in the first half
of fiscal year 2002. Through information dissemination and training, we
have educated our employees so they may identify and properly handle
any potential threat that may be present in the large volume of
packages and documents we receive. In addition, we have implemented
special mail handling and routing procedures to minimize the
possibility of exposure to biological and chemical threats.
critical infrastructure projects
New Headquarters Facility
Today, a new site for the permanent home of the Bureau of Alcohol,
Tobacco and Firearms is a reality. With the unwavering support of this
body, ATF and GSA made significant progress in fiscal year 2001 towards
relocation of ATF to a safer and more secure headquarters for its
workforce and mission. Our new headquarters is being heralded as having
one of the most significant design concepts for a Federal office
building located in a major urban center. Building construction for the
new ATF headquarters will begin in January 2003. Accordingly, in our
fiscal year 2003 budget, we are requesting $10.7 million to fund our
project involvement with GSA, which includes reimbursable agency
construction items, and a state-of-the-art technology and security
infrastructure and construction process. ATF will remain a full partner
to GSA for daily management and coordination activities throughout the
construction project. Strategies to provide the best opportunity for
cost controls and savings are being incorporated at each juncture. ATF
plans to occupy this landmark facility in the second quarter of fiscal
year 2005.
New National Laboratory Center
The ATF National Laboratories provide service for the domestic war
on terrorism through our expertise in investigating and analyzing
evidence related to firearms, explosives and arson crimes. ATF is
grateful our scientific operations and national forensic investigation
programs will soon be carried out in a new ATF National Laboratory
Center facility. During 2001, enormous strides were made on this
project. By the end of the fiscal year, we were 60 percent complete
with site and construction, major mechanical systems on site to be
installed. Today, the interior systems are being prepared and
technology infrastructure and wiring are about to begin. ATF will move
from its outdated Rockville laboratory to the new facility by December
of this year. We are excited to have the opportunity to advance our
mission and provide even greater capabilities in identifying criminals
and collecting revenue. Important breakthroughs in facilities
engineering during the design of the Fire Research Center of the new
National Laboratory will allow ATF to test and gather scientific data
from reconstructed fire scenes as large as a two-story town house. The
fire science and arson investigation communities will greatly benefit
from the work of the Fire Research Center. As members of the Committee
are aware, costs for the project went beyond what was anticipated. ATF
is grateful for the support received through fiscal year 2001
reprogramming and Treasury commitments, and we are confident these
investments are in the very best interest of the law enforcement, the
science community, and the citizens we protect.
Expansion and Renovation of Martinsburg Facility
Renovation of the Martinsburg facility is a 10-month construction
effort projected to begin on June 1, 2002. We believe that we will be
able to begin relocation of the Tracing Center prior to final
completion of the construction as individual areas in the building are
completed. If there are no delays in the construction, it should be
completed by March 31, 2003. Complete relocation of ATF'S National
Tracing Center will follow immediately. The Committee's support of this
facility is greatly appreciated.
president's management agenda
Information Technology
We continue to place the best available technology into the hands
of each ATF employee, enabling us to work more efficiently and to
achieve our strategic goals. In August 2001, we began our first seat
management equipment refresh cycle, which will replace about 6,500 ATF
desktop and laptop computers under our Seat Management contract. We
will complete the nation-wide replacement by mid-March 2002. We
continue to lead the Federal Government in outsourcing our end-user-
computing support to Unisys Corporation, and in providing the best
possible support to the personnel responsible for carrying out the
Bureau's missions.
One significant effort we started in May 2001 was the
implementation of a disaster recovery system. This system will provide
ATF with the ability to run either any mission critical application
from a primary or an alternate location. This effort took on a greater
significance after the events of September 11. This project is almost
complete; we have successfully tested the recovery of all Headquarters
mission critical applications at our alternate site in West Virginia.
Security Measures
Another significant information technology effort for the Bureau is
improving the security posture of all systems. All ATF systems undergo
a rigorous certification and accreditation process to ensure risks are
assessed and either addressed or mitigated. Internet vulnerabilities
are assessed and addressed on a continuing basis. The Bureau has
implemented rigorous configuration management and systems development
life-cycle processes. These processes ensure that systems in
development are designed to be as secure as possible, and that changes
to operational systems do not introduce security vulnerabilities. ATF
has a documented computer security incident response plan that provides
early indication of potential problems and a proactive response to
actual problems. Finally, a system auditing capability is being
implemented to track detailed user actions in all systems and identify
additional potential security issues. We have made remarkable progress
in securing our information technology systems over the past year.
E-Government
In May 2001, ATF's Strategic Leadership Team approved the formation
of an office under the CIO to manage ATF's electronic filing projects
and strategies. Using current Internet based technologies; ATF's goal
is to provide the necessary tools to permit the 630,000 members of the
alcohol, tobacco, firearms and explosives industries to file required
forms and reports using secure Internet transactions.
ATF developed a Business Case for fiscal year 2002 and fiscal year
2003 for its E-Government Investment. The fiscal year 2002 Business
Case was presented to and endorsed by Treasury's Capital Investment
Review Board.
Although the completion of full electronic transactions with
external customers relies on integration projects, ATF is developing
the following interim solutions:
--E-COLA.--Responding to the alcohol beverage industry's request to
file Certificates of Label Approval electronically, ATF funded
the development of the electronic Certificate of Label Approval
system. The system is scheduled to be completed by the end of
fiscal year 2002.
--Firearms Services Technological and Management Enhancements.--In
fiscal year 2001, appropriated funds were earmarked to provide
technological and management enhancements to the National
Licensing Center, the National Firearms Act Branch, and the
Firearms and Explosives Imports Branch. The 2 million earmark
was utilized for three significant developments:
standardization of all the data elements between the various
Services databases, so that all the databases will be
consistent and will be able to ``speak'' to each other;
development of retrievable management analytical reports
through creation of a metadata layer; and development of a
prototype which, after development and testing, will enable
electronic submission (e-filing) of the Imports permit
application.
--Firearms Tracing.--In fiscal year 2001, web-based tracing
capabilities for the Electronic Trace Submission System (ETSS)
began a pilot project. Since ETSS saves at least 4 days in the
processing time for firearms trace requests, the current phase
of the FIT project is developing solutions to expand the system
for use by other police agencies.
--Pay.gov.--In fiscal year 2000, ATF entered into a partnership with
Treasury's Financial Management Service (FMS) to pilot a
Government-wide system, called Pay.gov, for conducting
financial transactions between agencies and their external
customers. Beginning in fiscal year 2001, a limited number of
excise taxpayers have participated in filing their excise tax
returns and payments through Pay.gov. As of October 1, 2001,
$1.9 billion in tax payments have been processed through this
system. In fiscal year 2002, FMS will extend the capabilities
of Pay.gov to include a pilot with ATF for filing monthly
operating reports submitted by the companies included in the
tax return pilot.
--FFL-EZ Check.--Responding to a need for firearms licensees to check
the license status of purchasers who identify themselves as
Federal firearms licensees, ATF developed the FFL-EZ Check
system in fiscal year 2000. Currently, the FFL-EZ check system
has been accessed over 100,000 times for FFL verification.
conclusion
Since the tragic events of September 11, our National priorities
and the priorities of our Government institutions appropriately
changed. Although it has always been the responsibility of Government
to ensure the safety and well being of those we serve, ATF's
contribution to these efforts are even more critical. I assure you that
ATF is ready to meet the new challenges that lie ahead.
ATF will continue our National effort in combating terrorism and
violent crime through effective use of investigative techniques,
cutting-edge technology and collaborative sharing of Federal resources
with our Federal, State and local law enforcement counterparts. Through
judicious management and use of the resources you provide the Bureau
will continue to make America sounder and safer by reducing violent
crime, collecting revenue, and protecting the public. 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 providing the best service to the American people.
Financial Crimes Enforcement Network
STATEMENT OF JAMES SLOAN, DIRECTOR
Senator Dorgan. Next, we will hear from the Director of the
Financial Crimes Enforcement Network, Mr. James Sloan. Mr.
Sloan, you may proceed.
Mr. Sloan. Thank you, Mr. Chairman, Senator Campbell,
Senator Reed. Thanks to all of you for this opportunity to
appear today to discuss the Financial Crimes Enforcement
Network's fiscal year 2003 budget. We greatly appreciate your
ongoing consideration of our needs.
Last year was an important and pivotal year for FinCEN. The
tragedy of September 11 brought about a greater demand for our
unique network and analytical expertise in the areas of
financial crime and terrorist financing. Mr. Chairman, I would
like to say how very proud I am of the men and women of FinCEN
who, like many of my colleagues you have heard from today
throughout Government, are making significant contributions in
our Nation's war against terrorism.
My remarks today will briefly summarize our priorities as
we move forward to meet our obligations, and thank you for
including my entire statement in the record.
COUNTERTERRORISM INVESTIGATIONS
Today, FinCEN's top priority is supporting counterterrorism
investigations. On September 13, because of our unique mission
capabilities and our existing infrastructure, we were able to
immediately implement several new initiatives and enhance core
programs to assist in the investigation of the attacks on the
United States.
We directed over 30 percent of our resources to the initial
investigation and those efforts included, for instance, the
establishment of a 24-hour operations center to coordinate
investigative requests and responses, which included enhanced
on-site liaison with the FBI's Counterterrorism Center and
eventually U.S. Customs' Operation Green Quest. We established
a 24-hour, toll-free hotline for financial institutions to
report the essence of suspicious transactions that might relate
to terrorist activity. We began facilitating multi-agency
efforts by temporarily housing the Foreign Terrorist Asset
Tracking Center at FinCEN in our secure facility, alongside our
own existing interagency task force operations, and by
enhancing international cooperative efforts with other Nations'
financial intelligence units. In fact, in October of 2001,
following the FATF meeting that was earlier discussed, FinCEN
hosted a special meeting of the Egmont Group of FIUs on
terrorist financing to support the law enforcement
investigation in the wake of September 11.
USA PATRIOT ACT
In addition to FinCEN's immediate responses to September
11, Title III of the USA PATRIOT Act has provided us with new
authorities and opportunities to augment our primary mission to
support law enforcement. In fact, FinCEN is responsible for
implementing over half of the 44 provisions contained in Title
III and has a key role in many of the working groups
established by the Department of the Treasury to address the
other provisions; all of which have various due dates over the
next 9 months.
Though we are making good strides in implementing the
numerous provisions of the USA PATRIOT Act, I would be remiss
if I did not add that the resource implications of the Act
cannot be fully estimated at this time, and could be
substantial in the years to come. So I would like to thank you
and the members of the subcommittee for the timely support you
have already provided to FinCEN through the Homeland Security
Emergency Supplemental. Your responsiveness is enabling us to
meet our immediate increased obligations.
USE OF INFORMATION TECHNOLOGY
As Director, I can assure you that FinCEN will continue to
explore creative ways to effectively leverage resources. In
fact, two of our most successful programs for providing
Federal, State, and local law enforcement with Bank Secrecy Act
data rely heavily on leveraging our resources with cutting-edge
information technology. That would include our popular Gateway
program. In fact, in fiscal year 2001, we supported a 10
percent increase in investigative requests through that
program.
More than 300 Gateway customers now participate in our
Secure Outreach Direct Net, which allows them to obtain Bank
Secrecy Act data over the Internet in a secure mode. In fact,
one of the most useful features of the Gateway program alerts
FinCEN that two or more agencies have an interest in the same
subject. Last year alone, there were over 1,500 opportunities
for FinCEN to connect law enforcement agencies at the State,
local, or Federal level with one another because they were
inquiring on the same individual.
Besides providing case support to law enforcement, FinCEN
continues to provide a unique capability to identify trends,
patterns, and national level security issues, disseminate
information on money laundering methodologies, and prepare
geographic threat assessments associated with money laundering
and other financial crimes. We have established a Geographic
Financial Crimes Assessment Branch to enhance FinCEN's capacity
to produce strategic analysis, threat assessments, and
financial lead information.
FINCEN'S REQULATORY MISSION
FinCEN's regulatory mission that serves as the foundation
of our ability to carry out our primary function of providing
support to law enforcement investigations was heavily impacted
by the USA PATRIOT Act. Although FinCEN was in the process of
expanding certain provisions of the Bank Secrecy Act to
financial sectors beyond depository institutions, the USA
PATRIOT Act has accelerated that effort.
We are working closely, for instance, with the securities
industry to issue the broker-dealer suspicious activity report
rule and recently proposed a casino suspicious activity report
rule to ensure that we have fully explained to that industry
how the standard for reporting suspicious activity will be
applied.
Moreover, as the subcommittee is aware, FinCEN's regulatory
program to register and require money services businesses to
report suspicious activity has been, and continues to be, a
significant undertaking. Today, I am pleased to report that the
response of money services businesses has been outstanding. In
fact, within 2 weeks of the requirement, over 80 percent of the
almost 11,000 money service business principals in the United
States that were required to register had, in fact, registered.
The efforts are continuing to pay off as FinCEN continues to
work with its public relations contractor to continue an
outreach effort with the industry through the remainder of the
year.
In addition, we are working closely with the Internal
Revenue Service's Office of Examination to reinforce and build
on this effort to alert all money services businesses to their
registration and reporting obligations. And our new MSB
website, www.msb.gov, provides guidance, forms, and other
information to assist the industry in complying with the rules.
In the international arena, FinCEN's steady, persistent
efforts to promote global cooperation are another of our
success stories. The financial intelligence unit network, which
FinCEN has been in the forefront of helping to promote, has
grown from a handful in 1995 to the current membership of
almost 60 Nations.
PREPARED STATEMENT
I once again want to thank the subcommittee for its
continued support of FinCEN over the years. Without your
support, FinCEN could not have progressed so far or been nearly
as effective. We respectfully request your continued support as
we work with other Federal agencies to fight terrorism, conduct
our core business activities, and implement the USA PATRIOT
Act. Thank you.
Senator Dorgan. Thank you, Mr. Sloan.
[The statement follows:]
Prepared Statement of James F. Sloan
Mr. Chairman, Senator Campbell, and members of the Subcommittee,
thank you for this opportunity to appear before you today to discuss
the Financial Crimes Enforcement Network's (FinCEN) fiscal year 2003
budget request. We greatly appreciate your ongoing consideration of our
needs.
As everyone knows, the horrific events of September 11 changed our
Nation forever. That tragic day also changed FinCEN forever and the
demand for FinCEN's services rose exponentially. Mr. Chairman, I would
like to say how very proud I am of the men and women of FinCEN, who,
like their colleagues throughout the Government, have risen to the
challenge and are making significant contributions in our Nation's war
against terrorism.
Last year was a pivotal year for FinCEN--the tragedy of September
11 brought about a greater recognition of, and appreciation for, our
unique network and analytical expertise in the areas of financial crime
and terrorist financing. Moreover, the USA Patriot Act of 2001 codified
FinCEN as a bureau and added numerous responsibilities and accelerated
deadlines in the regulatory area. In addition, we continued our Money
Services Businesses (MSBs) outreach program and implemented the
registration and suspicious activity reporting requirements, effective
at the end of last year.
My statement today will elaborate on these and other ways in which
FinCEN is supporting the September 11 investigation and carrying out
the agency's most immediate obligations under the USA Patriot Act. I
will then focus on our fiscal year 2003 budget request and the
accomplishments we have achieved in fiscal year 2001.
fincen's top priority--supporting counter-terrorism investigations
Prior to the terrorist attacks of September 11, FinCEN's
Intelligence Liaison Office had been analyzing Bank Secrecy Act (BSA)
information in support of law enforcement investigations into terrorist
financing. On September 13, FinCEN's expertise in money laundering and
financial crime was recognized and we were requested by law enforcement
to provide immediate assistance to the investigation. The agency was
well positioned to act quickly to this request. FinCEN's mission and
its programs already had been designed to provide exactly the type of
comprehensive, interagency information sharing and support that is now
needed in this Nation's war against terrorism.
Because of our existing infrastructure, FinCEN was able to
immediately implement several new initiatives and enhance core programs
to assist in this investigation. With our workforce of less than 300
FinCEN employees, contractors, and detailees, these additional demands
placed a significant strain on our ability to perform day-to-day
mission-related activities. We directed approximately 30 percent of our
resources to the initial investigation and these efforts included:
Establishing a 24-Hour Operation Center.--To coordinate
investigative requests and responses which included enhanced on-site
liaison with the FBI Counter-terrorism Center and the U.S. Customs
Service's Operation Green Quest;
Establishing a Toll-Free, 24-Hour Hotline.--For financial
institutions to report suspicious transactions that might relate to
terrorist activity, thus making the information available to law
enforcement in real time;
Facilitating a Multi-Agency Effort.--Using our specialized tools
and secure facility. FinCEN was called upon to make its secure facility
available to the Foreign Terrorist Asset Tracking Center (FTAT) as a
temporary measure. Aside from logistical assistance provided to the
FTAT, FinCEN's importance to FTAT lies in our ability to network
agencies having common investigative interests, the information
contained in our BSA databases, and in the human and technological
expertise used in manipulating financial data to identify relationships
between people, places, organizations, and financial transactions; and,
Enhancing International Cooperation Efforts.--With other Nations'
Financial Intelligence Units (FIUs) to share information and work
together on joint analytical projects. These specialized agencies,
created by Governments to fight money laundering, first met in 1995 at
the Egmont-Arenberg Palace in Belgium. Now known as the Egmont Group,
FIUs meet annually to find ways to cooperate, especially in the areas
of information exchange, training, and the sharing of expertise. In
October 2001, FinCEN hosted a special meeting of the Egmont Group on
terrorist financing to support the unprecedented law enforcement
investigation in the wake of the events of September 11.
Before I proceed with my statement, I would like to thank you and
members of this Subcommittee for the support that was provided to
FinCEN in the Homeland Security Emergency Supplemental. The $1.7
million and 9 FTE gave FinCEN the funding necessary to cover our
expanded responsibilities in the wake of the terrorist attacks of
September 11.
usa patriot act of 2001
Congress recognized the need to expeditiously make additional tools
available to law enforcement to fight money laundering and terrorist
financing by passing the USA Patriot Act (the Act). On October 26, the
President signed this landmark bill into law. Title III of the Act
provides FinCEN with new authorities and opportunities to augment our
primary mission to support law enforcement investigative efforts and
foster interagency cooperation against domestic and international
financial crime.
In fact, FinCEN is responsible for implementing 23 of the 44
provisions contained in Title III and also has a key role in many of
the working groups established by Treasury to address the other
provisions. Fortunately, many of the 23 provisions reaffirmed, and in
some cases, codified many programs and initiatives that were already in
place or under discussion at FinCEN. Briefly, I would like to provide
the Subcommittee with a short summary of the progress FinCEN has made
to date on implementing some of these provisions.
cooperative efforts to deter money laundering
Section 314 of the Act requires that the Treasury Department
promulgate regulations, within 120 days, to encourage further
cooperation among financial institutions, their regulatory authorities,
and law enforcement to share information with financial institutions on
individuals, entities, etc., that are reasonably suspected to be
engaged in terrorism or money laundering.
On February 25, the Secretary approved an interim final rule
immediately implementing information sharing procedures between
financial institutions that are designed to enhance the institutions'
ability to identify and report to the Federal Government instances of
terrorism or money laundering. The interim final rule requires
financial institutions that wish to share information with one another
to provide a yearly certification to FinCEN, which can be accomplished
through our web site. The certification requires participants to
protect the confidentiality and security of shared information and use
the information solely for identifying and reporting suspected
terrorism or money laundering.
At the same time, the Secretary approved the issuance of a notice
of proposed rulemaking of a regulation designed to establish a link
between Federal law enforcement and financial institutions so that
vital information about terrorism and money laundering can be quickly
and efficiently exchanged between them. The proposed rule uses the
communications resources and networking ability of FinCEN to quickly
locate the accounts of persons and entities engaged in such illegal
activity. Federal law enforcement will provide the identities of
suspected terrorists and money launderers to FinCEN, which will
distribute the information to financial institutions to check for
accounts and transactions. Any matches found will be immediately
transmitted to law enforcement for appropriate follow up. The rule is
intended to formalize and streamline the information sharing and
reporting process the Federal Government undertook following the
attacks of September 11, 2001, by permitting FinCEN to serve as a
conduit for information sharing between Federal law enforcement
agencies and financial institutions.
Bureau Status for FinCEN
Section 361 of the Act establishes FinCEN as a bureau within the
U.S. Department of the Treasury. Codification of bureau status also
reflects the Congress' recognition that FinCEN is a small but highly
effective Government agency that should be put on equal footing with
the other Treasury bureaus. FinCEN has now been given full
administrative authorities associated with such status. For example,
bureau status allows for the acceleration and streamlining of the
hiring and procurement process.
Electronic Filing of BSA Reports
Section 362 of the Act requires FinCEN to develop a highly secure
network to allow financial institutions to file BSA reports and to
supply financial institutions with alerts and other information
regarding suspicious activities that warrant immediate and enhanced
scrutiny. FinCEN has been working to implement this requirement and has
awarded a contract for the prototype and pilot. We expect the pilot
program to be completed in late summer.
Law Enforcement Access to Currency Reports by Non-Financial Businesses
(Form 8300)
Section 365 of the Act requires that the Treasury Department
prescribe new regulations for filing currency reports by non-financial
businesses with FinCEN. (Before the Patriot Act became law, the
Internal Revenue Service (IRS) was required to collect Form 8300
information under Section 6050I of the Internal Revenue Code. This
information was considered tax return information and was not readily
available to law enforcement.) FinCEN has worked diligently with
Treasury to issue these new regulations and on December 20, 2001, an
interim rule and a companion notice of proposed rulemaking were issued.
As of February 20, FinCEN began receiving the 8300 data from IRS.
Our fiscal year 2003 budget request will allow FinCEN to continue
its efforts to support law enforcement investigations to prevent and
detect money laundering, terrorist financing, and other financial
crimes. We are very appreciative of the Subcommittee's continued
support, which has enabled us to construct a cost-effective
technological infrastructure. I would like to now discuss in detail our
fiscal year 2003 budget request and highlight our accomplishments in
fiscal year 2001.
fiscal year 2003 budget request
FinCEN has a unique combination of law enforcement and regulatory
responsibilities. As Director, I can assure you that FinCEN will
continue to explore creative ways to effectively leverage its
resources. Given the uncertain resource implications of the USA Patriot
Act, this approach will be essential to our success.
In fiscal year 2003, FinCEN is requesting $52,289,000 and 254 full-
time equivalents (FTE). This request includes $1 million and 8 FTE to
begin to meet the challenges of the USA Patriot Act. Also included in
this request is $2.1 million to allow FinCEN to continue operations at
the current level, and $400,000 and 8 FTE to provide us with the
funding necessary to continue the 17 new positions approved in the
Homeland Security Emergency Supplemental. Now I would like to highlight
the accomplishments FinCEN has achieved in fiscal year 2001. These
milestones would not have been possible without the valuable counsel
and funding the Subcommittee has provided to FinCEN over the years.
fiscal year 2001 accomplishments
supporting the financial aspects of investigations
In fiscal year 2001, Federal, State and local law enforcement
officials accessed BSA data directly through FinCEN's popular Gateway
and Platform programs to support more than 9,000 investigations. FinCEN
analysts used BSA data to support over 4,000 investigations--an
increase of 10 percent over fiscal year 2000. I would now like to
briefly highlight some of these key programs that serve our principle
partners--the law enforcement, regulatory and international
communities.
Gateway Program
One of our flagship programs, the Gateway program, continues to
demonstrate its effectiveness in saving investigators time and money
because participating agencies can conduct their own research and not
rely on the resources of an intermediary agency to obtain financial
records. Using the Gateway process, State, local, and, more recently,
Federal law enforcement agencies can search records such as Currency
Transactions Reports (CTRs), Suspicious Activity Reports (SARs), and
Reports of International Transportation of Currency or Monetary
Instruments (CMIRs) to aid them in their investigations. Form 8300 is
now available to law enforcement through Gateway access.
We are constantly making technological upgrades to Gateway to
include enhanced security and monitoring processes. FinCEN audits the
Gateway process through both record reviews and on-site visits to
ensure that all inquiries are connected to actual or potential criminal
violations.
One of the most outstanding and useful features of this system is
its ``alert'' mechanism that automatically alerts FinCEN that two or
more agencies have an interest in the same subject. In this way, FinCEN
is able to assist Federal, State and local law enforcement agencies in
coordinating their investigations among themselves. Last year, there
were over 1,500 opportunities for networking investigations that
originated from the Gateway inquiries.
Last month, we hosted the Gateway Coordinators Conference to
provide an overview of FinCEN and the variety of services available to
State and local law enforcement. The conference was attended by 65
coordinators from the U.S. and Puerto Rico, and several gave
informative presentations on how Gateway has assisted them in their
investigations.
Platform Program
FinCEN's Platform Program, one of our most valuable law enforcement
services, enables Federal agencies to send their representatives to
FinCEN to use its databases and receive technical assistance. These
individuals know the needs of their organization and can support that
need directly through database access. FinCEN pioneered the Platform
program in 1994, and it has grown steadily. In fiscal year 1997,
Platform had 49 participants. By fiscal year 2001, participation had
grown to nearly 80 participants from approximately 40 agencies.
Analytical System for Investigative Support (ASIS)
Last year we introduced you to ASIS, a case management software
system developed by FinCEN that gives Federal, State and local law
enforcement officials the ability to make sense of the information they
gather through their investigations. FinCEN continues to use ASIS
successfully to support major investigations. Immediately after
September 11, we used ASIS to check activities surrounding the
hijackers, and presented the analytic charts at meetings with the FBI.
The ASIS data was a helpful beginning. We have continued to use ASIS to
assist the FBI in analyzing the large volumes of data from the National
Drug Intelligence Center's Real-Time Analytical Intelligence Database
(RAID). Additionally, ASIS has enabled our analysts to link FinCEN's
other databases to RAID data. The linkages reveal connections to other
information from financial records such as suspicious activity reports.
identifying financial crime trends and patterns
FinCEN provides a unique capability to identify trends, patterns
and national-level security issues, disseminate information on money
laundering methodologies, and prepare geographic threat assessments
associated with money laundering and other financial crimes.
In fiscal year 2001, FinCEN, in conjunction with the financial,
regulatory and law enforcement communities, began publishing a semi-
annual report on the use and utility of suspicious activity reporting
by financial institutions that includes current money laundering trends
and patterns. [The USA Patriot Act, Section 314, mandates FinCEN to
report semi-annually on suspicious activity reporting.] FinCEN also
disseminated 53 strategic analytical products covering money laundering
methodologies, trends and patterns, statistical reports, and geographic
threat assessments, including the issuance in June 2001 of the
Suspicious Activity Report Bulletin on activity related to phone card
businesses. In addition, a Geographic Financial Crimes Threat
Assessment Branch was established last year to enhance FinCEN's
capability to produce strategic analyses, threat assessments, and
financial lead information.
administering the bank secrecy act
FinCEN's regulatory mission--administering the BSA--serves as the
foundation for FinCEN's ability to carry out our primary function of
providing support to law enforcement investigations. As such, the
strengthening and effectiveness of our regulatory program directly
affects the quality and efficiency of FinCEN's efforts to serve its
diverse and growing universe of customers. The effective administration
of the BSA has been challenging on many fronts--from the development of
streamlined internal processes and industry-specific expertise, to the
formation of an ever-widening circle of industry, regulatory, and law
enforcement partnerships in order to obtain data of immeasurable value
to law enforcement. We further challenge ourselves by achieving these
goals within the context of two unequivocal standards that influence
all that we do at FinCEN--maintaining appropriate privacy safeguards
and minimizing burdens on the industry.
Although FinCEN was in the process of expanding certain provisions
of the BSA to financial sectors beyond depository institutions, the
urgency of this effort has been accelerated by the USA PATRIOT Act, and
FinCEN has risen to the challenge. For example, we are working closely
with the Securities industry to issue a broker/dealer SAR rule while
simultaneously focusing on the MSB program with its extensive outreach
component.
In fiscal year 2001, FinCEN continued to work towards expanding its
regulatory outreach efforts, responding to over 1,563 telephone
inquiries, 129 publication requests, 115 written inquiries, and 91 e-
mail inquiries. FinCEN also worked to draft regulations requiring the
securities industry to establish programs to detect and report
suspicious activity. These draft regulations were issued on December
20, 2001. In addition, FinCEN made tremendous progress in implementing
the money services businesses (MSBs) regulations. A short synopsis
follows on this progress.
Money Services Businesses (MSBs)
The term MSBs is used to denote the sub-group of non-bank financial
institutions comprised of money transmitters, issuers of traveler's
checks or money orders, sellers or redeemers of traveler's checks or
money orders, check cashers and currency dealers or exchangers.
As the Subcommittee is aware, FinCEN's regulatory program to
register and require MSBs to report SARs has been and continues to be a
significant undertaking. The support and funding provided by this
Subcommittee has been crucial to the development and implementation of
this mandated initiative.
FinCEN, in general, has proceeded very deliberately with its MSB
regulatory program. We have taken this approach for a number of
reasons: (1) MSBs have not been regulated at the Federal level and
therefore it will take time to identify and understand the various MSB
sectors and how they operate; (2) many MSBs are small and serve diverse
communities making the task of shaping appropriate regulatory programs
even more complex; and, finally (3) because of the absence of a Federal
regulatory infrastructure, developing a positive working relationship
like the one which currently exists between regulators and the
depository institutions will take time.
Because the education process is so important, FinCEN had been
considering moving the effective dates of the regulations back several
months allowing more time to reach out to this community which could
number upwards of 200,000 entities versus the smaller universe of
approximately 21,000 depository institutions with which we have
traditionally worked. Following the attacks of September 11, however,
we felt it was imperative that the effective dates remain unchanged.
The potential value of the information that MSBs could provide to law
enforcement was too significant to delay the implementation of the
regulations. As a result, the first regulation requiring the principals
of all MSBs to register by December 31, 2001, and the second, requiring
money transmitters, issuers and sellers of traveler's checks and money
orders and the U.S. Postal Service to report suspicious activity
transactions effective January 1, 2002 went into effect on these dates
as scheduled.
Fortunately, to ensure that MSBs are familiar with these new
requirements and to develop better demographics about who and where
many of the smaller, independent MSBs are located, we had already
conducted an extensive education program. This effort resulted in an
excellent registration response. More than 80 percent of the total
known universe of 10,745 MSB principals, required to register, had
responded within the first 2 weeks of January and initial SAR filings
indicate our efforts are paying off. FinCEN, in conjunction with Burson
Marstellar, will continue this outreach effort throughout the coming
year.
Finally and importantly, we are working closely with the IRS'
Office of Examination to reinforce and build on this effort to alert
all MSBs to their registration and reporting obligations. In addition,
FinCEN has developed a new dedicated MSB website (www.msb.gov) to
provide guidance, forms and other information to assist industry in
complying with the rules.
fostering international cooperation
FinCEN's steady, persistent efforts to promote global cooperation
are one of this agency's greatest success stories. The financial
intelligence unit (FIU) network, which FinCEN has been at the forefront
in helping to promote, has grown from a handful in 1995 to the current
membership of 58 countries.
In fiscal year 2001, FinCEN coordinated 435 investigative
information exchanges with 67 foreign jurisdictions, including support
for 114 domestic law enforcement cases. We provided technical
assistance to 22 countries to include extensive training courses and
review of draft anti-money laundering legislation and hosted visits by
law enforcement agencies or diplomatic representatives from over 53
countries. In addition, FinCEN drafted the chapters on the state of
anti-money laundering programs in all of the 95 countries included in
the State Department's Annual International Narcotics Control Strategy
Report. Lastly, FinCEN issued numerous Advisories in conjunction with
the Financial Action Task Force (FATF) and the G-7.
strengthening management support
Information Technology
As the Subcommittee is aware, FinCEN's effectiveness is based upon
our emphasis on networking. This ``networking'' capability is crucial
to the fulfillment of our information gathering and sharing mission.
The creative use of technology is an essential component to the
successful execution of our mission. For example, tools such as the
Secure Outreach Network and advances in data mining applications allow
FinCEN to strengthen its network capability and produce sophisticated
analytical products.
In fiscal year 2001, FinCEN, taking advantage of emerging
technologies, significantly expanded the Secure Outreach Network's
access capability to BSA data via the Internet. More than 300 Federal,
State, and local Gateway customers are now participating in the system
that is known as the Secure Outreach Direct-Net. To ensure the widest
use of the Secure Outreach Network, FinCEN also has a dial-up
capability for those entities without access to the Internet. Over the
next year, FinCEN envisions an even greater increase in user
participation in this system as we continue to explore and make use of
the most efficient technological options.
In our ongoing efforts to explore various data mining techniques,
FinCEN recently completed a 90-day pilot program on new, state-of-the-
art software for link analysis. We have been extremely encouraged by
the results of this pilot and by the end of fiscal year 2003, we plan
to incorporate all BSA data into the system.
President's Management Agenda
FinCEN supports the President's Leadership Initiatives and
participates on a number of working groups. As you know, the Treasury
Department has outlined strategies to meet the President's goals for
human capital, e-government, competitive sourcing, financial
management, and budget/performance integration. FinCEN will perform a
self-assessment over the next few months to further refine areas that
need improvement. As we move forward to implement the newly acquired
administrative authorities granted by bureau status, the strategies
mentioned above provide a basis for examining our administrative
processes to develop the best mix between in-house services and
competitive sourcing with other Federal agencies.
Lease Renewal
Lastly, as I discussed with this Subcommittee last year, FinCEN is
facing a lease renewal. Our current 10-year lease will end in April
2003 on the space we occupy in Vienna, Virginia. FinCEN has been
working over the past year with the General Services Administration
(GSA) and they advise us that a competitive solicitation will be issued
this spring for a lease renewal, with an award expected in late summer
or early fall of this year. In addition to issuing the solicitation,
GSA recently completed a security threat assessment of our facility.
FinCEN is working with GSA to implement a series of recommendations.
conclusion
On November 7, 2001, FinCEN was greatly honored with a visit by
President George W. Bush, Secretary of Treasury Paul O'Neill, Secretary
of State Colin Powell, and Attorney General John Ashcroft. The fact
that the leaders of our country took time out of their demanding
schedules to personally thank the men and women of FinCEN for their
contribution to our Nation's war on terrorism was a great tribute to
all the hard work of our dedicated employees. In turn, I would like to
thank this Subcommittee for its unfailing support of FinCEN over the
years. Without such support, FinCEN could not have progressed so far
nor been nearly as effective. We respectfully request your continued
support as we work with other Federal agencies to fight terrorism,
conduct our core business activities, and implement the USA Patriot
Act.
Thank you again for this opportunity to appear before this
Subcommittee. I would be happy to answer any questions you may have at
this time.
Federal Law Enforcment Training Center
STATEMENT OF PAUL HACKENBERRY, ACTING DIRECTOR
Senator Dorgan. Next, we will hear from Mr. Paul
Hackenberry, the Acting Director of the Federal Law Enforcement
Training Center. Mr. Hackenberry, you may proceed.
Mr. Hackenberry. Thank you, Mr. Chairman, Senator Campbell,
Senator Reed, members of the subcommittee. I am pleased to be
here today to support our appropriations request for fiscal
year 2003 and I will keep my remarks brief and submit a longer
written statement for the record.
The FLETC has experienced remarkable growth, development,
and achievement since it was established in 1970. Over the last
30 years, more than 400,000 law enforcement agents and officers
across all branches of Government have now graduated from
training conducted at FLETC. I would like to especially thank
this committee for their most generous support in funding the
consolidated training.
WORKLOAD INCREASE
The horrific events surrounding the terrorist attacks of
last September 11 have brought about the greatest challenge yet
for FLETC. During fiscal year 2002, the FLETC is projected to
train nearly 50,000 students, resulting in over 200,000 student
weeks of training. Those numbers are about double what FLETC
had been asked to do previously in any single fiscal year.
The consolidated concept for law enforcement training at
FLETC continues to be the most efficient and economical means
for delivering this essential service to the law enforcement
community and to the Nation. Because of the excellent
cooperation with its many partners, we believe FLETC is fully
achieving the vision of its founders in this critical
undertaking.
FISCAL YEAR 2003 REQUEST
The Center's fiscal year 2003 request is for a total of
$149,357,000, and with this funding, we anticipate the training
objectives of our partner agencies as thus far projected would
be met.
WASHINGTON, D.C. AREA SITE PROGRESS
With regard to the Washington, D.C. site progress, with the
funding provided by this committee, excellent progress is being
made in the design and development work at the Cheltenham,
Maryland, site. A director and core staff to manage the site's
conversions have been hired, and in keeping with the direction
of Congress, we have placed the highest priority on completion
of an in-service academy operation for the U.S. Capitol Police.
In February of this year, the Capitol Police began using an
interim facility at Cheltenham and the permanent facility for
them is slated for occupancy by September of 2002. We
anticipate that the design work will be finished by this summer
for all the facilities and construction completed in late 2003.
WORKLOAD GROWTH
As a result of September 11, our partner agencies' workload
projections have increased significantly, and as previously
stated, FLETC is projecting the greatest increase in training
requirements in its history. Over the years, the FLETC has
experienced a number of periods of sustained growth in the
training requests by its partner agencies and we have been able
to accommodate most of these increases by being innovative and
undertaking extraordinary measures. That is certainly going to
be the case in fiscal year 2002 and probably for the
foreseeable future.
Even though the training requirements currently scheduled
have drastically increased, they may not represent the entire
training needs of our partner agencies. Due to facility
capacity and agency hiring constraints and issues, the impact
of the increased workload will likely be spread over the next
several years.
In the emergency supplemental, sufficient funding was
provided to allow us to schedule all the projected workload
needs identified thus far for fiscal year 2002. The fiscal year
2003 request includes sufficient funding to maintain the same
level of training as provided in fiscal year 2002.
TRANSPORTATION SECURITY TRAINING
With regard to transportation security training, in October
of 2001, the Federal Aviation Administration requested that
FLETC undertake training for the newly-expanded Federal Air
Marshal program authorized by the administration and Congress.
In concert with the FAA, training programs were adapted to
provide training for both new hire personnel with previous law
enforcement experience and those with no previous law
enforcement experience. This training began quickly at the
Artesia Center and is expected to continue well into the next
fiscal year.
Also, for the last several weeks, FLETC has been engaged in
discussions with the Transportation Security Administration
officials about other specific training needs. FLETC is helping
to design training for airport screeners and train-the-trainer
programs for those who will be responsible for delivering this
training. FLETC sites would not be the focus of this training
because of the heavy requirements for law enforcement training
already identified. However, we will continue to consult with
TSA and help validate the training given to the screeners.
Finally, with respect to TSA, we are now working closely
with them on possible options for training a cadre of law
enforcement agents that TSA has under consideration for
deployment to the Nation's airports. As this situation becomes
clearer and decisions are made, we will keep the committee
informed of our role in this development.
FACILITIES MASTER PLAN STUDY
Mr. Chairman, I would like to comment on the status of the
progress that has been made in expanding the FLETC facilities.
The funding that this committee has provided over the years in
support of our construction plan has positioned FLETC to better
meet the surge in training workload requirements experienced
after September 11. Prior to the events of that date, the
FLETC's plan for construction focused on maximum utilization of
the facilities at both Glynco, Georgia, and Artesia, New
Mexico.
In the aftermath of the terrorist attacks, the training
capacity of FLETC has been pushed to the limit. The development
of an updated comprehensive facilities master plan to address
the post-September 11 demands is crucial and has been
initiated. A contract has been awarded to a private firm
experienced in planning activities to complete such a
comprehensive study within a year. This study would also
include the new site in Cheltenham, Maryland.
CLOSING REMARKS
Mr. Chairman, FLETC is committed to providing the highest
quality law enforcement training at the lowest possible cost.
Substantial savings are being realized through the operation of
consolidated training sites and we know that the challenge
ahead of us may be the most important of all. I look forward to
your continued support as FLETC strives to remain a partnership
committed to excellence, and I am available to answer any of
your questions. Thank you.
PREPARED STATEMENT
Senator Dorgan. Mr. Hackenberry, thank you very much.
[The statement follows:]
Prepared Statement of Paul A. Hackenberry
Mr. Chairman, Senator Campbell, 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 2003.
opening remarks
The Federal Law Enforcement Training Center (FLETC) has experienced
remarkable growth, development and achievement since its establishment
in 1970, when a handful of agencies partnered together and created a
concept of consolidated training for Federal agencies. Over the years,
more than 400,000 law enforcement agents and officers across all
branches of Government have now graduated from training conducted at
FLETC.
However, the horrific events surrounding the terrorist attacks of
last September 11 have brought about the greatest challenge yet for
FLETC in its brief 32-year history. During fiscal year 2002, the FLETC
is projected to train nearly 50,000 students resulting in over 200,000
student weeks of training. Those numbers are about double what FLETC
previously has been asked to do in any single fiscal year.
Mr. Chairman, FLETC will do whatever is required to meet this
daunting challenge because we recognize that high quality training is
the essential element necessary in preparing law enforcement personnel
to assume their enormous responsibilities in these difficult times.
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 the Secretary of the Treasury and the Under Secretary of
the Treasury for Enforcement, the FLETC has received strong support and
active assistance in carrying out its responsibilities. I want to
especially thank this Committee for the trust it has continued to place
in the FLETC. Throughout our history of service to Federal law
enforcement, this Committee has been especially 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 continues to be the most efficient and economical means for
delivering this essential service to the law enforcement community and
the Nation. Because of the excellent cooperation of its many partners,
we believe the FLETC is fully achieving the vision of its founders in
this critical undertaking.
Before I comment on our fiscal year 2003 budget request, I want to
acknowledge the leadership of our former Director, W. Ralph Basham. At
the end of January 2002, Director Basham left the FLETC to assume a
senior position in the newly formed Transportation Security
Administration. During Mr. Basham's 4 years at the helm of FLETC, much
was achieved. He is a pragmatic and inspiring leader and he gained the
respect of all whom came in contact with him. We wish him well in his
new endeavors, and believe we will continue to have occasion to work
with him on training matters of mutual interest.
fiscal year 2003 request
Today, I am prepared to discuss the President's fiscal year 2003
budget request. The FLETC's fiscal year 2003 request is for a Salaries
& Expenses (S&E) appropriation of $126,028,000 and 748 FTE, a decrease
of $2,652,000 below the fiscal year 2002 level. Our request for the
Acquisition, Construction, Improvements, & Related Expense (ACI&RE)
appropriation is for $23,329,000, a decrease of $18,605,000 below the
fiscal year 2002 appropriation. Most of the decrease in the S&E
appropriation is related to one-time, non-recurring, costs such as
permanent change of station (PCS) costs for hiring new staff, equipment
and furniture costs, and one-time minor construction items funded in
the Emergency Supplemental resulting from the September 11 attacks. The
decrease in the ACI&RE appropriation is related to construction costs,
which do not recur in fiscal year 2003. FLETC supports the President's
fiscal year 2003 request, and we anticipate that the training
objectives of our partner agencies, as thus far projected, will be met.
Together, the S&E and ACI&RE request totals $149,357,000 for fiscal
year 2003. Coupled with an estimated $35,000,000 in funds to be
reimbursed to the FLETC for training related services by our partner
agencies, the total budget for fiscal year 2003 is $184,357,000.
government performance and results act (gpra)
Before providing this Committee with an overview of our operations
in more detail, I want to address the 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 after a fiscal year is completed. These performance plans are
now an integral part of the budget documents sent to the Congress
annually.
As noted in the FLETC's testimony last fiscal year, we have revised
our performance measures in an effort to more accurately reflect
performance indicators and to better align them with the organization's
mission. The new measures were base-lined in fiscal year 2001 and have
now been submitted in this request as our final measures for fiscal
year 2002.
There are a total of six proposed performance measures in our
budget request for fiscal year 2003. The performance measures proposed
for the Law Enforcement Training activity include: (1) results of the
student quality of training survey, (2) results of the Partner
Organization survey, (3) cost of a student-week of training, and (4)
results of the employee satisfaction survey. The performance measures
proposed for the Plant Operations activity include: (1) results of the
student quality of services survey and (2) the percentage of training
classes held within 15 days of the requested start date by the 74
Partner Organizations.
The student quality of services survey and student quality of
training survey performance measures are outcome measures. The ratings
for student quality of training and student quality of services 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 FLETC programs.
I am pleased to report that the Center's overall performance
against established target goals for fiscal year 2001 was very good.
The most critical performance measure in our plan, the student quality
of training survey measure, was 99.9 percent. This exceeded the
Center's performance plan target goal of 90 percent. The FLETC's
training costs were below the cost figure established for the variable
unit cost per basic student-week of training. The plan projected a per
week cost of $149 and the actual cost was $133. The volume of training
conducted and the efficient management of facilities scheduling allowed
us to realize significant reduction in costs. In the Plant Operations
activity, all performance measures were either met or exceeded.
fiscal year 2002 achievements
Finally, before I discuss operational areas, I want to report on
some of the FLETC's other specific achievements resulting from the
appropriations provided by this Committee.
In fiscal year 2002, the FLETC had its second complete audit of its
financial records and systems and received another ``unqualified
opinion'' for its operations in fiscal year 2001. We believe this to be
significant because FLETC has to interact with so many different
agencies on the Federal, State and local and international levels.
At the request of the Department of the Treasury, FLETC has assumed
the lead for the establishment of a United States International Law
Enforcement Academy (ILEA) operation in Gaborone, Botswana, the first
of its kind on the African continent. The academy under the joint
direction of the Departments of State, Justice and Treasury, is
providing training to law enforcement officers from Nations throughout
that region. The in-country program director is a senior FLETC manager,
who is overseeing the program management and facility construction,
jointly funded by the Government of Botswana and the U.S. State
Department.
I want to mention that the FLETC has completed, or will soon
complete, the following construction projects in fiscal year 2002. In
Artesia, NM, two dormitory buildings, two additional environmentally
safe firearms ranges and a classroom building have been completed. An
administration building is under construction and will be completed
during fiscal year 2003. In Glynco, GA, we will complete renovation of
an office building and the auditorium as well as renovation of various
smaller facilities, and complete construction of a new anti-terrorism
training facility and a new gas training range. This fall, FLETC will
open a 600-bed dormitory complex in Glynco that is notable because it
is our first build-lease venture with a private corporation in a
facility near, but not on, Government property. These new facilities
are especially welcome at this time because of the projected huge ramp-
up in training requirements for all of our customer agencies.
Finally, I want to note the progress that is being made in the area
of accreditation and standardization of Federal law enforcement
training. Through seed funding provided by the Department of the
Treasury's Asset Forfeiture Fund in fiscal year 2001 and this
Committee's appropriation for $650,000 in fiscal year 2002, a project
is fully underway that will improve the training provided all Federal
agents and officers. FLETC is working in collaboration with Federal
agencies, including the Federal Bureau of Investigation, the Drug
Enforcement Administration, the U. S. Postal Inspection Service,
private organizations, professional associations, and others, to
develop a format to accredit training facilities, instructors and
programs and courses provided by every Federal law enforcement
organization. When implemented over the next several years, this
project may have the most far-reaching impact on the way law
enforcement training is conducted at the Federal level since the
establishment of consolidated training itself.
overview of operations
Now Mr. Chairman, I would like to provide the Committee with a
brief overview of the operations of the Federal Law Enforcement
Training Center.
With few exceptions, the FLETC conducts basic and advanced training
for the vast majority of the Federal Government's law enforcement
officers. We also provide training for State, local and international
law enforcement officers in specialized areas and support the training
provided by our partner agencies that is specific to their individual
mission needs. In all, there are now more than 200 separate training
programs offered through the FLETC and its partners. Twenty-three
agencies now maintain training academy operations at Glynco and three
are housed at Artesia. These academies provide mission specific
training to their agency trainees.
The FLETC provides entry level training 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, computer forensics, health care fraud, and
international banking and money laundering. Training is conducted at
the Glynco, Georgia center, the Artesia, New Mexico center, and at a
temporary training site in Charleston, South Carolina.
The temporary training site in Charleston was established in fiscal
year 1996 to accommodate a large increase in the demand for basic
training, particularly, the U.S. Border Patrol (USBP). The training
workload increase for the U.S. Border Patrol and other INS training
categories is the direct result of prior Administration and
Congressional initiatives to control illegal immigration along the
United States' borders. That training is expected to reach even higher
levels over the next several years.
In addition to the training conducted on-site at 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. In utilizing export sites, most of which are local police
academies, the FLETC does not incur any capital expenditure
obligations.
washington, dc area site progress
Construction activity authorized by Public Law 106-346, enacted by
Congress in fiscal year 2001, provided $30,000,000 for the development
of a training site within the Washington, DC area, primarily for short-
term requalification training and as a site for in-service U.S. Capitol
Police training. Public Law 107-117, enacted by Congress in fiscal year
2002, provided an additional $8,500,000 toward site development and to
accelerate facility construction for the U.S. Capitol Police. The site
ultimately selected, following an extensive review of available,
surplused Federal sites, was the former naval communications base in
Cheltenham, Maryland. Transfer of the 247-acre site by the General
Services Administration and the Navy was completed in May 2001 to the
FLETC inventory
Since assuming ownership of the Cheltenham property, excellent
progress is being made in design and development work. A site Director
and core staff to manage the site conversion work for a law enforcement
training center have been hired, an environmental assessment completed,
other required studies undertaken and design is now well underway for
new and upgraded facilities. Plans call for a completely enclosed and
environmentally safe firearms complex, a vehicle training complex for
non-emergency, obstacle and pursuit driving and related support
facilities. In keeping with the direction of Congress, FLETC has placed
the highest priority on completion of an in-service academy operation
for the U.S. Capitol Police. In February 2002, the Capitol Police began
using an interim facility at Cheltenham that FLETC renovated for them,
while a more permanent facility, slated for occupancy by September
2002, is completed. The interim building contains classrooms, offices
and support capabilities to train 50-100 officers at any one time. We
would like to acknowledge the commitment and assistance the retiring
Chief of Police, James Varey, and the Capitol Police Board have
rendered in getting this endeavor underway.
We anticipate that design work will be finished by this summer for
all facilities and construction completed by late 2003. The District of
Columbia Metropolitan Police Department (MPDC) has indicated its
intention to transfer funds to FLETC to help defray the cost of the
firearms range complex. MPDC is one of the principal agencies
specifically incorporated into the legislation as a partner
organization at Cheltenham. In total, the FLETC projects more than 50
agencies in the Washington, DC area will receive requalification
training at Cheltenham when it is opened.
The Cheltenham project came about as a result of a serious
shortfall for over a decade in adequate firearms and driver skills
training capabilities in this region, which has one of the highest
concentrations of Federal law enforcement officers in the United
States. These officers are mandated to receive short-term
requalification training on a periodic basis to refresh perishable
skills that, left unaddressed, can lead to liability issues.
workload
During fiscal year 2001, 25,689 students graduated from the Center,
representing 106,407 student-weeks of training. This total included
19,435 students who were trained at Glynco, GA; 2,543 students trained
at Artesia, NM; 829 students trained at the temporary training site in
Charleston, SC; and 2,882 students trained in export programs. There
were 10,735 basic students; 11,525 advanced students; 3,151 State and
local students, and 278 international students trained providing for an
average resident student population (ARSP) of 2,046.
As a result of the September 11th attacks, our partner agencies'
workload projections increased significantly. As previously stated,
FLETC is projecting the greatest increase in training requirements in
its history. In fiscal year 2002, the FLETC will train 49,773 students
representing 202,842 student-weeks of training. This total includes
32,377 students to be trained at Glynco; 9,147 students at Artesia;
2,269 students at the temporary site in Charleston; and 5,980 students
in export programs. A total of 23,511 basic students; 18,259 advanced
students; 6,073 State and local students; and 1,487 international
students are projected for a total ARSP of 3,900. Simply stated, this
growth is unprecedented.
Over the years, the FLETC has experienced a number of periods of
sustained growth in the training requests by its partner agencies and
we have been able to accommodate most of these increases by being
innovative and undertaking extraordinary measures. That is certainly
going to be the case in fiscal year 2002 and probably for the
foreseeable future. To meet the training influx, the FLETC has gone to
a 6-day workweek at both the Glynco and Artesia centers which provides
nearly 36 more training days this fiscal year. By implementing this
format, FLETC will be able to accelerate training to get students
graduated more quickly and ``on the streets.'' The FLETC realizes that
the implementation of the 6-day training week will take a toll on the
FLETC and partner agency staff and resources and we will closely
monitor and do everything possible to minimize adverse impacts. Even
though the training requirements currently scheduled have drastically
increased, they may not represent the entire training needs of our
partner agencies. Due to facility capacity and agency hiring
constraints and issues, the impact of the increased workload will
likely be spread over 2 years. In the Emergency Supplemental, Congress
has provided sufficient funding to allow the FLETC to schedule all of
the projected workload needs identified thus far for fiscal year 2002.
The fiscal year 2003 request includes sufficient funding to maintain
the same level of training as provided for in fiscal year 2002.
transportation security training
In October 2001, the Federal Aviation Administration (FAA)
requested that FLETC undertake training for the newly expanded Federal
Air Marshal (FAM) program authorized by the Administration and
Congress. In concert with FAA, training programs were adapted to
provide training for both new hire personnel with previous law
enforcement experience and those with no previous law enforcement
experience. This training started quickly at the Artesia center and is
expected to continue into next fiscal year. Over 500 FAMs already are
in training, or have graduated from these programs. To supplement
FLETC's staff resources, a number of reemployed annuitants are on board
to support this training. FAA also has contracted with a private firm
to assist in the FAM specialized mission training. Recently, three 727
aircraft were obtained for use in more realistic training scenarios for
the FAMs. FAA has agreed to reimburse FLETC for the costs of training
tuition, staffing needs, overtime, and special effects equipment.
Also, for the last few weeks FLETC has been engaged in discussions
with Transportation Security Administration (TSA) officials about other
specific training needs. FLETC is helping to design training for
airport screeners and train-the-trainer programs for those who will be
responsible for delivering this training. FLETC sites will not be the
focus of this training because of the heavy requirements for law
enforcement training already identified. However, FLETC will continue
to consult with the TSA and to help validate the training given to
screeners.
Finally, with respect to TSA, we are now working closely with them
on possible options for training a cadre of law enforcement agents that
TSA has under consideration for deployment to the Nation's airports. As
the situation becomes clearer and decisions are made, we will keep the
Committee informed of our role in this development.
facilities master plan/five year construction plan
Now, Mr. Chairman, I would like to brief you and the Committee on
the status of the progress that has been made in expanding the FLETC's
facilities. A Master Plan, first presented to Congress in June 1989,
was intended to provide for efficient and orderly development of the
FLETC's land and facility resources to meet anticipated workload needs
through fiscal year 1998. It was a comprehensive blueprint and a guide
for expansion of capacities to meet all of the requirements identified
at the time to accomplish multi-agency law enforcement training.
Over the years, the original Master Plan was updated to reflect
refined cost estimates and to incorporate changes necessary to meet the
evolving training needs of our customers.
In fiscal year 1999, due to the U.S. Border Patrol and Immigration
and Naturalization Service (INS) projected multi-year hiring and
advanced training buildup, the FLETC Master Plan was changed to a 5-
year plan to focus exclusively on addressing the FLETC facility
capacity constraints. Under this modified plan, $83,000,000 in new
construction at Glynco and Artesia was proposed. Through fiscal year
2002, Congress has appropriated nearly $53,000,000 for this purpose.
The funding that this Committee has provided over the years in
support of our construction plan has positioned the FLETC to better
meet the surge in training workload requirements experienced after the
September 11 attacks. Prior to the events of that date, the FLETC's
plan for construction focused on maximum utilization of facilities at
both the Glynco, GA and Artesia, NM sites.
In the aftermath of the terrorist attacks, training capacity at
FLETC has been pushed to the limit. The development of an updated,
comprehensive, Facilities Master Plan, to address the post-September 11
training demands, is crucial and has been initiated. A contract is
being awarded to a private firm, experienced in planning activities, to
complete a comprehensive study within about 1 year. This study will
also include the new site at Cheltenham, MD.
maintenance and renovation request
The FLETC's fiscal year 2003 ACI&RE request of $23,329,000 will
provide funding for all of the cyclical maintenance and up-keep of our
permanent sites. The FLETC is not seeking any additional funding for
new construction projects this fiscal year, but the funding requested
will permit us to continue the renovation of several older facilities
in Glynco which need to be brought up to current code and design
regulations
closing
Mr. Chairman, FLETC is committed to providing the highest quality
law enforcement training at the lowest possible cost. Substantial
savings are being realized through the operation of consolidated
training sites and we know that the challenge ahead of us may be the
most important of all. I thank you for 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.
Senator Dorgan. Senator Campbell?
Senator Campbell. Mr. Chairman, I have got another
committee I have got to drop by before we have that briefing at
2:30, so with your permission, I am going to submit questions
to several of the gentlemen here at the table and ask for them
in writing.
I am particularly interested, Director Buckles, about the
expansion of the GREAT program, particularly on Indian
reservations, and how you are coordinating with the Bureau. For
Director Hackenberry, I am interested in knowing how you are
handling that new workload of 5,000 new air marshals that you
have to train. But those things, I will submit in writing, and
I thank you.
Senator Dorgan. Thank you, Senator Campbell.
Senator Reed?
Senator Reed. Thank you very much, Mr. Chairman. Again, let
me commend all of you for not only your testimony, but for your
service to the Nation and also convey that to the men and women
who serve with you.
EXPLOSIVES PERMITS
Mr. Buckles, given the aftermath of September 11 and the
images emanating from the Middle East, we have to be concerned
about the use of explosives by terrorists, and your Bureau is
on the front lines of this effort to protect Americans from
these types of explosive incidents. In your estimate, how easy
would it be today for an individual with violent intentions to
obtain commercial or improvised explosives in this country?
What kinds of permits are required? Is it difficult?
Mr. Buckles. Senator, under current Federal law, it is
fairly simple to acquire explosive materials. It requires less
of a background check, for example, than is currently required
for firearms. Under Federal law, if you have a driver's
license, can establish that you have residency in a State, and
you complete a form that says you are not a felon and that you
are not otherwise disqualified from purchasing explosives, a
licensed dealer, at that point, is free to sell you any kind of
explosives. Some States have their own laws that require
blasters' permits before these can be purchased, but that is
not uniform around the country.
Senator Reed. I understand that Senators Kohl and Hatch
have introduced legislation, the Safe Explosives Act. Are you
supportive of that Act and might you elaborate on why you are?
Mr. Buckles. Yes, Senator, and we have been working closely
with the Administration and the committees to finalize some
language on that. Principally, what that statute would do is
require that all persons purchasing explosives would have to
have a permit. Currently, only purchasers who buy explosives in
interstate commerce are required to have a permit. This would
require all purchasers to have a permit. To get the permit,
there would have to be a background investigation, fingerprints
would be submitted, et cetera. Some of the details on how it
would work with some limited users and those issues are
continuing to be worked out, but we believe that this is
important legislation.
Senator Reed. Do you have the resources now to actively
monitor and implement existing law and the additional law if
this Kohl bill is passed?
Mr. Buckles. We do not have the resources to enforce the
new law, were it to pass, and we have developed some budget
projections on that already for people in the Department.
As for today, we currently have about 500 inspectors in the
field in ATF, and those inspectors are responsible for the
collection of $14 billion in revenue, monitoring about 100,000
firearms licensees, as well as the current number of Federal
explosives licensees and permitees, which is about 9,000. We
are very strapped under the current situation to really
adequately follow everything we need to be doing in this area.
Senator Reed. Thank you, Mr. Buckles.
BACKGROUND CHECKS FOR GUN SHOW SALES
Let me turn to another issue, and that is, again, in the
wake of September 11 and recent press reports, there have been
indications that individuals, some at least allegedly
associated with terrorist groups like al Qaeda, like Taliban,
like the IRA, have attempted to use gun shows to acquire
weapons. In this concept, would you consider a law requiring
background checks on all firearms sales at gun shows to be
helpful to you in enforcing the laws?
Mr. Buckles. Yes, Senator. A couple of years ago, ATF
prepared a report on gun shows, in terms of how they operate as
part of a larger firearms market in the United States, and we
made some recommendations, at that time, that applying, for
example, the background checks that are required of Federal
firearms dealers today and requiring those in gun show
environments is something that should be done.
Senator Reed. Thank you, Mr. Buckles.
NATIONAL INSTANT CRIMINAL BACKGROUND CHECK
Let me just ask about one other aspect of this issue. As
you indicate, federally licensed firearms dealers must go ahead
and institute a background check before a sale is processed. I
understand that in your formal testimony, you indicated that
the Bureau referred to its field offices over 12,000 ``delayed
denials'' under the National Instant Criminal Background Check
system. As I understand it, these delayed denials are
situations in which an individual, at least a question comes
about their fitness for acquiring the weapon, is that correct?
Mr. Buckles. Correct. Under the Brady Law, a decision must
be made within 3 days as to whether or not the person is
disqualified. If the FBI National Instant Check System does not
have final data in 3 days, they continue to search for any
information that they come up with. After those 3 days, they
will report it to the dealer, and that is what is sometimes
called a ``delayed denial''.
Senator Reed. Now, as I understand it, again, from the
information I have, of those 12,000 delayed denials, the Bureau
has recovered or accounted for about 7,000 firearms. I also
understand another 3,000 were found to be ultimately not
transferred or the purchase was not prohibited. So this leaves
about 2,000 potentially illegal firearms transfers under
investigation by the Bureau at this point, is that correct?
Mr. Buckles. I believe those are the correct numbers, yes.
Senator Reed. And how long do you investigate these delayed
denials? I mean, are you working through them or they will be
forever in limbo?
Mr. Buckles. No, Senator. We give these delayed denials a
high priority and continue to work them. As you can see just
from the numbers, there are an awful lot of them. The reason
they are delayed in finalizing on those is because there are
complicated issues about whether or not the person is, in fact,
actually convicted and whether or not the firearms have been
properly disposed of. But we continue following up on those.
Senator Reed. Thank you.
Mr. Chairman, you have been most gracious. Let me turn back
my time to you and additional questions, I will direct to the
witnesses in writing. But thank you, Mr. Chairman, and thank
you, Mr. Buckles, and all of you gentlemen for your efforts.
Thank you.
Senator Dorgan. Senator Reed, thank you very much.
Let me begin with you, Mr. Stafford. There has been, I
understand, a substantial increase in the number of people in
the Federal Government who are provided protection. I know that
you will not want to describe the details for me, but can you
tell me about the increased workload of the Secret Service for
providing protection for those in the executive branch and
legislative branch, for that matter?
INCREASE IN PROTECTIVE DETAILS
Mr. Stafford. Yes, I can, Mr. Chairman. Prior to 9/11, we
had 17 full-time protectees in addition to a number of foreign
heads of state that visit our country.
Senator Dorgan. That 17 is 24 hours a day, 7 days a week
protection?
Mr. Stafford. That is correct, including the foreign heads
of state who visit the country, but these visits are sporadic
and normally not for long-term periods of time.
We have gone up to 38 full-time protectees as a result of
what happened to us on 9/11. Additionally, as was mentioned
earlier, the National Special Security Events have been a drain
on our manpower. In January, we had the World Economic Forum in
New York with over 40 heads of state visiting our country. It
was our responsibility to safeguard their visit. In February,
we had the Super Bowl, which was designated a National Special
Security Event, and, of course, the Olympics. As I mentioned
earlier, the Olympics was enormous with the 900 square miles,
15 venues, and required our presence for over a month. It was
very manpower-intensive.
WORKFORCE RETENTION AND WORKLOAD BALANCING
Senator Dorgan. For the last couple of years, we have
provided funding--last year was the third year--in the
workforce retention, workload balancing effort that we have
had, a 3-year phase-in. We had been seeing a massive quantity
of overtime in your agency and so we were trying to phase in
something that would remedy that. Does the 2003 budget request
provide sufficient funds to fully annualize the new hires that
you have received under our initiative?
Mr. Stafford. We are in the third phase of that hiring and
have been very grateful for the support of this committee. The
quality of life issues for the men and women in the Secret
Service were very serious 3 years ago. Our people were working,
on average, over 80 hours of overtime a month, which was too
much.
OVERTIME
This is the third phase. Prior to 9/11, we saw an
improvement in that. We were down to 72 hours. Of course, after
9/11, with the enhancements, we have seen overtime revert to
the 80-hour mark. But with the continued hiring, we think we
will see that be reduced again. We are going to hire almost 500
people this year, with attrition, and that is a very positive
thing for us. The annualization for those people in 2001 and
2002 is not in the 2003 budget, and that is approximately $27
million.
Senator Dorgan. Mr. Gurule, can you tell me why that is not
in the budget? I think the administration has supported this.
The Congress obviously feels strongly about it and has
initiated the approach, but why has the administration chosen
not to annualize the funding for that?
Mr. Gurule. I believe that the funds included in the budget
are sufficient to go ahead and cover that particular item. It
is something that I would like to talk to Director Stafford
about and see if there is something there that can be done to
address that. But it was my understanding that the budget that
was submitted was sufficient in that regard, so----
Senator Dorgan. Okay. Well, I will need to understand that
at some later date. Either the budget provides sufficient funds
to annualize it or it does not.
Mr. Gurule. I understand.
Senator Dorgan. That is something we can work on, if our
staff can work with your budget folks to understand it. The
reason I raise that point is this program was designed for a
very specific purpose. We were having trouble with retention,
working people to the bone, massive quantities of overtime, and
working with Treasury and with Secret Service, we decided to
try to do something about it. We put in place a three-phased
approach, and if that is going to work, then the cost of that
has to be annualized so that we say, yes, now we have phased it
in and it is here and here is the funding for it, and the
funding is either there or it is not there, and I am not quite
sure I understand the answer, but we will work with you to get
that answer.
NEW YORK FIELD OFFICE RELOCATION
Mr. Stafford, tell us about the relocation of the New York
field office at this point. How is that going?
Mr. Stafford. It is going slowly. I just came back from New
York this morning. I was there all day yesterday visiting with
our supervisors in New York and we have moved from Ground Zero.
Obviously, we lost our entire office, most of our fleet, and
unfortunately, we lost one employee, as you are well aware, and
we had a number of injuries.
Some operations moved to Brooklyn. We are finding the
commute is becoming a bit cumbersome as well as other
difficulties relative to our responsibilities in Manhattan. We
are in three different locations now; two temporary locations
in Manhattan, the post office in Manhattan, and also at John
Jay College. Within the next 3 to 4 months, employees at those
two locations will all co-locate at our new office facility in
Brooklyn. At that time, I think we will be in much better
shape.
Senator Dorgan. Thank you.
GANG RESISTANCE EDUCATION AND TRAINING PROGRAM
Mr. Buckles, is the GREAT program funded in this budget?
Mr. Buckles. Yes, Senator, it is. There was some question
earlier about whether the appropriate language was included in
the budget to indicate that. That is the grant authority that
would allow us to put out $13 million in grants. It is my
understanding that that issue has been resolved and that the
appropriate language is being provided to the committee to
ensure that that funding is available.
BUSINESS STRATEGY ADJUSTMENT
Senator Dorgan. Mr. Buckles, was the business strategy
adjustment your idea?
Mr. Buckles. No, Mr. Chairman, it was not.
Senator Dorgan. So what savings do you propose from your
budget to cover the $7.6 million business strategy adjustment?
Mr. Buckles. Mr. Chairman, we are going to be looking at an
entire range of possibilities in terms of ways to achieve those
savings. We do not have the precise plans on what we will do,
and one way or another, they will eat into some of our base
resources that we are facing. But we are hoping that we can
achieve savings in the way in which we are going to go about
renting space by trying some innovative ways of housing people.
We have a lot of new space issues coming up with the growth we
have had over the years, so we are going to try to minimize the
cost in that area. We are also looking at other ways in which
we can cut down on the expenses without really cutting into the
muscle of the agency, but we do not have precise plans on how
we are going to meet that entire $7 million.
OFFICE OF HOMELAND SECURITY
Senator Dorgan. Have you placed any reimbursable or non-
reimbursable employees within the Office of Homeland Security
at this point?
Mr. Buckles. No, Chairman, we have not.
Senator Dorgan. Mr. Stafford, have you placed any employees
within the Office of Homeland Security?
Mr. Stafford. Yes, we have.
Senator Dorgan. Can you tell me how many?
Mr. Stafford. Right now, we have two detailees.
Senator Dorgan. Mr. Sloan, have you?
Mr. Sloan. Mr. Chairman, no, we have not.
Senator Dorgan. Mr. Hackenberry?
Mr. Hackenberry. No, sir.
Senator Dorgan. All right. The reason I asked the question
is I believe the budget request from the White House for the
Office of Homeland Security describes 95 detailees and I am
going to try to get a list of where they are coming from, but
it sounds like, with the exception of the Secret Service having
two, it sounds like they are not coming from this group.
Mr. Stafford. Let me correct that. I think we have three.
Senator Dorgan. Three, I am sorry.
So, Mr. Gurule, this business strategy adjustment, is that
yours?
BUSINESS STRATEGY ADJUSTMENT
Mr. Gurule. No, it is not my idea, but I think it is a good
idea, nonetheless, and I think it is based on a very sound
principle that attempts to enhance the effective utilization of
limited resources. I think that any agency, if it is going to
call itself a world class agency, should continue to examine
how it does business and pursue ways to enhance the
effectiveness of operations and identify programs that are not
being effective and are not adding value, and either eliminate
those programs or reduce those.
So I think the idea is a sound idea, one that the Bureaus
have, I believe, ample time to take; to examine their
operations and identify ways, whether through renting space, or
whether through looking at travel. I know the Secret Service is
looking at ways in which they could reduce travel expenses by
making sure that agents are leaving out of airports in the D.C.
area that provide the least cost and housing them together in
ways that will reduce cost. So I think we can do it.
Senator Dorgan. Would you recommend that we have the same
kind of business strategy adjustment for the Office of
Management and Budget?
Mr. Gurule. Well, I am not going to speak for OMB. I think
it is a sound principle and----
Senator Dorgan. Would it be helpful to them?
Mr. Gurule. I think that every agency has an obligation to
continue to look for ways in which to conduct their operations
in a more effective, the most, maximum effective way.
Senator Dorgan. That is a fair point and I accept it. My
only point was that while we do not fund--well, we do fund the
Office of Management and Budget and the White House, I noticed
that there was no business strategy adjustment for the White
House or the Office of Management and Budget. If you make the
point that it is an awfully good thing to require everyone to
look at how well they are doing and making adjustments, then
would you recommend it for the White House and the Office of
Management and Budget?
Mr. Gurule. I am not going to tell them what to do. The
only thing that I would suggest is that with respect to our
boss, and I am referring to Secretary O'Neill, he has been a
very successful businessman and I think that the principles
that have caused him to realize the kind of success that he has
realized in the private sector, he is bringing to the Treasury
and we welcome those.
Senator Dorgan. That is a fair point. You answered it well.
I just would say that if we suggest this for the White House
and OMB, I will tell them that you indicated that it was a good
thing for them.
Mr. Gurule. I was afraid you were going to take my words
and----
Senator Dorgan. Let me amend that. I will not say that you
said it was a good thing for them, but if we do it to them, I
will say that you said it was a good thing.
Senator Dorgan. That, I think, is technically accurate.
Mr. Gurule. Why do we not state it this way, that for any
organization to achieve world class status as a world class
organization, I think this principle should be adopted and
incorporated.
Senator Dorgan. Mr. Gurule, thank you.
Let me ask Mr. Hackenberry a couple of questions, and then,
Mr. Sloan, I have a question or two for you.
FEDERAL AIR MARSHAL TRAINING
Mr. Hackenberry, let me ask, where are you going to train
air marshals and how many do you envision will be trained over
the next 2 years, or what do you know about the training of air
marshals at this point?
Mr. Hackenberry. Actually, several things. The first is
that the air marshal training that is being conducted, for the
most part, is being conducted at our facility in Artesia, New
Mexico. Post 9/11, very shortly after 9/11, we met with
officials from the FAA, prior to the creation of TSA, and
developed a training program specifically for air marshals.
Prior to that, there were very few air marshals that were
trained on a yearly basis and they went through the regular
criminal investigative training program at FLETC-Glynco.
In meeting with the FAA and subsequently with TSA
representatives, a specific training program for the air
marshals was developed and it is being delivered in Artesia,
New Mexico. By July, the end of July this year, we will have
trained, or we will have in training, the number of students
for the air marshal training program that was mentioned earlier
by yourself and by Senator Campbell.
The training is in two phases. One is training for people
who come in with former law enforcement experience. That
training is brief. It is actually only 1 week long, and that
has now been moved to, and is being conducted in, Atlantic City
in an FAA facility. For the non-law enforcement new hires, who
receive a 5-week basic training program and then a 1-week
follow on----
TRAINING CAPACITY FOR AIR MARSHALS
Senator Dorgan. And what is your capacity to train at this
point? How many can you handle, especially in the second case,
without law enforcement training?
Mr. Hackenberry. We are about at capacity now. We are
handling an overlap of, say, 700 per week at Artesia, New
Mexico.
TRANSPORTATION SCREENER TRAINING
Senator Dorgan. Let me ask you about baggage screeners. Who
will be making the decision, in your judgment, about who will
undertake that kind of training?
Mr. Hackenberry. As far as baggage screeners, in that they
are not law enforcement, our involvement on that was simply to
meet with the FAA. We brought in experts from the Secret
Service, from FLETC training and from the FAA and looked at a
program that the FAA had developed to train the screeners. We
had what we call a ``curriculum review conference'' and
reviewed the curriculum content and helped FAA develop the
curriculum to train-the-trainers for the screeners.
Then we piloted a program in Glynco, and now we have
actually piloted a second program in Glynco to train-the-
trainers that the Transportation Security Administration has
hired. It is my understanding TSA plans to deploy those
trainers to do training across the country, in locations such
as Oklahoma City and other places, where facilities are
available. This training will be conducted by trainers that
have been trained at the initial pilot programs in Glynco and
then additional trainers will be trained elsewhere, and that is
how they plan to accomplish their goal for screener training.
Senator Dorgan. All right. Mr. Sloan, does your 2003 budget
request cover the requirements that you have as a result of the
USA PATRIOT Act?
FISCAL YEAR 2003 AND THE USA PATRIOT ACT
Mr. Sloan. Mr. Chairman, the quick answer is yes. As I sit
here today on April 17, I am comfortable that, for lack of a
better term, we are keeping our head above water. But as I said
in my opening statement, I am not going to be shy about coming
forward, either, to the committee, to your staff, and to
Treasury if we start to see that balance change in a negative
way. But based on what we have proposed and based on what I see
in my resource allocations, I am comfortable that we can
maintain momentum in those requirements.
Senator Dorgan. Can you describe your relationship with the
Office of Homeland Security?
COOPERATION WITH OTHER FEDERAL AGENCIES
Mr. Sloan. We do not have----
Senator Dorgan. Have you had a relationship with them?
Mr. Sloan. Our relationship with the Office of Homeland
Security would typically be through the Office of Enforcement
at Treasury. Although I think we have had one person go to a
meeting. Other than that, it would be through Enforcement.
Senator Dorgan. Let me ask Mr. Gurule, then. There was a
Los Angeles Times article that I noted, who knows the accuracy
of these things, but here is what it said. It said the
financial war on terrorism has been hamstrung by turf battles
between Federal agencies. Allegedly, Treasury and Justice have
opened hundreds of independent investigations, independent of
each other, and so on.
First of all, respond to that, because that went out in a
press story, and then, second, what kind of cooperation exists
at this point between, for example, your agency and the FBI?
Mr. Gurule. I am very familiar with that L.A. Times story,
and in my opinion, it is riddled with a number of inaccuracies.
I am very suspicious of articles where the sources are
anonymous and even the agencies that they are working for are
not disclosed in the article.
But the short answer is that we are cooperating. In fact,
the FBI and Treasury Enforcement are cooperating. In fact, when
Operation Green Quest was announced publicly, there was a press
conference that was held in October at the Customs Service and
Assistant Attorney General Michael Chertoff actually
participated in that press conference and voiced his support of
Operation Green Quest.
Since then, FBI agents have been assigned to work at Green
Quest. Most recently, there have been two that were pulled back
and now some additional agents are going to be reassigned, so
there was a gap period there where, quite candidly, we did not
have FBI agents assigned.
But let me add that I had an opportunity on Thursday of
last week to meet with FBI Director Mueller and it was in
direct response to the L.A. Times article. Commissioner Vaughn
was also present at that meeting. Obviously, Director Mueller
was very concerned, as was I, because both of us believe
strongly that with respect to the challenge at hand, and that
is to combat and defeat global terrorism, we cannot have a
situation where agencies are not working closely and sharing
information, and if that is the case, I am determined to take
whatever appropriate action is necessary with respect to the
individuals who are not cooperating.
However, at that meeting, I committed, as I have in the
past, to Director Mueller that any information, any
investigative information that we have developed, they have
access to, unfettered access to, and he committed the same to
me.
We have also put in place--this has been in operation for
some time--a system and method to resolve conflicts. It is
certainly possible that there could be some operational
conflicts with an investigation that the FBI is involved in,
and so we have that in place to resolve conflicts and ensure
that cooperation is what it should be.
Senator Dorgan. Mr. Gurule, one last question about the
business strategy adjustment, if I might. What percent was
applied to the BSA, business strategy adjustment?
BUSINESS STRATEGY ADJUSTMENT
Mr. Gurule. What percentage is----
Senator Dorgan. What percent of the----
Mr. Gurule. It is a very small percent. I do not recall the
exact number, but I think it is in the maybe 3 percent, 4
percent range, but I do not have that number right in front of
me, but it is a very small percent of the overall figure.
Senator Dorgan. Does anybody in your budget office know
that?
Mr. Gurule. Excuse me, one-half of 1 percent.
Senator Dorgan. One-half-of-one percent?
Mr. Gurule. Yes.
Senator Dorgan. Okay. We are doing a lot of things in the
area of defense, Defense Department, national security,
homeland security. All of it relates to the same meat and
muscle that is necessary to protect this country. In my
judgment, we are going to take a look at these budgets. I want
to make sure that we have annualized what we have tried to do
to give the Secret Service what it needs to retain its people.
I want to make sure that we have the muscle in these agencies
dealing with counterterrorism, with homeland security.
I do not know whether the business strategy adjustment is
good or not. It is arbitrary, and it seems to me that every
agency ought to take a look at where it is spending money it
ought not spend, and if they cannot find it, we will look for
it, we will find it, and we ought to dump that out of the
budget, number one.
Number two, we ought to fully fund those things that we
know we need to do in these agencies, especially in these days
when we talk about homeland security. If we are going to put
$49 million more in the Department of Defense, and it is likely
Congress will do that, without a business strategy adjustment,
then those agencies that are involved in homeland defense need
to have the same muscle and the same investment that we do with
respect to the Defense Department.
So we are going to take a hard look at all of these things
and evaluate what needs to be done to annualize the things that
we have tried to do to strengthen all of these agencies. We are
not interested in wasting money. We are very interested in
investing in this country's strength.
I worry, as I believe does Governor Ridge, the President,
and others, that, God forbid, there could be another terrorist
act committed in this country. Terrorists would love to commit
a terrorist act in this country again and kill additional
Americans. Your agencies are part of the critical agencies that
need to work together to make sure that does not happen. We
have, knock on wood, been successful since September 11. It is
not as if they have not tried, but a number of terrorist
threats have been thwarted through the good work of a lot of
dedicated Federal agents and law enforcement personnel and
others, both Federal, State, and local.
But my point is, this issue of homeland defense is
critically important because this was is not just waged on
foreign soil. This war exists here, as well, and it is a
defensive war, and your agencies, the success of your agencies
will depend a lot on whether we see future terrorist acts
foiled or whether they actually occur in this country, and so I
want the investment to be made to make sure that your agencies
can tell me that you have got what you need to do the job and
the men and women who work for you in the middle of the day and
the middle of the night have what they need to do the job, as
well, to defend this country.
ADDITIONAL COMMITTEE QUESTIONS
So having said all that, I appreciate your testimony. This
subcommittee will meet tomorrow at 2:30 in this same room to
discuss the 2003 budget request for the United States Customs
Service. Mr. Gurule, you will be back tomorrow. I will have
some additional questions for you then, as well.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted to James Gurule
Questions Submitted by Senator Byron L. Dorgan
financial war on terrorism
Question. An April 7th LA Times article stated that the financial
war on terrorism has been ``hamstrung'' by turf battles between Federal
agencies. In fact, recently we learned that the FBI pulled out of
Operation Green Quest. Allegedly Treasury and Justice have opened
hundreds of investigations independent of each other. Undersecretary
Gurule was quoted as saying that the groups perform important but
separate functions. Mr. Gurule states that Treasury pursues broader
financial investigations while the FBI pursues September 11 activity.
What is the current status of the disparate financial
investigations?
Answer. The Departments of Justice and Treasury continue to work
closely to investigate terrorist financing networks. Since its
inception in October 2001, Operation Green Quest has initiated
approximately 300 investigations targeting the finances of terrorist
organizations and their infrastructure. Many of these investigations
have been developed independently by Green Quest or referred by various
sources; however, those cases that appear to crossover with FBI
investigations are coordinated at either the headquarters or field
level. We have established a mechanism at the departmental level to
resolve any disputes and coordinate overarching policies and
activities. These investigations often complement one another, and
there is a need for all agencies with relevant expertise to bring their
assets to bear on this campaign against terrorist financing. In
addition, the activities of the law enforcement agencies dealing with
terrorist financing are coordinated as part of the larger U.S. strategy
in the inter-agency context.
Question. Are they truly separate, and if so is there any
coordination?
Answer. There are separate task forces that utilize expertise from
various parts of the Government devoted to the task of fighting
terrorist financing. As mentioned above, Operation Green Quest has
generated and is pursuing a number of investigations that target
terrorist financing. These cases, as well as those that crossover with
current FBI investigations are coordinated at the headquarters and
field level to ensure case coordination. The FBI-led Financial Review
Group (FRG) originally began as an arm of the September 11
investigation but has since expanded its mission to include
investigation of terrorist financing cases generally. Treasury Bureaus,
including Customs, IRS-CI, ATF, FinCEN, and OFAC have been committed to
the FRG since its inception and have provided invaluable resources and
expertise to the FRG's efforts. There are currently representatives
from all the relevant bureaus at the FRG. In addition, Treasury
participates fully in the inter-agency Joint Terrorism Task Forces as
well as the various High Intensity Money Laundering and Related
Financial Crimes Areas (HIFCAs). The FBI also participates in Operation
Green Quest, and the DOJ has committed attorneys to Green Quest's
efforts. In general, there is good coordination and cooperation, but we
are always striving to improve our overall U.S. Government efforts in
this area.
Question. Is Treasury denying the FBI access to Treasury's
financial information and is the FBI doing the same to Treasury?
Answer. The question appears to stem from a false and uninformed
allegation in a recent LA Times article. The Treasury does not deny FBI
access to any information it obtains. In fact, information sharing in
this unprecedented law enforcement and intelligence endeavor, thanks in
large part to provisions of the USA PATRIOT Act, has been very good.
Operation Green Quest and the FBI are working together on several major
investigations. Information, to include financial data, is routinely
exchanged in the pursuit of these cases, and information is constantly
being shared among the intelligence and law enforcement communities.
The allegation in the article stems from a misunderstanding of how
``blocked'' documents, those that have been blocked but not seized
because of a designation made by the Office of Foreign Assets Control,
can be reviewed by the U.S. Government. In cases where documents have
been blocked, a search warrant, subpoena, or consent of the owner must
be obtained to actually read the contents of the documents. Thus, the
alleged ``denial'' of information set forth in the article was simply a
reflection that no agency had access to the documents for purposes of
reading or searching them.
treasury counterterrorism fund
Question. The CT Fund was first appropriated in fiscal year 1997 as
a central fund to reimburse any Treasury organization for the costs of
providing support to counter, investigate, or prosecute terrorism,
including payment of rewards in connection with these activities.
The President's fiscal year 2003 Budget proposes to transform the
Counterterrorism Fund under the Department of Treasury into a
reimbursable account for any agency in the Federal Government for its
role in a National Special Security Event (NSSE). Congress has
cautioned the Administration on the use of this fund to pay for events
such as the Olympics and other NSSEs. Is it your intention that these
Treasury funds be used to reimburse any agency for its participation in
these events?
Answer. The Counterterrorism Fund is available to provide funding
for unanticipated costs associated with support to counter,
investigate, or prosecute domestic or international terrorism. Also,
the Fund can be used to re-establish the operational capability of an
office, facility, or other property damaged or destroyed as a
consequence of any unexpected domestic or international terrorism act.
NSSEs are expensive and unpredictable, and the Counterterrorism Fund
has been a ready source of funding that enables us to carry out our
mission even in the instances when we need to reimburse other agencies.
Question. Aren't you concerned that this fund will be depleted by
planned activities that should be budgeted for by the affected
agencies, rather than unforeseen events that will require the
involvement of agencies within the Department of Treasury?
Answer. We are not particularly concerned that this fund will be
depleted by planned activities largely due to senior Departmental
oversight in the fund's administration.
business strategy adjustment
Question. The Secretary of the Treasury mandated that all of its
subordinate agencies plan for a ``business strategy adjustment.'' This
represents an attempt to force the agencies to realize savings through
economies of purchases and contracts, etc. The effect, however, is a
cut in Agency budgets in real dollars. For example, U.S. Customs faces
an approximate $18 million dollar adjustment. Similarly, U.S. Secret
Service faces a $6.8 million cut.
How does the Secretary reconcile the very real needs of his law
enforcement bureaus with a business model more appropriate to ALCOA
than to an agency protecting the American public?
Answer. The Secretary would not view a distinction between a highly
productive corporate business model and a Treasury enforcement bureau
striving for greater success. While it is true that Treasury has
historically been a labor-intensive group of bureaus, the experience of
some of them, including IRS and the Bureau of the Public Debt,
demonstrates that continued productivity improvements are both possible
and necessary.
Treasury's enforcement mission, given even greater urgency within
the homeland security context, will need to draw on every facet of
American ingenuity and creativity to meet that challenge. This requires
constant improvement in labor force productivity, using a combination
of technology and better management. An example of this is the Customs
Service Container Security Initiative (CSI). The CSI would secure an
indispensable, but vulnerable, link in the chain of global trade: the
oceangoing sea container. Ensuring the security of the maritime trade
system is essential, given that approximately 90 percent of the world's
cargo moves by container. This initiative consists of four core
elements: (1) establishing criteria to identify high-risk containers;
(2) pre-screening those containers identified as high-risk before they
leave the port of origin; (3) using technology to quickly pre-screen
high-risk containers; and (4) developing and using smart and secure
containers. Customs has already rolled this initiative out at three
Canadian seaports and they are actively engaging other large overseas
seaports, and working with the foreign governments within which those
large international ports are located, to cooperatively develop a
program to implement the four key elements of the CSI.
Thus, the recurring cost of labor-intensive efforts will be coupled
with technology investments and smarter management to increase
efficiencies and enhance the level and degree of scrutiny for various
ports of entry. Rather than just accepting the conventional wisdom
that, without a vast influx of new human resources, there is an
unavoidable trade-off between efficiency and security, this new
endeavor is an improvement in both. When we are at our best--both in
Government and in the private sector--we can accomplish anything we set
our mind to. Dramatic increases in labor productivity are responsible
for an American economy that is the envy of the world. So also, that
same quest for productivity improvement will be critical for Treasury
enforcement bureaus to achieve the best outcome at the lowest cost to
the American taxpayer.
office of homeland security
Question. We have been briefed that there was no Treasury
Departmental Offices interface with Governor Ridge's staff at the
Office of Homeland Security during the fiscal year 2003 budget process.
In fact OMB was the liaison on behalf of the Department for resources.
Partly as a consequence, Treasury only received a $518 million pass-
back for CT efforts although $1 Billion was required and requested. On
the other hand, the Administration proposes funding DOJ significantly
more than that, and in real dollars, (NOT through a proposed user fee/
tax). This is has been an annual sore point between the Treasury law
enforcement agencies and those at Justice.
Now that Governor Ridge is coordinating between those Departments
and agencies involved in Homeland Defense, what efforts are being made
to properly advocate Treasury's needs in funding for Homeland Defense?
Answer. I have always considered, and will continue to consider,
our Nation's security needs, as a high priority, when determining the
allocation of bureau resources for Homeland Defense. I will also
continue to serve as an advocate for the bureaus and continue to work
closely with the Office of Homeland Security. Furthermore, I will
continue to work closely with each of the law enforcement bureaus to
achieve and maintain a World Class organization, to ensure the
connection between Homeland Defense resources and results.
Question. Are your needs being met by the Administration?
Answer. Yes. The Office of Enforcement will continue to work with
the Office of Homeland Security during the fiscal year 2004 budget
process, to ensure that limited Federal resources are spent wisely, to
obtain the best results for the investments made. However, any
additional tools that the Treasury Department determines may be needed
will be fully considered in coordination with OMB.
joint border agency
Question. There has been considerable discussion within the
administration, on Capitol Hill, and in the press about creating some
sort of joint border agency. This could involve combining Customs with
some elements of INS, and possibly other agencies (FEMA/Coast Guard).
Do you support such a plan?
Answer. Homeland security is a top priority for the President and
the entire Cabinet. The Administration is engaged in a full review of
options to ensure that all homeland security resources are deployed in
the most effective way possible. The Treasury Department works with the
Office of Homeland Security to ensure that the best advice and a full
range of options are available to the President. I will encourage the
implementation of any plan that best supports strong border enforcement
and an efficient flow of cross border commerce.
Question. If this were to happen, under which Department do you see
this new agency being placed or should it become a new, stand-alone
Department?
Answer. As noted in the above question, the Administration is
engaged in a full review of options to ensure that all homeland
security resources are deployed in the most effective way possible. The
Office of Homeland Security has submitted a border security proposal to
the President for his consideration. The White House has indicated the
President will make his decision after a full review.
Question. How would the revenue generating responsibilities of
Customs fit in with such a plan?
Answer. A specific border agency configuration has not yet been
determined. The issue you raise is under review by the Office of
Homeland Security.
______
Questions Submitted by Senator Ben Nighthorse Campbell
Question. Almost immediately following September 11, the Financial
Crimes Enforcement Network--FinCEN--went into action to begin to trace
the funds utilized by the terrorists who attacked our Nation. Then, the
Office of Foreign Assets Control took steps to freeze those assets.
I know that you have a particular interest in this function. I
would be interested in learning how that effort is going.
Answer. In keeping with its mission to support law enforcement,
FinCEN applies leading edge technologies to analyze Bank Secrecy Act
and law enforcement data as well as information from other sources to
assist law enforcement in following and identifying the financial
aspects of an investigation. Law enforcement agencies use the
information that FinCEN provides according to their respective
missions. In the case of the Office of Foreign Assets Control (OFAC),
the information is used to help OFAC identify and build its asset
freezing cases. Post 9/11, FinCEN has been responding on an expedited
basis as required to related case requests from OFAC.
The April 7 edition of the Los Angeles Times carried a very
disturbing article which began with the following sentence, and I
quote: ``The U.S. Government's much-touted financial war on terrorism
has been hamstrung by bitter turf battles among Federal agencies,
questionable evidence against targeted Middle Eastern groups and a lack
of cooperation by foreign allies, senior government officials said.''
The article goes on to say that the Departments of the Treasury and
Justice have established parallel and oftentimes conflicting programs
which has led to confusion among law enforcement and intelligence
agencies both here and abroad.
Question. I would be interested in knowing your view of this
article and, if the allegation of infighting is even a little bit
accurate, what actions you have taken to make sure that components of
this one Government work together for a common goal.
Answer. The article, named ``Crackdown on Terror Funding is
Questioned,'' contained several inaccuracies about the Administration's
efforts to disrupt terrorist financing worldwide. First, no agency can
unilaterally designate an individual or organization as a terrorist
financier without the unanimous approval of every participant in the
inter-agency task force made up of the Treasury Department, the State
Department, the Justice Department, the FBI and the CIA. Treasury and
Justice Department lawyers assess the sufficiency of the evidence
before we move forward on any name.
Second, the article claims that the U.S. Customs Service with the
Treasury Department has removed its two agents who were detailed to the
FBI's Financial Review Group. This is untrue-one agent was recently
promoted and another is working off-site as per his duties within the
Financial Review Group. Similarly, Operation Green Quest has enjoyed
the support of the Justice Department from day one, when Assistant
Attorney General Michael Chertoff joined Treasury at a news conference
in welcoming its creation.
Finally, the story makes assertions about information sharing that
are simply ignorant of the law. The Treasury Department cannot turn
over ``blocked'' documents to any law enforcement agency, including the
FBI, unless the law enforcement agency obtains either consent, a search
warrant, or a subpoena to review the contents of the blocked documents.
The article failed to recognize the distinction between ``blocked''
documents and seized documents. Clearly, it is crucial that all our
efforts remain well within the law to respect the parameters of the law
and to protect the integrity of investigations.
The Department of Treasury and the Department of Justice have
worked closely together, with the State Department, the intelligence
community and others, to track and block terrorist funding.
Specifically, all the entities I've mentioned participate on a weekly
if not daily basis in the fight against Terrorist Financing. The
financial front on the war on terrorism, while quite different from the
military or humanitarian fronts, requires continued cooperation to
ensure success. To date, we have received such cooperation and look
forward to continued success.
In mid-November of last year the Treasury Inspector General issued
a report which outlined the results of their audit of the performance
measures for the Treasury law enforcement program. Unfortunately, due
to the fact that most of our mail has been significantly delayed due to
the bio-terrorism attack on the Hill, we just received that report. I
am pleased to note that your Office of Enforcement generally concurred
with the findings, and that you planned to take corrective action.
Question. Agencies are to include copies of their performance plans
with the budget request every year. Were you able to include any of
your planned corrective actions in the plans we received in February of
this year?
Answer. While the IG's report did identify areas for improvement, I
believe more importantly it indicated that there are ``difficulties
inherent in designing a clear and complete set of outcome-related
performance measures for Federal law enforcement.'' The IG agreed that
it will take quite some time to develop a good set of performance
measures. Still, we are taking action to implement the recommendations
included in the report. However, due to the timing of its release (when
our bureaus were finalizing their fiscal year 2002 performance plans),
along with the inherent challenges involved in developing effective
performance measures, the planned corrective actions that we submitted
to the IG will be implemented in fiscal year 2003 and fiscal year 2004
performance plans.
Specifically, we are working hard to develop good outcome measures
as recommended by the IG. As an example, the Attorney General
instructed the Drug Enforcement Administration (DEA) to develop drug
flow models for the four major drugs (heroin, cocaine, marijuana, and
methamphetamine) by the end of the year. Treasury representatives,
along with other Federal law enforcement organizations, recently
attended a meeting hosted by DEA to discuss a process to develop drug
flow models for the four major drugs.
Also, as recommended by the IG's report, the Office of Enforcement
will continue to work closely with the Department of Justice, DEA, the
Office of National Drug Control Policy, and the Federal law enforcement
community to develop drug flow models and to improve drug interdiction
and drug investigation performance measures. An example of this
partnership is the fact that Treasury and Justice are in the process of
developing an outcome measure for the Organized Crime Drug Enforcement
Task Forces that would measure disruption and dismantling of drug
trafficking organizations.
______
Questions Submitted to Brian L. Stafford
Questions Submitted by Senator Byron L. Dorgan
workforce retention--annualization of new hires
Question. In fiscal year 2002, we provided funding for the 3rd year
of a workforce retention/workload balancing initiative. The events of
September 11, however, have further strained your already overworked
agents.
Does the fiscal year 2003 budget request provide sufficient funds
to fully annualize the new hires?
Answer. Although the funding to fully cover the annualized cost of
this new hiring is not included as an increase in the Secret Service's
fiscal year 2003 budget request, the Service is reviewing its options
for covering this cost within it base budget.
Question. Are you concerned that the Service may again start
falling into an overtime-retention cycle?
Answer. There should be an improvement in overtime levels when the
full complement of agents hired under the re-balancing initiative for
fiscal year 2002 (204 agents) are hired, trained and assigned to the
field. At the present time the Service is not concerned that we will
again fall into an overtime-retention cycle.
business strategy adjustment
Question. Secretary O'Neill is requiring that all agencies incur a
Business Strategy Adjustment. He feels that every agency can find
savings, but all those we asked were absent any ideas that wouldn't
affect mission-related activities. He proposed something similar in
fiscal year 2002, but this Subcommittee restored the funds for law
enforcement agencies. In fiscal year 2003, the BSA for Secret Service
totals $6.824 million.
How do you plan to meet these targets? Hasn't the Secret Service
already proved itself to be fairly efficient in achieving savings in
areas such as the purchase of airline tickets?
Answer. The Service is developing action plans and strategies to
set a course for improved management, and to monitor the progress made
in improving performance. These efforts extend to improved uses of
human capital, better financial management, expanded use of technology,
and competitive sourcing of appropriate business lines.
The improvement of current business processes has been made a
priority in the Secret Service, as evidenced by the creation of the
Logistics Resource Center (LRC). The LRC is just one example of the
Service's recent efforts and commitment to promoting fiscal
responsibility, and complying with the spirit of implementing new
business strategies.
The Secret Service spends millions every year on Government travel-
related expenses. The LRC was created last year to review our travel
procedures and implement cost effective measures, while enhancing our
ability to meet operational needs. The goal of the LRC is to
institutionalize a formal structure within the Service that provides
for a more efficient operation in the utilization of human resources,
scheduling, and travel logistics. The LRC complements the existing
joint structure of the Investigations/Protective Operations Manpower
section by: implementing a systematic process to produce more informed
decision-making; providing a central point to address travel related
issues and policy; and most importantly, promoting overall fiscal
responsibility and sound financial management practices within the
Secret Service, while balancing cost considerations with operational
needs.
Ultimately, our success in achieving the savings to offset the
$6.8M business strategy adjustment will depend on our ability to manage
current resources efficiently.
electronic crimes task force
Question. The Secret Service has been involved for some time in the
area of investigating computer-related crimes. The USA Patriot Act
authorized the establishment of additional task forces.
Are funds included in the President's budget for this purpose? If
not, how much additional funding is required to meet the authorized
targets?
Answer. The Secret Service plans to spend $21.8 million in fiscal
year 2003 to fully implement what is authorized in the USA Patriot Act.
Of this total, $17.2 million will be used to develop a national network
of electronic crimes task forces.
Question. Also, why is this important to the Secret Service and
Homeland Security?
Answer. Since the Secret Service was given primary jurisdiction for
investigating the counterfeiting of identification documents, and
access device fraud, and concurrent jurisdiction for investigating
computer fraud, the nature of these financial crimes has expanded to
new areas, both geographic and technological. This has resulted from
the effects of globalization combined with the information technology
revolution. Computers and the Internet are an integral part of an ever-
increasing amount of the criminal activity investigated by the Secret
Service, either as targets of the criminal activity, tools used in the
commission of the crime, or a repository of evidence.
protection of the u.s. currency
Question. The Secret Service was initially established by President
Abraham Lincoln to protect the Federal currency. When we met last week
you discussed your concerns about the use of the dollar as the currency
of choice by many other countries.
Please describe your concerns about this and how the creation of
overseas Secret Service offices can help protect the dollar.
Answer. When Guatemala's Congress voted on legislation that would
pave the way for the dollarization of their economy, that decision made
it the third South or Latin American country to do so in less than a
year.
When El Salvador announced that it would fix the colon--the local
currency--to the U.S. dollar, initial contact by agents in the Miami
Field Office with banking and law enforcement officials in El Salvador
indicated that most people in El Salvador would not be able to
distinguish between a genuine and counterfeit Federal Reserve Note. The
Miami Field Office has continued to receive urgent requests from
banking and law enforcement contacts to provide assistance with the
training of cash handling personnel and forensic specialists.
Ecuador's recent conversion to the U.S. dollar as its base unit of
currency has made it vulnerable to the exportation of criminal activity
from Colombian organized crime. The Secret Service has seen a sharp
increase in the importation, distribution and passing of Colombian-
generated counterfeit U.S. dollars since Ecuador formally converted to
the U.S. dollar. Ongoing investigations in Colombia reveal that
organized criminal groups are operating multiple schemes within their
criminal enterprises, and are using the same courier network for both
counterfeit and narcotics trafficking.
Currently, there are fifteen (15) \1\ other countries and/or
territories that have formally adopted the U.S. dollar as their
official ``coin of the realm.'' Many other countries have tied the rate
of exchange for their internal currencies with the U.S. dollar and are
``de facto'' dollarized economies, e.g. Argentina. Economists have
speculated that all of South and Central America will be dollarized
within the next 10 years, with the possible exception of Brazil. It is
anticipated that this process will be further expedited by the
development and implementation of cash disbursement/payment systems,
e.g. ATMs. On the other hand, it is also important to note that the
rapid increase of ATMs and electronic transfers may ameliorate this
labor-intensive effort.
---------------------------------------------------------------------------
\1\ El Salvador, Ecuador, Panama, Guam, Marshall Islands,
Micronesia, Northern Mariana Islands, Palau, Pitcairn Island, Turks and
Caicos Islands, British Virgin Islands, East Timor, Puerto Rico, U.S.
Virgin Islands, and American Samoa.
---------------------------------------------------------------------------
national special security events
Question. Your agency has already accomplished the design of and
conducted two National Security Special Events (NSSEs) this year--the
Winter Olympics in Salt Lake City and the Super Bowl in New Orleans.
These events place an additional strain on your personnel.
Has any thought been given to reducing the number of NSSEs each
year or to limiting the amount of Secret Service resources going into
these events?
Answer. The Secret Service does not designate events as National
Special Security Events. The designation process is coordinated by the
Office of Homeland Security, with the final determination regarding
designation being made by the Secretary of the Treasury and the
Attorney General. For an event to be designated as an NSSE, there must
be unanimous agreement from the director of Homeland Security, and from
the Attorney General and Treasury Secretary.
Since 1998, fourteen events have received designation as National
Special Security Events. The number of NSSE's by year is as follows:
1998-1; 1999-2; 2000-4; 2001-4; 2002-3. It is important to note that
one event that did receive designation as an NSSE--the IMF/World Bank
Fall Meetings scheduled to be held in late September 2001--was canceled
as a result of the September 11, 2001 attacks on America.
Each NSSE is unique. The specific resource requirements for events
vary due to a number of factors, such as the size and significance of
the event, number of attendees, location of the event, and
vulnerabilities. After preparing for 14 NSSE's, the Secret Service has
developed a cost efficient and effective approach to managing security
for major events. However, the events of September 11, 2001 have caused
the Service to plan for new and emerging threats. As a result, the
resource requirements for NSSE's will continue to be significant for
the foreseeable future.
new york field office relocation
Question. The September 11 terrorist attacks destroyed the Secret
Service's New York Field Office--including the loss of vehicles and,
tragically, one of your men.
How are the efforts progressing to establish a new office and
relocate the personnel?
Answer. The General Services Administration (GSA) has acquired
office space for the New York Field Office at 335 Adams Street,
Brooklyn, N.Y. Currently, personnel occupy one of the three floors.
This floor requires minimal renovation. The remaining personnel are
currently utilizing two temporary office locations in Manhattan.
The GSA is working on finalizing an agreement for obtaining the
services of an architect who will begin designing the space relative to
the remaining two floors, after which renovation of the space will
commence. We anticipate all personnel will be in our new Brooklyn
office by the end of December 2002.
______
Questions Submitted by Senator Ben Nighthorse Campbell
Question. I noted that in fiscal year 2003 the Secret Service will
begin gearing up for the 2004 Presidential campaign. You have requested
$1.16 million to lease 120 vehicles late in the fiscal year so that you
have enough time to install the necessary communications and emergency
equipment. Then, after the election, you will need to remove the
equipment and return the vehicles to the rental company.
Why don't you simply purchase the vehicles as part of your normal
vehicle-purchase cycle, permanently install the equipment, and continue
to use them as part of the Service's fleet after the election?
Answer. Historically, the Service has leased vehicles to increase
the size of the fleet due to the spike in workload during campaign
years. Once the campaign is over these vehicles are returned to the
rental company reducing the fleet back to its normal size.
However, following the 2000 campaign the Service purchased 55 of
the leased all-terrain vehicles that had been used during the campaign,
because they were fully equipped and the Service needed to replace
older all-terrain vehicles within its fleet. Had this been done up-
front the Service would have realized a savings. As a result, the
service has reconsidered the lease vs. purchase issue in regard to
campaign vehicles.
Some of your employees have been enticed to join former Secret
Service Director John Magaw at the Transportation Security
Administration. From what I understand, this is particularly true of
the Uniformed Division. When you combine these departures with the
number of agents and officers who will be eligible to retire this year
and next year, you're looking at a huge number of potential vacancies.
Question. What steps are you taking now to try to retain your
workforce, and recruit new agents and Uniformed Division Officers? How
does the Secret Service go about recruiting agents? How does the
Service recruit for the Uniformed Division?
Answer. The Secret Service recognizes that retention concerns are
closely associated with quality of life issues. Through aggressive
recruitment, and the subsequent hiring of additional agents and
officers, the Secret Service is achieving increased staffing levels. By
increasing the number of agents assigned to Secret Service field
offices, the amount of time spent on protection assignments away from
home, will ultimately be reduced for each agent. Additionally, the
amount of required overtime for agents and officers will be reduced, as
the number of assignments is dispersed among a larger work force.
The Secret Service is also deeply concerned that our employees are
being lured away by other agencies that offer both better salaries, and
other compensations. This situation is particularly acute in our
Uniformed Division (UD).
We are currently exploring options within the Department (e.g.,
``pay banding,'' recruitment bonuses, and other financial incentives).
The President's budget request for the Secret Service contains new
language which would allow training of other Federal law enforcement
officers at the James J. Rowley Training Center in Beltsville,
Maryland, as well as training of State and local law enforcement and
even private sector security officials but on a space-available basis.
Question. What is the purpose of this language? Is the Training
Center currently under-utilized? Have you had requests from other
Federal or State or local law enforcement entities for training at your
facility?
Answer. The purpose of the proposed language is to allow the
Director the discretion to request, not require, reimbursement from
other Federal, State and local law enforcement, and from private or
foreign entities, for training provided by the Secret Service at the
James J. Rowley Training Center. The Secret Service receives numerous
requests each year from outside sources for protective and
investigative training. These requests are not to be confused with the
invitational training sponsored and hosted by the Secret Service during
our Dignitary Protection Seminars.
The JJRTC is currently operating at or near full capacity to
provide core mission training for our Uniformed Officer and Special
Agent basic training classes, and for in-service training provided for
current employees. This is the highest priority and primary mission of
the JJRTC. The Secret Service rarely has the opportunity to entertain
or satisfy any training requests originating from other agencies. Any
opportunity to train or actual training for other agencies would never
be done at the expense of our core mission requirements.
______
Questions Submitted to Bradley Buckles
Questions Submitted by Senator Byron L. Dorgan
shortfalls to the budget
Question. ATF began their budget process with a $3.6 million
shortfall to their MCL's (Maintain Current Levels). OMB provided
direction that the $13 million GREAT Grant Program would no longer be
funded out of their base because they deemed it the responsibility of
State and local Governments. Therefore, ATF felt they had the necessary
flexibility in their budget to cover the $3.6 million shortfall and the
proposed Business Strategy Adjustment (see #2). When asked about GREAT
at our ATF budget briefing on their fiscal year 2003 budget, they
informed us of the Administration's position on the Program. Knowing
that the Senate would reinstate the program, OMB came back and said
``no, we never said that and of course the $13 million is in their
base''. Now ATF is left with a $3.6 million shortfall to start off the
budget process, which will only be aggravated by the BSA and pay
parity.
What savings do you recommend to cover the proposed $7.6 million
business strategy adjustment?
Answer. ATF is committed to the Administration's goal of improving
business practices and seeking programmatic efficiencies. ATF is
currently reviewing how to achieve the savings required by the $7.6
million business strategy adjustment. ATF will be considering a broad
range of possible ways to achieve the required savings, including the
re-evaluation of on-going programs to determine whether there may be
more efficient and cost effective ways of doing business.
For example, ATF invests a significant amount of resources in the
area of space rental. The Bureau is considering some innovative ways of
saving or avoiding costs in this area so we can decrease the amount of
space required, while still supplying employees with the physical space
they need to accomplish their jobs.
Current practice dictates a dedicated office workstation for each
employee. As new personnel are added, the standard process calls for
either expanding the amount of office space and parking or relocating
the entire office to accommodate the increased personnel. It is
estimated that increased space and parking requirements resulting from
recent increases in Bureau staffing will cost the Bureau approximately
$9 million per year. We are considering an alternative approach
utilizing one or more of the following processes:
Hoteling.--An individual would not be assigned a specific
workstation, but rather would be expected to work the majority of their
duty hours (80 percent or more) outside the office. On the occasions
where a need exists to come into the office (approximately 20 percent),
the individual would call into the office and reserve one of the shared
workstations. Upon arrival, the person would move their personal files
to the assigned station and work for the required period of time. On
their departure the desk would be emptied, files returned to their
storage place and the workstation ready to be reassigned the next day.
It is anticipated that four workstations could accommodate 10-12
personnel.
Flexi-place.--The normal duty station of an individual would be
located in their personal residence. The individual would not normally
be expected to appear in the office except in infrequent instances for
required meetings or individual conversations with management (or other
such activities). There would be no dedicated workstation for this
individual at the office site. There is no theoretical maximum to the
number of persons who could be assigned to a flexi-place arrangement.
Alternative Worksites.--In this scenario, an individual would not
have an assigned, ATF-controlled office space. If there were a need to
occupy a workspace, the person would report to one of the satellite
office locations maintained by the General Services Administration
(GSA). The individual would report to ATF-controlled office sites only
in such instances when their physical presence was required, but would
not occupy office space during the visit. It should be noted that there
are some limits to the availability of satellite office locations.
Question. What would the affect be on your agency if forced to
absorb the business strategy adjustment and a 1.5 percent pay raise?
Answer. The estimated cost to fund a 1.5 percent pay raise
increment would be $5.323 million. This would equate to roughly 53
full-time equivalent employees (FTE) if one estimates using a $100,000
average annual salary. It should be noted that this pay raise estimate
has been coordinated with the Department and refined since original
draft estimates were provided to the Subcommittee staff.
ATF is committed to the Administration's goal of improving business
practices and seeking programmatic efficiencies. However, ATF does not
yet have specific plans for how to achieve the savings that would be
required by the $7.6 million business strategy adjustment and an
additional $5.3 million increment in the pay raise. The Bureau will be
considering a broad range of possible ways to achieve the required
savings, including the re-evaluation of on-going programs to determine
whether there may be more efficient and cost effective ways of doing
business. ATF would be reluctant to impact staffing levels.
As stated in the response above, ATF invests a significant amount
of resources in the area of space rental. We are considering some
innovative ways of saving or avoiding costs in this area so we can
decrease the amount of space required, while still supplying employees
with the physical space they need to accomplish their jobs. We are
considering an alternative approach utilizing the concepts of
``hoteling,'' ``flexi-place,'' and alternative worksites.
supplemental funding
Question. It is my understanding that your agency has proposed a
number of explosives related initiatives to further our efforts in
homeland security. I also understand that these proposals were met with
resistance by the Administration and were never requested through the
fiscal year 2003 budget submission or the recent fiscal year 2002
supplemental request.
Please describe any initiatives that ATF has proposed, the costs
associated with these projects, how they will further our efforts in
homeland security, and where they stand in the Administration.
Answer. The canine and Joint Terrorism Task Force initiatives were
funded through the fiscal year 2002 supplemental request and annualized
in the fiscal year 2003 President's Budget request.
g.r.e.a.t. grant program
Question. Please describe the status of the grant program in
relation to expanding into Native American communities and any
involvement in North Dakota.
Answer. There have been 177 Bureau of Indian Affairs (BIA) Officers
trained to teach G.R.E.A.T. to the 27,893 Native American students in
the program.
In fiscal year 2002 the inter-agency agreement with BIA in support
of Native American law enforcement for G.R.E.A.T. is $200,000. In
addition to the inter-agency agreement with BIA, ATF funded Lummi
Nation Law & Order in Bellingham, Washington ($6,900), and Menominee
Tribal Police Department in Keshena, Wisconsin ($25,000), and provided
$25,000 to Grand Forks Police Department, North Dakota. We were able to
satisfy all funding requests from law enforcement agencies that applied
in fiscal year 2002.
In October of 2001, ATF was a co-sponsor of the National Native
American Law Enforcement Association's annual conference that was held
in Albuquerque, New Mexico. ATF presented three workshops, which
covered information on the new G.R.E.A.T. Curriculum Firearms Tracing
and Identification, and Less Than Lethal Use of Force.
In mid April, ATF provided an 80-hour G.R.E.A.T. Officer Training
specifically for BIA in Rapid City, South Dakota to train 28 students.
This session included four students from New Town, North Dakota and two
students from Belcourt, North Dakota.
ATF is working through a collaborative effort with BIA and the Boys
and Girls Clubs of America to develop pilot sites for G.R.E.A.T.
Officers to teach the G.R.E.A.T. Curriculum in Boys and Girls Clubs in
Native American communities.
There is a G.R.E.A.T. National Conference is in Keystone, Colorado,
from August 28-August 30, 2002. One thousand people are expected to
attend.
national special security events
Question. More and more communities are requesting NSSE designation
for certain events. The Administration proposes in the fiscal year 2003
budget that the Treasury Counterterrorism Fund be used to reimburse ANY
Federal agency for expenditures from NSSE's.
What resources did ATF use during the Olympics and the Superbowl,
how did it affect your overall mission responsibilities, and how were
your expenses covered?
Answer. ATF received Olympics funding through the Department of the
Treasury from the Supplemental Appropriations Act, 2001, Public Law
107-20. Costs incurred by ATF in support of the 2002 Winter Olympic
Games in Salt Lake City are being reimbursed by the Treasury Department
pursuant to an interagency agreement on Olympics funding. Expenses
related to preparation and planning for the Winter Olympics, which
occurred prior to October 1, 2001, were covered under ATF's salaries
and expenses and through utilization of the Treasury Counter Terrorism
Fund.
ATF provided 300 personnel to assist in the overall security
mission during the 2002 Winter Olympics. These personnel included 75
Special Agent Certified Explosive Specialists, 20 Explosive Enforcement
Officers, 27 National Response Team members, 10 explosive detection
canine teams, 100 special agents for standing post, 17 intelligence
officers and research specialists, and additional agents, supervisors
and support staff to work in the various command posts and assist the
Joint Terrorism Task Force in Salt Lake City, UT. ATF also supported
the mission with two state-of-the-art fire and explosive response
vehicles, a mobile laboratory and bomb technician vehicles and
equipment.
Prior to the games ATF sent a cadre of experienced inspectors into
Utah to inspect the Federal explosive and firearms licensees to ensure
compliance with proper storage and distance regulations and to provide
security awareness. ATF's costs associated with protection activities
at the Super Bowl in New Orleans were minimal, and were absorbed within
the Bureau's salaries and expense accounts.
ATF supported the security efforts at the Super Bowl with two
Explosive Enforcement Officers, one explosive detection canine team,
and local agents from the New Orleans Field Division. ATF worked
closely with the other Federal, State and local law enforcement
agencies in planning and determining the appropriate level of resources
for these events.
office of homeland security (ohs)
Question. Have you placed any reimbursable or non-reimbursable
employees within OHS?
Answer. No.
Question. Please describe your agency's relationship with OHS?
Answer. ATF Intelligence Division personnel established an initial
relationship with the OHS during the fall of 2001 to provide background
on the core mission responsibilities of ATF and our strong fundamental
working relationships with State and local law enforcement agencies.
The Bureau's involvement with the Law Enforcement Working Group
(LEWG) was briefed as a process by which the Intelligence Community and
law enforcement could work more closely together.
ATF currently participates in the Law Enforcement/Investigations
Policy and Coordination Group and the Detection, Surveillance and
Intelligence Policy and Coordination Group of OHS.
Question. Has your agency been intimately involved in any homeland
security decisions made by OHS that are directly related to your
mission?
Answer. No
staffing
Question. The fiscal year 2002 Treasury Appropriations Bill and the
fiscal year 2002 Supplemental provided an additional 73 positions.
Please detail your progress on hiring these positions.
Answer. The following table shows current projected hiring for
canine handlers, canine trainers and JTTF positions.
------------------------------------------------------------------------
Fiscal year Quarter Positions
------------------------------------------------------------------------
2002.................................... 2nd 9
2002.................................... 3rd 22
2002.................................... 4th 38
-------------------------------
Subtotal.......................... .............. 69
===============================
2003.................................... 1st 4
-------------------------------
Total............................. .............. 73
------------------------------------------------------------------------
______
Questions Submitted by Senator Jack Reed
Question. The General Accounting Office recently released a
preliminary report that found that the Justice Department's proposal to
destroy NICS audit log records of approved gun sales within 24 hours
would allow hundreds of disqualified buyers, including felons and
domestic abusers, to purchase guns each year. The GAO review found that
between July and October of last year, there were 100 cases in which
authorities used data that is currently kept for 90 days to go back to
try to retrieve guns from people who were not authorized to buy them.
As the head of the agency that is responsible for illegal firearm
retrievals, were you consulted in connection with this investigation?
Answer. ATF responded to questions from GAO regarding ATF's
activities and processes involving NICS referrals from the FBI.
Question. What is your view of the Justice Department's proposal to
destroy records of NICS approvals within 24 hours? Were you consulted
during development of the proposal, and were your recommendations
included in the proposed rule?
Answer. ATF was consulted during the development of DOJ's proposal
and ATF provided input on how we would change our existing procedures
to deal with the proposed change. The Department of the Treasury did
not formally comment to DOJ's Notice of Proposed Rulemaking.
Question. My understanding is that the Justice Department let the
90-day rule for retaining NICS records go into effect while the new
rule is pending. Has ATF been able to use the information in the audit
log in connection with dealer inspections? If so, how has the
information been used?
Answer. ATF inspectors provide information obtained from the
records of Federal firearms licensees (FFLs) to the FBI to be compared
against the NICS audit log as a deterrent against misuse. The FBI notes
any discrepancies and refers this information back to ATF for further
investigation as needed. To date, the use of this information has not
produced significant results beyond the deterrent value.
Question. In defense of its proposed rule, the Justice Department
maintains that it can perform ``real-time'' audits? What role would ATF
play in this real-time audits? And can you explain how these audits
would work?
Answer. ATF would play no role in the FBI's ``real-time'' audits.
Question. In the aftermath of the September 11 attacks, your Bureau
asked the FBI to check the names of 186 individuals against the NICS
audit log. How do audit log records help you to streamline your
investigations with the limited resources you have available? (For
example, in the absence of a NICS audit log record, if you receive
information--perhaps an anonymous tip--that indicates a potential
terrorist may have inappropriately obtained a gun, how would you go
about identifying the dealer, the point of sale, and the firearm? How
would the process differ if you had access to a NICS audit log record?)
Answer. As a point of clarification, ATF made the request mentioned
above to the FBI in response to a request for information from the
Joint Terrorism Task Force (JTTF). ATF only uses NICS audit log
``proceed'' information during compliance inspections of FFLs. It is
the Attorney General's opinion that NICS audit log ``proceed''
information may not be used a general law enforcement tool. The
Treasury Department defers to the Attorney General and his Office of
Legal Counsel as the interpreter of Federal statutes.
Question. Could you explain step-by-step the mechanics of a firearm
retrieval operation?
Answer. Initially the FBI refers information to ATF's Brady
Operations Branch in Martinsburg, West Virginia regarding alleged
prohibited individuals who purchased (or received) a firearm and all
persons who were denied after a NICS background check. All referrals
involving possible receipt of a firearm by a prohibited person are sent
to the appropriate ATF field office for further investigation.
Question. Would you please provide a break-down of the prohibited
categories into which the individuals fall from whom firearms have been
retrieved?
Answer. Breakdown of prohibited categories include:
--Possession of firearm by previously convicted felon;
--Possession of firearm by fugitive from justice;
--Possession of firearm by illegal narcotic user;
--Possession of firearm by illegal alien;
--Possession of firearm by person dishonorably discharged from armed
forces;
--Possession of firearm while under restraining order;
--Possession of firearm by person having misdemeanor conviction of
crime of domestic violence;
--Persons who have renounced citizenship; and
--Persons adjudicated mental defectives.
Question. What types of firearms are typically retrieved?
Answer. Handguns are the type of firearm typically retrieved from
Brady/NICS referrals.
Question. In the last 10 years, how many firearms that fall within
the definition of ``semi-automatic assault weapon'' pursuant to 18 USC
Sec. 921(a)(30) have been retrieved''?
Answer. 315 semi-automatic assault weapons have been retrieved from
individuals in the various categories of prohibited persons since 1993.
(It is noted that statistical information in the National Field
Office Case Information System (NFOCIS) contains data since 1993, which
was migrated into automated investigative case reporting system (N-
FORCE) sometime in 1998. It is further noted that the responses to next
three questions are also from data compiled since 1993.)
Question. For the same period of time, how many retrieved firearms
are handguns?
Answer. 8,386 handguns
Question. How many are sporting rifle or shotguns?
Answer. 7,587 shotguns/rifles
Question. Were any of the firearms machine guns?
Answer. Two machineguns.
Question. How many firearms are retrieved in the typical retrieval
operation? Is it ever the case that agents find more than one firearm
in the possession of the individual from whom firearms are being
retrieved?
Answer. One firearm is usually retrieved in a typical case although
there are instances where more than one firearm is retrieved from
violators.
Question. If the answer to the previous question is yes, have
trafficking or other criminal charges been initiated following the
execution of a retrieval?
Answer. Yes, the United States Attorney, depending on prohibited
category of suspect and prosecutorial guidelines of that office, files
criminal charges.
I note from your testimony that out of about 276,000 FBI referrals
of denied firearms purchases since 1998, only 2,737 have been forwarded
to U.S. Attorney's offices for prosecution. That's about 1 percent. I'm
sure you're aware that the previous Administration received an enormous
amount of criticism for not prosecuting more of these illegal purchase
attempts under the Brady Law.
Question. Why haven't more of the FBI's referrals of NICS
violations been sent to U.S. Attorneys?
Answer. We believe there are several contributing factors:
--Standard Denial cases reviewed/filtered by Brady Operations Branch
personnel that do not meet United States Attorneys'
prosecutorial guidelines are not referred.
--It may be revealed after cases (Standard & Delayed Denial) are
referred to the field for follow-up investigation that the
suspect was not prohibited and no violation occurred.
--ATF and United States Attorneys' Offices around the country have a
coordinated approach to NICS referrals and have established
criteria for these cases. Not all referrals are presented for
prosecution as a result of mutual agreement between ATF and the
local United States Attorney.
--Standard Denial cases are usually prioritized for those involving
the most violent offenders who meet prosecutive guidelines of
the respective United States Attorney's Office.
--All Delayed Denial cases are referred to the field for immediate
follow-up investigation and are reported on with a disposition.
[Clerk's Note.--A Statement received from the Institute of Makers
of Explosives, is going to be inserted in the record.]
______
Questions Submitted by Senator Ben Nighthorse Campbell
Question. As you know, I have long been a supporter of the
``G.R.E.A.T.'' program so I was pleased to see the budget amendment
which clarifies the Administration's intention to continue that program
at the current level of funding.
I do have a question about the use of the ``G.R.E.A.T.'' program
curriculum on Indian reservations. I recognize that ATF must coordinate
those efforts with the Bureau of Indian Affairs. I'd appreciate it if
you could describe for me exactly how that is working out.
Answer. In addition to the inter-agency agreement with the Bureau
of Indian Affairs (BIA), ATF funded Lummi Nation Law and Order in
Bellingham, Washington ($6,900); and Menominee Tribal Police Department
in Keshena, Wisconsin ($25,000).
In October of 2001, ATF was a co-sponsor of the National Native
American Law Enforcement Association's annual conference that was held
in Albuquerque, New Mexico. Through the inter-agency agreement with
BIA, law enforcement officers from BIA and Tribal law enforcement
agencies attend this conference. ATF presented three workshops, which
covered information on the new G.R.E.A.T. Curriculum, Firearms Tracing
and Identification, and Less Lethal Use of Force.
In mid-April, ATF provided an 80-hour G.R.E.A.T. training session
for 28 Native American law enforcement officers in Rapid City, South
Dakota.
ATF is presently working through a collaborative effort with BIA
and the Boys and Girls Clubs of America to develop pilot sites for
G.R.E.A.T. Officers to teach the G.R.E.A.T. Curriculum in Boys and
Girls Clubs in Native American communities.
In the wake of September 11, there was an emphasis on making sure
that firearms are not brought into this country by non-citizens. I
understand that on February 5, ATF issued a temporary rule regarding
import permits required for non-immigrant aliens who wish to bring
firearms and ammunition into the country for perfectly legitimate
things like shooting competitions or hunting trips. While I applaud you
for taking action to further protect our citizens, I also noted that
this temporary rule went into effect very quickly--before the permit
application could even be printed or distributed.
Question. I am interested in knowing how this transition worked
out. Were there any incidences where foreign visitors were not aware of
this change in policy? If so, what happened when they reached our
shores?
Answer. On February 19, 2002, a temporary rule affecting
nonimmigrant aliens entering the United States for legitimate hunting
or lawful sporting purposes took effect. Prior to February 19,
nonimmigrant aliens did not need to file an Application for the
Importation of Firearms, Ammunition and Implements of War, an ATF Form
6, to enable them to bring firearms and ammunition into the Untied
Sates. ATF coordinated this transition with our colleagues at the U.S.
Customs Service, the Department of State and the Immigration and
Naturalization Service. Months prior to enactment of the temporary
rule, meetings and teleconferences were held with these agencies to
elicit cooperation and understanding for the express purpose of
facilitating nonimmigrant aliens coming to the United States to
participate in competitive shooting events or engage in hunting
activities.
ATF proactively sought to inform the international hunting and
shooting community. ATF sent letters to the Fish and Game commissioners
for each of the 50 States, asking them to inform nonimmigrant aliens
seeking to obtain a hunting license of the new ATF F6 requirement. We
contacted the international travel agency association and asked them to
make their oversees members aware of the new requirement. Further, we
contacted the international airline association, seeking their
assistance in informing their potential passengers of the need to
submit this form. Press releases went out over the wire services both
domestically and internationally. In addition, several months before
enactment, through ATF's attach in Ottawa, we established a solid
working relationship with our Canadian counterparts and enlisted their
support and aid in widely publicizing this new requirement to
Canadians. The ATF website prominently displayed the new requirements,
and provided a thorough Q&A section, in addition to links to the form
itself and other information. The ATF F6 was available immediately on
the effective date. The form could be downloaded from our website,
Imports Branch employees were faxing the form upon request, and also
accepting completed faxed forms.
Let me give you one example of what happened when some travelers
did arrive at a port of entry without the ATF F6 properly completed. A
large group of competitive shooters arrived at a port of entry to
participate in a competitive shooting event in a southern State. They
were not in possession of the required ATF F6. Because of the extensive
communication between Customs and us, the Customs Inspectors were well
aware of the new requirements. The inspectors called our Imports Branch
personnel, and through the mutual dedication of these employees, the
nonimmigrant aliens filled out the forms at the port of entry, forms
were faxed to ATF, they were reviewed for completeness, accuracy and to
ensure the firearms were not prohibited and the travelers were not from
a prohibited country. The approved forms were then returned to Customs
officials at the port of entry. The nonimmigrant aliens experienced
some minor delays, but arrived at their competitive shoot in more than
enough time to participate, and were extremely appreciative of the
assistance they received.
Up until late 1999, two Federal agencies were providing competing
ballistics imaging technology to State and local law enforcement
agencies. ATF had the ``CEASEFIRE'' technology and the FBI had the
``DRUGFIRE'' system, and each had its own supporters. Unfortunately,
one system couldn't share information with the other. In December of
1999, the FBI and ATF agreed that ATF would provide the hardware--the
``CEASEFIRE'' system--and that the FBI would provide the communications
network to tie the machines together. ATF has been hard at work to
replace the ``DRUGFIRE'' systems with funding provided by this
Subcommittee. Now, I understand that the FBI has reneged on their part
of that written agreement.
Question. What does this mean for ATF? Do you have sufficient funds
to take over this responsibility as well? What about the one area where
the FBI Communications Network is already in place?
Answer. ATF has accepted sole agency responsibility for management
and administration of the NIBIN network, and is confident that single
agency management will maximize the efficient operation of the program.
In order to create and maintain the communications network for
NIBIN, ATF will incur some costs. These include the following:
--One-time charges for network encryption equipment purchase and
installation of encryptor and router;
--Recurring costs for ongoing network circuit and maintenance charges
for network equipment;
--Special labor costs for project engineering and onsite technician
labor;
--Recurring telecommunications costs; and
--ATF contractor support costs for site installation and travel and
network design support.
As the question notes, one of the sixteen regions (Florida) is
currently operating on a communications network operated by the FBI.
This region will be transferred to the ATF-owned frame relay network,
enabling nationwide connectivity.
Funds for these requirements are included in the fiscal year 2002
appropriation level and in the fiscal year 2003 President's Budget
request.
______
Questions Submitted to James Sloan
Questions Submitted by Senator Byron L. Dorgan
terrorist funding
Question. Prior to September 11, FinCEN's Intelligence Liaison
Office had been analyzing Bank Secrecy Act (BSA) information in support
of law enforcement investigations into terrorist financing. Immediately
after the terrorist attacks, FinCEN was able to immediately implement
several new initiatives and enhance core programs to assist in this
investigation. In addition, the USA Patriot ACT expeditiously made
additional tools available to law enforcement to fight money laundering
and terrorist financing. FinCEN is responsible for implementing 23 of
the 44 provisions contained in Title III of that Act and also has a key
role in many of the working groups established by Treasury to address
the other provisions.
Do we anticipate any criminal cases resulting from the millions in
terrorist assets frozen through FinCEN investigations?
Answer. Most criminal cases in the terrorist area utilizing FinCEN
investigations are brought by Operation Green Quest at the Customs
Service or the Financial Review Group at the FBI. FinCEN analysis is
also used in research and actions conducted by the Office of Foreign
Assets Control (OFAC). For example, the Office of Foreign Assets
Control used information derived from FinCEN investigations in partial
support of its blocking of Al Barakaat, the Somali money remitter. In
general, we anticipate that FinCEN resources will prove important to
all the U.S. Government's efforts to combat terrorist financing.
Question. Does your fiscal year 2003 budget request cover your
requirements as a result of the USA Patriot Act?
Answer. FinCEN and Treasury are analyzing what additional resources
may be needed for hiring both personnel and contractual support in
order to fully implement all of the mandates of the USA PATRIOT Act.
Until the regulations or programs are finalized, and we review funding
options with OMB, it would be premature to accurately predict the
overall resource implications that will be needed to implement these
mandates.
Question. Are you working on the necessary funding adjustments in
fiscal year 2004 to make these pilot projects permanent as a result of
the Patriot Act? How much would that cost?
Answer. FinCEN is beginning the fiscal year 2004 planning process
in preparation for the next President's Budget submission. During this
process, FinCEN will work with the Department and OMB to consider ways
to make the pilot projects permanent to meet the new mandates in the
Patriot Act. It would be premature to accurately predict the level of
resources needed to fully meet the requirements of the Patriot Act.
Question. How have your increased activities under the Patriot Act
affected your initial mission?
Answer. FinCEN is responsible for implementing 23 of the 44
provisions contained in Title III and also has a key role in many of
the working groups established by Treasury to address the other
provisions all of which have due dates over the next 9 months. The
Patriot Act also accelerated the implementation of many of the goals
articulated in the 2002 National Money Laundering Strategy. Currently,
FinCEN is making good strides in implementing the numerous provisions
of the Act, however, the workload increase is significant. For example,
in the regulatory area, the accelerated deadlines for expanding certain
Bank Secrecy Act (BSA) requirements to additional financial services
providers have placed a substantial burden on resources in terms of
consulting with industry, drafting and issuing regulations, and
managing the resulting comment periods. These mandated requirements are
occurring at a time when a major new regulatory program, money service
businesses (MSBs), was already being implemented. Additionally,
management of technology-driven projects such as the Patriot Act
Communications System (PACS) under the tightened deadlines is also
requiring human and monetary resources.
fiscal year 2003 budget
Question. Secretary O'Neill is requiring that all agencies incur a
Business Strategy Adjustment. He feels that every agency can find
savings, but all those we asked were absent any ideas that wouldn't
affect mission-related activities. He proposed something similar in
fiscal year 2002, but this Subcommittee restored the funds for law
enforcement agencies. In fiscal year 2003, the BSA for FinCEN totals
$481,000.
What savings do you recommend to cover the proposed $481,000
business strategy adjustment?
Answer. FinCEN continually reviews its business processes and
technologies to ensure that best business practices are in place and
that new technologies are explored that will enhance services or
provide efficiencies. For fiscal year 2003, we are reviewing ongoing
programs with the goal of identifying any cost savings from current
business practices. While some programs are being enhanced through the
use of technology, the results will be qualitative, in terms of
enhanced analysis and services. Examples of the type of efforts
previously identified include the Gateway and the Platform programs
which allow customers to do their own research using our technology
tools and other resources.
Question. What would the affect be on your agency if forced to
absorb the business strategy adjustment and a 1.5 percent pay raise?
Answer. At this time, FinCEN would review on-going programs and
staffing levels to absorb the 1.5 percent pay raise and extend out
several of the information technology or law enforcement support
initiatives to meet the business strategy adjustment. We would look for
program efficiencies to reduce the impact of the reduction in future
years.
office of homeland security (ohs)
Question. Have you placed any reimbursable or non-reimbursable
employees within OHS?
Answer. No, FinCEN has not been requested to place any employees
within OHS.
Question. Please describe your agency's relationship with OHS?
Answer. FinCEN does not have a direct relationship with OHS. These
issues are addressed through Treasury's Office of Enforcement.
Question. Has your agency been intimately involved in any homeland
security decisions made by OHS that are directly related to your
mission?
Answer. No. As mentioned in the previous response, any involvement
with OHS is coordinated through Treasury's Office of Enforcement.
______
Questions Submitted by Senator Ben Nighthorse Campbell
Question. I understand that the lease on your current location will
expire in April of next year, and that you are searching for new space.
What is wrong with the existing location? Are you being forced to
leave? Is FinCEN the only Federal tenant in that building? How much
would it cost to move to a different location?
Answer. The current location is included in the geographic area
selected as part of the competitive solicitation. The lease renewal
follows standard acquisition process including a competitive
solicitation. Therefore, the ultimate selection of the lease location
could be other than the current lease. At this time, it is premature to
comment on a forced move from the current location or the costs
associated with a different facility.
Currently, FinCEN is the only Federal tenant in the building.
However, it is our understanding that another Federal agency is in
negotiations with the building concerning a possible lease.
Question. The USA Patriot Act of 2001 established the Financial
Crimes Enforcement Network as a separate Treasury bureau, much like ATF
or Customs or the Secret Service. Other than the prestige of this
change, what has been the effect of becoming a separate bureau?
Answer. In many respects, FinCEN has been treated as a bureau--
having its own appropriation, participating with other bureau heads at
Treasury meetings, and producing many of the same products required by
larger bureaus. However, the bureau status does provide a number of
basic administrative authorities to perform numerous activities and
functions. Examples of these administrative functions include debt
collection, records management, mail distribution, personnel security,
physical security, procurement, personnel, travel cards, and other
areas or programs.
FinCEN has been examining its administrative processes to develop
the best mix between in-house services and competitive sourcing with
other agencies. In many instances, FinCEN has an adequate structure in
place so the impact may just be a new or enhanced reporting
responsibility. For example, FinCEN now has its own Records Group
Number from National Archives and Records Administration. Also, FinCEN
has begun to streamline its personnel processes to include taking
responsibility for final classification of positions and partial
recruitment activities while continuing to use a service provider for
systems related processing. These streamlined activities have realized
a combined savings of 90-180 days in the time needed to fill vacant
positions.
Immediately following September 11, FinCEN moved into high speed to
trace the funding of terrorist groups. This was followed by various
news reports which only touched on the efforts of your agency.
Question. I would appreciate it if you could explain, in layman's
terms, how FinCEN goes about tracing the money. How do you receive the
raw data used to follow the financial trail?
Answer. Since its inception, part of FinCEN's anti-money laundering
mission has been to identify illegal financial activity, regardless of
the specified unlawful activity. Over the years, advances in
technology, analytical training, and liaisons with other agencies have
enhanced FinCEN's financial tracking techniques.
A requisite to tracing funds is the requirement of some ``tidbit''
of terrorist-related information--a starting point. It may be
information related to an account, an address, a business, or
individual, etc. that serves as the basis for tracing funds. The
process may start: with a ``tip'' from our newly established Hotline;
or be discovered through proactive efforts; or result from some type of
information from law enforcement; or may be derived from sensitive
information. Regardless of its origin, once the information is
determined to be reliable, the tracing process begins.
As an example, using just an account number, the first step would
be to identify whether the account is in any way connected to Bank
Secrecy Act (BSA) reports, such as (Currency Transaction Reports
[CTRs], Currency Transaction Reports by Casinos [CTRCs], Suspicious
Activity Reports [SARs], Currency or Monetary Instrument Reports
[CMIRs], Foreign Bank and Financial Accounts Reports [FBARs]. If the
account is found as part of a BSA report, it provides additional
information that can be used to broaden the field used for tracing,
i.e., an address, additional persons associated with the account,
biographic data relative to account owner or party. From that point,
consideration is given to transaction amounts, number and frequency of
transactions, whether monetary instruments or money transfers are
prevalent. If a SAR has been filed, the narrative can enhance the
tracing process even more by providing additional data such as
associates, bank accounts, financial institutions, beneficiary names,
and locations.
Through thorough research, FinCEN analysts exploit every bit of
information that surfaces during the research phase, and then develop
what FinCEN refers to as ``multi-generation link analysis.'' Analytical
techniques used by FinCEN analysts incorporate link analysis and
timelines that aid in the tracking and overall flow of funds. Such
analysis considerably expands the overall scope of a financial
investigation. In tracking terrorist funds, FinCEN has realized
particular value through proactive initiatives. In the absence of a
``tip,'' FinCEN analysts routinely conduct proactive queries of SARs to
identify possible indicators of terrorist financing. Proactive cases
normally originate from SARs, and are then augmented by law
enforcement, commercial, and additional financial information. When
proactive cases are fully developed, they are referred to law
enforcement as lead information.
FinCEN's counter-terrorism efforts are far reaching and utilize
diverse sources of information to include designated foreign terrorist
organizations and nationals, the Department of Commerce's Denied
Persons List, and information from the law enforcement and intelligence
communities.
______
Questions Submitted to Paul Hackenberry
Questions Submitted by Senator Byron L. Dorgan
facilities construction master plan
Question. In your statement, you discuss the need to update the 5-
year FLETC facilities construction master plan to respond to the
increased demand for training. This makes a great deal of sense.
However, you only plan to review the facility needs at Glynco, GA,
Artesia, NM and Cheltenham, MD.
You already have a significant and potentially growing presence in
Charleston, SC. Given the increased demand for training, as well as
some potential expansion limitations at the other FLETC facilities, why
not take another look at Charleston?
Answer. Unlike the Glynco, Artesia and Cheltenham sites, which are
owned and operated by FLETC for multiple agencies, Charleston is leased
by the Department of Justice and is used exclusively for entry level
U.S. Border Patrol training. FLETC helped the INS/U.S. Border Patrol to
set up operations in the mid-1990's and we have supported their
training with instructional, contract and technical assistance. FLETC
has developed a business case study that advocates the consolidation of
all Border Patrol training in Artesia at a significant cost savings to
the government. Discussions are underway with Justice and INS on the
issue. The facilities master plan now under development by an
experienced site planning firm, Clark Nexon, Inc. of Norfolk, VA, will
include consideration of U.S. Border Patrol training needs, but the
indications are that they still can be accommodated by FLETC without
recourse to yet another permanent training site.
Question. Also, how does the new Customs Service facility being
constructed in Harpers Ferry, WV fit into your plan?
Answer. Congress provided funding directly to the U.S. Customs
Service in fiscal year 2000 for the development of a requalification
firearms training site at Harpers Ferry, WV. The appropriation language
in the bill stated this site was for a specific, limited purpose and
was not to duplicate training conducted at FLETC sites. FLETC, U.S.
Customs Service and the Office of Enforcement in the Department of
Treasury signed a Memorandum of Understanding for operations of the
Harpers Ferry location consistent with Congressional intent. U.S.
Customs Service continues to be a major partner in FLETC training, and
all FLETC sites, including the newest location in Cheltenham, MD, are
available to the U.S. Customs.
transportation security agency
Question. In your statement, you note that the FAA requested that
you undertake training for the newly expanded Federal Air Marshall
program. There also appears to be discussion about who will train the
new Federal baggage screeners. The uncertainty about who will be
providing the training in the long run makes it difficult to budget
effectively.
Where are you training the air marshals? How many do you envision
will be trained in over the next 2 years?
Answer. In agreement with the Department of Transportation, FLETC
began training of Federal Air Marshals (FAA) at our Artesia, NM center
in October 2001. A number of steps have been taken to ensure that air
marshals are accorded the training needed for their important
assignments, including the use of three 727 aircraft fuselages for
practical training at the site. Artesia will continue as a major source
of air marshal training for the foreseeable future, but FAA's Atlantic
City site is also being used for certain types of training conducted by
FAA. The precise number of air marshals to be trained is still being
determined by the Transportation Security Administration.
Question. As for the baggage screeners, who will be making the
decision about who will undertake this training? If it is decided that
FLETC will conduct the training, where do you envision this training
will occur? Would a new site be required? Also, are funds for this new
mission included in your fiscal year 2003 budget request? If not, how
much would be required and when?
Answer. FLETC's involvement in the training of baggage screeners at
U.S. airports has been limited. FLETC's chief responsibility is to
conduct and support training for Federal law enforcement personnel.
Baggage screeners will not have law enforcement powers. Thus, FLETC's
involvement has been as a consultant on curriculum development and on
formulation of a train-the-trainer program for would-be trainers of
baggage screeners. FLETC conducted two pilot programs in February and
March 2002 to prepare trainers, but no further training of this nature
is expected at FLETC. It is our understanding the Transportation
Security Administration intends to offer this training through a
contractor and at locations across the country. FLETC may continue to
provide training validation assistance for these programs.
border agency consolidation
Question. There is a recommendation pending to fold the Customs
Service into the Justice Department via the INS. There is also
discussion and legislation to create a new border agency or department
comprising a number of agencies.
Should any of these recommendations occur, how will they require
you to modify your current training regime? Would you also consolidate
training at a given location or make some other arrangement or maintain
current practices--at least for the time being?
Answer. Both the U.S. Customs Service and the Immigration
Naturalization Service are member agencies in FLETC; thus we have had
significant experience with the type of training they receive and the
facility requirements for conducting that training. Should any
consolidation of these two agencies or others occur under a
Congressional mandate, FLETC is prepared to help redesign curricula and
realign training to meet new objectives, including cross designation
training. If a new border security agency is formed in the future,
FLETC will work with the affected agencies to determine the duration,
special requirements and location to best conduct this training.
cheltenham facility
Question. You are in the process of modifying the Cheltenham, MD
facility for use by Washington, DC-area law enforcement personnel.
Who will be trained at this facility? Do you envision it being used
by other Federal law enforcement personnel who need to qualify as
weapons carriers?
Answer. The Cheltenham facility will serve two major needs: an in-
service academy operation for the U.S. Capitol Police and an
interagency requalification site for firearms and law enforcement
vehicle skills training. The U.S. Capitol Police already have begun
training in interim quarters at Cheltenham, and their permanent
facility is expected to be ready in September 2002. The firearms and
vehicle facilities are under design and expect to be opened to use by
late fiscal year 2003 and early fiscal year 2004. The legislation
establishing the Cheltenham site in fiscal year 2000 specifically
identified the Treasury law enforcement bureaus, U.S. Capitol Police
and the Washington, DC Metropolitan Police Department. The legislation
also makes this site available to all Federal agencies with law
enforcement personnel assigned to the Washington, DC area who need
requalification training of a short duration. FLETC calculates that
over fifty Federal agencies will participate at Cheltenham, but the
precise number of personnel is still being determined. Training
provided at this location will be conducted on a reimbursable basis
similar to the way advanced training is done in Glynco and Artesia for
partner agencies.
rural law enforcement project
Question. For the past few years, this Subcommittee has added a
limited amount of funds to your budget to assist in the development of
a rural law enforcement training curricula. That work has been
performed primarily by the Rural Law Enforcement Education Project at
Minot State University in Minot, ND. I understand that FLETC finds the
work product delivered by MSU to be valuable and that there is interest
in expanding the program.
Please describe your impression of the current program and the
interest level in expanding the program. Also, if additional funds are
needed to accomplish this expansion, how much additional funding would
be required and for what purposes?
Answer. Minot State University (MSU) has provided a number of
excellent work products in connection with the Rural Law Enforcement
Education Project, which was first initiated in 2000 under the National
Center for State and Local Law Enforcement. ``The Training Needs
Assessment for the Northern Plains States'' research surveyed rural
agencies as to the types of crimes impacting rural law enforcement
agencies. Minot State University has contracted with the National
Center to provide longitudinal studies on the effectiveness of the law
enforcement training offered to agencies as determined in the Northern
Plains States. Longitudinal studies are continuing for ongoing
training. MSU has created a clearinghouse as specified in the contract,
and they are serving as a resource center for rural law enforcement
agencies seeking training, research, and grant availability and writing
assistance. MSU is sending two representatives to the National Center
for an 8-week period to work with these projects. MSU has conducted
post training surveys on the National Center's train-the-trainer
programs to validate and strengthen much needed specialized training
for rural law Enforcement agencies. As a result of their research, they
have recommended that a Rural Policing Institute (RPI) be created to
link the work of MSU and the National Center, which will strengthen the
programs provided by the National Centers' Small Town And Rural (STAR)
Project and reach additional rural agencies. The mission of the RPI
would be to develop and deliver specialized and advanced training,
based upon sound research, for small town and rural law enforcement
officers, supervisors, and managers. The training would be held at the
FLETC facilities, MSU, and throughout the U.S. We are studying their
proposal and can make recommendations once this assessment is complete.
______
Questions Submitted by Senator Ben Nighthorse Campbell
Question. The biggest question on all of our minds with regard to
the Federal Law Enforcement Training Center concerns the training needs
of the new Transportation Security Administration. We know that 5,000
new Federal Air Marshals need to be trained this year, and that there
will be at least 4,000 more next year--not to mention the continuing
need to train replacements.
I'd appreciate it if you would give us an update on the role of
FLETC in this regard. And, secondly, does FLETC have sufficient
resources for this effort?
Answer. FLETC began training for increased numbers of Federal Air
Marshals in October 2001 at the request of the Federal Aviation
Administration (FAA). Program agreement has been reached between the
FAA and the FLETC on the training format to be used. Adjustments will
continue to be made as more information becomes available as to the
long-term mission goals of the TSA. FLETC is now conducting intensive
training at its Artesia, New Mexico site on a 6-day workweek for new
Federal Air Marshals. The increased training requirements of the FAA
were not fully known when the fiscal year 2003 President's budget was
submitted; however, the FAA has provided a reimbursable agreement to
pay for the cost of providing this training for fiscal year 2002.
Funding was provided by this Committee in late 2000 to develop a
D.C. metropolitan area law enforcement training center at Cheltenham,
Maryland. This site was primarily envisioned as a location for firearms
and vehicle operation requalifications, as well as providing training
space for the Capitol Hill Police.
Question. Please give us an update on what progress has been made,
and when this facility is expected to be open for business.
Answer. The Cheltenham, MD site was transferred to FLETC's
inventory in May 2001 from the U.S. Navy. Significant progress has been
achieved thus far, and the timelines for design and construction are on
track. An environmental study was completed, with a finding of no
significant impact issue. Other studies such as noise levels and
traffic patterns also have been concluded, and local meetings within
the private communities near Cheltenham have been successfully
undertaken. An interim building for U.S. Capitol Police training was
opened in February 2002. Their permanent academy site is expected to be
ready by September 2002. Design is complete, or nearly so, on several
projects, including the firearms range complex and vehicle training
range. Construction will begin in May and throughout the summer of 2002
on these buildings and related facilities, such as office space,
security and registration, a haz-mat storage facility and other
permanent structures. Much of the $33.5 million appropriated for
Cheltenham will be obligated in fiscal year 2002. The anticipated
opening for most facilities at Cheltenham is early fiscal year 2004.
More than 50 Federal agencies and the District of Columbia Metropolitan
Police Department are projected to train in excess of 8,000 law
officers in the first year or two of operation.
______
Prepared Statement of the Institute of Makers of Explosives
On behalf of the Institute of Makers of Explosives (IME), I am
submitting a statement for inclusion in the Subcommittee's hearing
record regarding the proposed fiscal year 2003 budget for the Bureau of
Alcohol, Tobacco & Firearms (BATF).
interest of the ime
The IME is the safety association of the commercial explosives
industry. Our mission is to promote safety and the protection of
employees, users, the public and the environment; and to encourage the
adoption of uniform rules and regulations in the manufacture,
transportation, storage, handling, use and disposal of explosive
materials used in blasting and other essential operations.
Commercial explosives are key to our way of life. Without them,
materials used in nearly every item in our society would be practically
impossible to remove from the earth. Effective recovery of energy
resources, such as coal and oil, cannot be accomplished without
explosives. Our transportation system, which underpins our economy, is
built on minerals and aggregates mined with explosives. Specialty
applications for fire and avalanche control or demolition and
construction rely on commercial explosives. Last year, 2.7 million
metric tons of explosives were consumed in the United States of which
IME member companies produced over 95 percent. These products are used
in every state in the Union and are distributed worldwide.
The production, distribution, storage and use of explosives are
highly regulated. BATF is one of the agencies that plays a primary role
in assuring that explosives are identified, tracked, and stored only to
and by authorized persons. The ability to manufacture, distribute and
use these products safely and securely is critical to this industry.
With this perspective, we have carefully reviewed the Administration's
fiscal year 2003 budget request and have the following comments.
budget resources are inadequate for responsibilities
Our industry relies on BATF to efficiently and effectively perform
a number of functions to ensure that the legitimate commerce of
explosives can go forward safely and unimpeded. Additionally, when
explosives are stolen, lost, or used for illegal purposes, we rely on
the BATF to recover products and investigate incidents as necessary. In
this regard, we support all necessary resources for these essential
services. However, the BATF budget request does not adequately support
these essential services.
BATF claims in its budget justification ``to provide a
comprehensive proactive and reactive force in the fight to protect the
American public against the criminal use of explosives [and] to have
the potential to thwart terrorist activity at every level of the
execution process, i.e., from the theft or purchase of explosives to
the deployment of those explosives for terrorist purposes at public
events.'' \1\ The commercial explosives industry and the public are
served best by the prevention portion of this mandate. However, the
budget clearly points to gaps in BATF's ability to perform assigned
functions.
---------------------------------------------------------------------------
\1\ Fiscal year 2003 BAFT Budget Justification, Volume 1, pages 2-
3.
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BATF has admitted in the past that its explosives program is not
adequately covered. While BATF has stated that it is making efforts to
better balance its responsibilities, this budget request would suggest
otherwise. In the wake of the events of September 11, BATF set out to
inspect all licensees/permittees, currently a class of about 9,400, of
which IME represents about 3.4 percent. These were not all full
inspections. The task would be too daunting. Despite BATF's efforts,
the Bureau came 2,000 licensees/permittees short of its inspection
goal. As a result of the inspections it did perform, BATF found about
2,000 violations, about 10 percent being referred for enforcement.\2\
Although less than 2.7 percent of licensees/permittees were the source
of these violations, BATF still must follow-up to ensure that
corrective actions have been taken. At the time the Bureau's budget
document was prepared, BATF estimated that its corrective action
workload would be about 850 in fiscal year 2003.\3\ The violations data
from the post-September 11 inspection drive as well as that from fiscal
year 2001, indicate that 850 corrective actions is less than half the
current workload.\4\ In the meantime, no matter how serious the number
of violations discovered may seem to be, it appears that BATF has
issued only one notice of license revocation.\5\ Yet, BATF's fiscal
year 2003 budget request asks for no additional FTE under the budget
function that includes these and other inspection activities of the
Bureau's regulated commodities, holding at 529 FTE.\6\ With this
resource commitment, BATF states that it will only be able to inspect
50 percent of the explosives industry and that it will ``strive'' to
investigate 100 percent of reported explosives thefts and losses.\7\
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\2\ Statement of Bradley A. Buckles, Director, BATF, Subcommittee
on Treasury, Postal Service and General Government, House
Appropriations Committee, February 28, 2002, page 3.
\3\ Fiscal year 2003 BATF Budget Justification, Volume 2, page 20.
\4\ Op. Cit., Statement of Bradley A. Buckles, February 28 2002,
page 17. Fiscal year 2001--1,813 violations; 1st quarter fiscal year
2002--1,763 violations.)
\5\ Ibid.
\6\ Fiscal year 2003 BATF Budget Justification, Volume 1, page 13.
\7\ Fiscal year 2003 BATF Budget Justification, Volume 2, page 20.
(The Budget Justification does not disclose data to evaluate whether or
not the Bureau has met its goal to investigate 100 percent of reported
explosives thefts and losses.)
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The Subcommittee should also be aware that, in the aftermath of
September 11, legislation has been introduced with Administration and
industry support to close loopholes in Federal explosives permitting
law.\8\ Currently, all manufacturers, importers, and distributors of
commercial explosives are required to obtain Federal licenses. However,
only interstate, but not intrastate, users of explosives, with one
minor exception, are required to obtain Federal permits to purchase
commercial explosives. This legislation would close the intrastate
loophole. It would also significantly broaden the base of those
employees of licensees/permittees that are required to obtain
background checks and broaden the scope of the background check before
such employees can ``possess'' or otherwise ``direct'' the management
or policies of businesses engaged in the manufacture, importation,
distribution, purchase, receipt or use of explosives. While IME is
extremely supportive of these legislative efforts, we are concerned
that BATF have in place the systems and resources necessary to
implement these additional requirements in a timely manner.
Regrettably, BATF lacks the data to estimate what the additional
workload will be.\9\
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\8\ S. 1956. We also understand that similar legislation is being
developed by the House Judiciary Committee.
\9\ BATF did estimate that the number of additional background
checks for those that ``direct'' would be in the neighborhood of 80,000
checks per year. This figure does not capture the number required for
those that ``possess'' explosives, nor the workload to process the
intrastate purchase permits.
---------------------------------------------------------------------------
There is a price to safety and security. Industry and the public
trust that BATF has the resources to fulfill its regulatory
responsibilities. It is up to Congress and, in particular, this
Subcommittee, to ensure that BATF has the resources it needs.
strategic goals
A key to rebalancing the Bureau's statutory responsibilities is the
identification of performance standards that can measure BATF's
progress or areas needing attention. In fact, such performance measures
are demanded by the Government Results and Performance Act. Currently,
BATF has identified six customer service standards to measure its
delivery of services to its regulated community.\10\ None of these
standards address the needs or concerns of the explosives industry.
Nearly 2 years ago, we approached BATF with suggestions of measures
appropriate for our industry.\11\ While the Bureau has discussed our
suggestions, no final decisions have been made as to whether our
suggestions are appropriate, could be modified, or if other standards
would better measure service to the explosives industry. In the
meantime, measurable indices remain unavailable to assess Bureau's
service to the explosives industry.
---------------------------------------------------------------------------
\10\ Fiscal year 2003 BATF Budget Justification, Volume 2, page 24.
\11\ Letter to Wayne Miller, BATF, from Cynthia Hilton, IME, July
19, 2000.
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rulemaking concerns--closing the import marking loophole
Currently, BATF regulations require domestic manufacturers to mark
all explosive materials they manufacture for sale or distribution.\12\
These marks consist of the manufacturer identity and the location,
date, and shift of manufacture, commonly referred to in the industry as
the ``date-plant-shift code.'' These marks are necessary for reasons of
security and safety. The BATF has emphasized that the failure to apply
these markings inhibits law enforcement from tracking explosives to the
source, and proving criminal activity. The date-plant-shift code
enhances safety because some explosives deteriorate over time and the
code allows users to keep inventory fresh. Additionally, the date-
plant-shift code is one of industry's ``QA/QC'' tool, allowing the
manufacturer the ability to trace product quality problems back to the
point of manufacture and distribution.
---------------------------------------------------------------------------
\12\ 27 CFR 55.109(a).
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These marking rules, however, do not apply to foreign
manufacturers. During the last 3 years, we became aware of heretofore
unprecedented large imports of unmarked explosives being shipped to the
United States from China.\13\ This development prompted IME to petition
BATF for a rulemaking to close this loophole as it applies to high
explosives and blasting agents. Our petition would make it unlawful for
any licensee to import such explosive materials without legibly
identifying by marking all explosives materials in the same manner
prescribed by the BATF for domestic manufacturers.
---------------------------------------------------------------------------
\13\ Regrettably, not all countries that manufacture explosives
maintain the same high standards for stewardship and security
that.underpin the BATF's marking requirements for domestic
manufacturers. This disparate regulation gives rise to concerns about
trade practices. In terms of high explosives, the United States has
already lost its ability to domestically manufacture TNT, and only one
company still makes dynamite. We do not think it is in the national
interest to lose more of our high explosive domestic manufacturing
capability to unfair trade requirements.
---------------------------------------------------------------------------
While stating general agreement with our concern, BATF expressed
doubt that they could go forward with our proposal without more
information about the economic consequences to the explosives industry
irrespective of whether or not the product was a ``high'' or ``low''
explosive. Nevertheless, to the Bureau's credit, an advanced notice of
proposed rulemaking (ANPRM) was issued.\14\ Although all comments to
the ANPRM supported the need to close this loophole, the Bureau remains
reluctant to go forward with a rulemaking because it did not receive a
greater number of comments. It is unclear to us what additional ``me
to'' comments would substantively add to the Bureau's understanding of
this issue as it relates to the problem at hand, namely unmarked
imports of high explosives and blasting agents. In the meantime, we
have seen at least one State unilaterally act to preclude the
introduction in commerce of unmarked imported explosives in that State
in the face of BATF delay.\15\ While we understand and applaud this
State's initiative, we are concerned that over time other states will
feel compelled to act independently and possibly inconsistently to
address this issue. The lack of urgency given this rulemaking,
especially in light of the priority given to strengthening homeland
security, is without justification. We ask that you join with us in
asking the Bureau to close this security and safety loophole.
---------------------------------------------------------------------------
\14\ 65 FR 67669 (November 13, 2000).
\15\ CO 9-6-105, (2001).
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research
As manufacturers of explosive materials, we have a special interest
in doing everything possible to prevent the misuse of our products. We
are interested in the development of new technologies to safeguard the
public, and support efforts to develop detection and prevention
technologies that will enhance our national security. Nevertheless,
from time to time efforts are made to mandate technologies that are
unproven or unsupported by sound science and cost-benefit analyses.
Efforts to mandate identification taggants in explosives are a case in
point. In 1996, Congress refused to bend to such demands and enacted,
with IME support, anti-terrorism legislation that instead directed BATF
to study the feasibility of placing identification taggants in
explosives.\16\
---------------------------------------------------------------------------
\16\ Public Law 104-132, Section 732.
---------------------------------------------------------------------------
BATF initially planned to submit the report to Congress by the end
of fiscal year 2001. IME had worked with BATF to ensure that they have
the industry data that they require. Throughout the process BATF made
efforts to keep us informed of the work on the study and preliminary
findings. As late as August 2001, we were lead to believe that BATF's
research had concluded, as did contemporary assessments by the National
Academy of Sciences, that identification taggants cannot be supported
with current technology. However, following the events of September 11,
BATF informed us that the report had been pulled back and its
conclusions are being reassessed. As tragic and sobering as the events
of September 11 are, it does not alter the fact that current technology
does not support identification taggants. In the Subcommittee's
oversight capacity, BATF should be asked about the release date of the
1996-mandated report and, after 5 years of study, what if any of the
reports recommendations have been changed due to the events of
September 11.
need for federal agency coordination
Events in the last 12 months have prompted concerns about BATF
intrusion into the jurisdiction of another Federal agency. A critical
shipment of explosives to a mine is northern Alaska was frustrated, for
a number of weeks last summer, in large part because a BATF agent sent
to a local Chief of Police a letter the agent wrote to the area Captain
of the Port questioning the U.S. Department of Transportation's (DOT)
authority to regulate the shipment and disputing its advisability
because of the devastating consequences that would occur if the
shipment detonated.\17\ Throughout the incident, DOT vigorously
defended its jurisdiction over and the safety of this movement. Before
the resolution of this matter, Senator Stevens was prompted to include
a provision in law to ensure that a port would always be available to
the shipment of this critical supply.\18\ More recently, BATF has
described the scope of its proposals to broaden the applicability of
Bureau background check requirements to include truck ``drivers'' and
presumably other employees who may ``possess'' explosives in the course
of transportation. We are concerned about these statements inasmuch as
current Federal explosives law does not apply to any aspect of the
transportation of explosives regulated by DOT.\19\ Regulatory overlap
leads to confusion and non-compliance. To reduce such overlaps
particularly with DOT where the interface should be seamless, BATE
should work with DOT to establish a general protocol to minimize
regulatory overlaps. We believe Congress should insist that these
agencies show progress in clarifying and respecting each other's
jurisdictional authority.
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\17\ Letter to Captain James Spitzer, USCG, from Gary Bangs, BATE,
copy to Chief Lane Wintermute, Astoria, OR, May 10, 2001.
\18\ Public Law 107-107, Section 1046.
\19\ 18 U.S.C. 845(a)(1).
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conclusion
The manufacture and distribution of explosives is accomplished with
a remarkable degree of safety. We recognize the important role played
by BATF in helping our industry achieve and maintain safe and secure
workplaces. We, therefore, strongly recommend full funding for BATF.
Thank you for your attention to these issues.
SUBCOMMITTEE RECESS
Senator Dorgan. This concludes today's hearing. Thank you
for being here.
[Whereupon, at 2:40 p.m., Wednesday, April 17, the
subcommittee was recessed, to reconvene at Thursday, April 18.]
TREASURY AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL YEAR 2003
----------
THURSDAY, APRIL 18, 2002
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 2:33 p.m., in room SD-192, Dirksen
Senate Office Building, Hon. Byron L. Dorgan (chairman)
presiding.
Present: Senators Dorgan, Reed, and Campbell.
DEPARTMENT OF THE TREASURY
U.S. Customs Service
STATEMENTS OF:
JAMES GURULE, UNDER SECRETARY FOR ENFORCEMENT
ROBERT BONNER, COMMISSIONER, U.S. CUSTOMS SERVICE
OPENING REMARKS
Senator Dorgan. I will call the subcommittee to order.
This is a hearing of the Subcommittee on Treasury and
General Government, a hearing on the United States Customs
Service fiscal year 2003 budget.
Yesterday we had a hearing on the budget for a number of
law enforcement agencies within the Department of the Treasury
that was exclusive of the Customs Service. Today we will
receive testimony from the largest and the oldest law
enforcement agency within the Treasury Department, the U.S.
Customs Service.
Aside from the IRS, which dwarfs all Treasury agencies in
the size of its budget, Customs is the largest agency within
Treasury, both in terms of the size of its budget as well as
the number of people it employs. Its budget passed the $3
billion mark this current year with an FTE level of 18,595
employees. While the budget decreases in real terms next year,
the number of FTEs would be increased by 1,024.
The events of September 11 serve to reinforce the critical
role of the Customs Service and the role it plays, particularly
in protecting our country. To the long list of prohibited items
your agents and inspectors attempt to apprehend before they
cross into this country from cocaine to ecstasy to Iranian
pistachios and counterfeit Chinese copies of Hollywood movies
and Silicon Valley computer software, we must now add weapons
of mass destruction, as well as persons attempting to enter
this country by enclosing themselves in shipping containers.
It started a few years back when an alert Customs inspector
in Washington State, at Port Angeles, not an orange rubber cone
but actually a live human inspector at a small port of entry,
apprehended Ahmad Ressam, the so-called Millennium Bomber. Now
Customs officials are at a Level 1 alert and every port of
entry into this country is staffed 24/7 by at least two Federal
officials. This is what we must expect to be the normal
operating environment for the near future as we fight a war on
terrorism.
Mr. Commissioner, I am pleased that the effort begun by
this subcommittee a couple of years go to refocus attention on
the northern border and its chronic lack of resources and
personnel has been embraced by the Customs Service under your
leadership. Customs is creatively attempting to address this
new environment by looking at how resources, both people and
technology, can be effectively used to provide homeland
security.
I also applaud your container security initiative,
Commissioner. This was a topic of considerable debate during
the last week's full committee hearings and I look forward to
discussing this concept today with you.
It is no secret that the discussion of modifying Customs
operations, folding Customs into the INS, for example, at the
Justice Department or creating a new border security agency is
a prospect that troubles me greatly. In my judgment, the
Customs Service works. The Customs Service is unique. Not only
does Customs protect our borders, it also keeps our economy
moving by facilitating legitimate trade. Also, it is the second
largest revenue raiser for the Federal Government, after the
Internal Revenue Service.
During your brief tenure, Mr. Bonner, the Customs Service
has moved out aggressively to address the needs at our land
borders and at our seaports. I do not want to see all of this
good effort and momentum lost as the boxes on organizational
charts are moved. I do not happen to think you solve
organizational issues by creating larger organizations or
greater bureaucracy. The Customs Service should not be visited
by the problems of the Immigration Service, in my judgment.
Mr. Commissioner you, of course, are restricted and
restrained to support whatever the Administration says it
intends to do, and I understand that. But I want you to
understand, and those in the Administration who are discussing
this, that there are those of us in Congress who believe the
Customs Service does a fine job, has a unique role, and we
would not look favorably upon visiting upon the Customs Service
some problems that other agencies have.
Let me call on the ranking member, Senator Campbell.
Senator Campbell. Thank, Mr. Chairman, just a brief
comment.
I also believe the Customs Service is doing a fine job.
Certainly the additional role that they have taken on since the
9/11 tragedy cannot be overstated. Certainly, there is more to
the Customs Service than just the vital security of the
physical borders.
The Customs Service works with the trade industry to make
sure that the legitimate goods can come into our country on a
timely basis, and that counterfeit goods cannot. Both have a
major impact on the economic well-being of our Nation.
Customs is also involved in reducing the flow of illegal
drugs into our country. I noted with interest the part of
Commissioner Bonner's prepared remarks which showed that the
Level 1 security at the border has had the added benefit of
much higher than normal drug seizures. Customs is also involved
in disrupting money laundering efforts by implementing parts of
the National Money Laundering Strategy, and that too protects
our economy while at the same time combating terrorism.
So I look forward to the testimony, Mr. Chairman. Thank
you.
Senator Dorgan. Let me call on my colleague, Senator Reed.
Senator Reed. Mr. Chairman, I have no formal statement. I
just want to welcome the witnesses and proceed to the
questioning. Thank you, Mr. Chairman.
Senator Dorgan. Commissioner Bonner, I know you are
accompanied by Under Secretary Gurule today. He was with us
yesterday. Let me ask you to proceed any way that you choose to
proceed. Did you want to proceed first, Mr. Secretary?
OPENING REMARKS FROM UNDER SECRETARY OF JIMMY GURULE
Mr. Gurule. Yes, Mr. Chairman. Let me just begin with a
very brief opening statement.
Chairman Dorgan, Ranking Member Campbell, and Senator Reed,
I am privileged to return to be with you here today to support
the President's 2003 budget request for the Department of the
Treasury's Office of Enforcement and the U.S. Customs Service
in particular.
In the interest of time, I refer the subcommittee to my
statement in yesterday's record for an overview of the
President's fiscal year 2003 budget request for the Treasury
Department's Office of Enforcement and its law enforcement
bureaus.
Today I am pleased to join Robert C. Bonner, the
Commissioner of the United States Customs Service, who will
testify regarding that bureau's programs and initiatives. I
have had the privilege to work with Commissioner Bonner in
various capacities over many years, and it is indeed a pleasure
to work with him again in this capacity. He brings a wealth of
experience and leadership ability to his position and already
has launched a number of new Customs initiatives to make our
nation more secure.
Yesterday, during my testimony, I discussed three priority
areas of the Office of Enforcement and the law enforcement
bureaus: terrorist financing, security for the Winter Olympics,
and border security. The Office of Enforcement and the Customs
Service have worked closely in each of these areas, and I would
like to highlight briefly for the Subcommittee some of those
initiatives.
With respect to terrorist financing, last October Treasury
created Operation Green Quest, which is a multi-agency
financial enforcement investigative initiative designed to
augment existing counterterrorist efforts by bringing the full
scope of the Government's financial expertise to bear against
systems, individuals, and organizations that serve as sources
of terrorist financing. The work of this task force that is
headed by the U.S. Customs Service already has led to 12
arrests, six indictments, and the seizure of nearly $4 million
and bulk cash seizures, cash smuggling of over $11 million.
Green Quest agents, along with those from the FBI and other
Government agencies, including the IRS-CI, have traveled abroad
to follow leads, exploit documents recovered, and provide
assistance to foreign governments. The work of these financial
experts is just starting, as they have opened well over 300
terrorist financial investigations.
International cooperation is an important part of our
strategy in the war against terrorist financing. Today, all but
a handful of countries have expressed their support for the
international fight against terrorism. The Office of
Enforcement, in conjunction with the Customs Service and other
Federal agencies is providing technical assistance to countries
to strengthen their capacity to freeze terrorist funds and are
working with foreign financial officials on new cooperative
actions against terrorist activities and financing.
The Office of Enforcement has helped coordinate the
deployment of financial jump teams consisting of experienced
accountants, bank examiners, and other financial experts from
the Customs Service, OFAC, IRS-CI, FinCEN, the FBI, and other
agencies. These experts review bank records and possible links
to money associated with bin Laden's al Qaeda network.
With respect to Olympic security, yesterday I testified
before this subcommittee about the excellent coordination among
Treasury law enforcement bureaus in providing security support
for the 2002 Winter Olympic games in Salt Lake City. With
Commissioner Bonner here today, I take this opportunity to
commend him and the dedicated men and women of the United
States Customs Service for the key security role they played
for these Olympic games. I personally visited a number of the
Olympic venues and met with many of the men and women of the
Treasury enforcement bureaus who were involved in providing
security for the Olympic games.
I personally toured the U.S. Customs Service command and
coordination center in which Customs was monitoring the general
aviation of flights that were flying into Salt Lake City, into
the restricted fly zone during the Winter Olympics. The Customs
Service provided critical air surveillance in restricted air
space, ground support to the Secret Service, increased presence
at the northern border, and screening of general aviation
aircraft and their passengers and crew. At least 500 Customs
officers were committed to the day-to-day oversight of the
Winter Olympic games.
The total success of this coordinated enforcement effort in
a heightened security environment is a tribute to the dedicated
men and women who serve in the Customs Service and in the other
Treasury enforcement bureaus.
Last, border security. One key component of defending our
homeland is protecting our Nation's borders while facilitating
the flow of travelers and cargo. Last November, Secretary
O'Neill, Commissioner Bonner and I met with our Canadian
counterparts during the G-20 meeting in Ottawa to discuss
cooperative efforts to strengthen security along our shared
border while expediting the flow of trade.
Commissioner Bonner and I are also working with the Office
of Homeland Security to help implement the 30-point action plan
announced in December by Governor Ridge and then Foreign
Minister, now Deputy Prime Minister, John Manley. A similar
smart border accord is now in place for the United States-
Mexico border. On March 22 of this year, President Bush and
President Fox announced in Monterrey, Mexico a 22-point
agreement to build a Smart Border for the 21st century between
our two countries.
I can assure the subcommittee today that the coordination
and cooperation not only among Federal border agencies, but
also with their Canadian and Mexican counterparts, has never
been stronger.
Finally, on Tuesday of this week, Secretary O'Neill,
Commissioner Bonner, Governor Ridge, and Governor Engler
visited the port of entry at the Ambassador Bridge, in Detroit,
to announce C-TPAT. Under this program, major companies work
with the Customs Service to implement security procedures
throughout the supply chain. In exchange, the Customs Service
expedites the processing of these companies' products when
entering the country.
Commissioner Bonner will discuss this initiative in greater
detail, but this stands as a model for ways in which the
Government and the private sector can work together to ensure
enhanced security at our Nation's borders.
In conclusion, I want to thank you for the opportunity to
testify today in support of the President's fiscal year 2003
budget, and I want to thank you sincerely for the support that
you have provided to the Treasury Department, to Treasury
enforcement, and specifically to the Customs Service. I look
forward to answering any questions that you may have.
Senator Dorgan. Secretary Gurule, thank you very much.
Next we will hear from Commissioner Bonner, the
Commissioner of the Customs Service. Mr. Commissioner, I
understand you have a short video presentation, but we will be
happy to include your entire statement as a part of the record,
and you may summarize and proceed as you will.
OPENING REMARKS FROM CUSTOMS COMMISSIONER ROBERT C. BONNER
Mr. Bonner. I appreciate that, Mr. Chairman. I want to make
a few remarks before I show the video.
I want to thank you, Senator Campbell, and Senator Reed. I
am very pleased to be able to appear before the subcommittee
this afternoon with Under Secretary Gurule in connection with
the fiscal year 2003 budget request for the U.S. Customs
Service.
I know, from conversations I have had with the Chairman,
that everybody recognizes that the mission of the U.S. Customs
Service, actually in the history of our country, has always
been very important. But since September 11, that mission has
never been more important. From that day forward, since
September 11, the number one priority of the U.S. Customs
Service has been protecting and defending our country against a
real and a continuing terrorist threat.
The fiscal year 2003 budget request reflects this priority.
It reflects it, number one, at our borders, where U.S. Customs
inspectors and canine enforcement officers defend our country
day in and day out, at our land port of entries, at our
airports, and our seaports. Customs role certainly is, in
addition to all of the other things that the chairman indicated
at the outset of the hearing, in addition to interdicting drugs
and other contraband, it is a mission to detect and prevent
terrorists and terrorist weapons from entering our country. We
need the resources to strengthen border security. But at the
same time, we also need these resources so we can do so without
choking off the flow of trade that is so important to our
country's economy.
But we are not just playing defense. We also, as Under
Secretary Gurule has indicated, have gone on the offense with
our Customs agents who are, and have been, investigating and
disrupting terrorist financing through Operation Green Quest
which is, as Mr. Gurule indicated, a multi-agency task force
led by the U.S. Customs Service.
And our Customs Agents, through Project Shield America, are
also protecting against international terrorist organizations
and rogue nations that support the acquiring of strategic
weapons, components, technology and equipment by illegally
exporting those kinds of materials.
This priority, in fact all of the counterterrorism
initiatives of the Customs Service, have been supported by
Congress in the fiscal year 2002 supplemental and they are
supported by the Administration in its 2003 budget request in
the form of program increases and annualizations.
I want to thank you particularly, Mr. Chairman, and members
of this subcommittee for the support that you have given to the
U.S. Customs Service in the 2002 appropriation and the 2002
supplemental, and for your continuing support of the U.S.
Customs Service and its mission.
Regarding border security, I believe that we can
dramatically improve security of our country against the
terrorist threat and keep commerce flowing if Customs has the
right strategy, if it has the right tools and technology, and
if it has sufficient staffing. That strategy is, and should be
in my view, two fold. First, it involves applying risk
management principles to sort out the high risk from the low
risk cargo, vehicles and people, so that we can concentrate our
efforts and our inspections on those goods and those cargo
containers and those vehicles and people that pose a potential
risk. And secondly, I believe we need to push our security out.
And that is, working with industry and working with other
nations, we need to do far more to increase security along the
entire supply chain and we need to start pre-screening cargo
containers before they arrive in the United States.
As part of our efforts to push the security of our country
outward, Customs has established--in fact, Customs has been
working very hard with industry, with U.S. importers and
others, to establish a partnership to dramatically increase
security along the entire supply chain of goods into the United
States. This is the Customs Trade Partnership Against
Terrorism.
Last Tuesday, Secretary O'Neill, Governor Ridge, and I
announced the Customs Trade Partnership Against Terrorism at
the Ambassador Bridge in Detroit. I proposed this partnership
to the trade last November at the Customs trade symposium that
was held here in Washington in November. I am pleased to report
that, as a result of, let me say, a lot of dialogue with the
trade, a lot of listening on the part of the Customs Service,
and a whole lot of hard work on the part of Customs Service
working with the trade, we have developed a program, a
partnership to prevent legitimate commercial cargo from being
used by terrorists. That is to say, we have developed a program
to increase the supply chain security literally from the
foreign loading docks to our land borders and our seaports.
The companies that have joined with Customs in the
Partnership Against Terrorism include General Motors, Ford,
Daimler-Chrysler, Motorola, Sara Lee, Target Stores, and BP-
Amoco. Those were the charter partners in the Partnership
Against Terrorism. Since that time, we have added 74 companies
who have committed, who have signed an agreement with Customs,
to implement tighter security guidelines to significantly
increase supply chain security, and also to use their leverage
as importers with their foreign suppliers to increase security.
Customs has also developed the Container Security
Initiative which, if implemented, will extend our zone of
security to foreign seaports and also protect an indispensable
means of global trade, which is containerized shipping. Under
the Container Security Strategy, in cooperation and in
partnership with other nations, we will target and pre-screen
high risk containers before they depart foreign ports headed
for the United States.
I want to tell this committee that the Container Security
Initiative is not just some theoretical program. It is not an
academic pilot project. We have already implemented the
Container Security Strategy with Canada. Last month, we
stationed U.S. Customs Officers in the ports of Vancouver,
Halifax, and Montreal to target high-risk containers off-loaded
at those Canadian ports that are in transit to the United
States.
And by the way, there are about 500,000 sea containers that
arrive at those three ports in Canada annually, which are the
major Canadian ports, that are not going to Canada. They are
coming to the United States, either by truck or rail. So we are
targeting and pre-screening those containers there.
We are also participating with the Canadian Customs Service
to screen these high risk containers before they are shipped to
the United States. The strategy is to expand the Container
Security Initiative to the major ports in Europe and Asia,
starting with the largest 20 container ports.
Mr. Chairman, there are about 5.7 million sea containers
that arrive in the United States annually, let us say almost 6
million, at our various seaports around the country. Of those,
nearly two-thirds either originate from or transit through 20
foreign container ports. So you can see that these are choke
points. If we could have a screening and security system at
just these 20 ports, you would cover something along the lines
of two-thirds of all of the sea containers that are being
shipped and imported into the U.S.
We are actively discussing the expansion of the Container
Security Initiative with several nations in both Europe and
Asia. The prospects look good for rapid expansion of this
important security initiative because these nations understand
that world trade would be severely disrupted if international
terrorist organizations used a container to conceal or detonate
a weapon of mass destruction.
With your permission, Mr. Chairman, I would like to
conclude my remarks by showing what is about a three minute
video tape of several of our northern border ports of entry and
the men and women of the Customs Service who staff them. If I
could roll that now.
Senator Dorgan. Please proceed.
Mr. Bonner. Thank you.
As that is indicating up there, Mr. Chairman, I think it is
very important to note that there are 659 new positions in the
U.S. Customs Service that were given to the Customs Service
under the 2002 appropriation and the 2002 supplemental
combined. 659 positions that are for the northern border. 591
of those are Customs officers, Customs inspectors, and canine
enforcement officers; and 69 are Customs agents.
Most importantly, not only are many of these personnel
already hired by the Customs Service, but I can report to this
committee that we will have hired all 659 before the end of
this fiscal year, by September 30 of this year.
Secondly, let me just also say that if you looked at the
total number of new positions for the U.S. Customs Service
under the 2002 appropriation and the 2002 supplemental, the
total number of new positions for the Customs Service is 1,300.
That is about 919 inspector positions and 381 agent positions.
This is including the northern border positions. All of those
positions, Mr. Chairman, will be hired and on board before the
end of fiscal year 2002.
PREPARED STATEMENT
Because of attrition, when you add the attrition and the
new hires, we will actually hire, train and bring on board to
the U.S. Customs Service this year, 2002, 1,975 new inspectors
and new agents to the Customs Service. We have already hired
1,037 of those, which is over half. And we will have all of
them hired and on board by the end of this fiscal year.
I would be happy to answer any questions that you or other
members of the committee might have.
[The statement follows:]
Prepared Statement of Robert C. Bonner
introduction and overview
Chairman Dorgan, Senator Campbell, and members of the Subcommittee,
it is a privilege to appear before you today to discuss U.S. Customs
2003 budget request. As you know, this is my first appearance before
the Subcommittee and I welcome this unique and very important
opportunity to discuss U.S. Customs' priorities at this challenging
time for our agency and for our Nation.
I want to begin by expressing my thanks to the Subcommittee for its
continuing support of U.S. Customs and its mission. You have played an
invaluable role in assisting Customs with the guidance and the
resources it needs to defend America's borders and to protect and
promote America's economy.
The Customs Service has stood as a pillar of American stability and
strength for over 200 years, by defending our country's borders and by
facilitating international trade and travel. That is why it is such an
honor for me to serve as Customs Commissioner, and to have been chosen
by President Bush to lead an organization whose origins stretch back
the very founding of our Republic.
At the direction of the President, the battle against international
terrorism is now the number one priority of the United States Customs
Service. Over the past several months, I have visited Customs employees
in locations throughout the U.S., and I can assure you that they are
working extremely hard to protect our Nation. Their dedication and
commitment are truly inspiring.
Their efforts have been supported greatly by the Congress and the
Administration in Public Law 107-117, the 2002 Terrorism Supplemental,
which provided approximately $465 million in additional counter-
terrorism funding for our agency, and in the additional $365 million in
program increases and annualizations provided in our fiscal year 2003
budget request.
The funding provided in the 2002 supplemental and in our 2003
budget will enable Customs to meet the full range of its mission-
critical responsibilities. First among these, as I mentioned, is the
battle against terrorism. As Commissioner, I will also devote needed
resources to strengthen Customs' drug fighting capabilities, improve
the management and overall operations of the agency, enhance Customs'
relationship and partnership with the trade community, and build a new
system of trade automation to strengthen our national security and
improve the flow of commerce across our borders.
Mr. Chairman, I want to touch briefly on each of these priority
areas in my statement, and outline the actions the Customs Service has
taken or is planning to take in each. And I want to begin with our
overarching concern, which is the critical role of Customs in our
Nation's homeland security.
u.s. customs' top priority: counter-terrorism
The Immediate Response
Immediately following the terrorist attacks on September 11, at
10:05 a.m. on September 11, Customs went to a Level 1 alert across the
country at all official border entry points--land border ports of entry
(POEs), seaports, and international airports. Level 1 requires
sustained, enhanced scrutiny and questioning of those entering the
U.S., and includes increased inspections of travelers and goods at
every port of entry. Because of the continued terrorist threat, we
remain at the Level 1 alert today.
As part of our response, we also implemented round-the-clock
coverage by at least two officers at every authorized, public land
border crossing, even at low volume crossings along our northern
border. To do this on a 24 by 7 basis, and to keep trade moving at our
high volume ports--in Detroit, Buffalo, and elsewhere--we temporarily
detailed about 100 Customs inspectors to the Northern Border. To this
day, Customs inspectors are, in many places, working 12 to 16 hours a
day, 6 and 7 days a week. At some ports, the National Guard has been
augmenting our officers, providing some much-needed relief.
Despite the demands of extended shifts and a vastly increased
workload, these employees have carried out their duties with quiet
determination. Many even volunteered to go to remote border locations
to serve and protect their country.
As U.S. Customs shifted into its highest security posture after
September 11, we experienced extraordinarily lengthy delays at the
northern border, especially at Detroit, Port Huron and Buffalo. The
wait times at these ports of entry quickly swelled to 10 to 12 hours. I
am pleased to report that, in response, Customs and the trade community
immediately worked together to reduce those delays to pre-September 11
levels, without compromising our Level One security.
These initiatives included assigning additional Customs inspectors
to these entry points and opening more lanes for longer hours, and with
the assistance of Governor Engler of Michigan, detailing national
guardsmen to assist Customs in prescreening passengers and cargo and
conducting secondary inspections. We also posted--for the first time--
wait times at the border on our Customs website, to assist importers
and carriers with logistics. And we still do, for ports of entry on the
Canadian and Mexican borders.
In the days immediately following September 11, Customs was also
quick to join the investigative front in the war on terrorism. We
assigned many of our special agents to Joint Terrorism Task Forces
across the country, and at the SIOC at FBI Headquarters. At one point,
almost a third of our investigative workforce, over 1000 agents, were
engaged in investigations related to the terrorist attacks. That
proportion has gradually declined since last October. Customs has also
contributed approximately 110 agents to the Federal sky marshal
program. In addition, we have assumed a leading role in the Treasury
Department's efforts to disrupt and dismantle terrorist financing
networks, through our longstanding expertise in anti-money laundering
operations.
The Response in New York City
Mr. Chairman, as you also know, the Customs Service was struck
directly by the attacks of September 11. Our building at 6 World Trade
Center, which served as Customs' Headquarters for much of our most
important northeast operations, was completely destroyed by falling
debris from the twin towers.
I toured that area during my first visit to the field as Customs
Commissioner, the day after I was sworn in. I will never forget that
trip, nor the images of destruction I witnessed. During that time, I
also met with Customs employees from our World Trade Center site, all
eight hundred of whom escaped unharmed. Ultimately, the loss of our
building was nothing in comparison to the thousands of innocent people
murdered on that day.
Nonetheless, the sudden disruption to such a large and important
area of Customs' operations threatened to compromise the immediate
security of area ports and the integrity of ongoing Customs
investigations and trade and enforcement activities. But Customs' New
York employees responded heroically to the challenge, setting up a
temporary operations center within hours at nearby JFK airport. And
within just 3 weeks of the attacks, they succeeded in permanently
relocating our New York Customs Office into new office space in
Manhattan. I believe that is a remarkable achievement by any standard.
In fact, we recently concluded a highly successful drug money
laundering investigation in New York known as Operation Wire Cutter.
Much of the evidence and case history for Wire Cutter was buried along
with other files in the 6 World Trade Center rubble. After the attacks,
our agents had to go back into the piles of debris, hoisted up in
cranes, to salvage evidence for the case. Undeterred, they recovered
crucial files that allowed them to continue their investigation and,
just last month, bring down a notorious ring of Colombian money brokers
involved in laundering illicit proceeds for the drug cartels.
Support of the Congress
The support of the Congress in providing immediate assistance to
Customs was critical, and we are very grateful for that help. The
approximately $36 million in up-front reconstruction funding enabled
Customs to reestablish operations in New York and begin replacing badly
needed equipment in a very short period of time.
I also want to acknowledge the immediate Congressional support for
overtime funding for Customs inspectors and agents assigned to the
battle against terrorism, and the support given to our Air and Marine
units to patrol our airspace and our coastal waters. This prompt
congressional response allowed Customs to secure our borders quickly in
the face of an immediate threat.
Looking ahead: Three Core Areas of Counter-Terrorist Response
Since the implementation of the Level 1 alert and the emergence of
a clear new mission priority, we have identified three primary areas of
focus in our efforts to protect America from international terrorism.
They are: (1) border security; (2) the disruption and dismantling of
terrorist financing networks; and (3) the monitoring of strategic
exports. Customs is actively engaged and is playing a leading role in
each of these areas of our national counter-terrorist response.
border security
First and foremost is the critical job of border security, and our
mission to prevent individuals and items that may pose a threat to the
United States from crossing our borders. This includes stopping and
seizing terrorists, terrorist weapons and weapons of mass destruction
that could be used in an attack on American soil. The actions we have
taken to date--our Level 1 alert, the mobilization of inspectors to the
northern border, and the deployment of additional inspection technology
to our borders since September 11--have all been directed at this goal.
At the same time, our ports of entry are the vehicles by which
lawful international trade and travel enters the U.S. Accordingly, we
must ensure that our anti-terrorism efforts do not slow legitimate
international commerce and travel, for the health of the U.S. economy
depends on the timely movement of goods and people into the U.S.
Customs is focusing on several initiatives because there is no
single, key component of a strategy designed to increase security and
facilitate trade. Instead, such a strategy involves a combination of
factors: (A) expanding advance information on people and goods and
improving targeting systems; (B) fostering initiatives that ``push the
border outwards'' and extend our security perimeter; (C) developing
industry partnerships to protect trade; (D) strengthening northern
border security through our partnership with Canada; (E) enhancing
information-sharing and cooperation with Mexico on our southern border;
(F) protecting ocean-going sea containers, a vital artery of global
trade; (G) deploying state-of-the-art inspection technology; and (H)
increasing staff positions for border security.
As a first, fundamental step in coordinating these various
initiatives, I established a new Office of Anti-Terrorism within the
agency. I appointed an experienced security expert and senior military
leader to head that office, who reports directly to me.
The Director of the Office of Anti-Terrorism is also helping to
coordinate Customs' role within our national security architecture,
with the Office of Homeland Security, our fellow border inspection
agencies such as the Immigration and Naturalization Service and the
U.S. Coast Guard, and other government entities. This cooperation is
essential to ensure that we are effectively responding to the threat of
terrorism and to our other mission priorities. In addition, effective
coordination by all the government partners involved in counter-
terrorism will help to relieve the strain that each of our agencies,
individually, may face.
The Key Role of Advance Information and Targeting
Better targeting will be achieved not only through new equipment
but also by improving the quality and the quantity of advance
information we receive from airlines, shippers, and businesses. Having
such information allows us to do a much more effective job of sifting
out the potential threats from the vast flow of legitimate
international trade and travel that Customs processes every day.
Indeed, good information is the crux of effective targeting, and we
have already taken steps to ensure that Customs receives more of it.
As part of our immediate response to September 11, we moved quickly
to make available more information on arriving air passengers into the
United States. We promptly sought, and the Congress promptly enacted,
legislation that made the submission of data on incoming passengers to
Customs' Advanced Passenger Information System, or ``APIS,'' mandatory
for all airlines. That law was passed last November as part of the
Aviation Security Bill. Let me take this opportunity to thank the
members here for their support of that bill. I told those airlines that
initially balked at submitting APIS data to comply with the new
regulations, which took effect in December, or face 100 percent
questioning and inspection of all people and luggage disembarking from
their flights. Not surprisingly, nearly all the airlines came around
quickly and began supplying Customs with the needed information, even
before the law took effect.
On February 18, 2002, Under Title 19, section 1436 of the United
States Code, a civil monetary penalty was put into place against the
pilot of any commercial passenger aircraft that fails to transmit APIS
data. The penalties range from $5,000--$10,000 for each violation. For
habitual violators, Customs has the authority to revoke landing rights,
and we will for any airlines that seek to defy the new law. In all
cases, we are committed to working with our partners in the airline
industry toward achieving the mutual benefits of timely APIS reporting.
In allocating funds from the fiscal year 2002 Supplemental and
fiscal year 2003 budget, Customs has dedicated more than $49 million to
upgrade and expand the Advance Passenger Information System (APIS).
With this funding, the APIS will be able to collect and process advance
information on all commercial passengers entering and exiting the
United States. In addition, the APIS will be transformed into a real-
time system that will run advance passenger information against law
enforcement databases on a passenger-by-passenger basis and will issue
board/no board recommendations to international carriers.
Securing the legislative mandate for APIS data represented a strong
start in Customs' efforts to improve targeting with more advance
information. However, we would also like to expand that mandate to
cover shipments of goods entering the U.S. Currently, the submission of
advance information on most trade entering the country is done on a
voluntary basis. This information is not always complete or accurate.
And it is not necessarily provided before cargo departs from the
foreign port for the U.S.
Customs already collects a large amount of advance information on
incoming shipments. In fact, we receive this information on 98 percent
of the containers that land on our shores, thanks to a system known as
the Automated Manifest System, or AMS. Customs has developed an
extensive database of information on the shipping industry, its
patterns, and all who participate in it through the manifests that
every shipper is required to submit.
Using a targeting program known as the Automated Targeting System,
we can sort through the vast AMS database and pick up anomalies and
``red flags.'' Whatever deviates from the norm or is otherwise viewed
as ``high-risk'' is scrutinized at the port of entry. This system has
functioned as Customs' main method of picking the needles out of the
haystacks, and it has served us well.
But this system could be improved. We need mandatory and accurate
data in a form we prescribe. But even with those enhancements, if we
select a container for inspection by x-ray technology at the port of
entry on the suspicion that it contains a weapon of mass destruction,
by that time it could be too late. And that is why we also need
shippers and importers to provide more complete information up-front in
the import process, before those goods leave their last foreign port.
S. 1214, which has passed the Senate, would make the filing of
electronic transmission cargo manifest information in advance of port
entry or clearance mandatory. For Customs, this would increase the
amount and timeliness of information we can input into our targeting
systems, thereby enhancing our ability to spot the red flags. We will
continue to work with the Congress to secure much broader manifest
advance information, not only for inbound cargo but for outbound trade,
for outbound air passengers, and for inbound and outbound land and sea
passengers.
Finally, to enhance our information-gathering abilities in our
targeting of goods and people, I established the Office of Border
Security at Customs to develop more sophisticated anti-terrorism
targeting techniques. I have allocated almost $10 million over the next
2 years to provide the necessary computer equipment and permanent
staffing for the office.
``Pushing Security Beyond Our Physical Borders''
In approaching our primary mission of border security, I believe
that Customs must also do everything possible to ``push security beyond
our physical borders''--that is, to expand our perimeter of security
away from our national boundaries and towards foreign points of
departure. In other words, we can no longer afford to think of ``the
border'' merely as a physical line separating one nation from another.
We must also now think of it in terms of the actions we can undertake
with our foreign partners and with industry to pre-screen people and
goods before they reach the U.S.
The concept of ``pushing security beyond our physical borders''
focuses on building and reinforcing security layers against the
terrorist threat, beginning with our immediate borders. The ultimate
aims of this concept are to allow U.S. Customs more time to react to
potential threats--to stop threats before they reach us--and to
expedite the flow of low-risk commerce across our borders.
The Critical Role of the Trade Community
Any effort to ``pushing security beyond our physical borders'' must
include the direct involvement of the trade community. In November, I
proposed a new Customs Trade Partnership Against Terrorism to the trade
community at a Customs-Trade Symposium I hosted. I am pleased to tell
you that we are entering into partnership with some of the biggest U.S.
importers. This Customs-Trade partnership will vastly improve security
along the entire supply chain, from the factory floor, to foreign
vendors, to our land borders and seaports. ``C-TPAT,'' as its acronym
is known, builds on past, successful security models between Customs
and the trade that were designed to prevent commercial shipments from
being used to smuggle illegal drugs. The good news is that we already
have much of the security template in place to protect trade from being
exploited by terrorists. Our challenge now is to apply that to as broad
a range of the trade community as possible.
In working with importers in the battle against terrorism, we are
looking at such criteria as where their goods originated; the physical
security and integrity of their overseas plants and those of their
foreign suppliers; the background of their personnel; the means by
which they transport goods; and those whom they have chosen to
transport their goods into our country. We are examining the security
practices of their freight transporters, and the routes their shipments
travel. We are also reaffirming to importers the importance of ``know
your customer,'' and we are assessing the overall ``air-tightness'' of
their supply chains. Every single link in that chain will be made more
secure against the terrorist threat.
At the same time, Customs will provide incentives to companies who
partner with us to improve our national security against the terrorist
threat. Those companies that adopt or have a program that meets
security standards will be given the ``fast lane'' through border
crossings, and through seaports and other ports of entry. We are
working on initiatives now to make that happen.
The benefits of the C-TPAT are threefold. First, the security of
the U.S. against the terrorist threat will be increased with respect to
shipments made by trade partners. Second, the volume of commerce that
will need to be targeted and examined by the Customs Service will be
reduced, thereby allowing us to concentrate our resources on high-risk
shipments. Third, the U.S. economy will benefit because trade partners
will be able to move goods into the U.S. more expeditiously and with
less cost. Accordingly, I have allocated more than $11 million in
combined fiscal year 2002 and fiscal year 2003 funding for the
technology and staffing necessary to begin implementing this critical
initiative.
The C-TPAT is also key part of our efforts to better secure our
northern border with Canada. U.S. Customs and the Canadian Customs and
Revenue Agency are working closely together to implement systems and
programs that will both enhance security and at the same time allow for
the free flow of commerce between our two countries. The C-TPAT is a
core plank in the 30-point Secure and Smart Border Action Plan, which
was part of the Smart Border Declaration signed in December 2001 by
Homeland Security Director Tom Ridge and Deputy Prime Minister John
Manley.
Under the Ridge/Manley plan, the United States and Canada are
attempting to harmonize commercial processing between the two
countries. The Canadian and U.S. Governments have been working
independently on systems designed to increase security of cargo and
help sort low risk shipments from high risk ones. The U.S. Customs
program, C-TPAT, and the Canadian Customs program, the Customs self-
assessment program (CSA), are both designed to achieve the dual
objectives of greater security and faster processing for low risk
shipments. Some questions remain, however, as to the extent of security
that should be required for shipments to qualify for low risk status.
Discussions are ongoing between the two Governments to resolve the few
remaining security-related questions. The U.S. Customs Service is
optimistic that the remaining issues will be quickly settled.
Strengthening our Northern Border and our Partnership with Canada
Recently, I met with the Commissioner of Canada Customs, the
Commissioner of the U.S. Immigration and Naturalization Service, and
the Deputy Minister for Citizenship and Immigration Canada to continue
implementing the Ridge/Manley plan. We agreed on many action items and
made substantial progress on others. This was the seventh meeting in 5
months between myself and Canada Customs Commissioner Rob Wright. I
will continue this ongoing and productive dialog next month when I meet
again with Commissioner Wright.
In addition to harmonizing the standards of our respective industry
partnerships, our talks are aimed broadly at expanding our security
perimeter outward from our national borders. We are focusing on
initiatives to improve information exchange and adopt benchmarked
security measures. This will help us to expand our mutual border and
reduce the terrorist threat to the North American continent, and it
will expedite the flow of trade.
The Smart Border Declaration focuses on four primary areas: the
secure flow of people; the secure flow of goods; investments in common
technology and infrastructure to expedite trade and minimize threats;
and coordination and information sharing to defend our mutual border.
An action plan put together to advance the Smart Border Declaration
includes initiatives that will allow us to do more prescreening of
people and goods entering the U.S. from Canada, and vice-versa, far in
advance of their arrival at the border.
Part of that plan includes placing U.S. Customs and Canadian
Customs personnel in each other's ports to help in the targeting and
pre-screening of cargo that arrives in one country and is headed to the
other. To implement this initiative, I have directed that U.S. Customs
inspectors be stationed in the ports of Vancouver, Halifax, and
Montreal to assist in the targeting and pre-screening of cargo that
arrives there and is destined for the U.S. That is happening as we
speak. Likewise, Canada Customs will soon be stationing inspectors at
U.S. ports such as Seattle and Newark. I have set aside approximately
$2.4 million in fiscal year 2002 and 2003 funding to place Customs
inspectors in Canada to enhance our targeting abilities.
Using funding from fiscal year 2003, I have allocated almost $6
million to expand a NEXUS-like program to high-volume ports of entry
along the Northern Border. The NEXUS program, which is being piloted in
Port Huron, allows low-risk Canadian and U.S. residents to travel
across the border with minimal customs or immigration processing by
either country. Like the growth of the C-TPAT, the expansion of a
NEXUS-like program will improve security by identifying low risk
travelers and by allowing the Customs Service to focus its targeting
and inspection resources on people about whom it knows relatively
little.
Even with the implementation of these types of initiatives, the
lack of certain infrastructure at the Northern Border would still be a
significant impediment to enhancing security. As you know, before
September 11, many of the low-volume POEs were closed for a portion of
each day with nothing more than an orange cone to prevent someone from
making an unauthorized crossing into the U.S. Since September 11, these
low-volume POEs have been staffed 247 with two inspectors per
shift to prevent such unauthorized crossings.
Over the longer term, the Customs Service could provide a
comparable level of security for less cost by permanently ``hardening''
these low-volume POEs. Such hardening would include installing physical
barriers, sensors, and monitoring devices at the low-volume POEs to
prevent and detect unauthorized crossings. Accordingly, I have
allocated $41 million to harden the low-volume POEs during fiscal year
2002 and fiscal year 2003.
Providing comparable security at the low-volume POEs would also
include developing a mobile response capability to respond to
unauthorized crossings. Indeed, such a capability could and should also
respond to unauthorized crossings between the POEs. The principal
benefit of developing such a combined response capability would be that
it would allow agencies to pool existing resources and air assets,
including helicopters. The Customs Service and the INS have agreed to
launch the combined mobile response concept by establishing two teams
at locations along the Northern Border. I have allocated approximately
$10 million to fund the Customs Service's contribution to these two
pilot projects during the remainder of fiscal year 2002 and in fiscal
year 2003.
U.S. and Canada Customs will also integrate our systems for
intelligence and information gathering to improve our mutual targeting
abilities. We will engage in a broad range of information exchange,
including APIS and trade data.
Mexico
We are also engaged in implementing the U.S.-Mexico Border
Partnership Action Plan. This 22-point plan was signed by Secretary of
State Colin Powell during President Bush's 21-22 March trip to
Monterrey, Mexico. The action plan outlines specific measures that will
be taken to ensure a modern border that assures the secure flow of
people and goods. Customs is the lead agency for eight of the 22 action
items. Specifically, we are focusing on information sharing about goods
and people, provision of Mexican APIS information; a possible joint
system for processing rail shipments; shared border technology; and the
assembly of a joint investigative task force to deter trade fraud.
The Container Security Initiative
In addition to meeting part of the goals of the Ridge/Manley
declaration, the placement of Customs inspectors in Canada is a first
step in another core area of our efforts to ``push the border
outwards,'' and that is implementation of the Container Security
Initiative, or CSI. I proposed the CSI this January to address the
vulnerability of cargo containers to the smuggling of terrorists and
terrorist weapons.
Ocean-going sea containers represent a vital artery of global
commerce. Over 200 million containers move between the world's major
seaports each year. Forty-six percent of the total value of all imports
received into the United States annually arrives by sea container. That
percentage is higher for other countries that are even more dependent
upon the use of seaports for international trade.
The sheer volume of sea container traffic and the multitude of
opportunities it presents for use by terrorists are alarming. And the
threat is by no means farfetched. Some of you may recall that last
October, Italian authorities found a suspected Al Qaeda operative
locked inside a shipping container bound for Canada. Inside the
container were a bed and bathroom for the journey to Halifax, as well
as airport maps, airport security passes and an airplane mechanic's
certificate.
Of ever-greater concern are the possibilities that international
terrorists such as Al Qaeda could smuggle a crude nuclear device in one
of the more than fifty thousand containers that arrive in the U.S. each
day. One can only imagine the devastation of a small nuclear explosion
at one of our seaports.
Such an event would have a massive impact upon global trade and the
global economy. Even a 2-week shutdown of global sea container traffic
would be devastating, costing billions. But the shutdown would, in all
likelihood, be much longer, as Governments struggled to figure out how
to build a security system that could find the other deadly needles in
the massive haystack of global trade.
Obviously, such a shutdown would also greatly impact the American
economy, sending the prices of major imported products spiraling
upwards. Cities and seaports dependent upon sea container trade would
be crippled, as business would dry up--resulting in massive layoffs.
We must do everything possible to prevent this scenario from
happening. For that reason, I have proposed a ``Container Security
Strategy'' to protect the use of ocean-going sea containers in
international trade. The core elements of that strategy are the
following:
--Establish criteria for identifying high-risk containers;
--Pre-screen containers before they are shipped to the U.S.;
--Use technology to pre-screen high risk containers; and
--Develop and use smart and secure containers.
The initial phase of the Container Security Strategy would focus on
the top ten largest foreign seaports or ``mega-ports'' that are
responsible for shipping the greatest number of sea containers to the
U.S. We have identified these ten ports, which combined account for
nearly half (49 percent) of all oceangoing sea containers arriving in
the U.S. each year.
Working with these ten ports, I want to build a common security
regime for the processing of sea containers. I want to see more pre-
screening of cargo that is bound for the United States done overseas,
at the port of origin or the port of transshipment, rather than at the
port of entry in the U.S. For example, we should know all there is to
know about a container that arrives in Rotterdam and is destined for
the U.S. before that container even departs from the country of origin
for the Netherlands. And if an anomaly appears, we should inspect it at
that port, the outbound port--the port of origin, not the port of
destination.
Again, I would stress the importance of advance information to
achieve this level of pre-screening. The sooner in the importation
process we can get that information from the shipper or carrier, the
better. Ideally, we would like to have complete manifest information in
electronic form the moment cargo leaves the factory, warehouse, or
loading dock abroad en route to its final destination.
The Importance of Technology
Outbound inspections of containers at the mega-ports will also be
enhanced by making the latest x-ray inspection machines and radiation
detectors available to or required by all who participate in the
Container Security Strategy. The use of inspection technology is a
major asset in our current efforts to inspect cargo coming inbound to
our ports of entry, both in terms of our ability to expedite trade and
to detect security breaches in containerized cargo. I am referring to
devices such as mobile, truck and seaport container x-ray systems that
obviate the need for costly, time-consuming physical inspection of
containers and provide us a picture of what is inside the container.
Thanks to the 2002 Terrorism Supplemental, Customs has been able to
acquire more non-intrusive technology to protect America. With this
funding, we will deploy 16 Mobile VACIS systems, 64 Handheld Acoustic
Inspection Systems, 172 Portal Radiation Detectors, 8 Tool Trucks, and
128 Isotope Identifiers to the Northern Border with Canada. We will
also deploy 20 Mobile VACIS, provide 4 VACIS upgrades, and supply 10
Tool Trucks to enhance security at our seaports. The use of this
technology will greatly enhance security as well as our capacity to
speed the flow of commerce through our ports.
Other technology we are exploring includes a crane-mounted
radiation detection system to detect radiological materials in
containers. This system would supplement the four thousand radiation
pagers currently in use by Customs officers. We're also moving ahead on
the development of electronic seals that would alert us to cargo
tampering while in transit.
Staffing
As important as our efforts to build international partnerships and
acquire technology are in thwarting international terrorism, I must
also stress the essential human element involved in a sound border
security strategy. The most important component of Customs success in
protecting American lives and the American economy lies in the men and
women who work directly on our Nation's frontlines. I am referring
specifically to the requirement for an adequate number of Customs
inspectors, and canine enforcement officers at the border to meet our
security and trade facilitation mission.
One need only recall that it was a Customs inspector, Diana Dean,
who in December 1999 stopped an Algerian terrorist bomber from crossing
into the United States from Canada with a trunk load of powerful
explosives in his car. His mission, as we now know, was to blow up Los
Angeles International Airport.
Inspector Dean relied on nothing but her Customs training to pick
up on Ahmed Ressam's nervous behavior, his unusual travel itinerary,
and his evasive responses to her questions. And thanks to her skill and
professionalism, and the skill and professionalism of her fellow
inspectors at Port Angeles, Ressam was arrested and a deadly terrorist
conspiracy to do great harm to American lives was foiled.
In the near term, a substantial increase in inspectors is necessary
to maintain our level one alert status while decreasing the
extraordinary amounts of overtime being worked by Customs inspectors.
It is also critical in ensuring the two inspectors per shift
requirement for officer safety and for phasing-out increased levels of
National Guard support. To actually increase security beyond that
provided in our Level 1 alert status and facilitate trade, additional
inspectors are required to conduct targeting analyses, operate
additional non-intrusive inspection equipment, staff all available
lanes, question more people, and perform additional physical
inspections while quickly processing an increasing volume of commercial
and passenger traffic.
Thanks to funding from the fiscal year 2002 Terrorism Supplemental,
immediate help is on the way. Over the remainder of fiscal year 2002,
Customs will be bringing on 543 new inspectors to support northern
border security and to enhance maritime security at the nation's
seaports. And with funding in our fiscal year 2003 budget, Customs is
hoping to hire an additional 472 inspectors to bolster these areas over
the course of the next fiscal year.
anti-terrorist money laundering
Staffing is also critical for Customs on the investigative front in
the war on terrorism. To bolster our immediate investigative efforts
with respect to anti-terrorist money laundering, northern border
security, maritime security at our ports, the investigation of
strategic exports, I have allocated funding from the fiscal year 2002
supplemental to hire 363 special agents and 80 additional investigative
support personnel. Agents will be assigned as needed to these priority
areas. In addition, I have designated funding from our 2003 budget for
the hiring of fifty more special agents to assist with these
activities.
Operation Green Quest
In accordance with the President's mandate to identify, disrupt and
dismantle terrorist financing networks, the Secretary of the Treasury
established Operation Green Quest, a joint investigative team led by
U.S. Customs and supported by the IRS, Secret Service, Treasury's
Office of Foreign Asset Control (OFAC) and other Treasury Department
bureaus, as well as the FBI and the Department of Justice.
Operation Green Quest is based in Washington at Customs
Headquarters and is led by a Senior Customs Supervisory Special Agent.
The Green Quest team also includes a dedicated staff of field agents
based in New York. These agents are highly trained and experienced in
anti-money laundering techniques, the result of their extensive work in
Operation El Dorado, a longstanding, Customs-led investigation into the
laundering of illicit drug proceeds by major narcotics-smuggling
organizations. Now, they are turning that expertise to the war on
terrorism.
I am pleased to report that so far, actions involving Operation
Green Quest have led to the seizure of approximately $4.3 million in
suspected terrorist assets and 12 arrests. Included in this was the
disruption of a major middle-eastern money transfer network known as
Al-Barrakaat, which had been tied to terrorist groups. But we are by no
means resting on these successes. Work to trace sources of terrorist
financing is ongoing under Operation Green Quest, and it will continue
until, working with our law enforcement colleagues from the Treasury
Department, the IRS, and the Department of Justice, we have starved
terrorist groups of the funding they need to survive.
Operation Oasis
In addition, Customs began Operation Oasis, a terrorist-related
outbound currency initiative, on October 10, 2001. This national
operation is directed at identifying, detecting, and halting the
illegal exportation of unreported currency to terrorist entities. As of
March 1, 2002, Operation Oasis has resulted in 253 currency seizures,
totaling nearly $9.4 million, and 6 arrests related to violations of
currency reporting requirements. Most importantly, these seizures have
generated dozens of leads that have been passed on to Operation Green
Quest agents. Operation Green Quest staff, in turn, have shared
investigative leads with frontline inspectors monitoring movements of
illegal outbound cash.
monitoring of strategic exports
We must work diligently to close the avenues for terrorist funding,
and we must also deprive terrorist groups of the weapons and strategic
materials they need to carry out their activities. The third major area
in which we will focus our counter-terrorist efforts is strategic
export control. We are working to prevent international terrorist
groups from obtaining sensitive U.S. technology, weapons and equipment
that could be used in a terrorist attack on America and its people.
Operation Shield America
The capstone of this effort is Operation Shield America, a Customs-
led initiative that also involves the Department of Commerce in working
directly with American companies to prevent these types of strategic
items from getting out of our country and into the wrong hands.
Since the inception of Operation Shield America, Customs agents
have visited approximately 1,000 companies in the United States. These
companies were selected for visits because they manufacture or sell
items that may be sought by terrorists or State sponsors of terrorism.
During these visits, Customs agents have shared information about
specific products that these firms manufacture or sell that may be
sought by terrorists. Customs agents have also passed out information
about Operation Shield America and encouraged these companies to report
attempts to illegally acquire or export such materials. In many areas,
Customs agents have coordinated with local FBI, Commerce Department,
and Defense Department officials prior to their visits. Commerce
Department officials have also accompanied Customs agents on many of
their visits to U.S. companies. Operating abroad, several Customs
Attache Offices have begun reaching out to foreign law enforcement
counterparts to help raise awareness among businesses in their nations.
safeguarding the economy; improving the flow of trade
Building a Better System of Trade
While Customs is providing security at our borders, we do not want
to choke off the flow of commerce to achieve security. We must be
careful not to sacrifice our openness as a society. America's strength
as a nation derives from its open society and its open economy. And
these should not be allowed to fall victim to terrorism.
I believe that with the right level of industry partnership and the
right combination of resources, we can succeed not only in protecting
legitimate trade from being used by terrorists, we can actually build a
better, faster, more productive system of trade facilitation for the
U.S. economy. And I believe this is an important and worthy goal to
strive for--if, from the devastation of ``9-11,'' we can succeed in
constructing a system that thwarts the terrorists, and at the same time
facilitates and improves the movement of legitimate business and trade,
faster and more efficiently than before September 11.
One of my goals when President Bush selected me last May to be
Commissioner was to build a strong U.S. Customs Service that listens to
the trade community, an agency that considers the needs of business as
part of deciding how we do business. And this remains my goal. But this
objective must now be viewed against the backdrop of the terrorist
threat to our nation. And that threat is continuing and it is real. It
is a threat not just to harm and kill American citizens; it is a threat
to harm the American economy. Al Qaeda and its associated terrorist
organizations are on the run but they are intent on striking back, and
on damaging our economy. For that reason, we must not let down our
guard.
The Office of Trade Relations
I have been very impressed with the level of communication between
Customs and the trade community on these and other major issues. There
are very few other Fderal agencies in which this level of communication
exists between government and industry. I want to promote that
communication, especially now during these challenging times. That is
the main reason I revamped the Office of the Trade Ombudsman at Customs
and renamed it the Office of Trade Relations. I wanted there to be a
central point through which the trade community could convey issues to
me, especially the broad issues of how we do business together, and how
we improve the security of our country against the terrorist threat.
That involves more than just the specific complaints of a
particular member of the trade community, complaints that the Office of
Trade Relations will continue to address. It must also focus on the
proposals and solutions to issues impacting the long-term relationship
between Customs and the trade, and the security challenges we both
face. I also wanted the office to communicate Customs' issues and
concerns to the trade community. In short, I wanted and I continue to
want more dialogue.
Trade and Security Benefits of the C-TPAT
One of the top priorities of the Office of Trade Relations is to
continue developing and adding companies to the Customs Trade
Partnership Against Terrorism. The promotion of trade and the
protection of our country should go hand-in-hand. Customs cannot
succeed in protecting our country without the help and the
participation of the business community--without partnering with the
trade.
Our goal under the C-TPAT is nothing less than to work with
importers, transporters, brokers and others in the trade community to
protect every aspect of the supply chain against the terrorist threat--
from the foreign loading dock, to transportation of goods, to the port
of entry in the U.S. No one knows those systems better than the
companies that oversee them, and what it will take to safeguard those
systems against potential terrorist use--against the concealment of
terrorist weapon of mass destruction at some point along the supply
chain.
Through the C-TPAT, through our efforts to build a common security
framework with our NAFTA partners Canada and Mexico, and through
initiatives such as the Container Security Strategy, I believe we can
make vast strides not only towards ensuring our defenses against a
terrorist threat coming via commercial trade--we can actually build a
better system for the processing of international trade. We have an
opportunity not only to protect America through these initiatives, but
to build a better system for trade facilitation.
Improving Internal Processes
Internally, I have also issued several challenges to Customs
departments that play a key role in our relations with the trade
community. I have asked these departments to focus on, streamline and
improve various processes.
First and foremost, these include our Office of Regulations and
Rulings (OR&R), and specifically the time it takes for Customs to issue
commercial rulings. I believe the current delays are unacceptable. I
want to dramatically shorten the time it takes for Customs to issue
commercial rulings, to no more than 90 days. I outlined this as a top
priority to OR&R and I expect to see progress very shortly.
I have also challenged our Office of Strategic Trade and our
Regulatory Audit Division to move forward with the focused assessment
process, which will enhance trade security and compliance. And, I have
challenged our Office of Field Operations to dramatically improve
uniformity in trade processing. I want to eliminate disparate treatment
of goods between different ports of entry in the U.S.
the automated commercial environment (ace)
Importance of ACE to trade facilitation and Counter-terrorism
Still, Mr. Chairman, no discussion of a successful strategy to
protect America and its economy in the 21st century would be complete
without consideration of the central importance of new automation to
the mission of the U.S. Customs Service.
That system, the Automated Commercial Environment (ACE), is an
important project for Customs and an important project for the business
community. It is an important project for our country and for the
future of global trade. It should, if done properly, reform the way
Customs does business with the trade community. It should also greatly
assist Customs in the advance collection of information for the
targeting of high-risk cargo to better address the terrorist threat.
And in doing so, it will help us to expedite the vast majority of low-
risk trade.
The successful and timely design, implementation and funding of ACE
is a priority of the U.S. Customs Service. It is one of my top
priorities as Commissioner. I believe that ACE is so important to our
country's security and the future of trade facilitation that I have set
a goal that the system be completed within 4 years, and I have
instructed our Office of Information Technology to plan for such a
schedule.
Increasing Administration and congressional support for ACE in
Customs' recent budget requests has been essential to the development
of the new system. As you know, Customs received $130 million for ACE
in fiscal year 2001 and $300 million in fiscal year 2002. That funding
has allowed us to establish the fundamental design framework for ACE
and to begin developing user requirements for the new system, in
concert with our prime contractor, the e-Customs partnership led by
IBM.
Update on ACE
Since April 2001, Customs, the e-Customs Partnership, the
international trade community, and other Federal agencies whose
regulations are enforced by Customs have worked to develop requirements
for the ACE system. This collaborative effort has:
--Defined the enterprise architecture to support and enhance trade
compliance, and set the framework for future integration of
Customs enforcement and administrative mission areas.
--Defined ``Desired Business Results'' and their linkages to Customs
Strategic Intents. These set the baseline for development and
measurement of the system's performance.
--Provided the foundation for full import-export views of trade flows
and web-enabled exchange of commercial data.
--Validated the business benefits of ACE and estimated their value.
--Established a robust technical architecture that will enable
Customs to take advantage of new technology, including
commercially available software components, in modernizing the
commercial, enforcement, and business systems.
As I stated earlier, ACE will not only replace our existing
automated system and functionality--it will transform the way Customs
does business. ACE will enable Customs to process and monitor import
and export shipments and related trade activity more efficiently
through account versus individual transactions. It will enable Customs
to release cargo more efficiently by integrating international law
enforcement intelligence, commercial intelligence, and data mining
results to focus our efforts on high-risk importers and accounts.
In developing ACE requirements and plans, Customs continues to
review system requirements, concepts, and technology to take advantage
of global customs ``best practices,'' advances in web development,
wireless computing, and supply chain technology. Moreover, as the
nation reviews its homeland security priorities, Customs will continue
to research and analyze emerging national security requirements as they
develop for possible integration with ACE.
I want to thank the Congress, and in particular the members of this
Subcommittee, for their past support of ACE, and acknowledge the
Administration for providing the $313 million contained in Customs'
fiscal year 2003 budget request. This level of funding will allow us to
keep pace with our 4-year time frame for completion and, most
importantly, begin to deliver on the first installment of ACE benefits
to the trade community.
Sustaining ACS
As Commissioner, I will continue to focus on the sound management
and implementation of ACE. However, at the same time, Customs must also
take care to maintain its existing system of automation, the Automated
Commercial System (ACS), until ACE is fully brought ``on-line.''
Critical ACS ``life support'' funds from our fiscal year 2002 budget
and fiscal year 2003 request have been and will continue to be invested
in infrastructure upgrades to improve ACS performance, reliability and
availability to both the trade and Customs field users.
As you know, Customs was provided $122 million for ACS ``life
support'' in fiscal years 2001 and 2002. This funding is being used
systematically to address the major structural weaknesses in the
information technology infrastructure that supports ACS. As a result of
this investment, there are no longer ACS brownouts occurring in the
data center, user response time has improved, and ACS availability has
been expanded. In addition, Customs 15-year-old communications network
has been substantially replaced with a modern system.
Customs fiscal year 2003 budget request again includes $122 million
in ACS life support. That funding will be used to continue upgrades on
data center processing capabilities, network capacity, and the support
structure to enable ACS to process increased trade volumes. It will
also go towards enhancing an information technology security program
that will enhance the system's response to a higher threat level.
other core mission responsibilities
Drug Interdiction
In accordance with the President's direction, since September 11
the U.S. Customs Service has made the defense against terrorism our
highest priority. At the same time, we remain firmly committed to our
other, core law enforcement responsibilities, first and foremost the
protection of our nation from illegal drugs.
I believe that our counter-terrorism and counter-narcotics missions
are not mutually exclusive. One does not necessarily come at the
expense of the other. There is an undeniable nexus between drug
trafficking and terrorism. We have seen that in Colombia, where the
FARC has channeled funds from its protection of illegal drug
manufacturing into its terrorist campaign to disrupt and destabilize
Colombia's legitimate government. We have seen it in Afghanistan, where
the Taliban harbored the terrorist murderers of September 11 and their
leadership, supporting their activities and their own repressive regime
through the heroin trade. And, there are indications that Middle
Eastern terrorist organizations are engaged in drug trafficking and
other crimes in the U.S. to support terrorist activities.
The models and lessons U.S. Customs has developed in our battle
against international drug trafficking organizations can and will help
us in the fight against international terrorist organizations. This has
been evidenced so far in the results achieved by the highly capable
field agents of Operation Green Quest, our lead anti-terrorist money
laundering investigation. These agents, who are on detail from
Operation El Dorado, an extremely successful, Customs-led drug money
laundering investigation, have applied their knowledge and experience
of drug money laundering techniques effectively in the effort to deny
terrorists the financing they need to conduct their operations.
In this and many other respects, Customs' new mission focus to
prevent terrorists or the implements of terror from crossing our
borders is a natural outgrowth of our interdiction role. The two
functions are interrelated, and increased attention to the terrorist
threat will likely enhance our drug-fighting capabilities. As we add
staffing on our borders, acquire more inspection technology, conduct
more questioning of travelers, and carry out more inspections of
passengers and goods in response to the terrorist threat, it should
come as no surprise that drug seizures will increase as well.
Indeed, it is thanks to its interdiction success that the Customs
Service has the knowledge, the experience, and the tools to serve as a
critical deterrent to terrorists who would attempt to target America.
But it would be a grave mistake for the drug traffickers and other
criminals to misinterpret our focus on terrorism as a weakening of
resolve on other fronts. If anything, we will make life even more
miserable for drug smugglers as we intensify our overall presence along
America's borders. Our heightened state of security along America's
borders will strengthen, not weaken, our counter-drug mission. So far,
the evidence we have seen confirms this.
Soon after implementation of our Level 1 alert, Customs witnessed a
dramatic decline in drug seizures. We believe that drug traffickers
reacted to the heightened level of security along our land borders by
witholding shipments until the Level 1 alert subsided.
That alert did not subside. But the pressure on the smugglers to
bring their illicit goods to market became too great to bear. Not only
did our drug seizures begin to rise once again a few weeks after
September 11--they started to increase dramatically from the same
period a year earlier. In fact, the overall amount of narcotics seized
by Customs in October, the month immediately following the terrorist
attacks, was up about 30 percent from the same month in previous year.
Even more impressive, the total quantity of drug seizures for the first
quarter of fiscal year 2002 were up dramatically in all major
categories compared to the first quarter of fiscal year 2001:
marijuana, up 19 percent; cocaine, up 60 percent; and heroin, up over
135 percent. Meanwhile, the total number of drug seizures climbed 17
percent.
Efforts to strengthen our borders through the deployment of
additional manpower and non-intrusive technology equipment are expected
to further enhance Customs counterdrug successes. In addition, Customs
continues to play a significant role in counterdrug programs such as
the Organized Crime Drug Enforcement Task Forces, High Intensity Drug
Trafficking Area enforcement teams, and the Special Operations Division
of the U.S. Department of Justice.
Furthermore, although intelligence resources and assets have been
redirected to border security and counter-terrorist missions, Customs
retains a highly active Counterdrug Intelligence Program. The agency's
Tactical Intelligence Center is focused entirely on drug intelligence
priorities and the processing of national level intelligence. It is
also continuing to monitor and report on Eastern Pacific and Caribbean
drug transportation movements.
Examples of successes against drug smuggling since September 11,
2001 include:
--September 26, Palm Beach, Florida: As part of an ongoing joint
operation, and with the assistance of Customs' air unit,
Customs Special Agents and local law enforcement intercepted a
suspicious vessel coming from Grand Bahamas and seized 2,210
pounds of marijuana.
--October 23 and 24, Falcon Heights, Texas: Customs Special Agents,
working together with the Customs air branch and the Border
Patrol, seized 2,644 pounds of marijuana in a 24-hour period as
a result of investigative leads regarding smuggling activity
along the banks of the Rio Grande.
--November 21, Puerto Rico: Customs air and marine officers, with the
assistance of other law enforcement entities, intercepted a 33-
foot speed boat several miles offshore that was transporting
about 2,000 pounds of cocaine.
--November 28, Nogales, Arizona: Customs agents seized 956 pounds of
cocaine after developing information about a home that was
being used to facilitate a drug smuggling enterprise.
--October-December 2001, El Paso, West Texas and New Mexico: During
the first quarter of fiscal year 2002, Customs Inspectors,
Special Agents and Canine Enforcement Officers performing
antiterrorism operations seized 86,603 pounds of marijuana,
cocaine, and heroin, compared to 47,910 during the same period
last year.
--January 2002, New York: Operation Wire Cutter, a major 2\1/2\ year
drug money laundering investigation, was conducted with the
assistance of the Drug Enforcement Administration and Colombian
law enforcement. As I noted earlier in my statement, Customs
agents based at the World Trade Center in New York continued to
pursue this case despite the destruction of their offices in
the September 11 terrorist attack. Their efforts resulted in
the dismantling of a ring of Colombian money brokers
responsible in recent years for laundering an estimated
hundreds of millions of dollars in illicit drug proceeds. This
investigation was groundbreaking in that, for the first time,
Customs and Colombian law enforcement collaborated to trace the
entire cycle of the conversion of narcotics proceeds, from cash
pick-ups in the U.S. to the laundering of those funds in
Colombia.
Despite the dedication of investigative resources to the fight
against terrorism, there has been no substantial reduction in the time
our special agents have devoted to drug investigations. Before
September 11, Customs had 1,475 agents cross-designated by the DEA to
conduct narcotics investigations under our Title 21 authority. I have
no intention of reducing that number. We will continue to work
effectively with the DEA to investigate drug traffickers and we will
continue our strong drug interdiction efforts.
Clearly, our Level 1 alert is having the collateral effect of
increasing our drug seizures. It is also likely to effect drug
smuggling trends in other ways. We are anticipating those trends, and
we will react to them quickly. That includes deploying an active Air
and Marine presence in the Eastern Pacific and the Caribbean, routes
the drug smugglers will turn to as we choke off their access to land
border crossings. Although we have redirected our P-3 Advanced Early
Warning (AEW) aircraft to homeland security, we continue to fly air
assets in support of counterdrug operations in the transit and arrival
zones.
As you also know, before September 11 our AEWs flew a substantial
portion of their missions in the Source Zone for narcotics. It was
because of the tragic shoot-down over Peru of a missionary flight by
host country forces last April 20, not September 11, that those flights
and all others conducted by U.S. agencies in the Source Zone were
suspended. Thus, the events of September 11 have not diverted our AEW
assets as much as might otherwise be the case. In addition, we
anticipate that the deployment of new P-3 AEWs and crews since the
shoot-down incident will help us to balance future demands for our air
assets in the source as well as the transit and arrival zones.
Air and Marine Interdiction efforts continue to result in
interdiction of drug smugglers in the Bahamas and Northern Mexico,
where smuggling activity remains robust. In Mexico, Customs continues
to cooperate with the Government of Mexico under Operation Halcon.
Operation Halcon is a cooperative initiative that teams Customs and
Mexican enforcement personnel aboard Customs aircraft based in Mexico.
Since September 11, Operation Halcon has resulted in the seizure of
approximately 11,000 kilograms of marijuana and close to 900 kilograms
of cocaine.
In order for Customs' Air and Marine Interdiction Division (AMID)
to continue to play a strong and effective role in the national
counterdrug effort, I believe that modernization of existing assets is
essential. In addition, as Commissioner, one of my priorities is to
ensure that AMID's mission goals are reviewed and reassessed with
frequency and consistency to maximize results.
We are also actively engaged on the personnel front, particularly
with respect to retaining a skilled and talented pilot workforce.
During the past 2 years, a 10 percent retention bonus has been in
effect for Customs pilots, and a streamlined pilot recruitment and
selection process was put in place. Customs also increased the P-3
pilot career ladder to GS-14, and identified non-P-3 Customs pilots
eligible to be trained to fly P-3s. We will continue retention pay at
the rate of 10 percent for all pilots through fiscal year 2002, and
maintain our efforts to streamline the recruitment, selection, and
background investigation clearance processes.
In addition, the Customs Service has made substantial progress in
modernizing its marine program. Marine program staffing has increased
from 65 Marine Enforcement Officers (MEOs) in November 1999 to 77 MEOs
in February 2002. An additional 22 officers who have accepted positions
will soon join the agency.
Replacement of aging ``open ocean interceptors'' is the number one
equipment procurement priority of the Marine program and is proceeding
well. Eight interceptors have been obtained through the sale and/or
exchange of excess vessels. Fiscal year 2002 appropriations of $9.3
million will allow for the replacement of the remaining interceptors in
the current inventory (with $6.4 million coming from the $35 million
allocated for the Western Hemisphere Drug Elimination Act funds, as
outlined in the fiscal year 2002 budget). Funds from the sale and
exchange of aging ``open ocean interceptors'' will be used to replace
aging utility vessels.
As directed by Congress, the Customs Service continues to consider
a wide range of options for basing and deploying its interceptor
vessels in the most effective and economical way. In June 2001, the Air
and Marine Interdiction Division conducted a performance-based
assessment of the Air and Marine program and then developed a
redeployment strategy in response to those findings. Approximately 90-
percent of the redeployment is complete. Customs is currently exploring
the option of using mobile support vessels to provide for on-station
mission support, supplies, maintenance, and personnel needs in support
of long-term offshore drug interdiction efforts.
Other Enforcement Priorities
Mr. Chairman, as you know the enforcement mission of the U.S.
Customs Service extends well beyond drug interdiction to include:
Internet child pornography and cybercrime; forced child and prison
labor; violations of Intellectual Property Rights; illegal textile
transshipment; tobacco smuggling; international auto theft; and other
criminal activities related to our border mission. Customs will
continue to actively pursue and fund priorities in each of these areas
in fiscal year 2003.
In fact, one of our most well-publicized cases in 2001 involved the
dismantling of a despicable ring of child pornographers operating over
the Internet from Russia. Under Operation Blue Orchid, Customs agents
from our CyberCrimes Center in Fairfax, Virginia and our Moscow attache
office worked closely with Russian authorities to identify and arrest
both the proprietors of the pornographic site and their customers, many
of whom were located in the U.S. That Operation also resulted in the
identification of the young victims of the ring and their subsequent
rescue from further abuse.
Despite our focus on counter-terrorism, Customs has achieved
noteworthy successes in other, critical areas of our enforcement work.
To mention just a few, since September 11, Customs has also managed to
shut down a major stolen luxury car smuggling ring operating out of New
York; dismantle a highly sophisticated internet piracy network known as
``Warez'' that was stealing and distributing billions of dollars worth
of software; and secure the largest seizure ever of pirated computer
software, over $100 million worth of fraudulent merchandise.
These successes testify to the diversity of threats Customs must
contend with and the skill of our people in protecting America, on all
fronts. I realize that with the added strain of September 11, balancing
our traditional enforcement priorities with counter-terrorism is a
difficult challenge. Yet it is one our employees have proven this
agency can meet. Protecting our citizens and our communities from
illegal drugs and other criminal threats was a core responsibility of
the U.S. Customs Service before September 11. And it remains at the
heart of our mission after September 11 as well.
closing
Mr. Chairman, members of the Subcommittee, I have outlined a broad
array of initiatives today that, with your assistance, will help the
U.S. Customs Service to protect America from a terrorist threat while
fulfilling our traditional trade and enforcement mission. Make no
mistake, Customs faces some very great challenges in balancing its
established mission priorities with the war on terrorism--perhaps the
greatest challenges in its long history of service to the American
people. But I am fully confident that, with the continued support of
the President, the Treasury Department, and the Congress, Customs will
succeed in meeting the great demands placed upon it, as it has done
throughout two centuries of change and challenge in our Nation.
Doing so will require a highly coordinated and concerted effort to
integrate Customs' strengths within the national strategy for Homeland
Security. That effort is well underway and is producing marked results,
as I have testified today. The funding provided to Customs by the
Administration and the Congress in the fiscal year 2002 Terrorism
Supplemental has enabled our agency to begin a profound and
unprecedented transformation to become a leading force against
international terrorism, while at the same time allowing us to protect
and promote the vital flow of commerce and our system of international
trade. It is a role that, as the guardian of our Nation's borders, we
are called upon by tradition and by modern-day responsibilities to
play. With your support for Customs' 2003 budget request, we will be
able to build upon these successes, and continue our efforts to defend
America's health, liberty and prosperity at this momentous time for our
Nation.
Thank you again for this opportunity to testify. I would be happy
to answer any questions you might have.
FORCED CHILD LABOR
Senator Dorgan. Mr. Commissioner, thank you very much. When
I met with you in my office I asked if you could provide me a
report on two provisions that we included in last year's
appropriations bill. One is the forced child labor funding. We
added funding to that activity in Customs. I will ask if you
would provide me and the committee members with an analysis of
what has been done with the funding for the enforcement with
respect to forced child labor issues.
Second, we included money for an intellectual property
rights center that is dealing with counterfeiting and various
things. We would like to get a report from the Customs Service
also on the implementation of that and the use of those funds
and the progress that is being made.
SEA CONTAINER SECURITY INITIATIVE
Let me turn to the container area just for a moment. The
Container Security Initiative, I indicated that when I heard
that you were going to do this, I was pleased, because I think
this is a significant threat to our country. There is such a
lack of inspection of containers coming in. And we understand
that it takes only one weapon of mass destruction in one
container at one port to cause massive, massive damage in our
country.
You, I think, mentioned did you say 5.6 million containers
per year?
Mr. Bonner. 5.7 million last year, and so it is around 6
million per year.
Senator Dorgan. And if two-thirds of those come from 20, 30
ports?
Mr. Bonner. They originate in or come through those 20
ports. So if you think of Singapore, some of those are
originating, being trucked down from Malaysia to Singapore.
Some of them are literally coming from Pakistan and other areas
and then on-loaded, transhipped through Singapore. Singapore,
for example, would be a real choke point in terms of a lot of
sea container traffic.
Senator Dorgan. It is probably not something we can do, to
inspect 100 percent of all containers coming into this country.
When you talk about two-thirds of nearly 6 million containers
going through 20 ports, I understand that there are ways to
work with other governments to pre-clear certain shippers.
There are ways to deal with it at the point of origin? Also,
here in the United States.
But if you talk about 6 million with 20 points representing
two-thirds of the traffic, that means 2 million containers are
not from those 20 ports. And so you have got a couple of
million containers that we also have to worry about. And as I
said, only one container containing one weapon of mass
destruction can wipe out a city.
So this is a very important issue. Speaking as one member
of this subcommittee, I am very anxious to work with you on
aggressive and robust funding for this initiative because I
think we are talking about a lot of things, Immigration, Border
Patrol, Customs, Homeland Security, so many different facets of
protection for our country. I think this issue is critically
important.
You, I am sure, read the story about the fellow from the
Middle East who had packed himself in a container, along with a
GPS, a computer, a heater, a water supply, and he was shipping
himself to Canada. And he was apprehended, but it describes the
great, great difficulty we have in dealing with this container
traffic.
Without asking a question about that, let me just tell you
that I think you are on the right track and I want to be
helpful and work with you on that.
NATIONAL GUARD ASSISTANCE TO CUSTOMS
Let me ask a couple of other quick questions. We are
supplementing some resources at the ports of entry with the
National Guard, but there is some concern that the National
Guard are going up to these areas, working with your Customs
agents and others, and the National Guard is not armed. Yet,
they are up there in full uniform. Do you know what the factors
were behind the decision not to arm the National Guard? Were
you involved in that?
Mr. Bonner. We made the initial request of the Department
of Defense in late October. It went over to the Treasury
Department and was submitted in early November, our request for
National Guard. We were very specific. We had done an analysis.
We wanted 626 National Guard to provide some relief to what
were, and still are, some extraordinarily hard-working U.S.
Customs inspectors at our borders who are working extraordinary
amounts of overtime. They have been working far more than
normal, Mr. Chairman, since September 11, to maintain the 24-
by-7-by-2 security at our ports of entry, and also to make sure
that we have lanes, including commercial lanes, open for longer
periods of time.
My position, by the way, has never been that the National
Guard should be unarmed. Essentially, after several months,
after funding issues had been taken care of, we received from
the Department of Defense an MOA, a memorandum of agreement,
that they provided to us in which they were saying we were
getting the Guard, and that they were going to be unarmed.
My own view is that we have never taken the position that
the Guard should be unarmed, and frankly there are some
locations in which it would be certainly preferable that the
Guard be armed.
We were prepared, we have indicated to the DOD going back
to November and December, that we were prepared to provide the
training, both in terms of use of force of policy, and in terms
of the training with some sort of a sidearm pistol, a nine
millimeter pistol. And for whatever reason, essentially to get
the Guard, we had a memorandum of agreement that they would not
be armed.
Now we can use, at the large commercial ports and
warehouses and things like that, we can certainly use the Guard
and are using the Guard for appropriate purposes where they do
not need to be armed. But in my judgment it would be
preferable, certainly at the remote ports of entry, and also
the other locations, that they be armed.
So that is my position on the subject matter. We just
yesterday had a further discussion with the appropriate
representatives of the Department of Defense and I think their
position now is to simply--and by the way, we already have
these Guards and it is for 179 days. Now their position, in
midstream, is that they have made some analyses of the number
of Guard that they think need to be armed, that appeared to pay
little or no attention to the Customs Service's analysis of
where we need Guard and where we need them to be armed.
So we are following up promptly and as expeditiously as
possible with DOD to get this resolved, to identify those
members of the Guard that frankly, do need to be armed, and
then taking the steps--and Customs will absorb the cost of
this--to send them for what is going to be perhaps as many as a
10-day training course in the use of force policy and weapons
training.
The sad part of this is that this is not the time to be
doing it. This should have been done before the Guard were ever
deployed. But we are working on the issue.
Senator Dorgan. First of all, thank you for being candid
about it. It may get you in some hot water in one corner or
another, but I think it is an important issue here. The
National Guardsmen and women, I think feel strongly about this
issue, being sent to in some cases pretty remote places in full
military uniform with a security role but being told, by the
way you cannot carry a weapon. It is just an inexplicable
decision.
I do not know when we are going to get a decision. We have
appealed that and asked DOD to take a look at that issue. From
your discussion, apparently there are active discussions and we
are expecting some sort of decision.
Mr. Gurule, do you agree with Commissioner Bonner?
Mr. Gurule. Yes. I was just going to add, I spoke with
General George Casey yesterday on this issue. There was
actually a meeting that was held yesterday between DOD
officials and Customs officials. I think that we are close to
resolving the matter and he certainly seemed anxious to resolve
it as quickly as possible. So I think we are very close to
having this behind us.
Again, as the Commissioner stated, it is unfortunate that
it has taken this long, but I think we are close to resolving
it.
Senator Dorgan. Can you describe close? Is it days or is it
weeks?
Mr. Gurule. It is hard to say. My sense, from the
conversation that I had with General Casey, is that we are
literally days away from resolving it. I think it is that
close. And I certainly sense that there is a strong willingness
on the General's part to move as quickly and as expeditiously
towards resolving it.
And I think the spirit of cooperation here is very strong,
so I am optimistic.
PROPOSED COBRA FEE INCREASE
Senator Dorgan. Let me just ask one additional question and
then I will turn to Senator Campbell.
This administration, just like the past administration, has
recommended a user fee of sorts that would be used to fund a
portion of the Customs Service. The Administration says that
the Customs Service is actually receiving an increase in its
budget from 2002 to 2003. That is based largely on the $250
million proposal for a user fee.
We have not embraced the user fee under the previous
administration, under the Clinton administration. I doubt very
much whether we will this year. If we do not, what will we do
about funding here? In order to have a user fee, you would have
to work with the authorizing committee and have it authorized
by July 1st. Is that work underway, Mr. Gurule?
Mr. Gurule. Well, OMB and the Treasury General Counsel's
Office have been engaged in extensive discussions on the
legislation that would be needed to affect the change. It is my
understanding that it is in the final stages. Again, when I say
final stages, within a few days of being resolved, the language
to be submitted to the Hill for consideration. So we are very
close to having the language up here to authorize the user fee.
Senator Dorgan. Do you believe Congress would enact that?
Mr. Gurule. I do not know. I cannot speculate. The theory,
as you know, underlying the proposal with respect to the user
fee was that the user fee was established back in 1985. It has
not been changed, has not been increased in the last 17 years.
I have not done the math but I would suspect that if we
took the user fee and tied it to the rate of inflation, we
could justify going from $5 to $11 with respect to just
inflation and related costs incurred in conducting these
inspections.
And then finally I would add that post September 11, I
believe that we are seeing more scrutiny, close scrutiny of
international passengers. And therefore, there is increased
costs that are being incurred, as well.
Senator Dorgan. I understand that, but the point I was
trying to make is the Clinton administration could not sell it
here, and I do not believe the Bush administration can. If you
cannot, then you are $250 million short. And the question is
where will we come up with that shortage? Any ideas?
Mr. Gurule. Well, if the Congress rejects the COBRA fee,
and I am certainly hopeful that it will not, but if it rejects
it then we will need to meet and work closely with Congress to
see ways in which we might be able to fill the gap that is
created in the absence of such a fee. I would welcome the
opportunity to work with you and your staff to that end.
Senator Dorgan. Senator Campbell?
Senator Campbell. Thank you, Mr. Chairman.
Before I ask Mr. Bonner a couple of questions, let me
congratulate Mr. Gurule on some of his recent staff additions.
I speak with some authority, Mr. Chairman, because Mike
Russell, who is sitting behind him, was my deputy chief of
staff over 5 years. I still find myself, when I am in trouble,
saying where is Mike, where is Mike? He is now doing a fine job
for Mr. Gurule.
Mr. Gurule. Absolutely.
Senator Campbell. He was my loss and the Administration's
gain.
Let me also make a comment on the so-called user fee. We
have dealt with these user fees under different names for years
and years. I can remember 15 years ago, on the House side, when
we had the tourism caucus, when we were trying to just increase
tourism by adding some kind of a fee that could be called a
landing fee or some kind of a fee. And it absolutely fell on
its face then because of opposition from the tourism industry.
I do not think we are in any better shape now when we talk
about adding fees for people that want to come to the United
States.
SEA CONTAINER INSPECTIONS
Mr. Bonner, I am really interested in the numbers expressed
on these containers, and I do not know much about these
containers, and math is not my long suit either. But it appears
there is probably about 15,000 per day coming into the United
States roughly, 15,000 or 16,000 containers a day.
Mr. Bonner. That is about right.
Senator Campbell. You mentioned that the inspections now
are based on high risk, did I understand you to say that?
Mr. Bonner. Yes.
Senator Campbell. How do you identify high risk? Location
or intelligence or something?
Mr. Bonner. Obviously, any time you have specific tactical
intelligence, that is the best thing. But to be perfectly blunt
about it, we do not get a lot of tactical intelligence that
says you ought to take a look at x container coming in on x
vessel.
What you do, Senator, is first of all Customs has a very
significant volume of trade information in its databases. It
also collects, right now on a voluntary basis, advance manifest
information that is provided to us. By the way, it is
incomplete, it is not adequate in my opinion.
Senator Campbell. It could be counterfeit, and so on.
Mr. Bonner. But nonetheless, we do get a very large amount
of information. And we essentially, using targeting principles
and rules, we have developed and are getting more and more
sophisticated in developing a rules-based targeting methodology
which allows us to identify containers that are high risk.
By high risk I mean those at potential risk for terrorist
threat.
By the way, I do not think it is perfect. It is not perfect
because we are not getting complete information. We need
complete information and if the Congress makes it mandatory
that Customs be provided with complete manifest information,
this will assist us. But we do have a lot of information.
And so we make judgments that are based upon a risk
targeting methodology as to which containers we should inspect.
That is number one. That is our general approach to sorting out
high risk from low risk.
Senator Campbell. Out of those 15,000 or 16,000 a day, what
percent are actually inspected?
Mr. Bonner. I would say you are probably talking about
maybe 2 to 3 percent that are inspected as posing a potential
risk.
Senator Campbell. You are primarily inspecting for some
potential terrorist threat. But I was wondering, has your
inspections had a spinoff of finding increased smuggled goods
or counterfeit goods or so on that you have always been
concerned with?
Mr. Bonner. Let me distinguish two things here. We were
initially talking about sea containers, but we are also using
this same methodology in terms of, for example, commercial
trucks that are crossing our border and so forth.
So there, by the way, the Canadian border, I just want you
to know we are actually inspecting, in some way or another, a
significantly higher percentage than 2 to 3 percent.
But going back to your question, yes, there has been, by
virtue of increased scrutiny and increased inspections, there
has been a significant increase in the seizure, for example, of
illegal drugs coming into the country. A lot of that has been
at the southwest border because, as you know Senator, the
estimates are 65 to 70 percent of all of the illegal drugs that
are smuggled into the United States come across the border with
Mexico.
Senator Campbell. Have you found any more people, as
Senator Dorgan suggested about that one guy that snuck in in a
container.
Mr. Bonner. That was an individual that was actually on his
way from Egypt through Genoa, Italy to Halifax, Canada. I think
he was originating in Port Sayeed, Egypt and, by the way, very
troubling, he had an air mechanics certificate and some other
identification on him. He never reached the United States.
In the broadest sense, of course, the inspection technology
that we are using can detect a number of anomalies, illegal
drugs, terrorist weapons, and it is certainly capable of
detecting individuals that might be concealed either in a
tractor-trailer truck or in a sea container.
Senator Campbell. I have seen some of those gizmos that can
measure heart rates inside of a container. I have seen them
used.
Mr. Bonner. Again there have been instances in which sea
containers have been used to--at least we have some evidence--
where they have been used to transport people. I am not saying
terrorists. And we certainly have images, x-ray images of, for
example, train cars coming across from Mexico that have
individuals in them. This is something that you pick up on the
non-intrusive inspection technology, the large x-ray and gamma
ray machines that can image these containers.
So yes, leaving aside the radiation detection devices that
we have that we are also using, but the same kind of imaging
technology, in my judgment, is increasing the numbers of
seizures of illegal drugs that are coming into the United
States.
POST-SEPTEMBER 11 BORDER CROSSING WAIT TIMES
Senator Campbell. Let me ask you about impeding the flow of
trade. I do not know much about containers but I know a little
bit about the trucking industry. I was told by a number of
truckers that travel from Canada to the United States that, for
quite a while after 9/11, there was 24 hours or more wait at
the border while being inspected. Do you know if there is still
a huge wait like that? Or have we increased the speed?
Mr. Bonner. I know exactly what the wait times are,
Senator, because one of the things I did even before I was
confirmed as the Commissioner of Customs, I think on or about
September 13, is I directed the U.S. Customs Service to start
measuring with exactitude what the wait times were for a truck
to come across the U.S. border. The reason that I did that was
that we were experiencing what were 10 to 12 hour wait times to
cross into Michigan, into Buffalo, New York, and some other
points on the border.
So not only are we measuring these wait times, but we take
two snapshots, 8:00 a.m. and 4:00 p.m. every day at all the
major ports of entry, both on the northern border and the
southern border with Mexico. They are posted on the U.S.
Customs website, which is www.customs.gov, and have been since
a few days after September 11.
So if you want to know what wait times are for commercial
trucks, and it also goes for passenger vehicles, you can go to
that site. So I know, actually I track this if not on a daily
basis, at least every week. I look at the wait times. And I can
tell you, Senator, that while there were 10 to 12 hour wait
times essentially in the week after September 11, that through
a combination of efforts by U.S. Customs, with the trade, and
with getting some National Guard deployed, by TDY-ing,
temporary duty assignments, for Customs inspectors, to man more
of the lanes more often, and some other measures, we got the
wait times down, by about September 17, to what were pretty
close to pre-September 11 levels.
Senator Campbell. I am just looking at a chart here that
indicates in some places not more than 10 minutes delay or some
places no delay, some places 20 minutes. That is not bad.
Mr. Bonner. It is not bad, and it is as good, by the way,
in most places--there are some exceptions here, by the way,
that we need to work on that are not commercial truck traffic
so much as POV or privately owned vehicle traffic.
CUSTOMS TRADE PARTNERSHIP AGAINST TERRORISM
Senator Campbell. Let me ask you another couple of
questions on containers. You mentioned working with the
industry on inspecting the containers. Does that mean industry
sometimes inspects their own containers? Or is that always done
with Federal agents, too?
Mr. Bonner. Well, it is our responsibility to certainly use
our authority to inspect any containers that we think have
contraband or pose a risk. But what we have done with the
Customs Trade Partnership Against Terrorism is----
Senator Campbell. I do not have too much time.
Mr. Bonner. I will try to put it in a nutshell. It is
essentially to use the leverage of major U.S. importers to
increase the security, not just----
Senator Campbell. You do that at point of origin, rather
than here then, do you not?
Mr. Bonner. Point of origin, yes. The origin of the foreign
manufacturer to increase the security along the supply chain.
But that does not mean that we stop doing inspections. It
just means that it adds another layer, if you will, of security
with respect to goods, containers and cargo coming into the
United States.
Senator Campbell. Thank you. Thank you, Mr. Chairman.
Senator Dorgan. Senator Reed?
Senator Reed. Thank you, Mr. Chairman, and thank you
gentleman for your testimony.
Commissioner Bonner, it is good to hear that you are
increasing the number of personnel across the northern border
because that is a major access point to the United States. But
I also sympathize with your general comment about the need for
additional personnel for Customs Service. Indeed, in my home
State of Rhode Island, we are one person short of our full
complement of 12 people. That has been the case since the end
of the year. I hope not only can you fill up the northern
border, but also other places around the country that need
additional Customs officers for the very reasons you pointed
out so well in your testimony.
CUSTOMS AUTOMATION MODERNIZATION
Let me ask you a question with respect to the Automated
Commercial Environment. How well is that going, which
represents a major effort to increase the efficiency and
effectiveness of the Service and replace the old ACS system?
Mr. Bonner. This is, of course, a very, very important
procurement project at the U.S. Customs Service, and which had
started somewhat before my arrival and my confirmation on
September 19 last year.
But number one, I want this committee to know that this is
one of my highest priorities, the successful design,
implementation, and the funding necessary to design and
implement ACE in a timely manner. It is an incredibly important
system because it does hold the potential, and if we do it
right we will reform the way that the U.S. Customs Service does
business with the trade. It also will significantly add to our
ability to perform our security function against the terrorist
threat by getting ACE implemented.
Where it stands right now is that before I arrived, there
was a contract entered into with the E-Customs Partnership,
which is a consortium of companies led by IBM, to do the design
and the development of ACE, working closely with and being
overseen by U.S. Customs. In fact, this whole process is also
being overseen by the Office of Management and Budget and GAO
and this Committee, rightly so. It is a big project and it is
an expensive project.
We have just gotten approval, and I want to thank this
Committee, for the second expenditure spending plan. A few
weeks ago when I met, as I do on an almost monthly basis, with
the executive steering committee for the ACE project, we
approved and put forward the third spending plan, which is
making its way to this Appropriations Committee, but which is
right now somewhere between Treasury and OMB.
In any event, we believe that we will start receiving
deliverables, the first release of deliverables, under the ACE
system by, I believe, this coming fall. So right now, I would
say we are making reasonably good progress toward getting ACE
designed and beginning now, the implementation phase and
starting to roll out the deliverables.
As you know, this is being done in phases. At the current
level of funding, we should be able to complete the
implementation of the ACE system and get off the old ACS life
support system within 5 years. I am looking at seeing if there
is a way, without materially in any way increasing the risk to
ACE and its development, of actually completing the ACE project
within 4 years. That is being discussed right now. If, in fact,
we conclude that it can be completed within 4 years, then the
question is what kind of funding implications that would have.
I am not at a point to discuss that further with this
Committee. I chatted briefly with the Chairman about this last
Monday, but as soon as I have formulated my own conclusions and
discussed those appropriately within the executive branch, if
we think this can be done, I would look forward to coming over
and briefing not just the staff, but the members of this
committee as to how we might do that and what would be the
funding implications.
Senator Reed. If I may, a quick follow up. Did the events
of September 11 and all of the heightened security issues cause
you or the architects of the system to look again at whether or
not the system design is the right one for the new security
needs? And if you did, do you foresee any changes in the
system?
Mr. Bonner. We certainly are, and we are looking at the
possibility of seeing if we cannot push forward certain things
that would help us with respect to security issues. That is
being looked at, to see if we can do that.
Certainly, I mean if the system were in place now it would
be of immense benefit to the U.S. Customs Service in being able
to do even more sophisticated targeting and analysis of the
type that I was talking about with Senator Campbell. So we want
to see if there are some things, without again putting the
system or its development at risk, that could be done to push--
there are a couple of items that might be pushed forward that
would be particularly beneficial in terms of better dealing
with the security issue and the security threat.
JEWELRY MARKING
Senator Reed. Thank you. One final point, if I may, we all
have industries in our home States that are vital. The jewelry
industry has a long time been a vital, not only economic but
cultural and social force in Rhode Island. For many, many years
now I have been trying to give them a level playing field by
suggesting legislation which would require indelible markings
on foreign jewelry, the major form of competition. Today there
are requirements of some type of non-permanent marking, piece
of paper, et cetera, which mysteriously disappear.
I am wondering what the Customs Service perspective might
be on this matter? I think it is something that Senator
Campbell might be familiar with since Indian jewelry requires a
permanent indelible mark, which I think is very appropriate. Do
you have any thoughts? Or could you get back to us?
Mr. Bonner. You know, I would be happy to get back to you
on it. I must say, as I sit here right now, I have not given
that detailed thought. And I would want to make sure that any
system we have is one that Customs can----
Senator Campbell. If the senator would yield on that
specific point? Years ago, when Bill Richardson was in the
House, we tried to put an amendment in the trade bill to make
indelible stamping of metal. Several national groups, including
the National Jewelers Association, opposed it and we could not
get the thing passed.
Everybody wants some protection, but if it bites into their
bottom line profit, sometimes the line gets blurred.
Senator Reed. If you could get back to me, I would
appreciate it, Mr. Commissioner. Thank you, Mr. Chairman, thank
you Senator Campbell, for your comments.
ARMING NATIONAL GUARD DETAILEES
Senator Dorgan. Thank you, Senator Reed. Mr. Bonner, two
other areas.
I just looked at an April 9th memorandum from the
Department of Defense on this issue of arming the National
Guard and I wanted to just share this with you. This is
recommended to the chairman of the JCS that 411 soldiers be
armed, 337 on the northern border, 74 on the southern border it
appears. SECAR recommended approval, also. Forwarded to J-5 on
March 22 for coordination with lead agencies. I assume that
includes yours.
When approved by the lead agencies, it will be forwarded to
the Secretary of Defense for approval. Upon approval by the
Secretary of Defense, both MOAs will need to be amended before
arming can occur. It appears we are at least 8 weeks away from
arming our soldiers at the earliest. That is dated April 9th.
Does that conform to what you are hearing?
Mr. Gurule. I think the reason for the delay is that there
is going to have to be a training period. We are talking about
the decision, when we would have a decision resolved on this
issue. And my sense is that that is shortly to occur.
But after that decision is made, then there is still the
training issue that needs to be resolved. So it will be some
additional time before they are actually armed at the border
because they need this additional training requirement.
Senator Dorgan. You are talking about 10 days training,
right? I mean, the problem is this starts on March 2 and it
looks like you are talking the potential of mid-June. It is
sort of frustrating because I think the Commissioner indicated,
and many of us feel as well, some of these soldiers should not
have been deployed without arms. And as weeks and weeks and
weeks go by, I think it is inappropriate to have to wait this
long for an answer.
Mr. Gurule. Again, I do not think the issue is that
difficult, so I am surprised that they are referring to this in
an 8 week time frame. I do not think the issue is that
difficult to resolve. The training is not that long. So I am
not sure what other factors are being weighed into the equation
here that is extending this for such a long time.
Senator Dorgan. I am not sure this even contemplates a
training time. I think it contemplates a decisionmaking time.
It talks about when it goes to the Secretary of Defense,
dealing with lead agencies, then goes to SecDef, SecDef
approved, both MOAs need to be amended.
I mean, I suspect this is probably just kind of a
bureaucratic slowdown here.
Mr. Bonner. As I said, Mr. Chairman, they are available to
Customs only for 179 days. And my full intention, as I told DOD
all along, is to recruit, hire, train and deploy the new
Customs inspectors to replace the Guard, because I only have
the funding for 6 months anyway. So that is the problem we are
into now. By the time they approve all of this, it does not
make sense to take them away for 10 days and train them because
they are only going to have another month or so left on their
service. It was not done in an orderly way.
And second, the determination as to which Guard need to be
armed is essentially a unilateral determination by DOD. All we
are saying is here are the ones we need armed. It is not 411,
actually it is quite fewer than that who need to be armed. Let
us get them trained. I think we can probably get a training
program put in place and I am going to take this out of my own
budget, get the travel money to get them to FLETC or wherever
we need to put them to get them trained and redeployed.
The DOD proposal does not take into consideration that--we
are the ones that requested this and we are the ones that are
actually paying for it. Now granted, OMB has been helpful here
to Customs on the budget, but the DOD does not take into
account first of all, where we want them, and second which
Guard we think need to be armed. At this point it does not make
sense to, I do not think, to arm as many as they want. We are
using some of them--actually, in this film you saw we are using
some of them in situations at major commercial ports where
there are a lot of Customs inspectors around who are armed, and
we probably do not need them armed at this juncture in those
locations.
But we certainly need them armed at remote ports of entry
where they, along with one other Customs inspector, are
essentially standing sentry at our border.
Senator Dorgan. When did you alert DOD to the fact that you
felt that this certain group should be armed? About what
timeframe?
Mr. Bonner. You know, the problem is--the evolution of
this, frankly it has taken so long. But let me just say, I am
going back to the discussions that we were having back in
December with DOD. And in those discussions, we were proposing
the training program for armed Guard that we would have, we
would put together the training program, that we would be
putting on the training for them.
And somehow, I honestly do not know Mr. Chairman, but
somehow or another, as this evolved, and it was taking so long,
we were presented with a memorandum of agreement. At that
point, I thought we should just get the Guard and move on with
life. But it was always our view that either all of the Guard
would be armed, or at least some of the Guard where it made
sense to have them armed would be armed. It was not our
decision to have them all unarmed.
Senator Dorgan. You made that recommendation early and were
overruled by the DOD, who determined the conditions under which
they would be deployed; is that right?
Mr. Bonner. I think that is a fair way of characterizing
it. You have to know that there were all sorts of other issues
going on that were making this an excruciating process, in
terms of the delay in the negotiation.
MEXICAN LONG HAUL TRUCKING
Senator Dorgan. Let me ask one other quick item. I have
been told, it has not been made public yet, but I have been
told the Administration is prepared to proceed with a June 30
decision point for allowing Mexican long haul trucks to come
into this country. Many of us will have great heartburn about
that, because I do not think anybody is ready for it. Certainly
not DOT, certainly not the people who are engaged in
inspections, and so on. And I think that will pose a danger on
America's roads.
But tell me when the decision is made to allow Mexican long
haul trucks to come into this country, what impact will that
have on Customs? And is Customs ready?
Mr. Bonner. I think we are ready for it. There are some
issues here that probably are beyond my province that have to
do with safety of trucks and drivers and that sort of thing. We
are working, by the way, with the Department of Transportation
and Federal Highway Administration to do everything we
reasonably can to assist them with being in a position to
satisfy themselves that the Mexican trucks that would be going
past the 20 mile zone are safe and all of that.
I honestly think, Mr. Chairman, in terms of the
inspectional issues, the only issue I see--first of all, I
think we are ready for it when it happens because it is
essentially the same tractor-trailer truck that is coming
across. It is just not going back right away empty. Some of
them would be continuing on into the highway system of the
United States.
But I do not see it as, for example, significantly
increasing in any way the numbers of tractor-trailer trucks
and/or the numbers that we would need to screen and inspect.
Senator Dorgan. Had you heard of the June 30 proposal? In
your discussions with DOT are they talking about a date?
Mr. Bonner. I have heard that--I did not know whether it
was a firm date or a fixed date, but I knew that they were
trying to work toward being in a position so that they were
able to certify the tractor-trailer trucks coming in from
Mexico sometime in June. But I do not know that I have actually
seen, whether that was some specific legislation or regulation,
or what the exact driver of that timetable was.
Senator Dorgan. But this issue is more for DOT, because I
think you allow that quantity of Mexican trucks to come in and
long haul without nearly the capability to inspect, and there
is not the capability to inspect. And with massive problems,
lack of log books, lack of the requirements on Mexican drivers
that exist here, I mean a whole series of problems, we are
going to run into real serious safety issues on our highways.
That is an issue I will pursue more with DOT, but I was
curious about what you had been doing.
ADDITIONAL COMMITTEE QUESTIONS
Mr. Commissioner, thank you for testifying today. We look
forward to working with you. Please tell the men and women of
the Customs Service that we admire what they have done.
September 11 underscored again their value to this country and
the importance of having secure borders and their contribution
to making those borders secure.
[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 Byron L. Dorgan
customs tax increase
Question. The Administration is claiming that the Customs Service
fiscal year 2003 budget will receive an increase from fiscal year 2002.
This is largely based on the Administration's proposal for a tax
increase to cover $250 million of homeland security efforts. It is my
understanding that this user fee must be authorized by July 1, 2002 to
begin accruing the total $250 million.
Are you working with the authorizing committees to pass this
proposal? If not, who is responsible in the Administration for pursuing
this legislation?
Answer. We have had discussions with the House and Senate
authorizing committees and expect to continue working with them when
the legislation is finalized.
Question. What plans do you have to cover the $250 million
shortfall if the legislation is not enacted?
Answer. Given that Customs must address its existing labor costs
prior to embarking on new recruitments, it is essential that the COBRA
fee increase be enacted for the programs supported by the
Administration's budget request to achieve success. The allocation of
the fee increase would not be restricted to any aspect of that
mission.. The Administration will soon send a legislative proposal for
a COBRA fee increase to the House Committee on Ways and Means and the
Senate Committee on Finance. The Administration is willing to work with
the Congress to ensure that the fee increase gets enacted because it is
essential to the successful accomplishment of Customs overall mission.
Consequently, the Administration has not contemplated an operating
approach for Customs based on resources that are $250 million less than
the total availability assumed in the budget request. If the fee
increase is not enacted, the Administration is committed to funding
discretionary spending within the total submitted in the President's
Budget and would work with this Committee to fashion acceptable trade-
offs among all the important domestic spending priorities.
Question. What effect will this have on the Customs mission if this
``tax increase'' is not implemented?
Answer. As noted, the Administration is keenly aware that the
funding associated with the fee increase is essential to the successful
accomplishment of Customs overall mission. Consequently, the
Administration has not contemplated an operating approach for Customs
based on resources that are $250 million less than the total
availability assumed in the budget.
joint border agency
Question. It is my understanding that the Administration is moving
closer to Governor Ridge's proposal that would combine the Customs
Service in a joint border agency with other agencies such as the
Immigration and Naturalization Service (INS) under the Department of
Justice.
Given the INS's poor record and the most recent blunder of sending
approval letters for student visas of two of the terrorists from
September 11th, is it the most appropriate thing to combine these
agencies at this time?
Answer. The U.S. Customs Service is committed to protecting the
security of our Nation's borders and will continue to do so through
enhanced programs aimed to deter and detect terrorists or implements of
terrorism from entering the U.S. The U.S. Customs supports and is
prepared to comply with any direction from the Administration designed
to enhance overall border security.
Question. Do you support Governor Ridge in his efforts to create a
joint border agency and how would the revenue generating
responsibilities of the Customs Service fit in with such a plan?
Answer. As stated, Customs supports and is prepared to comply with
any direction from the Administration designed to enhance overall
border security. Governor Ridge has observed Customs border security
operations first hand, and Customs is working with the Office of
Homeland Security on a number of initiatives directed toward enhancing
border security and supporting trade facilitation.
Question. What is the President's timeline for making a decision on
this proposal?
Answer. Customs is not aware of a Presidential timeline for making
a decision on this proposal. (Response reflects pre-June 6 Presidential
announcement.)
business strategy adjustment and pay parity
Question. Secretary O'Neill is requiring that all agencies incur a
Business Strategy Adjustment. He feels that every agency can find
savings, but all those we asked were absent any ideas that wouldn't
affect mission-related activities. He proposed something similar in
fiscal year 2002, but this Subcommittee restored the funds for law
enforcement agencies. In fiscal year 2003, the BSA for Customs totals
$18,377,000. To reach parity to the military 4.1 percent from the
President's request of 2.6 percent, it will cost Customs $15,115,000.
What savings do you recommend to cover the proposed $18.377 million
business strategy adjustment?
Answer. Savings will be accomplished through an enterprise approach
toward administrative services and functions that will create synergies
within the Treasury Department and lead to economies of scale. Customs
will work with main Treasury and other Treasury Bureaus to identify
areas in which cost savings can be achieved. These areas could include
but are not limited to reengineering the drawback process, implementing
CD-ROM EEO Training, conducting EEO investigations at the Treasury
Bureau level, and establishing a corporate approach to Treasury
Acquisitions.
Question. What would be the affect on your agency if forced to
absorb the business strategy adjustment and a 1.5 percent pay raise?
Answer. Customs would try to achieve even more cost savings using
the enterprise approach mentioned in Question S-USCS7. Regardless of
the types of management efficiencies, how they are achieved, and how
successful they are, Customs will not compromise the security of the
United States.
usa patriot act
Question. This law authorizes the tripling of INS and Customs
personnel from fiscal year 2001 levels along the Northern Border.
Assuming the President's fiscal year 2003 budget is implemented, there
is still a hiring shortfall of 1261 Inspectors and 355 Agents under
Customs, while the shortfall for INS is significantly lower. I estimate
that Customs will need an additional $188 million to reach this goal.
INS is short only 447 Inspectors and 280 Border Patrol Agent to reach
the goal of tripling its personnel.
Would the tripling of staff from fiscal year 2001 levels fill the
necessary holes in staffing the Northern Border to place you at optimal
levels? Please detail what you would need to be at optimal levels along
the Northern Border and separately along the Southwest Border.
Answer. We believe that if Northern Border Inspector staffing were
tripled from fiscal year 2001 levels, coupled with appropriate
hardening of low volume ports and installation of electronic
surveillance equipment and Non-Intrusive Inspection Equipment (NII),
Customs Inspector staffing would be adequate.
Southern Border Inspector staffing maintained at existing baseline
levels, combined with additional staffing provided for in the fiscal
year 2002 Emergency Supplemental and fiscal year 2003 funding requests,
is sufficient for efficient and effective operations at the border. The
Southern Border has been hardened over the past several years due to
the ongoing contraband threat.
container security initiative (csi)
Question. Commissioner Bonner has been stressing the need to push
out our borders away from the conventional border. CSI is designed to
place Customs inspectors and agents in offices abroad to secure
containerized cargo entering the U.S. at the 10 largest mega-ports (50
percent of all cargo to the U.S. enters through these 10 ports).
Why is this important?
Answer. The U.S. Customs Container Security Initiative (CSI),
proposed by Commissioner Bonner in a January 17, 2002, speech given at
the Center for Strategic and International Studies, would secure an
indispensable, but vulnerable, link in the chain of global trade: the
oceangoing sea container. Ensuring the security of the maritime trade
system is essential, given that approximately 90 percent of the world's
cargo moves by container.
Each year, more than 16 million containers arrive in the United
States by ship, truck, and rail. In 2001, U.S. Customs processed more
than 214,000 vessels and 5.7 million sea containers. A proactive stance
by Customs in screening sea containers before they reach the United
States will significantly contribute to the agency's overall efforts to
secure the borders against dangers that might be introduced through
commercial traffic. A key goal of the CSI is to identify potential
high-risk shipments at the earliest point in the supply chain, thus
helping to protect the global maritime trading system.
Osama bin Laden and the Al Qaeda terrorist network have vowed to
cripple the U.S. and world economy. More than half of all goods that
enter the United States arrive by oceangoing cargo containers.
Question. What are the ramifications and complications of
stationing Customs Agents and Inspectors in foreign ports?
Answer. The ramifications and complications of deploying CSI teams
overseas vary from port to port because each situation is completely
different (e.g., ownership of the ports, relevant government agencies
involved, the private sector, legal/regulatory issues, etc.)
Several reoccurring issues have been raised during discussions with
foreign representatives such as sovereignty, port risk assessments,
data sharing, container inspection procedures, and reciprocity. As our
foreign partners gain a better understanding of our intentions under
the CSI program and how we want to work with them, these issues do not
elevate to insurmountable problems.
Also, we are coordinating with domestic agencies to answer foreign
representatives' potential questions. We are working out a response
process in the event a weapon of mass destruction is found in a CSI-
participating port. We are working with closely with USCS' Office of
Anti-Terrorism to coordinate our efforts with the Department of State
and its Foreign Emergency Support Team. Feeding off the Department of
Energy's Second Line of Defense Program we expect to send DOE teams to
potential ports to assess the host nation's ability to address this
issue.
Question. Are there jurisdictional or safety issues? What
conditions or constraints do you face?
Answer. The implementation of the Container Security Initiative
(CSI) is not expected to encounter any jurisdictional issues. U.S.
Customs officers stationed in foreign ports will be instructed to defer
to their host country counterparts with regard to the actual inspection
of containers. Host country inspectors will inspect the containers
previously identified as potentially high-risk. U.S. officers will
witness the inspections and ensure that any targeted containers have
been adequately screened prior to their clearance for the United
States.
The safety issues and potential conditions and restraints are
addressed in the above answer. We are coordinating with domestic
agencies to answer foreign representatives' potential questions
regarding safety issues.
Question. What will full implementation of the CSI program cost?
What time frame? What are the costs of a pilot project? In which Ports
would a pilot be most likely?
Answer. We anticipate full implementation of CSI would cost
approximately $63 million for the start-up year using standard costs
for overseas positions and estimates for establishing a new office.
Second year costs would be approximately $35 million. The estimated
timeframe to reach full CSI implementation is January 2004. The average
cost of a pilot project is $800,000. U.S. Customs has already
established CSI teams in Vancouver, Montreal, and Halifax, Canada. All
three sites rely on current resources. Our next step is to pilot CSI in
one port in Europe and one port in Asia. Following the establishment of
the initial pilots, U.S. Customs will incrementally work with the
Treasury Department and OMB to deploy teams in the world's top 20
megaports as well as other strategic locations. The typical
configuration of a team would include two inspectors, one special
agent, and one intelligence analyst. Of course, this configuration may
vary from port to port.
port security
Question. During last week's full Committee Homeland Security
hearings, we focused on port security. Witnesses highlighted the
challenges regarding port security. One issue concerns identifying
which Federal entity is responsible for the ports. One witness stated
that the Department of Transportation and the U.S. Customs Service both
claim control.
Commissioner Bonner, please state for the record, who is
responsible for containers entering the U.S. through these ports? Who
is responsible for security at the port itself?
Answer. Various Federal, State, and local agencies share the
responsibility for security at seaports, including the Customs Service
and the Coast Guard. However, the ultimate responsibility for seaports
rests with the states, which charter seaports within their territories.
Port authorities act on behalf of State or local governments and
operate some marine terminals while private sector tenants of the port
authority run others.
The Customs Service is the entity responsible for the security of
containers entering the United States. Customs is the lead Federal law
enforcement agency in the screening, examination and release of
commercial conveyances, persons, and cargo entering the United States
and a key stakeholder in the seaport security arena. Customs enforces
hundreds of laws for dozens of different Federal agencies at our
nation's air, land and seaports of entry.
Customs authority extends to the examination of cargo at both ends
of the transport chain and Customs is equipped with the infrastructure,
personnel, inspection equipment and computer systems to target, screen,
examine and process cargo shipments entering the United States through
our nation's seaports.
In general, State or local municipalities and terminal authorities
govern most seaport facilities in the United States. These facilities
are used to facilitate the movement of not only international shipments
that are imported or exported, but also facilitate the movement of
domestic cargo shipments that move between U.S. ports. As a result of
the multiple roles our nation's seaports play in the overall
international and domestic economies, there are multiple Federal
agencies with interests in seaport security. Customs is a key Federal
stakeholder in seaport security because Customs regulates the key
entities (shippers, carriers, importers, brokers, etc.) which are
involved in the importation/exportation of goods into and out of the
United States.
Question. Also, please illustrate your relationship with the U.S.
Coast Guard and other Federal, State and local entities at these ports.
Who is tasked with what responsibilities?
Answer. At the national level, the Customs Service and the
Department of Transportation (DOT) have been collaborating in a joint
Container Working Group (CWG) initiative that is focused on improving
the security of sea containers entering the United States. The U.S.
Coast Guard is one of many DOT sub-agencies represented on the CWG.
Additionally, Customs also works closely with the U.S. Coast Guard to
address seaport security issues through the Marine Transportation
System (MTS) and the Marine Transportation System National Advisory
Committee (MTSNAC), and promotes Customs best-practice security
standards through the U.S. Coast Guard at the International Maritime
Organization (IMO).
On a local level, Customs is the lead Federal law enforcement
agency in the screening, examination and release of commercial
conveyances, persons, and cargo entering the United States and is a key
stakeholder in the seaport security arena.
Customs authority extends to the examination of cargo at both ends
of the transport chain. Customs is equipped with the infrastructure,
personnel, inspection equipment and computer systems to target, screen,
examine and process cargo shipments entering the United States through
our nation's seaports. Customs is a key Federal stakeholder in sea port
security because Customs regulates the key entities (shippers,
carriers, importers, brokers, etc.) which are involved in the movement
of goods into and out of the United States.
Customs enforces hundreds of laws for dozens of different Federal
agencies. Additionally, Customs participates in Port Safety Committees
and coordinates enforcement activity with the proper Federal, State and
local entities, including the U.S. Coast Guard when necessary.
national guard
Question. The National Guard has been assigned to augment security
at the border and at Ports of Entry during on and off-hours after 9/11.
Critically, these troops are UNARMED. (Customs instituted a Level 1
alert wherein all Ports of Entry are manned 247 by at least
two people. This applied even to those border crossings, which have set
hours of operation, traditionally left unmanned). The National Guard
became dependant on the law enforcement officers of Customs and INS to
protect them. A decision to reverse the policy of not arming the
National Guard along the border is currently pending in DOD.
What were the factors behind the decision not to arm the National
Guard along our borders, especially given that they are armed at our
airports and at posts with the Capitol Police?
Answer. The Memorandum of Agreement (MOA) between the Department of
the Treasury and the Department of Defense (DOD) calls for DOD
personnel assigned to U.S. Customs to be unarmed for a number of
reasons. One reason is to avoid giving the appearance that the U.S.
government is militarizing its borders. Additionally, DOD personnel
will only be used to support very low-risk missions and will always be
under the immediate supervision of an armed Customs Inspector who can
provide force protection in the rare event it becomes necessary.
Furthermore, not arming DOD personnel helps minimize the possibility of
a use of force incident. Last, these additional DOD resources are being
utilized in a manner that is consistent with DOD support already in
place and also serving in an unarmed capacity.
DOD personnel assigned to U.S. Customs are detailed to our agency
under Title 10 USC. Title 10 soldiers are under the direction of the
President of the United States, and are funded by the Federal
Government. Therefore, the agreement to not arm the DOD soldiers
assigned to U.S. Customs was made between the Customs Service and the
DOD. On the other hand, the DOD personnel assigned to major airports
and the Capitol Police are detailed to those entities under Title 32
USC. Title 32 soldiers are under the direction of the State governors,
remain under the control of the States' Adjutant Generals, and receive
funding from their respective States. Therefore, the decision to arm
the soldiers assigned to major airports and the Capitol Police was made
among the respective States' governors, Adjutant Generals, and the
individual departments/agencies.
Question. What is the status of reversing this decision?
Answer. On April 12, 2002, the DOD requested to renegotiate the MOA
between our agencies, with the intent of selectively arming Title 10
DOD personnel assigned to the Customs Service. In an effort to
streamline the renegotiating process, Customs and DOD officials met at
the Pentagon on April 17, 2002, to discuss issues related to arming
Title 10 personnel. The DOD is currently drafting the proposed language
changes to the existing MOA, which will be forwarded to U.S. Customs
for consideration upon completion. Although the proposed changes have
not officially been agreed to at this time, the Customs Service has
orally agreed with DOD to arm the Title 10 personnel assigned to the
Northern Border locations. Both agencies have established this
renegotiating process as a very high priority. Every effort is being
made to ensure that the necessary changes are made and implemented as
soon as possible.
overtime cap for inspectors
Question. The USA Patriot Act lifted the overtime cap for INS
inspectors, but not for Customs. It is my understanding that Customs
did not ask for a similar provision because the Commissioner has the
authority to waive the cap upon special request. When visiting Ports of
Entry along the Northern Border, the overtime cap was a top concern of
many inspectors.
The USA Patriot Act lifted the overtime cap for INS inspectors, but
not for Customs. It is my understanding that Customs did not ask for a
similar provision because the Commissioner has the authority to waive
the cap upon special request. When visiting Ports of Entry along the
Northern Border, the overtime cap was a top concern of many inspectors.
You detail in your prepared statement that inspectors are working
12 to 16 hour days, 6 and 7 days a week. Why did you not request
lifting the caps through the Patriot Act, and do you require such a
provision at this time?
Answer. We do not require such a provision at this time. 19 U.S.C.
Section 267 (c) (1) authorizes the Commissioner of Customs to grant a
waiver of the statutory overtime cap to individual Customs officers. As
of April 26, 2002, I have granted overtime waivers to 94 inspectors for
fiscal year 2002.
Officers working 12 to 16 hour days, 6 and 7 days a week are more
an issue of available labor at certain locations than a cap waiver
issue for Customs.
cobra user fee shortfall
Question. Customs collects nine different user fees covering
services provided to the traveling public and trade community. These
COBRA fees reimburse the Salaries and Expenses account to address
overtime, benefits, salaries, and equipment, etc. COBRA receipts for
fiscal year 2002 are $35 million below fiscal year 2001 collections,
due primarily to a drop in air passenger travel. Treasury did not
request any funding in the Administration's recently released fiscal
year 2002 Supplemental Request (of 3/21). However, it should be noted
that the Administration proposes $35 million for INS to make up for the
``significant decline in international air travel to the United States
and an equally significant decline in projected immigration user fee
revenue.''
Please provide your understanding of why the Administration
requested funding for an INS shortfall in receipts from user fees and
nothing similar for Customs.
Answer. This question regarding INS funding is best answered by the
Office of Management and Budget.
Question. COBRA authorization expires 9/30/03. What efforts are
being made to address this?
Answer. The fiscal year 2003 budget does not reflect a specific
Administration position on extension of the COBRA fee, in either its
existing or proposed form, beyond fiscal year 2003. The Administration
will address this during the fiscal year 2004 budget cycle.
Question. The Administration is proposing an increase to COBRA user
fees to cover an estimated $250 million of homeland security needs.
With the drop in collections and the sunset of COBRA at the end of
fiscal year 2003, how do you envision the future and purpose of this
user fee?
Answer. The Administration plans to address the future of COBRA
during the fiscal year 2004 budget cycle.
ace funding
Question. You have expressed interest in completing ACE--the
Customs trade processing system--within a four year timeframe. The
Subcommittee strongly supports ACE and we have added funds to previous
budgets to keep the program on track. I am pleased that the
Administration now also seems to be supportive of the program.
How much is needed in additional funds in the next three years to
accomplish this goal?
Answer. Customs has performed an analysis of the benefits and risks
of a 4 versus 5-year plan, and is discussing with the Department and
OMB pursuing the 4-year ACE schedule (ending March 2006). We are
currently formulating the funding requirements for the President's
fiscal year 2004 Budget and the Modernization Executive Steering
Committee is considering the assumptions upon which the 4-year funding
requirements are based.
Question. How much additional funding would be required in fiscal
year 2003?
Answer. None
Question. Given the past experience with the IRS and its wasting of
millions of dollars on its earlier, failed systems modernization
program, are you concerned at all about moving too fast?
Answer. Customs goal to complete ACE in 4-years (ending March 2006)
is undergoing careful analysis. We believe that the benefits outweigh
the risks. The members of the Modernization Executive Steering
Committee (which includes representatives from the Treasury Department,
OMB, GAO and the trade) considered this issue when briefed on April 24,
2002. In the post-September 11 era, we are maintaining a determined yet
measured approach to putting ACE capabilities to work on America's
borders as soon as it is feasible.
ACE, like every development program, has a set of inherent risks
that are generally dictated by inter-related variables including
technical complexity, schedule, cost, and impact to the organization,
among others. The decision to proceed with a 4-year schedule is based
on not only the risk analysis, but also tangible factors including
benefits to Participating Government Agencies (PGA) that have yet to be
quantified, positive impacts on national anti-terrorism and border
security efforts, and the incremental development that will be
undertaken by the Customs Modernization Office (CMO).
The incremental development is extremely important as it provides
tremendous management leverage to facilitate mid-course corrections, as
necessary, throughout the development of ACE. This strategy will help
ensure that ACE meets the goals of the Customs Service and PGAs in a
manner that maximizes lifecycle benefit while remaining within planned
acquisition cost.
A more detailed risk analysis is being sent to Senators Dorgan and
Campbell via separate correspondence.
forced child labor
Question. Over the past three fiscal years, Customs received Forced
Child Labor (FCL) funding for initiatives to combat the illegal
importation of goods produced with forced or indentured child labor.
With this funding, Customs opened overseas offices in Brazil and the
Philippines. The State Department has also approved the establishment
of an office in New Delhi. Approval is being sought for Dubai and
another site in Africa. Staffing was also increased in Pretoria and
Moscow and backfilled in Beijing. Three overseas symposia were offered
in Thailand, Germany and Panama, as well as two in the U.S. There are
32 open FCL investigations. Customs' focus to combat FCL is through (a)
Foreign government training (b) International outreach and symposia and
(c) International investigations at the source.
How successful is this multi-tiered approach in addressing Forced
Child Labor?
Answer. The multi-tiered approach to addressing Forced Child Labor
(FCL) has been successful in ensuring that the relevant foreign
government entities, non-governmental organizations and U.S. Embassies
are informed on the mission of the Customs Forced Child Labor program.
In those offices where the FCL program has been established for at
least two or more years, our officers have often been successful in
gaining access to factories which export goods to the United States to
determine if Forced Child Labor is used in the manufacture of goods.
For example, the Customs Attache Office in Bangkok has had two FCL
dedicated agents since 1999. After successfully establishing an
international outreach program in their Area of Responsibility (AOR),
the Bangkok office has now been able to conduct several factory visits
in their AOR. In the last year they have visited 67 factories that
export goods to the United States with no findings of forced child
labor. Our offices in Panama and Uruguay have been able to accomplish
similar access for site visits in some countries in their AOR as well.
The multi-tiered outreach approach with foreign governmental
entities has also been effective in enlisting the support of foreign
governments in the FCL issue. For example, the Customs Attache Panama
Office has been able to cultivate support from politicians in the
Panamanian National Assembly and Ministry of Labor in tackling this
issue in Panama.
The success of tackling the issue of Forced Child Labor on a multi-
layered front comes from the fact that this issue can only be addressed
by focusing on all the entities that play a role in this issue from the
relevant foreign ministries to Non-Governmental Organizations. Our
overseas offices with FCL responsibilities have been vigorously
utilizing this approach to this issue.
Question. What more could you do, or do you intend to do
internationally to address FCL?
Answer. At the international level, the U.S. Customs Service plans
on opening a Customs Attache Office in India in July 2002 to address
FCL issues in South Asia. Customs is also seeking approval from the
Department of State to establish a presence in Dubai, United Arab
Emirates and Nairobi, Kenya to address FCL issues in the Middle East
and East Africa respectively. Customs plans to add an additional
Special Agent to address FCL issues in our current Customs Attache
Offices in Moscow, Russia and Pretoria, South Africa. In addition, we
are back-filling an existing Agent vacancy in Beijing, China to support
the FCL program.
Customs will also be providing formalized FCL enforcement training
to foreign officials based on a training plan that has been devised to
focus on how foreign governments can assist Customs in tackling Forced
Child Labor. This training will further enhance the international
outreach programs that have already been performed in those countries
suspected of having FCL problems.
______
Questions Submitted by Senator Ben Nighthorse Campbell
commissioner bonner
Question. Mr. Bonner, as you are probably aware, the Senate
Appropriations Committee has begun a series of hearings on homeland
security. The first sessions were held last week, and included two
witnesses who spoke about port security. Dr. Stephen E. Flynn of the
Council on Foreign Relations in New York spoke about the need for
security checks before shipment containers reach our shores. Admiral
Richard Larrabee of the Port Authority of New York and New Jersey
echoed that observation and spoke of Operation Safe Commerce as an
example of a private-public partnership. It was interesting that none
of the witnesses even mentioned the ongoing Customs efforts to pre-
screen containers at the international mega-ports--the Container
Security Initiative.
Please tell us more about the Customs Container Security
Initiative. Where are you concentrating your current efforts? Are U.S.
port officials and others involved in port security aware of this
initiative?
Answer. The U.S. Customs Container Security Initiative (CSI), which
I proposed in a January 17, 2002, speech given at the Center for
Strategic and International Studies, will enhance the security of an
indispensable, but vulnerable, link in the chain of global trade: the
oceangoing sea container. Ensuring the security of the maritime trade
system is essential, given that approximately 90 percent of the world's
cargo moves by container.
Each year, more than 16 million containers arrive in the United
States by ship, truck, and rail. In 2001, U.S. Customs processed more
than 214,000 vessels and 5.7 million sea containers. A proactive stance
by Customs in screening sea containers before they reach the United
States will significantly contribute to the agency's overall efforts to
secure the borders against dangers that might be introduced through
commercial traffic.
The Container Security Initiative consists of four core elements.
These are: (1) establishing security criteria to identify high-risk
containers; (2) pre-screening those containers identified as high-risk
before they arrive at U.S. ports; (3) using technology to quickly pre-
screen high-risk containers; and (4) developing and using smart and
secure containers. The fundamental objective of the CSI is first to
engage the ports that send highest volumes of container traffic into
the United States, as well as the governments in these locations, in a
way that will facilitate detection of potential problems at their
earliest possible opportunity.
As a first step, U.S. Customs has identified the top 20 ``mega-
ports'' that send containers to the United States, and has entered into
discussions with the governments in these locations to solicit their
participation in the CSI. These locations were identified based on
their volume of sea container traffic destined for the U.S.; however,
the CSI program will not be restricted to only these locations. Risk
assessments and trade analysis play an important part in future
deployments, and increased security measures are vital to the
operations of any port in today's environment.
U.S. Customs has undertaken an extensive outreach program to bring
CSI to the public's attention. Briefings have been provided to numerous
groups including the trade, Congressional offices, other government
agencies, the press, and associations such as the American Association
of Port Authorities which I addressed on March 19, 2002.
TOP TWENTY MEGA-PORTS: Hong Kong; Antwerp; Shanghai; Nagoya;
Singapore; LaHavre; Kaohsiung; Hamburg; Rotterdam; La Spezia; Pusan;
Felixstowe; Bremerhaven; Algeciras; Tokyo; Kobe; Genoa; Yokohama;
Yantian and Laem Chabang.
Mr. Bonner, there has been some discussion at the Customs Service
and throughout the trade industry about escalating the development of
the Automated Commercial Environment or ACE project. As you know, we
have some concerns about the added risks inherent in this idea,
especially considering that the General Accounting Office has
consistently identified agency management control weaknesses, which
have not yet been fully addressed.
Question. What is the status of a decision to reduce the ACE
project schedule from 5 to 4 years? What steps have been or will be
taken to address the management control weaknesses cited by GAO?
Answer. Based on an analysis of the benefits and risks of a 4
versus 5-year plan, Customs is discussing with the Department and OMB
pursuing the 4-year schedule (ending March 2006). This issue was
considered by the members of the Modernization Executive Steering
Committee when briefed on April 24. Customs has taken, and will
continue to take, prudent steps to address the risks associated with
the Modernization Program. This includes actions to address concerns of
the Committee and useful recommendations provided by the General
Accounting Office (GAO). A more detailed response of actions taken is
being sent to you and Senator Dorgan via separate correspondence. Key
actions are highlighted below:
--Tasked e-Customs Partnership (e-CP) to update and extend the
existing enterprise architecture to provide the requisite
design content, consistency, and integration across the full
scope of the Customs business areas. Enterprise architecture
certification is scheduled for June 2002.
--Developed a new, expanded organizational structure that doubles the
size of the Customs Modernization Office (CMO). Positions are
being filled now.
--Completed 75 percent of the software acquisition controls that span
the Software Engineering Institute's entire Software
Acquisition Capability Maturity Model (CMM).
--Continued to focus first on the most critical plans, processes and
procedures across all CMM Key Process Areas.
--Employed the use of both an independent government cost estimator
and software tools that enable reliable cost estimation
process.
--Identified the inherent risks of the 4-year approach, analyzed the
potential impacts, and briefed the Modernization Executive
Steering Committee.
--Employed risk management procedures that conform to Software
Engineering Institute standards to mitigate program risks.
I am told that a Customs COBRA fee advisory committee was created
in 1999 to advise the Customs Commissioner on issues related to the
performance of the inspectional services of the Customs Service. The
membership is to include representatives from airline, cruise ship, and
other transportation industries who may be subject to COBRA fees. The
meetings are intended to be a forum for discussions about the proper
number and deployment of inspectors, the level of fees, and the
appropriateness of any proposed fees. Mr. Bonner, the fiscal year 2003
budget request again includes a proposal to increase the COBRA fees for
airline and cruise vessel passengers. This proposal has landed with the
same resounding thud as earlier efforts by the previous Administration,
in part because the travel industry does not believe it is necessary.
Question. Why hasn't the Customs COBRA Fee Advisory Committee been
actually established? After all, if you can convince the industry
committee members that an increase is warranted, even a modest
inflationary increase, the battle has been won.
Answer. By enactment of the Miscellaneous Trade and Technical
Corrections Act of 1999, (Public Law 106-36), section 13031 of the
Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 (19
U.S.C. 58c) was amended to direct the Commissioner of Customs to
establish an advisory committee whose membership shall consist of
representatives from the airline, cruise ship, and other transportation
industries who may be subject to fees under 19 U.S.C. 58c. The Customs
Service has published three separate Federal Register Notices
soliciting applications for this committee. The first two Federal
Register Notices only produced applicants from four of the seven
eligible COBRA user fee sectors. After publication of the third Notice,
five applicants were tentatively selected.
Notification letters to the selectees will be mailed by the first
week in May 2002.
Along those lines, the fiscal year 2003 budget request assumes the
increase in these fees to the tune of almost $250 million which would
be used to augment funds appropriated by Congress for operations of the
Customs Service. Let us assume for a moment that Congress refuses to
increase those COBRA fees, which is not a stretch of the imagination,
and that we do not have sufficient funds to simply appropriate that
amount.
Question. What steps will you be forced to take if your operating
budget is, in effect, reduced by $250 million?
Answer. We expect the fee increase to be enacted because it is
essential to the successful accomplishment of Customs overall mission.
The Administration would work with this Committee to fashion acceptable
trade-offs among all the domestic spending priorities in order to
accommodate Customs' requirements if the fee increase were not enacted.
Mr. Bonner, every Federal agency faces normal attrition, either by
retirements or resignations, and those positions must be refilled. In
the case of the Customs Service, this recruitment effort is further
complicated by the need to fill additional positions authorized and
funded by Congress. I am told that you hope to hire 1,244 Inspectors
and 731 Special Agents this year, and your fiscal year 2003 request
contains funding for even more positions next year. While I completely
understand the need for more Inspectors and Special Agents, this is a
huge recruitment undertaking.
Question. What is the status of your fiscal year 2002 hiring plan?
How many applications are currently in the pipeline? Most importantly,
how do you compete with other Federal law enforcement agencies,
including the Transportation Security Administration, for the small
pool of qualified potential employees?
Answer. We are making excellent progress in hiring against our
fiscal year 2002 hiring plan. We have filled 57 percent of our
positions and expect to meet all of our hiring objectives.
Hiring Customs Officers
Hiring Plan (includes projected attrition)........................ 1,955
Hired to Date..................................................... 854
Cleared Pre-Employment & Scheduled for Training................... 269
Remaining to be Hired............................................. 832
We currently have an applicant pipeline of 3,000 Inspectors and
1,000 Agents who are pending pre-employment (medical, drug screening,
and background investigation). They will fill our remaining positions
for this year and be available for fiscal year 2003 hiring needs.
However, there has been a recent increase in the number of Customs
employees who have transferred to the Transportation Security
Administration (TSA). Seventy employees already have transferred to TSA
this fiscal year. TSA offers a higher career ladder (GS-13 vs. GS-9 for
Inspectors) and law enforcement retirement (wanted by most Inspectors).
If losses continue at this rate, this will be the first time we have
had problems in retaining Inspectors. (Our normal attrition rate for
inspectors is 4 percent--half of which are retirements.)
SUBCOMMITTEE RECESS
Mr. Bonner. Thank you, Mr. Chairman.
Senator Dorgan. This hearing is recessed.
[Whereupon, at 3:40 p.m., Thursday, April 18, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]
TREASURY AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL YEAR 2003
----------
WEDNESDAY, APRIL 24, 2002
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 1:35 p.m., in room SD-192, Dirksen
Senate Office Building, Hon. Byron L. Dorgan (chairman)
presiding.
Present: Senators Dorgan, Reed, Campbell, and DeWine.
EXECUTIVE OFFICE OF THE PRESIDENT
Office of National Drug Control Policy
STATEMENT OF JOHN P. WALTERS, DIRECTOR
ACCOMPANIED BY MICHELE C. MARX, DIRECTOR, FINANCIAL MANAGEMENT
OPENING REMARKS
Senator Dorgan. I call the hearing to order. This is the
Subcommittee on Treasury and General Government Appropriations
here in the Senate, and good afternoon, Mr. Director. We are
pleased that you are here.
This is the first time that you have testified before our
subcommittee. Myself and Senator Campbell and a couple of other
colleagues who will be joining us welcome you.
The purpose of this hearing is to discuss the fiscal year
2003 budget request for the Office of National Drug Control
Policy and to discuss your agency's jurisdiction over our
national drug control programs. I look forward to working with
you and supporting the necessary programs that will have the
greatest effect on our Nation to deter the use, promotion,
production, and the importation of drugs. And I know that my
colleagues on the subcommittee share that view.
I want to make a couple of observations as we begin. I will
not make a lengthy statement here, but I will put a statement
in the record.
I support and am interested in interdiction efforts,
interdiction efforts that are successful and help us interdict
the supply of drugs that come in. But I am also very concerned
about and very supportive of efforts to provide drug treatment
that is essential for those who are addicted to drugs. Those
who are addicted to drugs will find a supply somewhere at some
price, and they will find a way to pay for it, if necessary
through a life of crime.
Regrettably, our country has spent much more energy and
effort to interdict than it has providing treatment. We ought
to start, just as a starting point, with everybody who is
incarcerated. Those in law enforcement tell me that there are
two functions with respect to incarceration. You take a look at
guns and drugs, and you will find an attachment to most people
who are put behind bars to either guns or drugs. And especially
with respect to drugs, we have the capability for those that we
have incarcerated to treat them and allow them to leave
incarceration free of the drug addiction. Turning someone back
on to the streets with an addiction to drugs turns them back to
a life of crime.
It is almost unforgivable, in my judgment, for someone to
be addicted to drugs in our country and not able to find a slot
in a treatment center with which they can get treated. And that
exists around this country today, and we have people walking
America's streets and having this terrible addiction and unable
to find access to get treatment for it. So we must, even as we
talk about all these other issues, which I support, we must pay
much, much more attention to drug treatment than we have paid
in the past, and we ought to start especially with those that
we are incarcerating because we have the capability to address
all of those issues at the Federal, State, and local level.
I also want to mention that we have embarked on this
experiment of spending hundreds of millions of dollars on
television commercials to try especially to convince America's
youth not to take drugs. And we want to spend a lot of time
analyzing the effects of that. Has it been successful or hasn't
it?
We know that television advertising can have a profound
impact on behavior. We know that. Everyone knows that. That is
why people pay a massive amount of money to put a 30-second ad
on during the Super Bowl, for example. They know it has an
impact.
Does it have an impact, can it have an impact, has it had
an impact with respect to convincing young people that they
ought not experiment with drugs?
I think the jury is still out on that. I think that we have
had some analysis that is encouraging, some that it really
doesn't give us much of a road map here on what has happened.
So I want to visit with you about that as well.
But the media campaign, the National Youth Media Campaign
has been something that I have supported, Senator Campbell has
supported, but let's take a hard look at what we are getting
for that and exactly how we continue it, if we continue it. I
know the authorizers are taking a look at that as well at this
point.
But we welcome you here. I know you have assumed this role
with an attitude of wanting to provide great public service and
having an impact on what is happening with respect to drugs in
our country. And we pledge to you that we want to help you in
that mission. Our job as appropriators is to use the public's
money wisely. We have limited money and unlimited wants, and
our job is to economize in a way that provides the best
investment possible for the American taxpayer.
PREPARED STATEMENT
Investing in your agency is one part of that, and we want
to do it in the most effective way possible as well. So we will
need your guidance and help in order to accomplish that. Thank
you for being here.
[The statement follows:]
Prepared Statement of Senator Byron L. Dorgan
Good Afternoon, Mr. Director. This is your first time testifying
before our subcommittee, and we welcome you here today. The purpose of
this hearing is to discuss the fiscal year 2003 budget request for the
Office of National Drug Control Policy and to discuss your agency's
jurisdiction over our national drug control programs. I look forward to
working with you on supporting the necessary programs that will have
the greatest affect on our nation to deter the use, promotion,
production, and importation of drugs.
As you know from our meeting prior to your confirmation, I believe
the issue of drug treatment is critically important. In December 2001,
I wrote a letter to Acting Director Jurith on how much weight should be
given to drug treatment issues in developing this Administration's
first National Drug Control Strategy. Drug treatment is a necessary and
vital component of our drug control strategy yet in recent years, the
lack of facilities and options have left people who need treatment out
in the cold. I was encouraged to see the commitment of both your agency
and the Administration to this effort in the National Drug Control
Strategy that was released in February.
We must not lose sight that this is a long term investment and
commitment which we are making to close the gap on drug treatment. The
$224.2 million increase for substance abuse programs provided in the
fiscal year 2003 budget request is a step in the right direction. I
agree with many of your insights and ideas detailed in the National
Drug Control Strategy and will continue to be supportive of any effort
to increase drug treatment programs.
A crucial component of drug treatment resides within our criminal
populations. This sector of the population should be one on which we
have the most effect with regard to substance use. I commend the Bureau
of Prisons for continuing its efforts to serve as a model system for
many states and localities and for frequently modifying their ideas on
how to tackle this growing problem. I am concerned that the $7 million
increase to the Residential Substance Abuse Treatment Program (RSAT)
under the Department of Justice is not nearly enough to begin this
effort on a state level. As I stated in my letter, ``The National Drug
Control Strategy should include a comprehensive budget and plan to
test, treat, and monitor every person within the criminal justice
system. This plan should incorporate Federal, State, and local prison
systems.'' I am hopeful that in your capacity as Director of the Office
of National Drug Control Policy, you will increase funding
substantially for these programs and expand existing pilot projects in
next year's budget submission.
Another area I would like to focus on is the National Youth Media
Campaign. I understand that efforts are underway to reauthorize the
campaign. My staff has been working with the Senate Judiciary
Committee, representing the views of the appropriations Subcommittee
responsible for funding the campaign. As you know, there continues to
be enormous scrutiny over the Campaign, and with good reason. I look
forward to viewing some of the new commercials you brought with you
today and I understand that we will have an opportunity to see the
commercials specifically tailored to targeting the use of ecstasy by
our youth. This was something I felt very strongly about in the fiscal
year 2002 budget process and I remain concerned about the increased use
of this and similar club drugs.
Given the strain on our budget, it will be a difficult year for our
appropriations bill. In the past, it has always been difficult to
provide sufficient funding for the media campaign and this year will be
no different. To that extent, you have an obligation to spend this
money wisely and prove to this Subcommittee and to the American public
that this investment is worthwhile. When you aired commercials linking
terrorism to drug use during the Super bowl and the Olympics, two of
the highest premium commercial air times, many people were concerned
about the decision. I am hopeful that you can provide this Subcommittee
with data on why you chose to spend media campaign on these spots and
evidence of the impact/effect of those advertisements.
Finally, in the fiscal year 2002 budget submission, the
Administration proposed the creation of the Parents for a Drug Free
Future Program. ONDCP requested $5 million for this program, but never
provided my staff with sufficient information on how you planned to
spend the money. There may have been good intentions behind the concept
of this program, but I remain concerned when the Administration
requests funds for a program without providing a detailed plan to
Congress on allocating the funds. This was precisely the reason that
Congress chose not to fund this program. Not surprisingly, the
Administration is requesting this program during fiscal year 2003
through the Corporation for National and Community Service. This agency
falls under the jurisdiction of another subcommittee; however, my staff
informs me that they are having similar issues with getting more
information on the proposal. It concerns me greatly that there seems to
be no change in the Administration's practices, and even greater
concern that they have tried to circumvent this Subcommittee.
We welcome you here this afternoon and look forward to your
testimony. But first, let me turn to my Ranking Member, Senator
Campbell, for any remarks he wishes to make.
Senator Dorgan. Now let me call on the ranking member,
Senator Campbell.
STATEMENT OF SENATOR BEN NIGHTHORSE CAMPBELL
Senator Campbell. Thank you, Mr. Chairman. Just a short
statement. I will include my prepared statement in the record.
I agree totally with the chairman. I think we have made
some really big mistakes on our so-called war on crime, and
maybe that is our fault as elected officials. We put so much
emphasis on incarceration. I guess it helps you get elected if
you talk tough on crime and talk to everybody about how you are
going to put the bad guys away and make them break rocks
forever and that kind of thing. But it is very foolish on our
part because we don't put enough resources towards either
education or trying to recover people that could be recovered.
Years ago, I was a volunteer police counselor in Folsom
Prison and talked to a number of people, and I was absolutely
convinced, after I came out of that experience, that if you
don't do something about rehabilitation--and we don't--you just
end up with a larger and larger and larger turnover of the same
prisoners. I believe we have something like a 72 percent now of
repeat offender, and an awful lot of them have something to do
with alcohol or drugs. So I absolutely agree with the chairman
that we are not putting enough emphasis towards parts of the
war on crime and too much maybe on the other.
We have done an awful lot from the standpoint of education
with the ONDCP, and I have to tell you that--you haven't been
with us in past years, but we have gotten some really
questionable results. I believe we spent something like $930
million in the last 5 years on a national ad campaign to get
youngsters away from drugs. And the result is not encouraging
to me. In addition to that, how the money was spent bothered
both the chairman and me. When I was the chairman and he was
ranking, we felt we were completely left out of the loop on how
the millions and millions of dollars were spent in the face of
what we had sort of agreed to years ago when Senator Kohl and I
were on the committee. And we were worried at that time that if
we provided all that Federal money without some very, very
careful oversight, it would become sort of a cash cow for all
of the television stations, all of the networks, and magazines
as well.
In some respects I think it did, we began to see them trade
time for money rather than actually take the ads out, which was
what the ad campaign was originally designed for. So I have
some questions about that, too.
I think these other programs are just doing terrific. I
followed HIDTA very carefully and the growth of HIDTA, and I
visit the HIDTA outlets in different cities, in Denver and some
of the other ones. And as near as I can tell, that coordinating
effect it had with local, State, and Federal law enforcement
agencies has really done a lot of good.
PREPARED STATEMENT
Another program that I am just a big supporter of is the
Counterdrug Technology Assessment Center, CTAC. I have been to
three, I guess, seminars where the Federal agents demonstrated
the kinds of things local police departments who do not have
the operation money or the research money or the development
money to build the different kinds of highly skilled apparatus
that the Federal Government already has. I have seen how much
that can help the local communities when they get them. And I
think we have transferred around, oh, I don't know, 3,000 or
3,500 pieces of equipment to local police departments through
that program. I think it is just a terrific program.
So, in any event, thank you for calling this hearing, Mr.
Chairman, and I look forward to asking a few questions as we
have the time.
[The statement follows:]
Prepared Statement of Senator Ben Nighthorse Campbell
Thank you, Mr. Chairman. I am looking forward to this afternoon's
hearing. I know that our witness has time constraints, so I will keep
this short.
The Office of National Drug Control Policy was created to oversee
and coordinate this Ntion's efforts to reduce illegal drug use. There
have been both successful and not-so-successful periods during the past
13 years of ONDCP'S Existence. It is my hope that fiscal year 2003 will
be a successful year.
This subcommittee provides funding to ONDCP through four separate
accounts:
--Salaries and expenses.--Which funds the oversight and coordination
function.
--Counterdrug technology assessment center.--Which provides needed
technology to State and local Law Enforcement agencies.
--High intensity Drug Trafficking areas.--Which are designed to
reduce Drug trafficking in specified high-risk areas.
--And the special forfeiture fund.--Which, among other things, funds
the anti-drug national media campaignthis year we have been
asked to.
Provide a total of $523,588,000 for these accounts, over $457
million of which would go to the HIDTA program and the anti-drug
campaign.
That is a lot of money. It is our job to make sure that we provide
the funds required for these necessary programs without crossing the
line to wasting taxpayers' money. And, Director Walters, it is your job
to make sure we have the information necessary to make difficult
funding decisions
PREPARED STATEMENT
Senator Dorgan. Thank you, Senator Campbell.
Senator DeWine, do you have a statement?
Senator DeWine. No opening statement. I will actually have
an opening statement submitted for the record.
Senator Dorgan. All right.
[The statement follows:]
Prepared Statement of Senator Mike DeWine
Good afternoon. Thank you, John, for taking the time to talk to us
about the national drug control budget and your efforts to stop drug
use, heal America's drug users, and reduce drug demand.
I know you are well aware of how seriously I take the drug problem
and how committed I am to helping America fight against illegal drug
use. The illicit drug trade is all-pervasive, threatening our children
here at home and bolstering terrorist groups abroad. That is why, as I
have said repeatedly in the past, to combat illicit drugs in this
country, we need a balanced, comprehensive anti-drug strategy.
The first step in this balanced strategy is achieved by eradicating
drugs at their source. In doing this, we can take an important step
toward reducing domestic supply and demand. Right here in our own
hemisphere, the Revolutionary Armed Forces of Colombia, or FARC,
receives $300 million a year from drug sales. And, Colombia's right-
wing paramilitaries get 40-70 percent of their income from the illegal
drug trade. These groups use drug profits to carry out murder,
kidnappings, and extortion on a routine, if not daily, basis. Since
1990, 73 Americans have been taken hostage in Colombia. Since 1995, 12
have been murdered.
I look forward to working with you to help solve these problems--to
help stop the flow of drugs at their source, well before they can ever
reach our streets. I am pleased to see that your budget includes $731
million for Plan Colombia and the Andean Counterdrug Initiative.
Funding for this effort will help achieve our mutual objectives of
strengthening democracy, eliminating drug trafficking, and enforcing
the rule of law.
I read your op-ed supporting renewal of the Andean Trade Preference
Act (ATPA). I completely agree with your assertions that letting the
ATPA lapse threatens our regional security, and that our goal should be
to create an environment in which legitimate industry can thrive. For
us to be reliable partners with the countries of the Andean Region, we
must pass this critical piece of legislation as soon as possible.
As I said already, the drug war has many fronts and we must take
special care to address our problems here at home. We all know that
prevention, education, and treatment programs help reduce drug demand.
Your Drug Control Strategy supports these initiatives and indicates a
commitment to achieving a sustained reduction in drug use in the United
States. I support your efforts to focus on programs that work and to
set new goals--a 10 percent reduction in current drug use over 2 years
and a 25 percent reduction over 5 years. The President's support has
been encouraging, and the budget includes the resources necessary to
achieve these goals. I look forward to hearing more about it today.
I am particularly pleased to see the $644 million in funding for
the Safe and Drug-Free Schools Program. Over the years, Senator Dodd
and I have fought to continue and improve this vital program, which
provides funds to over 97 percent of our school districts nationwide to
keep schools safe and drug-free. I also support your request for $9.4
million in additional funding for the Drug-Free Communities Program.
This program works hand-in-hand with the Drug-Free Schools Program and
requires schools to implement proven, science-based prevention programs
to reduce and prevent drug and alcohol use. Your leadership and
coordination will be pivotal to the success of these two programs.
Already, you have taken a leadership role in your new media campaign
focusing on where the money spent on drugs actually goes--to
terrorists, for example. It is imperative that we educate our children
and the public about the evils and dangers of drug use. You have taken
a very positive step with this new media campaign, and your website is
fantastic. You are doing some very good work.
Thank you again for being here today. I look forward to hearing
your testimony.
Senator Dorgan. Mr Director, thank you very much for being
with us. We will include your entire statement as a part of the
permanent record, and we will ask you to summarize. Since this
hearing was scheduled, Secretary Powell has scheduled a
briefing for members of the Senate, so we will perhaps be
somewhat shorter in this hearing than we would otherwise. But
we want to have a good discussion with you about your agency
and the direction it is taking, and so why don't you proceed to
summarize your testimony. Your entire testimony will be made a
part of the permanent record.
STATEMENT OF JOHN P. WALTERS
Mr. Walters. Thank you, Mr. Chairman, Ranking Member
Campbell, and Senator DeWine. I am pleased to be here. I
appreciate the opportunity to talk about our fiscal year 2003
budget and to review some of the programs with you. I look
forward to continuing to work with each of you. I had an
opportunity prior to taking office during the confirmation
process to visit with you briefly, and I appreciate the time
you gave me at that point. As I am still in the beginning of my
term of office as director, I look forward to continuing those
discussions, here and afterwards.
I am joined by Michele Marx, who is our Director of
Financial Management, to help with any questions you have that
may not be answerable by me at this point. So I will call on
her, if you do not mind.
Just to summarize the high points and then to follow the
issues that you want to pursue, we are requesting a total of
$523.1 million in the four accounts that make up the budget of
the Office of National Drug Control Policy. In Salaries and
Expenses, we are requesting $25.5 million to support 116 FTE
and 30 nonreimbursable detailees, as well as some conference
activity, the clearinghouse that we are responsible for, and
some policy research.
As you know, the President's request is part of the
consolidated appropriation request for the Executive Office of
the President. We have broken this out to help the Committee in
doing its work.
Let me just summarize the highlights of----
Senator Dorgan. I just would point out, as you know, the
committee has not supported the consolidated budget, and we
intend not to. I can't speak for the entire committee, but I
expect that the committee will again intend not to do that this
year. So we appreciate your breaking it out, and we will break
it out even further for you in the future.
Mr. Walters. I understand.
COUNTERDRUG TECHNOLOGY ASSESSMENT CENTER
Let me start with the Counterdrug Technology Assessment
Center. We are requesting $40 million for the research and
development part of that effort and the Technology Transfer
Program. This supports, as you know, both demand and supply
reduction activities. Demand reduction activities, for example,
include neuro-imaging technology, medical instrumentation at
medical research institutions, and in this current fiscal year,
$2 million to begin a brain-imaging system at the University of
North Dakota.
Supply reduction activities include improving non-intrusive
inspection technologies, strengthening law enforcement
capabilities in such things as wireless communications-
interoperability, such as the Test Bed Project at Lakewood,
Colorado.
Since fiscal year 1998, the Technology Transfer Program has
delivered a total of 4,750 pieces of equipment to over 3,800
State and local law enforcement agencies. We agree this is a
good use of the Federal Government's ability to translate
technology into usable devices and make them available to local
and State officials who can use them. They sometimes are hard-
pressed and find these items very valuable.
NATIONAL YOUTH ANTI-DRUG MEDIA CAMPAIGN
The second area I would like to talk about that you
referred to is the National Youth Anti-Drug Media Campaign. We
are requesting $180 million to allow the Campaign to continue
the national multimedia paid advertisement campaign to its two
target audiences: parents and adults who influence young
people, and young people themselves.
During the past year, the Campaign, according to the
research we have, reached 90 percent of America's youth at
least four times a week. Ninety percent of youth and parents
recall seeing or hearing anti-drug ads at least once per week.
The last evaluation report released in October, 2001
provided data collected from the first three collection periods
or waves. It was retrospective to the first half of last year.
We are beginning to see some changes in attitudes among youth,
and we saw some decline in past-month use since the Campaign's
start in the target age group of 12- and 13-year-olds. For
example, past-month marijuana use among 12- and 13-year-olds
decreased from 1.8 percent to 0.7 percent between the beginning
and the third period of evaluation.
The next evaluation report, which is crucial because it
covers the full implementation of the whole program for the
first time and addresses the last half of 2001, is due next
month. So we are weeks away from that report, which we will, of
course, share with you as soon as we get it.
The pro-bono match component of this program has been
successful. From January 1998 through September 2002, total
value is projected to reach $659 million. The Campaign has also
been pursuing actively corporate involvement in the plan, and
my written statement includes a list of some of the
corporations that have been quite forward-leaning in their
assistance to the Campaign in a variety of areas.
In response to the terrorist attacks of last September, the
Campaign mobilized to educate the public on what has long been
recognized as the link between terror and funding from
trafficking in drugs. We did the most extensive process of
focus-group testing for what became the final ads that have now
been aired, beginning with release during the Super Bowl, and
found them to be some of the most powerful ever tested in both
their affect on young people, young adults, and parents, in
both encouraging parents to talk to young people, but also in
discouraging--or creating attitudes that would discourage
tendencies to use drugs.
We will have the results of that part of the Campaign in
the evaluation report that will be due, for the first half of
this year, in the fall of this year.
Also, as you know, our multicultural and subcultural and
language parts, especially foreign language, or language
adaptations of the Campaign are delivered to target audiences.
$38 million worth of drug prevention messages have gone in this
venue annually. The Campaign has just completed the
Government's first Native American anti-drug TV ads along with
a print complement and will be launched in the next several
weeks in targeted markets.
Pursuant to the report language for fiscal year 2002, the
Campaign is allocating $5 million for Ecstasy advertising
directed toward youth, which will appear on youth-oriented
network programs. With your permission, I have two examples of
these two ads that are only 30 seconds, I promise. I know
everybody loves their own videotapes, but since this is an
expensive program and I know you are concerned, I thought you
might want to see the ones that are about to be released in the
two areas you are interested.
Mr. Walters. We are committed to reauthorizing the Media
Campaign and will be sending language that we are working to
get both bipartisan and bicameral support for to Congress and
have its introduction shortly.
Let me just mention a couple of the other programs that I
know you have been interested in and that make up our request.
THE DRUG-FREE COMMUNITIES SUPPORT PROGRAM
The Drug-Free Communities Support Program, we are
requesting $60 million to expand the program. It now supports
463 communities in 50 States. We have also tried to expand this
program to all communities. Approximately 25 grants have been
awarded to communities with predominantly Native American and
Alaskan populations. Reauthorization of this program included
the creation of a National Coalition Institute to provide
scientific and technical support to the coalitions. The
Institute will help local coalitions measure outcomes in their
work and improve overall performance.
ANTI-DOPING EFFORTS
The United States Anti-Doping Agency and the World Anti-
Doping Agency have requested $1 million to support research and
administrative initiatives, educational programs, and efforts
to inform athletes of the rules governing the use of
performance-enhancing substances, and $800,000 to pay U.S. dues
for the World Anti-Doping Agency that coordinates efforts in
sports and with intergovernmental organizations, public
authorities, and athletes, respectfully.
COUNTERDRUG INTELLIGENCE EXECUTIVE SECRETARIES
Our Counterdrug Intelligence Executive Secretariat is
requesting $6 million to support approximately 30 reimbursable
detailees to continue improving intelligence architecture. The
ONDCP is completing an overall review as a part of the review
directed by the President of all counterdrug programs, and we
are working with the Counterdrug Intelligence Executive
Secretariat to both complete and hopefully implement the
results of that review.
NATIONAL DRUG COURT INITIATIVE
For the National Drug Court Institute, we have requested $1
million to continue expanding the Drug Court Training Program,
to convene special advisory groups to develop criteria for new
disciplines, and to develop a national community probation
initiative and expand the Institute's research library
resources.
PERFORMANCE MEASURES DEVELOPMENT
In the area of performance measures development, we are
requesting $2 million to develop and implement data sources for
performance measurement and management. ONDCP is committed to
management by results. We have started at the top. The National
Drug Control Strategy released by the President in February
sets the goal for this Nation of reducing drug use amoung
teenagers and adults by 10 percent in 2 years and by 25 percent
in 5 years. The President, I believe, took the bold step of
making his administration politically accountable in the period
with bold and aggressive, but I think achievable goals. We
intend to build that into all other program structures using
ourselves as an example.
NATIONAL ALLIANCE FOR MODEL STATE DRUG LAWS
For the National Alliance for Model State Drug Laws, we
have requested $500,000 to enable the alliance to encourage
States to implement laws, policies, and regulations that will
help reduce drug use.
HIGH INTENSITY DRUG TRAFFICKING AREAS
For the HIDTA program, we have requested $206,350,000 to
enable the HIDTAs to coordinate efforts to reduce the
production, manufacture, distribution, and transport of drugs
and to assist in money-laundering investigations.
We are requesting $2.1 million of the total to continue
auditing services and implement data collection systems. ONDCP
is conducting a review to ensure that HIDTAs are targeted and
results driven. In regard to the $20 million that Congress
added to the Administration's request for fiscal year 2001 in
discretionary funds, we plan to transfer $5 million to the
Department of Defense for National Guard counterdrugs efforts
that are supported largely by many in the field. This is a high
priority to maintain current operational levels and will not
affect current funding for existing HIDTAs. ONDCP will allocate
the remaining $15 million based on program priorities,
including intelligence operations, information technology,
infrastructure, training, money-laundering initiatives, and
communications interoperability.
FEDERAL DRUG CONTROL BUDGET
Finally, I will just mention what is in the National Drug
Control Strategy. We announced our intention to begin the
discussion with the goal of next year reorganizing the way in
which we present the drug control budget. I was in Government
before working on this issue all the way back in the Reagan
administration. I know that for very good reasons the budget
has tried to be a measure of what the drug problem costs the
Federal Government, the many things that various programs have
as expenses, as well as those that are targeted on supply and
demand.
What has happened in that time, though, is we have
accumulated many programs in this budget that we do not manage,
and we would like to focus our resources on the programs that
are directly targeted on reducing supply and demand. So we have
a proposal there, a preliminary proposal, to focus the arraying
and presentation of the budget on real programs that cross-walk
directly with the President's Budget and will for the first
time allow us to use results-based evaluations to drive money
to programs that work, not only within supply and demand
categories, but across supply and demand categories.
PREPARED STATEMENT
I know many of us have talked about shifting money to
programs of higher priority. This would be the first time that
this office would actually have the structural ability to do
that in an effective and concrete way. I have worked closely
with Director Daniels, and we intend to try to employ this this
time around in the budget process. But we announced it ahead of
time so that we could have conversations with yourselves,
people in the agencies, and others as we implement this
program.
That is my summary of ONDCP's fiscal year 2003 budget
request. I would be happy to answer questions about specifics.
[The statement follows:]
Prepared Statement of John P. Walters
introduction
Chairman Dorgan, Ranking Member Campbell, and distinguished members
of the Subcommittee: I am pleased to appear before you today to discuss
the fiscal year 2003 budget request for the Office of National Drug
Control Policy (ONDCP). I want to thank the Subcommittee for its strong
bipartisan commitment to our shared national goal of reducing drug use
in America, especially among our youth. This Subcommittee provides
critical funding to support ONDCP's programmatic, policy, and budget
development functions.
Your support of ONDCP's $523.1 million budget request permits ONDCP
to continue fulfilling our unique dual mission of serving as the
President's primary Executive Branch support for counter-drug policy
and program oversight while simultaneously managing our own diverse
programmatic responsibilities to achieve measurable results. ONDCP
takes seriously its primary statutory charge to develop national drug
control policy and a supporting budget; coordinate and oversee the
implementation of that policy and budget; and evaluate drug control
programs to ensure that our efforts are coordinated and focused on
obtaining measurable results. In addition to our policy role, ONDCP has
become increasingly responsible for managing and evaluating four key
programs: the National Youth Anti-Drug Media Campaign, the Drug-Free
Communities Program, the High Intensity Drug Trafficking Areas Program
(HIDTA), and the Counterdrug Technology Assessment Center (CTAC).
In addition to setting forth ONDCP's fiscal year 2003 Budget
Request, this statement includes brief updates on the President's
National Drug Control Strategy, the consolidated fiscal year 2003
national drug control budget request, and current drug use trends.
the president's national drug control strategy
As you know, developing an effective and comprehensive drug control
strategy and supporting budget is a complex challenge. I am confident,
however, that our nation is prepared to meet this challenge. Upon
assuming the office of Director of National Drug Control Policy last
December, I began conducting an in-depth review of existing policies
and program priorities. The first phase of that review culminated in
the National Drug Control Strategy released by President Bush on
February 12. At this release, the President reiterated his commitment
to combat drug use and emphatically stated that reducing drug use is at
the center of our national agenda. I welcome the subcommittee's
involvement as we continue to review our approach and will continue to
ask for your guidance as we implement policies and programs to make our
nation a safer and healthier place in which to live and to raise our
families.
The fundamental elements of effective drug control policy are
consistent with common sense. We are committed to mobilizing our
nation's efforts along three major themes:
Stopping Use Before it Starts.--We are using parents, educational
institutions, the media, and community action to prevent young people
from experimenting with drugs in the first instance and from starting
on the path that all too often leads to addiction, crime, and personal
and familial destruction.
Healing America's Drug Users.--We are placing a strong emphasis on
drug treatment. The President has made a historic commitment of $1.6
billion over 5 years in increased treatment funding. We will work to
deploy these resources to areas and populations that need it most and
provide more effective outreach to the chronically addicted drug using
population.
Disrupting the Market.--We are readjusting our efforts in supply
reduction based on market principles. We will identify and target
strategic vulnerabilities in the business of drug trafficking. We will
attack the drugs, money and corrupt financial institutions, precursor
chemicals, key managers and individuals, crops, key transit routes, and
key communication links that facilitate drug trafficking.
This Strategy places a heavy emphasis on obtaining measurable
results and providing accountability to the American people, to
Congress, and to our international partners. We will measure our
success against the national goals of achieving a 10 percent reduction
in teenage and adult current drug use over the next 2 years, and a 25
percent reduction in current drug use, nationally, over the next 5
years, as reported by the National Household Survey on Drug Abuse
(NHSDA). The Strategy recognizes that entities with counterdrug
responsibilities have not worked as effectively as they should.
Consistent with the goals of the President's Management Agenda, it is
our task to encourage and enable these entities to enhance their
performance. Good government demands it, and it is our responsibility
to future generations to ensure it. Finally, in the past, our ability
to manage counter-drug programs has been complicated by the methods
used to calculate the national drug control budget. The Administration
is developing a new way to report the national drug control budget that
will be readily identifiable and will reflect policy and management
decisions guiding our counter-drug efforts (see discussion on page 7).
assessing the extent of the drug problem in our nation
The Administration is committed to using science, research, and
performance management to direct our drug policy decisions. This
informed decision-making process will enable us to accomplish our goal
of reducing drug use in America. Everyone who cares about the drug
issue knows that our nation's drug problem is not a recent phenomenon.
Unfortunately, drug use among our nation's youth has remained at
unacceptably high levels for most of the past decade. Sadly, illicit
drug use has once again become all too acceptable among our young
people. This acceptance threatens to reverberate for years to come in
areas as disparate as crime rates, higher education, economic
competitiveness, and cohesiveness of community and family. For all
these reasons, it is incumbent on us to do all we can to empower
individuals to say ``no'' to drug use. The following is a snapshot of
the state of drug use in our country and the enormous harmful
consequences it inflicts upon our society:
Overall Trends.--According to the NHSDA, in 2000, 6.3 percent of
the household population aged 12 and older (14.0 million persons) were
``current'' or past month users of an illicit drug, a level that was
unchanged from 1999. Three of four current users (10.7 million)
reported using marijuana, either alone or in combination with other
drugs. Trend data prior to 1999 are not directly comparable to these
numbers because a new methodology to improve and expand the survey was
implemented in 1999. Nevertheless, historical data show that drug use
peaked in 1979, when 25 million people (or 14.1 percent of the
population) used illegal drugs.
Adult Trends.--According to the NHSDA, current drug use among
adults--aged 18 or older--remained statistically unchanged between 1999
and 2000, at 5.8 percent and 5.9 percent, respectively. Four out of ten
report having tried an illicit drug in their lifetime.
Youth Trends.--Drug use among 12-17 year olds also remained
relatively unchanged--9.8 percent in 1999 and 9.7 percent in 2000.
According to NHSDA, in 2000, 7.2 percent were current marijuana users,
and about one in four youth (26.9 percent) have tried an illicit drug
in their lifetime. The school-based Monitoring the Future study shows
that among 8th graders, 11.7 percent reported past-month (current) use
of any illicit drugs in 2001, lower than the 1996 peak of 14.6 percent.
Among 10th graders, 22.7 percent reported current drug use in 2001,
relatively stable in recent years and down slightly from the 1996 peak
of 23.2 percent. For 12 graders, 25.7 percent reported current drug use
in 2001, also relatively stable compared to the decade's peak of 26.2
percent recorded 1997. We are concerned that every day in 1999 (the
latest year for which data are available), more than 3,800 young people
tried marijuana for the first time, 1,800 tried hallucinogens, and
about 1,700 tried inhalants. Every day over the same period, over 8,000
youths first used alcohol.
Consequences of Drug Use.--There were 19,102 deaths as a result of
drug-induced causes in 1999, a slight drop from the 20,227 deaths in
1998. In 2000, there were 601,563 drug-related emergency room episodes
in the United States. This is an increase of 16 percent over the
518,800 episodes reported for 1994. Episodes including cocaine remain
at their historic highs; in 2000 there were 174,881 mentions of
cocaine, an increase of 22 percent since 1994.
Drug Consumption and Expenditure Estimates.--Americans spent over
$64 billion on illegal drugs in 2000. Most of the expenditure was for
cocaine ($35 billion), followed by marijuana ($10.5 billion) and heroin
($10 billion). The amount of cocaine consumed in the United States has
been declining over the past 10 years, from over 440 metric tons in
1990 to 260 metric tons in 2000. Heroin consumption has been stable at
13 to 14 metric tons per year, over the past 5 years.
Drug Availability.--Though overall coca cultivation decreased
between 1995 and 2000, a 25 percent increase in Colombia resulted in an
overall 18 percent increase in overall Andean Coca production in 2001.
The primary coca cultivation country is now Colombia, which accounts
for 580 metric tons, or 75 percent of the potential production. This
compares with 1995, where Colombia's potential production was less than
25 percent of world production. In 1995, Peru contributed 50 percent of
the total potential production. DEA's Heroin Signature Program, which
chemically analyzes heroin seizures, suggests that Colombia is the
source of over 60 percent of the heroin entering the United States and
Mexico is the source of an additional 20 percent.
Drug Seizures.--Worldwide cocaine seizures, over the past 5 years,
have averaged 280 metric tons (an average of 28 percent of the
potential production). Those seizures are distributed equally among
three components: (1) South America, (2) in transit to the U.S. market,
and (3) domestic United States, which includes seizures at and within
the United States border. Each of those components contributes to 30
percent of worldwide seizures. The remaining 10 percent are from
seizures in overseas markets. Seizures in transit to United States
markets have been rising (reaching 110 metric tons in 2001), while
seizures at the border have fallen (down to 34 metric tons in 2001),
suggesting that we are removing drugs farther from our borders. Federal
cocaine seizures have varied between 100 to 130 metric tons over the
past 5 years. Federal heroin seizures have been averaging 1,500
kilograms annually, but exceeded 1,600 kilograms in 2000. Federal
seizures of marijuana, which occur primarily at the Southwest border,
have increased annually about 20 percent for the past 5 years. In 2000,
these seizures exceeded 1,200 metric tons. Federal seizures of
methamphetamine rose dramatically in the late 1990s, and exceeded 3,300
kilograms in 2000. The number of clandestine methamphetamine labs
destroyed is projected to exceed 7,000 when the 2001 figures are
finalized. This compares with fewer than 4,000 labs destroyed in 1998.
It is all too obvious that despite our best efforts, too many
Americans are using drugs. Too many of our young people are using drugs
at a very early age. Too many of our citizens are addicted. The drug
trade is too prosperous. These statistics make abundantly clear that
achieving our goals will be a tremendous challenge. We are heartened
that Americans will never acquiesce to those who believe there is
nothing more we can do to reduce drug use--that we should be satisfied
with the status quo. We will meet this challenge by uniting as a nation
to begin the long and complex task of stopping use among youth before
it starts, transforming drug users back to health, and disrupting drug
markets to reduce the flow of illegal drugs into our country.
the consolidated fiscal year 2003 national drug control budget
The President's fiscal year 2003 Budget presents a balanced
approach for drug control programs, fully supporting the National Drug
Control Strategy. In fiscal year 2003, critical initiatives
significantly expand the Administration's commitment to drug treatment,
support essential drug prevention programs targeting youth, and
continue assistance to our partners in the Andean region. As reflected
in the following table, the President's fiscal year 2003 request for
aggregate national drug control funding and the drug-related functions
of Executive departments and agencies constituting the total is an
estimated $19.2 billion, an increase of $356.9 million (+1.9 percent)
over the fiscal year 2002 enacted level of $18.8 billion.
The President's fiscal year 2003 Budget Request puts the necessary
resources behind our commitment to reduce drug use in the near term.
The following are key budget highlights that will contribute to our
shared effort to stop drug use before it starts:
--Safe and Drug-Free Schools and Communities Program: $644 million
($634.8 million drug-related).--The budget continues funding
for this school-based drug and violence prevention program
aimed at young people, level funding the state grants program.
To improve evaluation and better direct program activities in
fiscal year 2003, ONDCP will work with the Department of
Education to develop a useful evaluation plan that will provide
the data needed to impose program accountability, while
alerting schools to problem areas.
--National Youth Anti-Drug Media Campaign: $180 million.--The Media
Campaign uses multi-media advertising and public communications
strategies aimed at youth and parents to promote anti-drug
attitudes and behavior. The campaign is a comprehensive
national effort that integrates paid advertising at national
and local levels with public information outreach through a
network of public and private partnerships to amplify and
provide local context for campaign messages.
--Drug-Free Communities Support Program: $60 million.--This ONDCP
program provides assistance to community groups on forming and
sustaining effective community and anti-drug coalitions that
fight the use of illegal drugs, alcohol, and tobacco by youth.
Further, the President's request includes $2 million for the
National Community Anti-Drug Coalition Institute. The Institute
will provide education, training, and technical assistance for
coalition leaders and community teams to enable coalitions to
evaluate their own performance.
--Parents Drug Corps Program: +$5 million.--This new
initiative, funded through the Corporation for National and
Community Service, will encourage parents to help children stay
drug-free by training them in drug prevention skills and
methods.
The President's fiscal year 2003 Budget builds upon the significant
bipartisan interest we enjoy in expanding our nation's commitment to
effective drug treatment programs and research. We are proud to be
associated with the President's historic commitment of providing $1.6
billion over 5 years to increase funding for treatment. We look forward
to working with the Department of Health and Human Services to
implement this commitment in such a way that the resources are targeted
to areas and populations with the greatest need. This Administration is
committed to going beyond merely providing additional funding for drug
treatment. We will seek to achieve a greater understanding of addiction
and of the types of programs that prove effective, as well as to foster
a climate where drug users are empowered to take an active, responsible
role in their recovery. The following are key highlights that will
begin an unprecedented effort to heal America's drug users:
--Targeted Capacity Expansion (TCE) Program: +$109 million.--This
additional funding will help to expand the Treatment TCE
program, which is designed to support a rapid, strategic
response to emerging trends in substance use. Included in this
proposal is $50 million to be used for a new component of the
TCE program. This new component will be structured to reserve
funding for state-level competitions, weighted according to
each state's need for treatment services.
--Substance Abuse Prevention and Treatment (SAPT) Block Grant:
+$60 million ($43 million drug-related).--This
increase in the SAPT Block Grant will provide additional
funding to states for treatment and prevention services. States
use these funds to extend treatment services to pregnant women,
women with dependent children, and racial and ethnic
minorities.
--Residential Substance Abuse Treatment (RSAT): +$7
million.--This enhancement will expand total funding for the
RSAT program to $77 million in fiscal year 2003. The RSAT
program is a formula grant that distributes funds to states to
support drug and alcohol treatment in state corrections
facilities.
--Drug Courts: +$2 million.--These additional resources
will expand total funding for the Drug Courts program to $52
million in fiscal year 2003. This program provides alternatives
to incarceration by using the coercive power of the court to
force abstinence and alter behavior through a combination of
escalating sanctions, mandatory drug testing, treatment, and
strong aftercare programs.
The President's fiscal year 2003 Budget enhances our ability to
protect our borders and cooperate fully in the international effort to
combat drug trafficking. The following key highlights will enable us to
disrupt the market at home and at the source:
--Andean Counterdrug Initiative (ACI): $731 million.--The fiscal year
2003 Budget includes an increase of $106 million over funding
enacted for the ACI account in fiscal year 2002 for Colombia,
Peru, Bolivia, Ecuador, Brazil, Venezuela, and Panama. This
fiscal year 2003 request includes resources to continue
enforcement, border control, coca and poppy eradication,
alternative development, institution building, and
administration of justice and human rights programs. For
Colombia, the fiscal year 2003 funding will be used for several
broad categories including: operations and maintenance of air
assets provided with Plan Colombia supplemental funding;
Colombian National Police and Army counternarcotics Brigade
operational support; and herbicide application programs. The
additional funding requested will support USAID-implemented
humanitarian, social, economic and alternative development
programs, support for vulnerable groups, and resources for
justice sector reform projects.
--Deepwater Project: +$500 million.--This proposal continues to
support the United States Coast Guard's Deepwater Project. The
Deepwater Project focuses on the re-capitalization and
modernization of the Coast Guard's assets including sensors and
communications equipment for the aging deepwater cutters,
aircraft and command centers. Although only a portion of this
initiative is related to drug control, the re-capitalization of
these assets will enhance the Coast Guard's ability to conduct
counterdrug activities.
--Border Control and Enforcement: +$76.3 million ($11.4 million drug-
related).--This enhancement for the Border Patrol includes
hiring an additional 570 agents to enforce national borders and
to combat international drug trafficking. For the new Border
Patrol Agents, a portion of their time will involve drug
control activities.
--Southwest Border Prosecutor Initiative: $50 million.--The
President's 2003 Budget maintains funding of $50 million for
the Southwest Border Prosecutor Initiative. This initiative
provides critical support to counties along the Southwest
Border for the costs of detaining and prosecuting drug cases
referred to them by U.S. Attorneys.
Restructuring the National Drug Control Budget
The President has instructed the Federal Government to manage by
results. Effectively managing the Federal drug control program, which
involves coordinating the work of more than 50 national drug control
program agencies, presents unique problems that require creative
solutions. Previously, our ability to manage anti-drug programs has
been complicated by the methods used to calculate the drug control
budget. The national drug control budget presented in the Strategy each
year does not represent actual managed dollars. With a few exceptions,
the dollars reported are not reflected as line items in the President's
budget or in appropriations acts. Instead, they reflect percentages of
total appropriations for agencies and programs, with a number of
different methods used to estimate the portion of the funds dedicated
to drug control.
Recent independent analyses commissioned by ONDCP, as well as
ongoing, required reviews by Inspectors General, have identified
weaknesses in the methodologies agencies use to measure spending
related to drug control. These reviews are unambiguous; we need to
reform the National Drug Control Budget. The Administration is
developing a new way to report the drug budget, based on the following
guidelines:
--All funding items displayed in the drug budget should be readily
identifiable line items in the President's Budget or agency
budget justifications; and
--The budget presentation should be simplified by eliminating several
supporting agencies from the drug budget tabulation. Only
agencies with a primary demand reduction or supply reduction
mission should be displayed in the drug budget. Agencies with
no, or little, direct involvement in drug control would be
excluded from the revised drug budget presentation.
Furthermore, the budget presentation has historically included
costs that are a consequence of drug use rather than expenditures aimed
at reducing drug use. As these costs do not reflect judgments about
drug policy, they would be excluded from the National Drug Control
Budget. ONDCP, however, will continue to report these costs as part of
the biennial report, Economic Costs to Society of Drug Abuse.
This proposal will enable the Administration, Congress, and the
general public to distinguish between funding for drug control efforts
and funding for the consequences of drug use. While this presentational
change will decrease the amount of funding attributed to the National
Drug Control Budget, it will not negatively affect the total size of
our Federal drug control efforts. In fact, this restructuring will
improve our ability to manage those efforts by enabling policymakers to
focus on managing programs genuinely directed at reducing drug use. The
President's fiscal year 2004 Budget will implement the proposed changes
to the National Drug Control Budget.
ondcp's fiscal year 2003 budget request
ONDCP is requesting $523.1 million in budget authority for fiscal
year 2003. ONDCP requested $519.1 million for fiscal year 2002. The
fiscal year 2002 enacted level is $533.313 million. The budget request
reflects four program accounts: Salaries and Expenses; the Counterdrug
Technology Assessment Center (CTAC); the Special Forfeiture Fund; and
the High Intensity Drug Trafficking Areas (HIDTA) program.
Salaries and Expenses: $25.458 million
For fiscal year 2003, ONDCP is requesting $25.458 million for
salaries and expenses to support 115 Full-Time Equivalents (FTEs) and
30 non-reimbursable detailees. ONDCP requested $25.1 million for fiscal
year 2002. The fiscal year 2002 enacted level is $25.263 million. This
request is essential if ONDCP is to carry out its policy, budget, and
programmatic responsibilities in a manner consistent with achieving
measurable results. Major expenses include:
--$24.108 million to provide compensation and benefits for all
authorized FTEs including a full complement of Executive Level
(EX) positions; contract services; rental payments to the
General Services Administration; travel and transportation;
communications and utilities; and equipment.
--$1.35 million to continue and expand ONDCP's policy research
program. For the past 10 years, ONDCP has conducted a program
of research and produced a series of studies and reports on key
policy issues surrounding drug demand and supply, law
enforcement, and consequences of drug use. With each round of
funding, ONDCP seeks to expand and improve the methodology used
in producing these studies and reports to improve the precision
and accuracy of the resulting estimates.
As you know, the President requested funds for this account in the
consolidated appropriation for the Executive Office of the President.
The preceding discussion is included only to facilitate the work of the
Appropriations Committees.
Counterdrug Technology Assessment Center: $40.0 million
For fiscal year 2003, ONDCP is requesting $40 million to support
the Counterdrug Technology Assessment Center (CTAC). ONDCP requested
$40 million for fiscal year 2002. The fiscal year 2002 enacted level is
$42.3 million. The aggregate request includes funding for two distinct
components: Research and Development ($18 million) and the Technology
Transfer program ($22 million).
Research and Development.--Concerning demand reduction, CTAC's
work, in conjunction with the National Institute on Drug Abuse (NIDA),
to expand the understanding of substance abuse and addition is
producing some of the most scientifically significant developments we
have seen in this field. These funds enable CTAC to sponsor advanced
neuroimaging technology, medical instrumentation, and facilities at
leading academic medical research institutions. In order to receive
CTAC sponsorship, research facilities must agree to use the equipment
to concentrate on drug abuse research and commit to train other
professionals who will continue to advance the body of knowledge on the
scientific aspects of substance abuse. Deploying proven or promising
technologies for imaging the human brain activity of a subject on drugs
is providing invaluable data and dramatically increasing our
understanding of the short- and long-term effect of drugs on the human
brain. Finally, this program supports developing and evaluating
therapeutic drugs for treating addiction with minimal physical side
effects.
By the end of fiscal year 2003, 12 of the nation's leading
substance abuse research institutions will have benefited from CTAC's
program. World-class medical expert teams at Massachusetts General
Hospital, Emory University, the University of Pennsylvania, Harvard
University, McLean Hospital, the University of Colorado, Oregon Health
Science University, and UCLA have benefited. In most cases, their
leading-edge drug abuse research efforts are sponsored by grants from
NIDA. Two new centers will be started to advance our understanding of
the genetics and phenotypes of the addicted brain.
It is time for these facilities be linked to form a central
information exchange allowing the transfer and sharing of images, data,
and research findings over a substance abuse research data backbone.
This data exchange backbone will make it possible for scientific
advances, achieved by individual applications of technology, to benefit
all of the nation's premier substance abuse research teams and
accelerate the rate at which research can progress.
Concerning supply reduction, CTAC R&D concentrates on high priority
scientific and technological needs of local, State, and Federal law
enforcement agencies. These efforts improve capabilities for conducting
non-intrusive inspection of cargo and containers for illegal drugs and
strengthen law enforcement capabilities to combat drug-related crime
and violence. Tactical tools are under development to improve
capabilities to intercept and process drug-related criminal
communications and to improve law enforcement capabilities to
communicate with each other. Advanced tactical repeaters and phone
intercept systems developed under CTAC funding are being evaluated in
the field by Federal, State, and local law enforcement agencies in the
New York City and Baltimore/Washington areas.
CTAC also sponsors technology testbeds. Last August in the
metropolitan Denver area, the wireless communications interoperability
testbed project demonstrated the interoperability of radios used by the
U.S. Customs Service, Drug Enforcement Administration, Lakewood Police
Department, Front Range Task Force and the Aurora Police Department.
Since the August 2001 demonstration hosted by the Lakewood Police
Department, the system has been used on a regular basis. By this
summer, a Colorado-wide capability will be demonstrated to law
enforcement agencies from across the country. This model allows state
and local police to continue using their existing radios inter-
connected through off-the-shelf interoperable communications systems.
The system used in Colorado is being added to the Technology Transfer
Program this year. In fiscal year 2003, CTAC plans to continue to
develop near-term improvements to law enforcement communications
interoperability and management of investigative data. These
capabilities assist in preventing, thwarting and prosecuting drug-
related crimes, as well as terrorist activities.
Technology Transfer Program.--The Technology Transfer Program (TTP)
provides technologies developed with Federal funding directly to state
and local law enforcement agencies that may otherwise be unable to
benefit from the developments due to limited budgets or lack of
technological expertise. CTAC utilizes technology testbeds to test and
evaluate new items before they are included in the program. The TTP is
unique because it provides hands-on training and support with the
delivery of the equipment to each recipient. The periodic follow-up
evaluations (at 90, 180, and 270 days) assures proper employment of the
technologies and helps the TTP to assess the effectiveness of both the
program as a whole and the individual technologies transferred.
The $79.498 million appropriated since the TTP began in fiscal year
1998 has made possible the delivery of 4,750 pieces of equipment to
over 3,800 state and local law enforcement agencies (as of April 15,
2002). During fiscal year 2003, the requested appropriation will allow
the transfer of much-needed technology to more than 1,200 state and
local law enforcement agencies across the country. By the end of fiscal
year 2003, TTP deliveries will have been made to over one-fourth of the
18,500 sheriffs and police departments across the nation.
Special Forfeiture Fund: $251.3 million
ONDCP's fiscal year 2003 budget requests $251.3 million for the
Special Forfeiture Fund. ONDCP requested $247.6 million for fiscal year
2002. The fiscal year 2002 enacted level is $239.4 million. This
account provides funds to a diverse group of ongoing programs: the
National Youth Anti-Drug Media Campaign, the Drug-Free Communities
Program, the United States Anti-Doping Agency, the Counterdrug
Intelligence Executive Secretariat, the National Drug Court Institute,
and the National Alliance for Model State Drug Laws. Furthermore, this
account contains a request for two new initiatives: Performance
Measures Development and World Anti-Doping Agency (WADA) Membership
Dues.
The National Youth Anti-Drug Media Campaign: $180 million
For fiscal year 2003, ONDCP is requesting $180 million for the
National Youth Anti-Drug Media Campaign. ONDCP requested $185 million
for fiscal year 2002. The fiscal year 2002 enacted level is $180
million. The Media Campaign uses multi-media advertising and public
communications strategies aimed at youth and parents to promote anti-
drug attitudes and behavior. The Campaign is a comprehensive national
effort that integrates paid advertising at national and local levels
with public information outreach through a network of public and
private partnerships.
Clearly, the goal of the Campaign is to reduce drug use among
youth. A statistically significant decline was found in past month
marijuana use among 12- to 13-year olds from 1.8 percent to 0.7 percent
between Waves 1 and 3. For 14- to 15-year-olds, however, there was a
statistically significant increase in past month use from 2.1 percent
in Wave 1 to 5.6 percent in Wave 3.
During the past year, the Campaign reached 90 percent of America's
youth at least four times a week in multiple languages to various
ethnic groups. A multi-cultural sub-set of the Campaign delivers $38
million worth of drug prevention messages annually to diverse
audiences, making it one of the largest multicultural communications
efforts ever launched by the Federal Government, and rivaling that of
most corporate efforts. The Campaign has just completed development of
the government's first-ever Native American anti-drug television ads
which, along with a strong print ad complement, are set to be launched
soon in targeted markets.
In addition to its primary effort against youth drug use, the Media
Campaign also developed and, through its partnership with the Ad
Council, operates a national multi-media public service advertising
campaign promoting community anti-drug coalitions. The campaign seeks
to expand community involvement against drugs by demonstrating the
positive effect coalitions can have in their own communities.
Paid anti-drug advertising placed in key television and radio time
slots and high readership publications is the foundation of the
Campaign. An integrated advertising program focused on specific
Campaign themes and messages is running nationally and in 102 local
U.S. markets (through more than 2,250 media outlets nationwide during a
5-year period). One unique aspect of the Campaign is that Congress
mandated that media accepting advertisements must match the Campaign's
purchases with an equal value of public service in the form of public
service advertising time or space, or other activities related to youth
drug use prevention. The Campaign has exceeded this ambitious ``pro-
bono match'' goal. For the period beginning January 1998 through
September 2002, the total value of the pro-bono match is projected to
reach $659 million. The pro-bono match was negotiated using paid media
valued at $614 million, and includes ``in-kind'' corporate
contributions of $72 million, bringing the total value of the Anti-Drug
Media Campaign to over $1.3 billion. Most of the match (86 percent) was
PSAs. Eligible PSAs aid in drug prevention by encouraging activities
such as mentoring, greater parental involvement, after-school programs,
and other nationally relevant youth-related issues.
The Campaign is uniquely positioned to educate American youth and
parents about the link between drug money and terror in the United
States and around the world. In the aftermath of the terror attack of
September 11, we realized that few Americans knew of the link between
money spent for drugs and the support of terrorist organizations like
Al Qaeda and the FARC. Twelve of the 28 international terrorist
organizations recognized by the State Department engage in drug
trafficking, and many other drug trafficking organizations engage in
widespread acts of terror--kidnapping, torture, bombings, and the
murder of innocents.
We subjected the ad concepts to an unprecedented level of testing
to assure their effectiveness with target audiences. The ads were
exposed to more than 1,300 individuals in 20 cities across the country.
Youth that participated in the testing found that the ads significantly
reduced their intent to use drugs in the future. Parents said the
information gave them timely new information to use in talking to their
children about drugs.
As the Subcommittee is aware, ONDCP launched the new ads during the
Super Bowl program and they are still in use. Our anti-terror
television, newspaper, and magazine ads are running currently and will
continue through June.
The ads have generated a large response from across the country.
Viewers are directed to www.theantidrug.com, which is the Campaign's
parenting Web site, where traffic surged after the ads were introduced.
From the ads' launch on February 3 through February 27, page views on
the site rose more than 21 percent. Visitors to the site doubled from
an average 125,000 per month to 250,000, and the time spent at the site
by visitors rose from an average 6 minutes to 10 minutes. During the
same Feb. 3-Feb. 27 period, 1,282 parents signed up to receive a weekly
parenting tips email.
ONDCP's fiscal year 2003 request will also support continued public
communications outreach which builds on and complements the advertising
component. Significant efforts under this ``non-advertising'' component
include a public information campaign that directly supports our
advertising messages and builds credibility for the Campaign, a robust
partnership initiative that expands the collective communications
output of the Campaign by building relationships with a wide range of
private sector media organizations and nonprofit organizations
committed to the goals of the Campaign.
The Campaign makes extensive use of interactive media. The outreach
component operates a family of Campaign Websites--the two most
important of which are ``Freevibe.com'', our youth site, and
``www.theantidrug.com'', our parents site. The growth and popularity of
the Internet, particularly among the nation's youth, enabled the
Campaign to achieve more than 1.2 billion match impressions on as many
as 50 consumer Web sites, including America Online. The efforts have
led to more than 40.7 million page views on the Media Campaign Web
sites, as of February 2002.
To further leverage the appropriated dollars allocated to the
Campaign, ONDCP is pursuing aggressively a corporate participation
plan. Pursuant to fiscal year 2002 report language, ONDCP submitted to
the Committee (on February 11) a report summarizing the Media
Campaign's corporate participation program, including its evolution,
value to the Campaign, accomplishments to date, and promise for the
future. This report focuses primarily on the corporate participation
effort that was initiated four months ago to recruit and engage
America's businesses in the Media Campaign. It also describes how
corporate participation fits within the context of overall private
sector involvement in the Campaign.
Evaluation Component.--The evaluation of Phase III is designed to
determine the extent to which changes in drug abuse-related knowledge,
attitudes, beliefs, and behaviors can be attributed to exposure to the
Campaign. Thus far, the evaluation has detected increases in awareness
and some positive changes in perceptions and attitudes toward drugs.
The parent findings are particularly positive, indicating changes in
behavior among parents--slightly ahead of the expected timeframe of 2
to 3 years for behavioral change.
The Campaign has successfully exposed its target audience to anti-
drug ads. Ninety percent of youth and parents recall seeing or hearing
some form of general anti-drug advertising at least once per month. For
recall of specific Campaign ads, 83 percent of youth recall seeing at
least one of the Campaign ads in the past 2 months, and 44 percent of
parents recall seeing at least one of the parent-targeted ads in the
past 2 months. Furthermore, a key aspect of the Phase III Campaign is
the introduction of the branding concept to both youth and parent
messages: about 60 percent of 12- to 18-year-olds recalled the youth
brand, and about 46 percent of parents recalled the parent branding
phrases. Parents are becoming more involved in addressing drugs with
their children. Building on positive findings reported in the second
semi-annual evaluation report, there was an increase in parent reports
for four of five key outcomes, including talking to their children
about drugs and monitoring their behavior. The most significant
increases are among those with the highest levels of exposure to the
Campaign ads.
Recognizing that the funds are authorized to be appropriated to the
Campaign through fiscal year 2002, ONDCP is committed to reauthorizing
this program. With the support of members from both houses, we hope a
reauthorization measure will be introduced in the next month.
The Drug-Free Communities Support Program: $60 million
For fiscal year 2003, ONDCP is requesting $60.0 million for the
Drug-Free Communities Support Program (DFCSP). ONDCP requested $50.6
million for fiscal year 2002. The fiscal year 2002 enacted level is
$50.6 million. The Administration is pleased that Congress recently
reauthorized this program from fiscal year 2003 through fiscal year
2007.
The DFCSP provides matching Federal grants directly to local
community anti-drug coalitions to improve or expand their efforts to
prevent substance use among children (including the underage use of
alcohol and tobacco). The DFCSP truly serves communities throughout our
nation, currently supporting 463 communities located in all fifty
States, Puerto Rico, the U.S. Virgin Islands, and the District of
Columbia. Furthermore, approximately twenty-five of the grants have
been awarded to communities with predominately Native American and
Native Alaskan populations. We anticipate awarding approximately 70
additional grants during the fiscal year 2002 grant cycle (September,
2002).
Of the total $60.0 million ONDCP is requesting for this program,
approximately $54.4 million will be granted directly to community anti-
drug coalitions. We anticipate awarding approximately 166 new grants
and approximately 12 mentoring grants in fiscal year 2003, bringing the
cumulative 6-year total to more than 700 grants awarded to over 600
community anti-drug coalitions.\1\ The Drug-Free Communities
Reauthorization Act of 2001 (Public Law 107-82) requires grant
recipients to match their Federal grant funds with other non-Federal
sources of support, including cash and in-kind contributions.
Coalitions competing for new awards after completing their initial 5-
years of eligibility must meet an increased threshold for matching
funds as a condition of eligibility for further awards.
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\1\ A number of community coalitions that received their initial
award in fiscal year 1998 have completed the 5-year period of
eligibility contemplated under the original DFCSP authorization. As the
reauthorization permits these coalitions to reapply as a ``new''
grantee at the completion of the initial 5-year period, some coalitions
will begin receiving their second ``new'' award in fiscal year 2003.
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ONDCP policy provides that grantees may receive a maximum award of
$100,000 for years 1, 2, and 3, and $75,000 for years 4 and 5. The
rationale for the funding reduction in years 4 and 5 is to encourage
the coalitions to become less reliant on Federal funds and more self-
sufficient. The statutorily-created Advisory Commission has informed
the ONDCP Director that this formulation is the most equitable and has
the greatest chance of securing the long-term success of the
coalitions.
Of the total $60.0 million request, $2.0 million, the maximum
authorized amount, is to award a grant to support a National Community
Anti-Drug Coalition Institute. The DFCSP Reauthorization Act requires
ONDCP to award a grant to a national nonprofit organization that
represents, provides technical assistance and training to, and provides
expertise and broad national-level experience in, community anti-drug
coalitions. ONDCP is working with the Center for Substance Abuse
Prevention to create an Interagency Agreement for them to administer
this grant. We anticipate awarding this initial grant in fiscal year
2002.
Of the total $60.0 million request, only $3.6 million will support
``administrative costs.'' These activities include grants management
and program evaluation, and program administration. We anticipate
allocating $3.28 million to OJJDP for grants management and evaluation,
up to $120,000 for grant management costs associated with the National
Coalition Institute, and $200,000 to support the DFCSP Program
Administrator and the Advisory Commission on Drug Free Communities.
United States Anti-Doping Agency: $1 million.
For fiscal year 2003, ONDCP is requesting $1.0 million to support
the United States Anti-Doping Agency (USADA). ONDCP requested $3.0
million for fiscal year 2002. The fiscal year 2002 enacted level is
$4.8 million. ONDCP is proposing fiscal year 2003 appropriation
language to allow ONDCP to transfer the entire amount of funds to the
USADA without restrictions on the type of transfer. This will ensure
that the Federal Government can provide appropriate financial oversight
and ensure accountability for these funds.
Now that the Salt Lake Games are concluded, the $1 million request
would support research and administrative initiatives, educational
programs, and efforts to inform athletes of the rules governing the use
of performance enhancing substances, and the ethics of doping and its
harmful health effects. Furthermore, USADA is developing an out of
competition program that will occur during the off years of the Olympic
and PanAm games.
Counterdrug Intelligence Executive Secretariat: $6 million
For fiscal year 2003, ONDCP is requesting $6.0 million for the
administration and operations of the Counterdrug Intelligence Executive
Secretariat (CDX). ONDCP requested $3.0 million for fiscal year 2002.
The fiscal year 2002 enacted level is $3.0 million. The General
Counterdrug Intelligence Plan (GCIP) created the CDX to implement the
recommendations contained it. The GCIP originally contemplated a staff
of approximately 35 people for the CDX. Current funding at $3 million
can support only 5 management/administrative staff and limited
substantive work to achieve GCIP action items. Of the total request,
$1.8 million will support existing administrative staff and continuing
efforts to complete GCIP action items. The remaining $4.2 million will
support approximately 30 reimbursable detailees from other Federal
agencies. This increase is necessary as participating agencies have
been unable to provide the number of non-reimbursable detailees
necessary to ensure sufficient support to the CDX.
A fully-staffed CDX will continue to improve our nation's
counterdrug intelligence architecture by enhancing information sharing,
operational coordination, and technical connectivity among Federal
counterdrug components and their State and local law enforcement
counterparts. CDX has reached a staff level of 16 (5 management and
administrative staff, plus 11 full-time non-reimbursed professional
detailees). Efforts are underway to address nearly all of the 73 action
items. Approximately 33 percent have been completed, substantial
progress has been made on approximately 30 percent, and some progress
has been made on approximately 30 percent. Additionally, the member
agencies have referred 16 interagency intelligence coordination or
policy issues to the senior Counterdrug Intelligence Coordinating Group
(CDICG) for review.
National Drug Court Institute: $1 million.
For fiscal year 2003, ONDCP is requesting $1.0 million for the
National Drug Court Institute (NDCI). ONDCP requested $1.0 million for
fiscal year 2002. The fiscal year 2002 enacted level is $1.0 million.
The NDCI's research program requires these funds to continue the
expansion of its drug court training program for practitioners, to
convene special advisory groups to develop curricula in new
disciplines, to develop a national community probation initiative, and
to expand and update the Institute's video instruction library.
Research conducted by the National Center on Addiction and
Substance Abuse, Columbia University, June 1998, demonstrates that drug
courts provide more comprehensive and closer supervision of the drug-
using offender than other forms of community supervision. Drug courts
have been tremendously successful in creating a comprehensive and
coordinated environment among the criminal justice and public health
systems and the community in which they operate. Furthermore,
individuals graduating from a drug court have lower rates of additional
criminal behavior and/or recidivism. In contrast to the traditional
``revolving door'' approach, drug courts provide an effective solution
to drug addiction and drug-related crime through the innovative use of
and sanctions and incentives, comprehensive supervision, drug testing,
and judicial monitoring. Defendants who complete the program either
have their charges dismissed (in a diversion or pre-plea model) or have
their probation sentences reduced (in a post-plea model). Drug courts
provide closer, more comprehensive supervision and much more frequent
drug testing and monitoring during the program than other forms of
community supervision.
To date, there are over 1,100 drug courts operating in the
community or are in various planning stages across the nation. These
include approximately 167 juvenile courts and 37 family courts. Since
their inception, almost 230,000 people have enrolled in drug court
programs and almost 75,000 have graduated. For fiscal year 2003, the
Department of Justice is requesting $52 million for the Drug Court
Program, an all-time high.
Performance Measures Development: $2 million
For fiscal year 2003, ONDCP is requesting $2.0 million for
Performance Measures Development. This is a new initiative; no funds
were requested or appropriated for fiscal year 2002. ONDCP will use the
requested funding to develop and implement data sources for performance
measurement and management for counterdrug programs government-wide.
Many measures are currently lacking or inadequate for informing policy
decisions. Over the past 4 years, ONDCP identified such shortfalls in
its annual Performance Measures of Effectiveness report, and described
efforts through its Data Subcommittee to address these limitations.
Additionally, last year, the results of the ONDCP-funded study from the
National Research Council containing a review and recommendations on
drug policy research were released. Both of these activities have
highlighted, among other topics, (a) the need for improvement in
estimates of the price and purity of illegal drugs, (b) the supply of
drugs flowing to the United States, and the amount of drugs consumed in
the United States; (c) evaluations of the effectiveness of prevention,
treatment, and law enforcement programs; and (d) empirical study of
drug markets. ONDCP will lead an interagency effort to address these
research and data issues. As a result of this effort, ONDCP will make
use of data generated to improve and refine program performance and
consider new initiatives.
World Anti-Doping Agency Membership Dues: $0.8 million
For fiscal year 2003, ONDCP is requesting $0.8 million for World
Anti-Doping Agency (WADA) Membership Dues. This is a new initiative; no
funds were requested or appropriated for fiscal year 2002. WADA's
mission is to promote and coordinate the effort against doping in sport
at the international level. To accomplish this task, WADA cooperates
with intergovernmental organizations, governments, public authorities,
athletes, and other public and private bodies working against doping in
sport. Furthermore, WADA coordinates a comprehensive anti-doping
program, including out-of-competition controls.
The requested funds represent full membership dues for the United
States in the WADA. The dues assessment is formula driven. The
International Olympic Committee (IOC) pays fifty percent of the costs
associated with WADA; participating governments and other agencies
(which are divided into six geographic regions) pay the remaining fifty
percent. The Americas' region is responsible for a twenty-eight percent
share of the governments' and other agencies' fifty percent. The United
States and Canada each pay one-third of the twenty-eight percent share
($0.8 million); the rest of the Americas pay the remaining one-third.
National Alliance for Model State Drug Laws: $0.5 million
For fiscal year 2003, ONDCP is requesting $0.5 million for the
National Alliance for Model State Drug Laws (NAMSDL). ONDCP requested
$1.0 million for fiscal year 2002. The fiscal year 2002 enacted level
is $1.0 million. These funds will enable the NAMSDL to encourage states
to adopt and implement laws, policies, and regulations to reduce drug
use and its adverse consequences. The funding reduction is in no way
reflective of dissatisfaction with the MSDL. However, the ONDCP
appropriation has been the NAMSDL's only source of support since fiscal
year 1997, and we believe NAMSDL should become less reliant on Federal
funds. We are working with NAMSDL to identify additional funding
sources. This approach is consistent with the Administration's
philosophy that Federal dollars should not necessarily be the only
source of funding for a program in perpetuity; these limited resources
should be used to leverage additional funds, thereby making the
organization/program able to survive even if Federal funds are reduced
or eliminated.
High Intensity Drug Trafficking Areas: $206.35 million
For fiscal year 2003, ONDCP is requesting $206.35 million for the
HIDTA program. ONDCP requested $206.35 million for fiscal year 2002.
The fiscal year 2002 enacted level is $226.35 million.
The ONDCP Director, in consultation with the Attorney General,
Secretary of Treasury, heads of National Drug-Control Program agencies,
and appropriate governors, designates the most critical regions in the
United States as HIDTAs. The HIDTA Program enhances and helps
coordinate efforts among State, local, and Federal law enforcement
entities in 28 designated areas to reduce the production,
manufacturing, distribution, transportation and chronic use of illegal
drugs and its consequences, as well as the attendant money laundering
of drug proceeds. Resources are allocated to link local, State, and
Federal drug enforcement efforts and to optimize the investigative
return on limited fiscal and personnel resources. ONDCP will work with
all involved entities to ensure that HIDTA resources are properly
targeted to offer maximum effectiveness. When HIDTA resources are
appropriately targeted, drug law enforcement entities will have a
greater chance of obtaining measurable results in their effort to
disrupt the illegal drug market through cooperative investigations,
intelligence sharing (coordinated at HIDTA Investigative Support
Centers), and joint operations against drug-trafficking organizations.
The philosophy underlying the HIDTA Program is to allow each region
the flexibility to address its unique drug threat in an appropriately
tailored manner. An Executive Board (the ``Board''), which consists of
an equal number of local/State and Federal law enforcement agency
leaders, is the governing body of each individual HIDTA. The Board
develops and implements the HIDTA Threat Assessment, Strategy, and
Initiatives, as well as the fiscal administration operations of the
HIDTA. The Board hires a HIDTA Director to administer the day-to-day
operations of the HIDTA, implement appropriate oversight controls, and
remain in contact with ONDCP. In contrast to the administrative
management functions, the participating law enforcement agencies
maintain sole operational control of initiatives.
The fiscal year 2003 HIDTA request includes $2.1 million to
continue auditing services and associated activities, and at least $0.5
million shall be used to develop and implement a data collection system
to measure the performance of the HIDTA Program. ONDCP contracted with
Klynveld, Peat, Marwick, Goerdeler (KPMG) to perform external financial
audits on the HIDTA grantees and Federal agencies. Thus far, KPMG has
conducted 13 full-scope audits and 16 limited-scope reviews. With
regard to the 13 full-scope audits, the HIDTAs grantees received all
unqualified ``clean'' opinions. With regard to the limited-scope
audits, the HIDTAs grantees and Federal agencies received no major
findings. In addition to issuing the final audit reports, KPMG will
prepare a Best Practices Report which will be shared with all of the
HIDTAs. Internally, ONDCP has begun a review process that includes on-
site visits to HIDTAs by ONDCP staff, as well as members from the
Departments of Justice and Treasury. The on-site reviews help
strengthen management at the individual HIDTAs and at ONDCP. To date,
we have reviewed 13 HIDTAs and we plan to conduct an additional 5 to 6
program reviews in fiscal year 2002 and an additional 5 to 6 in fiscal
year 2003. The program reviews have proven beneficial to the HIDTAs and
ONDCP as best practices are identified and shared.
Concerning the allocation of the $20 million in fiscal year 2002
funding, having obtained the concurrence of the Department of Defense,
ONDCP will be transferring $5 million to the Department of Defense for
National Guard counterdrug enforcement efforts. We believe that this
transfer is a high priority to maintain current operational levels for
the National Guard Bureau, and it will not affect current funding for
existing HIDTAs. ONDCP will prioritize the remaining $15 million based
on program priorities and other issues specific to the HIDTAs.
Since January 1990, counties in the following 28 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; and 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); and 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);
Central Valley California; Hawaii; New England (Connecticut, Maine,
Massachusetts, New Hampshire, Rhode Island, and Vermont); Ohio; and
Oregon (in 1999); and Northern Florida; and Nevada (in 2001). HIDTA
designated counties comprise approximately 10 percent of United States
counties; they are present in 41 States, Puerto Rico, the U.S. Virgin
Islands, and the District of Columbia.
conclusion
In announcing the release of the National Drug Control Strategy
this February, President Bush stated the Administration's view that we
need to have clear goals that can be measured, that we take
responsibility for achieving them, and that we explain how we will meet
them. The President's statement is worth quoting in this context: ``I
told John [Walters] when he signed on, I'm the kind of fellow that
likes to say, what are the results? I like to know, actually, are we
making a difference? And so here's our goal, here's the goal by which
we'll be measured--here's the goal which I'll be measured first, and
then John will definitely be measured if I'm measured. I want to see a
10 percent reduction in teenage and adult drug use over the next 2
years, and a 25 percent reduction in drug use, nationally, over the
next 5 years. Those are our goals. We understand we can't do it alone
here in Washington. And that's why our approach is a community-based
approach. That's why we recognize the true strength of the country is
our people. And we know there's thousands of parents, thousands of
educators, thousands of community activists, law enforcement officials,
all anxious to come together to achieve this national strategy.''
We look to this Subcommittee, and indeed the entire Congress, to
provide bipartisan leadership and support in this effort.
MEDIA CAMPAIGN
Senator Dorgan. Director Walters, thank you very much.
Let me ask a couple of questions about the media campaign
first. The information that I have says that, in fact, the goal
of the media campaign is to reduce drug use among youth. You
say a statistically significant decline was found in the past-
month marijuana use among 12- and 13-year-olds, from 1.8
percent to 0.7 percent between waves one and three. For 14- to
15-year-olds, however, there was a statistically significant
increase in the past-month use from 2.1 percent in wave one to
5.6 percent in wave three. That is nearly a doubling of the 14-
to 15-year-olds.
You indicate that the campaign during the past year reached
90 percent of America's youth at least four times a week, and
now those of us in politics understand about reach and gross
rating points. And I think what you are saying here is that you
have purchased enough points so that you expect that 90 percent
of your target group has seen four messages a week.
Mr. Walters. That may be a month, I think, but----
Senator Dorgan. Is it a month?
Mr. Walters. It is a week. I am sorry.
Senator Dorgan. All right. So that is a pretty significant
reach to your target audience, and, you know, we have been at
this now some number of years, and this year we are talking
about, what, $180 million again. That is a significant
expenditure.
Tell me, how can we know whether we are making a difference
here? If 14- and 15-year-olds--I would expect 12- to 13-year-
olds last-month drug use, I am guessing that is probably
marijuana in school or something--or I shouldn't say
``school,'' but marijuana use has gone from 1.8 percent to 0.7
percent. I assume that it is a very small number. The 14- to
15-year-olds has gone from 2.1 to 5.6. That is more than
doubled, and yet that comes at a time when the average 14- to
15-year-old has seen four messages a week for a year's worth of
messages in our media campaign.
How do we reconcile that, and what does that say to you?
Mr. Walters. First of all, I believe the only way to judge
this Campaign is whether it reduces drug use. We have interim
measures of awareness such as ``have you seen this and are you
remembering contact with it.'' But my goal for this and other
programs is reducing drug use. That is why the President set
the goals. If we can not reduce drug use with either our supply
or demand programs generally or individually, then my view is
we have to make changes and support the programs that do.
In regard to the Campaign, I think in fairness, from the
look I have been able to have at it so far, there has been a
lag, of course, in the period of the first appropriation to the
full implementation of the plan. We are now, for the first
time, going to get the evaluation in May to show us the first
full 6 months of the fully implemented campaign on nationwide
effects on drug use. I think that will be an important part of
our ability to say whether or not it is working at an adequate
level to justify the support it has been given.
Senator Dorgan. Let me ask you a hypothetical about that.
What if that shows pretty much what you have seen here? You
talk about full implementation. This is a pretty significant
implementation, the reach of targeted audience four times a
week for a lengthy period of time, and what it shows is that
your target audience is aware of the ads, but that 14- to 15-
year-olds, which is a pretty crucial area for us, it seems to
me, have more than doubled in their last month's use of drugs.
What if you discover that your first 6 months of full
usage, as you describe it, shows exactly the same thing? What
would that say to you?
Mr. Walters. I think we have two choices in that regard. If
it is working for younger kids, if it continues to show a
relationship to working for younger kids, then I think that
what you are seeing is at least part of the Campaign that is
targeted on younger kids, either directly or through trying to
influence parents, which is the other part of the target
audience to reinforce these messages with young kids, which we
know will have maximum effect, then we could say that part is
working. The direction of the Campaign against older students
needs to be changed, strengthened, or expanded.
In fact, I have begun discussions with my staff saying that
for years we have seen that, in fact, drug use doubles between
junior high school and high school. If we have shown success in
this age category, I think we have to do it across the board--
not just here but with things like the Drug-Free Schools
Program and others--we need to do a better job in high school.
We need to raise the awareness of people that we are losing the
battle at the high school level. We know that we are trying to
get kids not to experiment during their teenage years. We have
had long, hard experience here. If they do not use drugs during
their teenage years--the same is true of alcohol and
cigarettes--they are unlikely to go on to use later on; and if
they don't start experimenting, they will not go on to
addiction.
Our goal has to be to not only follow them in the early
teenage years, but we have to provide an effective prevention
effort throughout that whole period if we are going to be
successful. But the good news is, if we are successful, that is
the way to contain this problem for subsequent----
Senator Dorgan. I agree with that, but the question that I
am asking is: Is the media campaign successful? We are spending
potentially $180 million again this year on it, and at some
point, we are going to have to make a judgment. Are we just
putting a lot of money out there, running a lot of commercials,
and making kids more aware of the commercials, but, in fact,
among 14- and 15-year-olds last month's drug use is doubling?
Is there a point at which we say there is a much more effective
way to spend that money?
Mr. Walters. Yes, I agree with you entirely.
Senator Dorgan. And what is that point?
Mr. Walters. I think in fairness, the point will be
probably in the next two evaluation rounds. If we do not see
significant improvements in drug use, then we have to face the
problem of is this a matter of restructuring or is this a
matter of, for one reason or another, what seemed to be a good
idea is not working.
Senator Dorgan. Can I ask you, when you say a statistically
significant decline was found in the past month of 12- to 13-
year-olds from 1.8 to 0.7 percent, what kind of polling is this
or sampling? What kind of error rate exists with this sampling?
Mr. Walters. I am not an expert on the statistics. We
should probably provide you a full answer for the record. My
understanding, though, is that the samples are--especially
given the lower rates of use at that age group, the samples are
relatively small. So a statistically significant change will
have to be a larger change than it would be if we had a broader
sample with more ability to have significant changes measured
at smaller increments.
That is significant. I believe that means it is 95 or 99
percent certain. That is probably not an accident based on the
statistics. But we should give you a complete answer for the
record.
Senator Dorgan. All right. I have some other questions, but
let me turn to my colleagues. Senator Campbell?
Senator Campbell. Thank you, Mr. Chairman. Let me also talk
about the Anti-Drug Media Campaign. I think I have been
concerned with it, as you have.
I would like to first add that I like that second ad,--
about 10 percent of South Dakota are Indian people, and many
youngsters we lose not from high-powered drugs like, you know,
cocaine or something that is expensive. We lose them to paint
and glue, canned heat, cold medicines, oven cleaners, I mean
the stuff that just burns out their skull. It just gives them
no future at all. And I would like to see some resources put
there.
But as the chairman mentioned, we put an awful lot of money
in this ad campaign, and I am not altogether sure that we put
it in the right places, because it seems to me you have
mentioned targeting yourself a couple times, though, we have
had some disagreement with your predecessor about who they are
targeting and who is actually watching or viewing what it is.
As an example, I understand we spent a great deal of money
on the Super Bowl ads at roughly a million bucks a minute. I am
not too sure how many 12-year-olds watch the Super Bowl. I am
sure their dads all watch it, but I am not too sure how many of
those youngsters watch it. So whether it is cost-effective or
not, I don't know.
But I know one thing. We are not targeting and we are not
asking--we make too many decisions around here in the White
House and the agencies about where we put the money without
asking the people that are going to be affected.
I just happened to notice, while you were speaking, a bunch
of youngsters came in the back of the room, and we are always
very pleased to see young people attend these hearings. But if
I might, Mr. Chairman, I would like to ask the young people
back there: What kind of magazines do you read? Do you read
teen magazines, or People or some of those? Somebody just give
me a type of magazine you read. Yes, you. Seventeen and People.
And what is the third one? Sports Illustrated.
Well, if young people are using those, it seems to me that
that is where we ought to be taking out the ads. But last year,
or perhaps it was the year before--I am sorry, I lose track. I
have been around here too long. Your predecessor put a whole
bunch of money into an ad campaign buying ads for teenagers
U.S. News & World Report. And how many young people read U.S.
News & World Report? There might be one once in a while, but
that is a specialty magazine that tends to go to--you know, it
might go to bankers or investment people or business people,
but not many teenagers read that. It seemed to me it was just a
terrific waste of money. What we ought to be doing is taking
the word of young people like this saying what they are
interested in reading and putting those adds in there. And we
can't micromanage the agency from here, obviously, but somebody
over there that is making the decisions, it seems to me, needs
to find out who the heck they are trying to get to before they
start signing contracts with high-powered magazine agencies and
television media consultants and so on, because I think it is
just not getting to a lot of young people. And as I understand
the numbers, they support--the use of marijuana is going down.
You said 12- and 13-year-olds, if I am not mistaken. But use of
other drugs has gone up in other places. And yet we have spent
930 million bucks.
So I just want to pass that on. If you want an expert in
what young people are reading, ask the experts, and that is the
young people, not us or not somebody over at the White House or
in the agency. Ask the young people what they are reading, and
that, I would suggest, is where we ought to put our money, Mr.
Walters.
Now, let me go on to just a couple of other things.
Mr. Walters. Could I address that issue?
Senator Campbell. Yes, please do.
Mr. Walters. I think it is important that we have a common
understanding about what you want to have the program do.
My understanding in part of the answer to the question is
the decision was made when the Campaign started to divide the
program into two target audiences. One was the young people,
and I agree with you that ``U.S. News'' is not a good vehicle
to reach young people. The other part of the program was
parents, and to try to give the message with the information
that they needed to talk to their children based on the
research that if parents--I know parents sometimes feel they
are not listened to, but parents are the biggest influence.
They are the most important teacher; they are the biggest
example. And the research has showed that if parents state
clearly their sense of right and wrong in this area, it is the
most powerful thing. So to have reinforcement of the message
that is going directly to the kids with a message, that was
targeted on parents to get them to talk to young people.
Now, that is a technique. It may or may not work
effectively. The initial research or the evaluation showed that
there was both a greater engagement of parents on this, and
there were children reporting greater engagement by parents to
them talking about this. So it is bifurcated. But that may be
part of the reason why you are seeing this in different places.
Obviously, a children's ad should not be in ``U.S. News &
World Report.'' I am not taking issue with that.
On the Super Bowl, we did more focus group testing, on this
ad than any other came on late in this process, but I made the
decision to do the Super Bowl ads for the office. I personally
watched the most extensive set of focus group tests that we did
with parents and young people and saw the reaction to this. And
the reason we used the Super Bowl, while it is expensive, it is
a huge audience. It crosses all demographics that we are trying
to reach better than any other single vehicle that we could
find. And, in addition, it is the most watched program where
parents watch with kids so we get reinforcement.
Now, this concept is one thing. It cannot be the whole
game, and I am not saying that I am an expert on media. But
what I am saying is from what I heard, the reason we did that
that way was, dollar per eyeball, we got a good bargain on
that.
But, again, I want to be clear. I agree with you entirely.
I am not arguing, I am not equivocating. If this program
through the evaluation we have, which is one of the most
sophisticated ever constructed, to my knowledge, in a
Government program, does not change patterns of drug use, all
the good feelings, all the awards for ads, all the awareness
that does not translate into changes in use does not matter. We
will have to change what we do.
Senator Campbell. Well, I am not an expert on a lot of
things, and I am certainly not an expert on parenting with the
new styles of communicating all the problems with your
youngsters and dealing with them in some kind of a manner. I
guess I am kind of old-fashioned. I have a youngster who is a
grown man now, a very productive, hard-working, good citizen.
When he was a young teenager, if I had caught him using drugs,
I would have knocked the hell out of him. It is as simple as
that. I guess I am old-fashioned, because I remember that is
the way my dad did things. And sometimes I think that the new
method of parenting doesn't get it done.
Mr. Walters. I understand.
Senator Campbell. But, in any event, there is another
problem with that, too, and that is, sometimes the parents are
drug users, as you know.
Mr. Walters. Yes, I know.
Senator Campbell. If they are, I don't know how we give the
kids a chance if the parents are fooling around with the stuff.
Let me go on, Mr. Chairman, just maybe a couple others. I
am using too much time. Let me skip a couple of them.
This new drug called Ecstasy, we carved out $5 million in
the National Anti-Drug Media Campaign last year for that. How
do you plan to spend that, if it is going to be directed
specifically to Ecstasy?
Mr. Walters. We have a series of ads. I showed one here. We
have some also that are targeted----
Senator Campbell. A general ad dealing with everything.
Mr. Walters. Yes. And we are about to launch the actual
showing of these ads in target markets. Because $5 million in
the national advertising market is not a lot of money, although
I am not saying I do not recognize it is substantial money we
are going to try to use some target areas so that we get enough
of a concentration that we can measure effect. If it works we
will try to expand it.
Senator Campbell. Okay. And one last question, I guess, Mr.
Chairman, is: Why are we doing this at all? Because when I was
the chairman of this subcommittee, in 1997, your predecessor
requested funding for this National Media Campaign. It was
supposed to be a 5-year effort. So basically what we are
saying, now is that this is the 60 year. Where do we go from
here?
Are you working with an authorization committee to extend
this, or are we?
Mr. Walters. Yes. We will submit language with
representatives in both chambers, bipartisan, to reauthorize
the program. Now, again, we may reach an issue where you want
to make changes, but unless we have an authorization there, we
will not have the option of continuing. But that will be
forthcoming in--I think next month is when we are going to be
able to introduce it.
Senator Campbell. Well, in closing, I just have to tell
you, I really support any effort we can to educate youngsters
about the dangers of it. I have a nephew that is 50 years old
now, my nephew. When he was a youngster in high school, as a
freshman and sophomore, he was a straight A student. He was on
the wrestling team. He was in the band. Just a terrific kid.
And somehow he got to fooling around with speed and something
else; I have forgotten what it was now. Well, he is still in an
institution, 50 years old. And he did something to himself that
was not recoverable, and he has to be on medication all the
time. If he goes off medication, he hallucinates, he gets
violent, he does all kinds of things.
When they let him go home, as long as he takes the
medication, he is in pretty good shape. But if he doesn't, he
ends up back in the institution in California. And that is his
life, and that is what is going to be the rest of his life, 50
years old, never have a family, never have children, never be
able to enjoy the fruits of America, all the things that we do,
because of a mistake he made when he was a youngster fooling
around with the wrong kind of stuff. Oh, I know what it was,
TCP? What is that stuff called?
Mr. Walters. PCP.
Senator Campbell. It is something, I guess, that alters
your mind so that it doesn't grow back. And he did that, as I
understand it, just a few times as sort of a dare with some
other kids, and it has ruined his life. That is what has
happened to our family.
Mr. Walters. I think that is an important point, and I do
not mean to take too much time. But I think it is important
that you understand what we are trying to do or what I will try
to do here.
The discussion about the drug problem in general tends to
lapse into a view that the drug problem is about 28-year-olds
or 32-year-olds deciding to use drugs as a recreational
activity. That is not what the drug problem is in America, and
we cannot say that enough. It is about kids. It is about
teenagers. If they do not start at that age, they are not going
to be using drugs later on. It is about addiction when they
start young and they start too young, and it is about damaged
and destroyed lives through the use of those drugs.
We need to do a better job with our teenagers. We believe
we can do a better job and that we can help reduce the number
of people who will go on to adulthoods of wrecked lives. But we
are not going to do that by not making clear what the reality
is here, what the danger is here, and that the process of
addiction is a change in the human brain. The use of drugs is a
preventable behavior. Addiction has characteristics of disease.
It physically changes the brain.
We are taking young people when their brains are in
development, and we are damaging them, and we have difficulty
many times bringing them back from that dependency. That is
what this is really about. It has been distorted.
The Media Campaign, may not work. We may want to change it.
But I believe it was partly a response to the claims by a lot
of parents and adults by saying the culture is against me. I am
trying to do this at home, but all the messages coming from the
media and the culture in too many situations are the wrong ones
for my kids about drugs.
This may not work. It is a bold experiment. It is risky. It
is high visibility. It is a lot of money. But if we can do
something to help create a better environment for the way
parents and people in communities are trying to work this
problem, I think it is worth the risk. But I want to repeat: I
have no hesitation. If it does not work and I think we have a
reliable evaluation, we will change it.
Senator Campbell. Director Walters, I think we are on the
same wavelength. Thank you.
Thank you, Mr. Chairman.
Senator Dorgan. Senator DeWine?
Senator DeWine. Thank you, Mr. Chairman.
Mr. Director, I want to continue on the ad issue, and I
guess I come from this maybe a little different perspective,
but maybe not so much.
It seems to me that when you try to change the culture, as
you pointed out--which I think is a good point. I think that is
what we are trying to do, is try to change the culture, or at
least attempt to do that. And when you try to reduce
consumption, the demand side, there are many factors that go
into that. And I think it is very difficult to pull out one
thing that you are doing and isolate that and determine whether
or not that is working. It seems to me you have to do a lot of
things.
It is sort of like, if I could reference a political
campaign for my colleagues, you end up in a political campaign
doing a lot of different things, and at the end of the day when
election day is held, you are really not sure exactly what
worked, but you either won or you lost. But you did a whole
bunch of different things, and you hope a lot of them worked if
you won.
So I think it is difficult, very, very difficult to pull
this one out and say this is responsible for a reduction or it
is not responsible for a reduction.
Now, having said that, let me ask you, who do you rely on
to make the determination about what type ad, where the ad is
placed, what the target is? And do those people who advise you
in regard to that, who I assume are the advertising experts,
also figure out some way of measuring the success or failure?
Mr. Walters. Yes, there is a multi-part process that
includes staff in my office, but then working with a panel of
behavior-change experts that include child psychologists as
well as advertising people, to measure whether particular ads
or particular approaches are likely to be successful. So those
are all screened, and then the buys are based on advice from
advertising folks given the target audience and the nature of
the particular item that message is being placed.
I have begun to become more familiar with this. We do not
want to have amateurs entirely; but, on the other hand, we also
do not want to not be responsible for a large program. I have
asked them to make sure that if I can not understand what is
going on here, we better figure out how we can either make it
understandable----
Senator DeWine. But let me take an example, though. The
determination of what specific age we are targeting, who makes
that decision, and how is that made?
Mr. Walters. There was a strategy conducted when the
program started that we can provide you that was based on
advice of prevention people in the field on where to start and
what might be a target audience. As I said, I have directed a
reconsideration of a part of that strategy to focus on older
young people, high school age, basically because of the data
that we have seen from the first part of the campaign where it
may be working against the younger target audience, which has
been a target. We have to give them credit for that. But we are
not getting follow-through on the older kids where drug use
starts to increase.
Senator DeWine. You know, it would seem to me from what I
know--I am new to this committee. I am not new to the issue. I
have dealt with this for a long time. I don't pretend to be an
expert. I don't think we have any experts. But it would seem to
me that most of the information I have read and most of the
people I have talked to would indicate that, like most other
things in life, the earlier you are reaching someone, the
better off that you are. And then you have to sustain that.
So your problem is you have got to reach them young, and
then you have got to keep reaching them and keep reaching them
and keep reaching them.
Mr. Walters. Yes.
Senator DeWine. An example of a problem we have had--and
you and I have talked about this--is the Drug-Free School
Program. The problem with the Drug-Free School Program is not
that a lot of the programs don't work--some of them don't work;
but we have tried to correct that--but that we don't do it
consistently. We don't have a K-12 program because there isn't
enough money to do it.
If you had a K-12 program, you would have a decent shot at
maybe doing something. So it seems to me that that is the same
problem that you are facing with a finite amount of money.
My time is up, Mr. Chairman, but I just would say that I am
not--I think this committee should have oversight. We should
keep questioning you about how that money is spent. I know you
are questioning the experts. But at least this member of the
committee is not convinced that we shouldn't be spending money
on advertising. If it is good enough to try to get Mike DeWine
elected to the U.S. Senate and change people's minds, it seems
to me--and we all do it. There isn't a one of us that doesn't
do it. It seems to me that it is good enough--and it is good
enough to do anything else in society, then it ought to play a
part--it ought to play a part of our anti-drug strategy. It is
not everything. But if you look at the total amount of
dollars--the total amount of dollars, not what we give to you
but the total amount of dollars in the Federal Government that
we spend on anti-drug efforts, what we spend on advertising is
a very small amount of money.
Mr. Walters. I agree.
Senator DeWine. Thank you, Mr. Chairman.
Mr. Walters. I just want to be clear. The evaluation I am
talking about is not to say what is happening with drug use
globally and then hold only the Media Campaign, $180 million,
out of more than $19 billion in the drug control budget
requested for fiscal year 2003. The evaluation we have and we
have been submitting to you is the state of the art, very
sophisticated. It is expensive. But the goal was, since this
was a very expensive campaign for the Federal Government to do,
as much as possible to isolate the contribution the Campaign
itself makes to these behavior changes. We are not citing
generalized numbers. We are citing the numbers within the
component of use that is part of the evaluation of the
Campaign.
Now, all these things are not perfect, but I have not heard
anyone say that the evaluation for the campaign will not give
us the best results and pretty reliable results at this point.
We will see what they say.
Senator Dorgan. Senator Reed?
HIGH INTENSITY DRUG TRAFFICKING AREAS
Senator Reed. Thank you very much, Mr. Chairman.
Thank you, Director Walters, for joining us today. Let me
speak about the High Intensity Drug Trafficking Area Program.
It is extremely popular with law enforcement officials in New
England, and New England is somewhat unusual. It has a sixth
State as part of its region, one of the larger concentrations
of States. They would like more money. Last year, Congress put
an additional $20 million to raise the total up to $226
million, but this year the President's budget goes back to $206
million. Why was the $20 million, which you are using already,
lopped off the budget?
Mr. Walters. I have been personally meeting with the HIDTA
directors. I met with them when they assembled in Washington,
actually right after I was confirmed, and I met with them more
recently. I am personally visiting--and I intend to go to all
the HIDTAs.
I was actually in the ONDCP when this program was started
back in the President's father's administration. The question
with this program is how much additional value, given other
forms of law enforcement support and other activities the
Federal Government does, is appropriate.
My own view is--and when I have talked to the HIDTA
directors about it--if this program as it exists in some of the
best HIDTAs, I think, that are out there that I have seen, can
be used to build coordination, which it has, to target law
enforcement resources on enforcement activities that make a
difference, we are prepared in the course of the review to
drive more dollars here.
Now, this request got put together at the end of my coming,
and I am not making an excuse. I defend the President's budget.
But if the program simply provides an add-on in a competitive
environment for budgets that actually should be placed in
another program or put in another direction, we intend to do
that. But my goal to the HIDTA directors is to tell them--
across the board we have talked about what works here as a
criteria because, I think the greatest single thing--you talk
about this as well as I do--that we face as a threat in the
area of fighting the problem of drug abuse is cynicism that
nothing works.
I have asked them to not just talk about coping with the
drug problem. Give me a plan in every program, demand and
supply, including HIDTA, give me a plan using your resources,
with your coordination, to reduce the problem in your area. We
intend to attack the supply side as a market, and I have asked
them to give me a plan to do that. The additional $20 million,
with the exception of the $5 million of that that we have sent
to support the shortfall for National Guard that many of the
HIDTAs use, we have asked them to give us plans for directing
their efforts and expanding their efforts in that direction of
shrinking the problem.
If we can get those kinds of proposals, we are prepared to
support it as heavily as the results will warrant. But if it is
going to cope with it--and I am not saying there are not
valuable activities going on there--then I have to ask myself
where are there opportunities to reduce the problem.
Senator Reed. Well, I get very, very strong comments from
law enforcement professionals, and they are in the field. They
are the proverbial people on the front lines. And I think they
have got a good sense of what works and what doesn't, and they
go out of their way to tell me how important this is to New
England. One aspect of HIDTA is the Investigative Support
Center. That gets very good reviews, too, and I would urge you
to make sure that this program is funded adequately.
Mr. Walters. I understand.
Senator Reed. There is another aspect of this up our way.
Route 95 cuts right through the heart of New England. Last
year, in our report, we directed your office to work with State
law enforcement officials to combat interstate shipment of
drugs in the New England region. I wonder if you could comment
at all about any efforts that are underway or any specifics.
Mr. Walters. I do not know the specific operations that are
there. I will be happy to supply those for the record.
Senator Reed. Thank you, Mr. Director.
There is another aspect of the drug problem that has reared
its ugly head in Rhode Island. Just recently, the first
methamphetamine lab was discovered by Rhode Island law
enforcement officials. This marks a new chapter and a very
sinister chapter. Can you comment about your efforts to combat
the meth trade up in New England?
Mr. Walters. Yes. As you know, we have seen this problem
essentially start at the West Coast and move east. I was just
at the DEA Training center earlier this week looking at the
training they are doing for State and local law enforcement
officials to certify them. They essentially have to be
certified as hazardous materials handlers in order to conduct
enforcement operations and clean up sites. DEA has resources
appropriated by Congress to help in cleaning up such sites.
When I leave here today, I am going out to the Northwest to
look at what has, unfortunately, a more mature meth problem in
labs. We have used both parts of the HIDTA resources but other
programs in coordination with DEA and other Federal agencies to
go after this problem. We are continuing to look at ways, both
in terms of controlling precursors but also in, of course,
targeting the labs, to more effectively look after the issue.
The diversion of things like pseudoephedrine off the licit
market but in large quantities is obviously something that we
can take a look at. When you get the small labs, which are
essentially quantities you can go into larger discount stores
and buy off the shelf, even if you have to use a couple of
buyers because some of the stores have put in rules about how
many packs of pseudoephedrine you can buy, that is a different
problem.
But it is a serious problem. It is a growing problem. We
intend to both try to focus our law enforcement resources
effectively. I think we are--in some cases, doing a better job
of staying on top of it, but we are not where we need to be
there.
PRESCRIPTION DRUG ABUSE
Senator Reed. Thank you, Mr. Walters.
I just want to raise two final issues that are unrelated,
but give you a chance to comment on both, because the chairman
is very kind about his time, and I am sure he has other
questions.
We often focus in terms of drug abuse will regard to
illegal drugs, yet prescription drug abuse is becoming--not
becoming, it is a critical problem. One of the marquee issues
is OxyContin, which not only is being abused but people are
breaking into drugstores and stealing it at gunpoint in some
cases. That is one issue.
The second issue is when you go into the juvenile justice
system, you find very troubled youngsters, most of them with
substance abuse problems. Here is literally a captive audience.
You don't have to catch them watching the Super Bowl. You have
got them. And yet it seems to me that we do just an absolutely
deplorable job in trying to get them the type of support,
assistance, and resources to cope and to get off this problem.
And sometimes they leave those places worse than when they get
in.
So can you comment briefly on the issue of prescription
drugs, your strategy to deal with that type of abuse? And,
also, what are we doing with incarcerating youth in juvenile
justice?
Mr. Walters. On the diversion of--or the illicit use of
prescription drugs, we have begun discussions. I have met with
the Deputy FDA Commissioner and I have been in conversations
with DEA. I have also conversations with one of the physicians
that has been a leader in--Tennessee had an unusual
concentration of a diversion problem, and I met with a
professor there at Vanderbilt who was a leader in helping to
create programs for physicians.
There are two different problems here. Part of it is the
criminal diversion of drugs through, you know, either stealing
or the writing of criminal prescriptions knowingly. Another big
problem, which OxyContin is part of that, is physicians simply
not being careful or not being fully trained or not being aware
of what to look for: people shopping from one physician to
another to get multiple prescriptions; people being duped when
they present the alleged needs for pain or other kinds of
medication.
They have created an educational program in Tennessee that
has helped reduce the problem there. We are looking at ways
that we could be a convener to do that more broadly at medical
schools, with State licensing boards, because there is some
education that could help reduce a substantial part of this
problem.
There also is a need for referral because some of this
diversion is physicians writing prescriptions which are dubious
to friends or colleagues or family members and themselves,
frankly. So there needs to be kind of an intervention in the
profession, but there also needs to be better education. And I
think we can make some headway on this. It will probably take
us a few months to get everything together to convene that. But
I am hopeful that we can make a contribution here that will
help some of that problem.
The other part is tighter diversion controls, and we will
look at that with FDA, DEA, and the State Agencies involved as
well.
On the treatment effort, no one knows how long you are
going to be in these positions. You borrow them for a short
time from the American people. But I would like to have--one of
the results, I hope, of what our work can be removing the
current sharp line in people's minds between the criminal
justice system and the treatment system. I think criminal
justice has been going in this direction where people have been
leading and sorting people who have a dependency problem and
using the resources and, frankly, the authority of the criminal
justice system to get them treatment. We know if we start
younger, we have better outcomes. We know that if we do this
consistently and the longer people stay in treatment, the
better off they are. We know that if we follow up with them and
we provide a way of tying services that may be educational or
employment services to them, including mental health services,
we have better outcomes.
The criminal justice system through diversion programs for
youth and adults, drug courts, treatment in prisons, and
follow-up can be a very important source. We are going to
increase--the President has asked, as you probably know, to add
$1.6 billion to Federal treatment spending over the next 5
years. The Federal Government makes a big contribution. It is
not the only contribution. I would like to see us continue to
move in the direction of using the criminal justice system as a
way of effectively providing both intake when people have
problems and present themselves, but also as a kind of case
management to give people who are not violent offenders, who
are not hard-core criminals, and are not engaged in major
trafficking the impetus they may need to get into treatment and
to get into recovery and stay there.
Our goal is to make people well. The criminal justice
system is already an important intake point. I think there is
actually a better story here than most people know. We need to
make that clear. We need to reinforce it. I have asked my staff
as a part of the review to see how rapidly we could contribute
to an expansion of the drug court system and the system that
provides treatment in prisons. We should have that review done
to begin to shape the budget for the next fiscal year.
Senator Reed. Well, thank you, Director Walters. I would
suggest--and I know you are doing this--that in your analysis
you come up with some dollar figures which might be very
impressive in their size if we are going to really deal with
this treatment problem throughout the country. But I commend
you for that initiative, and I thank you.
DRUG TREATMENT
Senator Dorgan. Senator Reed, thank you.
Director Walters, is the $1.6 billion all new money?
Mr. Walters. It would be all new money. It would be over 5
years.
Senator Dorgan. My understanding is that some of it in the
2003 request is paid for by reductions in other treatment
programs. I don't have the list of that, but I think it is
important to understand when the administration says $1.6
billion over 5 years, is this a commitment to new money or is
it a commitment to rearrange old programs?
Mr. Walters. It is a commitment to new money, and I will
supply the detail for the record. There were some service-
providing programs that were consolidated and removed, but the
net increase meets the President's commitment, and the
reductions were not used--we did not rob Peter to pay Paul. I
understand the point of the question.
NATIONAL YOUTH ANTI-DRUG MEDIA CAMPAIGN
Senator Dorgan. Now, let me go back to this issue of the
media campaign because--I don't want to dwell too much on it. I
am going to submit a series of questions to you in writing.
But, you know, we would have expected at the end of 5 years to
be able to say, yes, we did it and it worked, or we did it and
it didn't work. We spend, what $500 million on your agency;
almost $200 million of that is the media campaign, so it is a
significant part of what we do.
The question, I guess, is: Why after 5 years do we not have
a pretty clear answer, yes, it worked or, no, it didn't work?
Mr. Walters. I think there are two reasons for that at this
point. One is there was a lag from the beginning of the program
to when it got fully implemented.
Two, the operating strategy, which, again, these are all
best guesses of how this is going to work, was to provide
messages both to parents and to young people that would first
try to get them to change the way they think, and then there
would be some lag between that process of re-analyzing the
issue and then the actual change in behavior; that there would,
in short, be a delay from first--it would not be watch one ad,
do something different; that it would take some exposure and
some time to create the environment.
Now, again, that may be true. That may not be true. But
what we will have in the period of the report that should be
available next month and then the next 6-month review available
in the fall is the first full implementation nationwide, and I
think the first period of time such that, if this follows as
predicted, the behavior change should be there.
Now, it may be--and, again, I want to emphasize I agree
with the premise of the question. It may be the Campaign either
does not work or is not big enough to counter things, and then
you have got to decide do you want to change it or do you want
to put the money somewhere else.
Senator Dorgan. But, you know, the behavior change isn't
like breaking the sound barrier. I assume if it exists it is
incremental. Over 5 years you ramp up, you have incremental
change, and at the end of the full phase-in, you measure where
that incremental change took you.
My feeling is that if this were the private sector, after 5
years you would decide whether you were making progress or not
making progress. And when I say ``you,'' you have just recently
arrived, but, you know, after--the anticipate was to spend
close to $1 billion in a 5-year period and then hand it off to
corporate sponsors and expect to be able, by the end of the 5
years, to evaluate with what accomplishment did we spend this
money.
The only reason I am raising that issue is I know the
authorizers will take a look at it, we in the Appropriations
Committee will take a hard look as well, at whether this is an
effective use of money, and whether there are other ways to use
this money that might be more effective.
Let me just also comment quickly, I think the record on
drug treatment for those who are incarcerated in this country
is abysmal. Most people who are incarcerated--we have well over
94 or 95 percent of the people incarcerated are incarcerated by
State and local governments. And I understand we have a
different standard at the Federal level, although it is not
perfect. But in most areas of State and local government,
county jails, State penitentiaries and so on, a substantial
portion of those in those incarceration facilities with drug
addictions are not getting treatment and not getting effective
treatment and are being released from incarceration with a drug
issue unresolved.
I think it requires a great deal of money to address that.
I don't know how much, but addressing the drug problem also
requires us to address that issue, I think, in a very
aggressive way. And so I hope--based on your testimony, I know
you will take a look at that.
I am going to submit a series of questions to you because
of Secretary Powell's briefing on his Middle East trip.
Mr. Walters. Can I say one thing about that?
Senator Dorgan. Yes, of course.
Mr. Walters. I have made clear my own concern about our
rigorous evaluation of the ad Campaign. But I also want to be
fair to you in this opportunity about what I think from my
experience the underlying factors are.
The closest thing we have to the kind of research about
attitude versus behavior in my experience over the long term
has been something like the high school survey that was
conducted for years that also measured both use and measured
attitudes of disapproval and change. We always saw that
attitudes about the danger of using drugs or disapproval were
about a year to 18 months or 2 years ahead of the change in
behavior. It would not be impossible--in fact, it is not
unreasonable to expect that there would be a similar pattern
here.
But, again, we are guessing as to what is the most likely
story of how these things work across a large population. Some
individuals are going to be different. That is not to say that
I do not think we have to be rigorous, and I understand exactly
what you are saying. If it does not work, we are not going to
continue funding it. And I understand the frustration with
after 5 years and this amount of investment how much change do
we see.
We also know that there are important factors here that we
have seen from the evaluation. An important factor in whether
kids use is the percentage that say they have been presented
with drugs through peers and others.
So the Campaign will play a part, we will be able hopefully
to measure that part, but we also have to hopefully empower
parents and other adults in their lives to supervise young
people. We cannot just have them watch ads and then inoculate
them and dip them into a society which is otherwise not doing
other parts of crucial activity here. So it has to be a part--
we will examine it as a part, but I understand what you are
saying.
Senator Dorgan. Well, you know, we used to raise horses,
and we actually drove some horses with a buggy, and we used to
use blinders on the horses from time to time, especially one of
them that would shy at almost anything. And the blinders, of
course, prohibit the horse from looking anywhere but ahead,
straight ahead. The only reason I am raising these questions is
we are moving straight ahead on this campaign. I resisted the
attempt by those in the Senate 2 years ago to interrupt the
campaign by saying that a much bigger problem in America's
schools is the issue of alcohol and drinking, and let's take
some of this money and move it to deal with that issue.
And I was one of those who resisted that and said, no, we
have embarked on a course here for 5 years to evaluate with
what effect can we achieve a reduction in drug use and a change
in behavior with respect to drugs among America's young people.
As I said, if this were the private sector, my guess is
they would have at this point been about the business of
deciding does this make sense or doesn't it, do we continue it
or don't we.
We still have those who believe that we ought to be doing
this with respect to teenage drinking, and I am very
sympathetic to that, I must say. I mean, I think there are
going to be far more kids in the next month killed by underage
drinking than drugs. It doesn't suggest--I don't think this
program has--I mean, I am really anxious to see the measurement
of it. But I will bet everybody in this room knows of a young
kid that is dead because of drunk driving. I have got several
in my family that have been killed from drunk driving, loved
ones and so on. And I think if you go to a school today and
talk to these kids, you will discover the really big problem is
somebody getting drunk and somebody else getting in a car and
having three of them killed in an accident.
So we will have those in Congress continue the effort to
say this campaign is spending $1 billion on this issue and the
issue in most high schools these days continues to be, as it
has been for 50 years, that kids are not responsible with
respect to alcohol. And a lot of our kids are dying because of
it.
Well, that took me off in a different discussion. Again,
the reason that I think it is important that we discuss this,
we are at the end of 5 years. This subcommittee doesn't have an
unlimited quantity of money. We are going to do with the money
that we have from the American taxpayer the most effective job
possible to address a range of issues. We want to provide good
funding for you so that you can do your job, and we have tried
to work very cooperatively with your agency over time.
Mr. Walters. I appreciate that.
ADDITIONAL COMMITTEE QUESTIONS
Senator Dorgan. So let me do this: There are other things I
wanted to inquire about, but because of time I will forfeit
that. But let me ask if you will submit to some questions in
writing.
Mr. Walters. Absolutely.
[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 Byron L. Dorgan
national youth anti-drug media campaign
Question. Has ONDCP used media campaign funds for creative costs
associated with producing advertisements? If so, how much and for which
ads?
Answer. Of the $658.1 million spent for paid advertising in the
last 4 fiscal years, $3.4 million (0.5 percent) has been spent on
creative labor costs. This was primarily for the production of internet
creative materials, for ethnic, in-language advertising addressing
important ``niche'' audiences, and for strategic brand development;
create material that the Partnership for a Drug Free America was not
able to produce.
Question. In each year, how much of the media campaign allocation
is used for media buys versus all other costs for producing
advertisements?
Answer. Advertising production is a small percentage of the overall
advertising budget, which is primarily allocated for media buying. Over
the last 4 fiscal years, 96 percent of the advertising budget was used
to purchase time and space with 4 percent used for production costs
(including creative labor). This compares favorably to private sector
allocations which typically include 90 percent for time and space and
10 percent for production. Production and media planning budgets have
varied from year to year depending on the need to develop creative
materials and when those materials were needed versus the cost of
television and radio time. Additionally, the media-planning year runs
from July to June, which crosses over calendar years.\1\
---------------------------------------------------------------------------
\1\ Program Year July and June Historical Media spending is higher
than CY spending as noted below due to FAR obligation requirements and
budget allocation procedures.
---------------------------------------------------------------------------
[In millions of dollars]
1998/1999......................................................... 157.5
1999/2000......................................................... 143.0
2000/2001......................................................... 143.2
2001/2002......................................................... 140.0
The following provides the calendar year commitments for media and
production materials and labor, along with media budgets for the July
through June plan years:
MEDIA AND PRODUCTION BUDGET FOR THE MEDIA CAMPAIGN CALENDAR YEAR BASIS
[In millions of dollars]
----------------------------------------------------------------------------------------------------------------
Production
Fiscal year Media spend spend Percent/split
----------------------------------------------------------------------------------------------------------------
1999............................................................ $140.6 $6.8 95/5
2000............................................................ 125.0 5.0 96/4
2001............................................................ 134.0 4.0 97/3
2002............................................................ \1\ 130.0 \2\ 4.9 96/4
----------------------------------------------------------------------------------------------------------------
\1\ Budgeted.
\2\ Estimated.
Questions. How is the $5 million for ecstasy targeting being spent?
Answer. Fiscal year 2002 Conference report language directed the
Campaign to allocate $5 million (out of the $180 million appropriated)
``for advertising time and space specifically targeted at combating the
drug Ecstasy.'' ONDCP intends to base this effort on anti-ecstasy
television ads already developed by the Partnership for a Drug Free
America. This anti-ecstasy advertising will be directed toward youth
and will appear on popular youth-oriented network television programs.
Question. What are the targeted media outlets and times?
Answer. The ecstasy campaign will air on a variety of popular
programs on the key networks that youth watch most, such as WB, MTV,
UPN, ESPN, Fox, and Much Music. Programs may include shows such as WB's
(``Seventh Heaven,'' ``Gilmore Girls,'' ``Dawson's Creek,''); UPN's
(``The Hughleys,'' ``Wolf Lake,'' ``The Parkers''); MTV's (``Real
World,'' ``WWF Heat''); Fox's (``Mad TV,'' ``Family Guy''); ESPN's
Sports Center; and Much Music's (``Live at Much Music,'' ``Oven
Fresh''). These programs air in primetime (8-11 p.m.) and late night
(11:30 p.m.).
The above schedule is based on ONDCP's April-June 2002 planned
television schedule. Actual programs airing ecstasy advertising will
vary depending upon availability and scheduling and will air between
June and September 2002.
Question. Why are you not continuing this effort in fiscal year
2003?
Answer. The Campaign is first and foremost a primary prevention
effort and its focus must be on the primary entry-level drug,
marijuana. We simply must respond to the fact that marijuana is the
single most significant factor in overall drug use by America's youth.
The Campaign focuses on primary prevention for three key reasons.
First, primary prevention targets the underlying causes of drug use,
and, therefore, has the greatest potential to reduce the scope of the
problem over the long term. Second, over time, a primary prevention
campaign will lessen the need for drug treatment services. And third, a
media campaign has greater potential to affirm and reinforce the anti-
drug attitudes of youth who are not involved in drug use than to
persuade experienced drug users to change their behavior.
When we examine the most recent findings from the 2000 National
Household Survey category of ``12-17 year old past 30-day use of all
drugs,'' we find that marijuana accounts for the 9.7 percent reporting
such use, approximately 75 percent of the total. This use is mostly by
itself, but also to a smaller extent is in combination with other
drugs. Therefore, as we look to focus our communications power against
youth drug use, the most obvious entry point has to be marijuana.
The communications challenge of this is significant. Of all illegal
drugs, marijuana is clearly the drug about which youth attitudes are
the softest and their parents attitudes are the most ambivalent. It
should be clear that we cannot expect to make progress in youth drug
use until we significantly reduce the use of marijuana, the
preponderant drug of choice.
To include a significant effort against ecstasy or any other
specific drug, will drain funds from focussing on the primary issue of
marijuana, fragment our messages, and result in a less effective and
efficient program.
Question. How will you monitor the effects of a targeted campaign?
Answer. As the primary focus of the campaign is on illegal drugs in
general and marijuana and inhalants specifically, the bulk of the
advertising component and therefor the evaluation focus on related
awareness, attitudes, and beliefs.
As with the core Campaign, we use a range of tools to monitor the
effects of our efforts. To ensure communications are strategically
sound and grounded in behavioral science, communications are reviewed
by our Behavior Change Expert Panel, by target audience specialists,
and by PDFA's Creative Review Council. All communications are
qualitatively tested in focus groups throughout the country to ensure
the intended message is being clearly communicated and understood by
our target audiences.
Measures in the market include our on-going Advertising Tracking
Study which tracks advertising awareness and related attitude and
behavior change. Further, our regular focus group testing of
advertising also provides us an opportunity to learn first hand the
impact of our advertising in-market and provide us with insight into
effects of targeted efforts. In addition we monitor the traffic to our
various web-sites and the NCADI Clearinghouse activity.
Question. How does the campaign intend to change with the
alterations recognized in youth drug behavior?
Answer. Based on the Westat Evaluation Report (May 2002), ONDCP is
pursuing a number of changes to improve the effectiveness of the
Campaign. First, ONDCP will become much more involved and at an earlier
stage in the development of the messages of the Campaign. Second, ONDCP
is changing the core target age of the Campaign from 11-14 years to 14-
16 years. Third, ONDCP is requiring that all television ads be tested
twice before they are aired, first in concept form and second after
they are produced, before target audiences in several cities. ONDCP
will continue to work closely with Congress and key Campaign partners
to ensure that the Campaign plays a significant role in our effort to
achieve the President's goal of achieving a 10 percent reduction in
teenage and adult drug use over the next 2 years, and a 25 percent
reduction in drug use, nationally, over the next 5 years.
Question. Why is the focus on marijuana, the most difficult drug to
unsell and the drug with flat lined behavior studies?
Answer. We focus on marijuana precisely because of its insidious
nature as an entry-level drug that accounts for the majority of
adolescent treatment episodes. Marijuana is the most prevalent drug of
use for the Campaign's youth target (as well as for young adults and
adults). If we are to produce a dramatic reduction in drug use overall,
we must begin with marijuana.
The Campaign leverages its communications power to produce maximum
impact on youth and drugs. As the Media Campaign is a primary
prevention campaign for youth, it focuses on the primary entry-level
drug, marijuana. According to the NHSDA, in 2000, 6.3 percent of the
household population aged 12 and older (14.0 million persons) were
``current'' or past month users of an illicit drug, a level that was
unchanged from 1999. Three of four current users (10.7 million)
reported using marijuana, either alone or in combination with other
drugs. More than 70 percent of the total ``Past 30-day drug use'' of
12-17 year olds in 2001, which combines data on all types of drugs, is
marijuana. The campaign's budget for media purchases is committed
against this entry-level, primarily marijuana strategy.
Question. Why are you not focusing on drugs that you can make
stronger claims on the potential dangers?
Answer. Marijuana is a dangerous drug and we can make strong claims
on its potential dangers. We will attack the pervasive myth that
marijuana is not addictive. A drug is addicting if it causes
compulsive, often uncontrollable drug craving, seeking, and use, even
in the face of negative health and social consequences. According to
the National Institute on Drug Abuse (NIDA), marijuana meets these
criteria. Moreover, treatment seeking for marijuana dependency has
increased almost twofold over the past 10 years. Research findings
suggest that marijuana dependence is more similar than dissimilar to
other forms of drug dependence. In 1999, the Treatment Episode Data Set
recorded more than 220,000 admissions for primary marijuana abuse to
publicly funded substance abuse treatment, or 14 percent of the 1.6
million admissions for alcohol or drug treatment in these facilities.
Marijuana activates the same pleasure centers in the brain that are
targeted by heroin, cocaine and alcohol. A Scripps Research Institute
study reports the stress and anxiety associated with the long-term use
of marijuana produces the same bio-chemical changes associated with the
withdrawal from other drugs, blurring the distinction, according to the
researcher, between what is considered hard and soft drugs because they
all do the same thing.
Well-funded and fully entrenched pro-marijuana interests have been
at work for many years seeding their messages throughout our popular
culture. However, no one of common sense will argue that marijuana use
is appropriate for our adolescent youth. We will conduct our effort
against marijuana by giving youth the facts in contexts they can
identify with, exploding the myths, and allowing them to draw their own
conclusions.
Further, while claims against the stronger drugs' may seem easier
to make, the rate of prevalence of these substances are dramatically
lower than for marijuana use, suggesting that the potentially largest
return for investment in an anti-drug campaign is in the area of
marijuana.
Question. Why do you wait until you reach a certain threshold to
target a given drug? Why would you not attempt to get ahead of the
curve? Isn't prevention a goal as well?
Answer. Clearly, the Media Campaign is a drug prevention program
primarily for youth, but the Campaign has finite resources, and
therefore, focuses on the primary entry-level drug, marijuana. Primary
prevention addresses all drugs. If the Campaign attempted to address
all thrusts, we would be unlikely to achieve our goals.
parent corp
Question. When Congress chose not to fund the fiscal year 2002
initiative for lack of information, why are you repeating the same
behavior?
Answer. The President is requesting $5 million for this initiative
within in the Corporation for National and Community Service's budget.
The program will encourage parents to help children stay drug-free by
training them in drug prevention skills and methods. It is my
understanding that CNCS included a description of the program in its
Congressional Budget Justification, but I would be pleased to continue
working with CNCS to ensure that all relevant Subcommittees obtain all
necessary information.
Question. Why circumvent this subcommittee and place it under the
Corporation for National & Community Service?
Answer. The Administration's decision to request funding for this
initiative is not intended to circumvent this Subcommittee. During the
formulation of the President's fiscal year 2003 Budget Request, the
Administration reached the conclusion that the CNCS would be the most
appropriate agency to administer this program because of their
extensive experience in community-based volunteer programs.
Question. Do you have details to provide to this or any other
subcommittee on how the $5 million will be disbursed?
Answer. The President's request is for $5 million to make grants to
national parents' organizations to train thousands of parents in
communities nationwide in how to reduce drug use and form parent drug
prevention groups. This effort will promote cooperation among national
parent groups and enable them to have a significant impact by working
through the network of community anti-drug coalitions nationwide and
with other local and state anti-drug efforts.
The Parent Drug Prevention Corps will provide an opportunity for
parents of school-age children to give 2 years of service to their
country to prevent drug use among children. Key parent leaders will be
trained in all aspects of the drug problem in communities, including
how to make their neighborhoods and schools safe and drug-free. The
parent leaders will mobilize other parents in the community who have a
few hours per week to volunteer in this effort.
Parents are a key in the effort to prevent drug use by teenagers.
Research has established that parents have a significant influence over
a child's drug use. For this reason, many drug prevention efforts are
targeted at sending messages and support to parents. The Parent Drug
Prevention Corps is built on the notion that other parents are often in
the best position to assist in delivering this message.
In fiscal year 2003, CNCS anticipates making one or two national
grants for this purpose. In turn, the grantee will support programs in
50-75 communities. Approximately 10,000 parent volunteers are expected
to be involved in this effort. Further, the grantees will share
information and technical assistance with anti-drug use programs
engaging parents as volunteers in other communities throughout the
country.
drug treatment
Question. With the drain on state budgets due to increased homeland
security efforts and needs, many states are facing tough decisions
about where to cut. Drug treatment in prisons could be a prime
candidate. How will a $77 million program cover the entire country? Who
gets left out and how can we help?
Answer. This Subcommittee, and indeed, the entire Congress can help
additional drug users obtain treatment by fully-funding the President's
request expanding funding for treatment services by $1.6 billion over 5
years.
Concerning drug treatment in prisons, the Department of Justice's
Residential Substance Abuse Treatment (RSAT) Program is not intended to
provide all funding necessary for State prison drug treatment programs.
Rather, the program supplements funding the individual States allocate
for this purpose. The President's fiscal year 2003 request includes an
additional $7 million (for a total of $77 million) for the RSAT Program
to support treatment of an additional 2,572 offenders. The Corrections
Program Office (CPO) estimates having resources in place to treat
45,913 offenders. As programs mature and move through preparation,
hiring and training stages to actually admitting clients and providing
substance abuse treatment, CPO anticipates that the numbers of
offenders treated will increase at a much slower rate than experienced
during the early years of the program. In fiscal year 2002, RSAT
program funds were first made available to support transitional
substance abuse treatment services, which involve coordination between
the correctional institutional treatment program and other human
service and rehabilitation programs in the community. Funding these
services may reduce the number of offenders able to receive treatment,
but should reduce relapse and recidivism.
Question. If the Administration is committed to increasing efforts
in drug treatment, then how will drug treatment in prison be addressed
in the out-years?
Answer. As the Subcommittee is aware, the President has proposed an
additional $1.6 billion over 5 years to expand drug treatment. ONDCP,
with the participation of Federal demand reduction and drug control
agencies, is now conducting a strategic review of all treatment and
prevention programs and developing the strategic plan that will define
next steps. This review will help inform the policy process as the
Administration contemplates adjustments to the National Drug Control
Strategy and potential budget initiatives for the President's fiscal
year 2004 Budget Request.
Question. Do you have data on the extent to which drug treatment
programs operate in state correctional facilities?
Answer. The RSAT Program provides formula grants to states to help
them develop and implement residential substance abuse treatment
programs that provide individual and group treatment activities for
offenders in residential facilities operated by state correctional
agencies. The Corrections Program Office (CPO), which administers this
program, conducted technical assistance workshops and conferences on
effective treatment programs and strategies to over 1,238 policymakers,
correctional practitioners, and treatment practitioners. Also in 2001,
39,718 offenders received treatment from 151 programs initiated or
expanded with 2001 funds. In 2002, CPO estimates that 40,840 offenders
will receive treatment from about 185 programs.
Question. The President stated his commitment to add $1.6 billion
to the drug treatment system over 5 years. In the fiscal year 2003
budget request, not all of the increase is new money. In fact, some of
it is paid for by reductions in other drug treatment programs. Will the
Administration commit to adding new money to these programs to
accurately account for a $1.6 billion increase?
Answer. The Administration has launched a major new treatment
initiative. In May 2001, the President committed to expanding funding
for treatment services by $1.6 billion over 5 years. We are on track to
meet the President's commitment with net increases in fiscal years 2002
and 2003. We are fulfilling this commitment gradually. In fiscal year
2002, an additional $95.4 million was provided to the Substance Abuse
and Mental Health Services Administration (SAMHSA) to begin to fulfill
this pledge. The Administration's fiscal year 2003 budget builds upon
this increase with additional funding for SAMHSA. The Budget proposes a
net +$127 million increase for the President's Drug Treatment
Initiative to help narrow the gap between the number of people in need
of drug treatment and the number getting it. The request includes a $60
million (+4 percent) increase to the Substance Abuse Block Grant, a
$109 million (+56 percent) increase to discretionary substance abuse
treatment grants, and a $43 million (-45 percent) reduction in drug
treatment research and demonstration grants. The request will support
52,000 additional drug treatment slots.
In addition, ONDCP has directed the major Departments and agencies
involved in funding and support of drug treatment to provide clear and
targeted input on what they will do to address the identified treatment
need, including efficiencies that can be implemented to help available
treatment funding support more and better treatment.
It is clear that we need to expand treatment capacity. But simply
expanding capacity nationwide will not ensure adequate support for
locations or populations in greatest need, nor will it ensure increases
in the kinds of treatment most needed. And broad increases are not
enough to get people into needed treatment and help them see it through
to completion. Addiction is a life-long challenge, requiring the
sustained efforts of the drug user to stay drug free. Some will
relapse, falling back into drug-taking behavior. As a society, we must
continue to take an active role in supporting these individuals
including providing appropriate, individualized treatment and follow-up
support to maintain recovery. For those who accept responsibility and
obtain treatment services, treatment can prove successful. Only by
developing this broad-based continuum of services and resources can we
provide the essential and life-saving assistance to those who need it.
drug free communities act
Question. Do you intend on granting the $2 million for a National
Community Anti-Drug Coalition Institute to the Community Anti-Drug
Coalitions of America?
Answer. As you know, the Reauthorization created a National
Coalition Institute ($2 million authorized in fiscal years 2002 &
2003). We have reserved $2 million for a grant award in late fiscal
year 2002. Pursuant to Federal grant law and report language
accompanying the Drug-Free Communities Support Program Reauthorization
Act, the grant will be awarded through a competitive process. CSAP will
award a grant to a national nonprofit organization with expertise and
broad national-level experience in community anti-drug coalitions to
provide technical assistance and training to community anti-drug
coalitions.
______
Questions Submitted by Senator Jack Reed
drug trafficking in new england
Question. As you know, there is a great deal of concern about drug
traffickers' increasing use of the interstate highway system in New
England to distribute illegal drugs from urban centers to rural areas.
This Subcommittee's fiscal year 2002 report directed your office to
work with State law enforcement drug control task forces to combat
interstate shipment of drugs in the region.
Could you describe your efforts to address this problem and any
progress you have made?
Answer. We have worked to address this serious threat throughout
the New England HIDTA. The most significant threat confronting the
HIDTA is the transportation of drugs from sources of supply in New York
to New England. Consequently, it is the major concentration of efforts
for the NEHIDTA. The New England HIDTA recently completed its first
year of operations and already is supported by representatives from
over eighty Federal, State and local agencies.
The New England HIDTA developed a cohesive and comprehensive
program combining regional and state specific initiatives. The
NEHIDTA's initiatives focus on reducing and disrupting the flow of
drugs along the pipeline. To accomplish this, the HIDTA is coordinating
thirteen initiatives in fiscal year 2002. These initiatives are
organized into and support four (4) counter-drug subsystems, with each
subsystem integral to the success of the HIDTA. Initiatives that were
approved to implement the 2000 New England HIDTA Strategy include:
--Southern New England HIDTA Task Force (CT)--this is a collocated
task force that is concentrating on mid-level to major
traffickers in the Fairfield county area of Connecticut and
will be comprised of Federal, State and local investigators in
Bridgeport, CT.
--Southern New England Street Sweep Initiative (CT)--this is a multi-
agency task force that targets violent narcotic traffickers in
the Fairfield and New Haven counties of Connecticut. This task
force will target those criminal groups whose activities
negatively impact quality of life issues in the neighborhoods
and communities in these counties.
--Bradley Airport Transportation Group (CT)--this task force is led
by the Connecticut State Police, and is staffed by special
agents of the Drug Enforcement Administration and the U.S.
Customs Service. This interdiction task force will concentrate
on cargo shipments containing drugs and general airport
enforcement programs.
--Northeast New England HIDTA Task Force (ME)--this task force is
located in Portland, ME and is a multi-agency, collocated task
force. This task force is targeting core and secondary heroin,
cocaine and crack cocaine criminal distribution organizations.
--New England HIDTA Financial Task Force (MA)--this task force is led
by the U.S. Customs Service and the Internal Revenue Service,
Criminal Investigation Division. It is staffed with Customs and
IRS special agents, Massachusetts State Police and Boston
Police Department detectives. This task force is identifying,
investigating and prosecuting large scale money laundering
organizations in New England and internationally.
--Greater Boston Task Force (MA)--led by the FBI, this multi-agency,
collocated task force will target mid to upper level criminal
organizations in the Greater Boston area. This initiative also
manages a smaller task force in Lawrence, Massachusetts.
--Central Massachusetts Task Force (MA)--this task force is led by
the DEA and consists of Federal, State and local investigators
targeting widespread criminal organizations in Central
Massachusetts.
--Northern New England HIDTA Task Force (NH)--established in
Manchester, New Hampshire this DEA led, collocated State,
Federal and local task force investigates core and secondary
drug distributors in Hillsborough County, New Hampshire.
--Rhode Island HIDTA Task Force (RI)--the Rhode Island HIDTA Task
Force is an FBI led, multi-agency task force that is co-managed
by the FBI and Rhode Island State Police. This task force will
primarily target violators in the greater Providence, Rhode
Island area.
--Providence County HIDTA Transportation Task Force (RI)--this task
force is DEA led and is working in the major rail, bus and
airport terminals, as well as cargo terminals and express
package delivery services. This interdiction task force was
established to intercept and seize illicit drugs and currency
derived from criminal activities.
--Northern Vermont HIDTA Task Force (VT)--this DEA led, multi-agency
task force will concentrate its efforts in the greater
Burlington, VT area and will target mid to upper level criminal
organizations.
methamphetamine in new england
Question. I understand that two weeks ago the first methamphetamine
lab was discovered by law enforcement in Rhode Island.
Given the significant crime and health concerns associated with use
of this drug in other parts of the country, what plans do you have to
address potential growth of the meth trade in New England?
Answer. This past year OxyContin, MDMA (Ecstasy), hydroponic
marijuana, and the methamphetamine precursors, ephedrine and
pseudoephedrine, became significant and formidable threats for the New
England HIDTA. In response, the HIDTA has brought together over 100
Federal, State and local law enforcement and prosecution agencies;
medical examiners; prevention and treatment professionals; health
providers; emergency medical services; emergency room doctors and
personnel and others to assist in the preparation of a comprehensive
and inclusive strategy for heroin and the emerging methamphetamine/
precursor and other drug threats. HIDTA brought these professionals
together to discuss the epidemic heroin problem and to establish
cooperative and coordinated communications to assess the drug problem
and provide recommendations. This was the first time professionals from
all the different disciplines met and formed a strong cooperative
coalition.
The basic element of the strategy is to build a coalition of
professionals and establish communication links that will provide a
system to alert law enforcement, health providers, treatment and
education and emergency services professionals and others with an
``early warning system.'' A significant problem is obtaining timely,
accurate, multi-source information/intelligence on emerging drug
trends/epidemics and disseminating that information to law enforcement,
education/prevention, emergency medical services, hospitals and others
to ensure a timely, efficient, coordinated response. Our common goal is
to save lives and ensure a thorough investigation and successful
prosecution of the Drug Trafficking Organizations, distributors and
violent criminals. When intelligence/information detects a new drug or
trend or a drug problem that is reaching epidemic proportions, as is
the case with heroin in New England, all disciplines will be alerted to
immediately focus on the threat. This same system will be used to warn
all the disciplines of new emerging drug threats as we are doing with
methamphetamine. We have started to build a system using email
addresses that will provide the basis for a more sophisticated alert
system, if necessary.
HIDTA participating agencies seized 3 clandestine methamphetamine
laboratories in 3 months. Furthermore, NEHIDTA Task Forces are
providing training courses for state and local law enforcement on the
investigation of clandestine laboratories.
national youth anti-drug media campaign
Question. In your testimony you note that the National Youth Anti-
Drug Media Campaign integrates paid advertising at the national and
local levels with public information outreach through a network of
public and private partnerships to provide local context for campaign
messages. How is the media campaign tailored to address issues of
specific concern to New England? Who are your key partners in this
effort?
Answer. The media campaign is tailored to address issues of
specific concern to New England via targeted media buys to key markets
and areas in the region (markets are defined as Designated Marketing
Areas/DMAs a standard media/population measurement).
Examples of media placed in New England are as follows:
Maine (Portland-Auburn DMA)
General Market.--Newspapers--Portland Press Herald Telegram, The
Sun-Journal, Kennebec Journal; Spot Television: WGME, WMTW, WPXT, WCSH;
Spot Radio: WJBQ-FM.
Vermont (Burlington DMA)
General Market.--Newspapers: Burlington Free Press, Plattsburgh
Press-Republican, Rutland Herald; Spot Television: WCAX, WPTZ, WVNY;
Spot Radio: WXXX-FM.
Multi-cultural.--African-American: WWBI (Syndicated TV).
Massachusetts (Boston DMA)
General Market Newspapers.--Boston Globe, Worcester Telegram
Gazette, The Boston Herald; Television: WLVI, Boston Interconnect
(cable), WSBK; Radio: WBOT-FM, WJMN-FM.
Multi-cultural.--The Boston DMA has a high concentration of African
American and Hispanic teens and Parents. Media is strategically
deployed to reach these key population groups; African American: Bay
State Banner (Newspaper), WSBK, WLVI, WHDH (Syndicated TV); Asian:
Boston Chinese News (Newspaper); Hispanic: TV--Univision WUNI,
Telemundo WWDP, W32AY; Radio--WHAV, WRCA, WORC.
Worchester, MA Hispanic
Radio--WKOX.
Connecticut (Hartford/New Haven DMA)
General Market.--Newspapers: Hartford DMA--Hartford Courant, New
Haven Register, Waterbury Republican-American, Manchester Journal
Inquirer, New London Day, Meriden Record-Journal; New York DMA--
Connecticut Post, The Danbury News-Times, The Norwalk Hour, Stamford
Advocate/Greenwich Times; Spot Television: WCTX, WTIC, WTXX; Spot
Radio: WZMX-FM;
Multi-cultural.--African American: WTXX, WCTX, WTNH (Syndicated
TV); Hispanic: TV--Univision W47AD, Telemundo WRDM; Radio--WPRX, WRYM.
Rhode Island (Providence/New Bedford DMA)
General Market.--Newspapers: Providence Journal Bulletin, The New
Bedford Standard Times, Spot Television: WLWC, WNAC, WLNE; Spot Radio:
WPRO-FM
Multi-cultural.--African American: WLWC, COX--(Syndicated TV);
Hispanic: TV--Telemundo WRIW; Radio--WRIB, WPMZ, WJYT.
New Hampshire, which does not have its own DMA (Designated Market
Area), receives Newspaper and Broadcast coverage from Boston with some
additional spill from Portland.
In addition several dozen community coalitions, and other local
organizations and agencies routinely receive Campaign materials,
newsletters, updates and e-mails from the Campaign.
Importantly, several organizations in New England have benefited
from the Campaign's Pro Bono Matching program, which has provided
opportunities to deliver important public health/anti-drug messages at
the local level at no cost. Working with American Advertising
Federation (AAF), local New England coalitions were able to participate
in the local television and local radio match activity. The local
activity aired from April 2000 through January 2001. The following
outlines the organizations and their match value (dollars are gross)
and match units:
----------------------------------------------------------------------------------------------------------------
Organization Match value Unites Media
----------------------------------------------------------------------------------------------------------------
American Symphony Orchestra League-Boston....................... $46,409 50 ( \1\ )
Cenikor Foundation-Boston....................................... 19,518 22 ( \1\ )
PDFA-Boston..................................................... 19,776 35 ( \1\ )
PDFA-New Hampshire.............................................. 37,999 65 ( \2\ )
Rhode Island Dept. of Mental Health, Retardation & Hospitals.... 787,832 3,957 ( \3\ )
-----------------------------------------------
TOTAL..................................................... 911,534 4,129 ..............
----------------------------------------------------------------------------------------------------------------
\1\ Spot TV.
\2\ Spot TV/Radio.
\3\ Spot Radio.
substance among youths in the juvenile justice system
Question. More than 2 million youth under the age of 18 are
arrested each year, and more than 100,000 of these youth will be placed
in juvenile detention and correction facilities on any day. Research
indicates that approximately twenty percent of all youths who enter the
juvenile justice system experience serious mental disorders, with a
much higher percentage experiencing some level of mental health
problems. Studies have consistently found the rate of mental disorders
to be higher among the juvenile justice population than among youths in
the general population. There is also a growing recognition that many
of these youths--between 50 and 75 percent--have serious substance
abuse problems.
What is your strategy for addressing this problem? What steps can
we implement to help these troubled youth break this destructive cycle?
Answer. We must link public safety with public health in a
systematic manner. We must intervene early, before problems have
worsened to the point where intensive, specialized treatment is
necessary. Working in concert, justice and public health agencies can
establish a continuum of accountability and treatment for juvenile
offenders with substance use disorders.
The juvenile justice system should operate--in concert with other
service systems--as a series of opportunities for intervention with
offenders experiencing substance use disorders. Interventions should be
carried out in a systematic manner and at the earliest possible
opportunity to prevent entry into the juvenile justice system for those
who can be safely diverted to community social service systems; to
limit penetration into the juvenile justice system for nonviolent
offenders through community justice interventions in concert with other
social service systems; and to intervene with those who must be
securely confined, through appropriate treatment and supervision, both
during and after the period of confinement.
Successful interventions are based on thorough assessments and
maintained with structured case management. The National Drug Control
Strategy has supported many effective efforts: the juvenile Breaking
the Cycle program in Eugene, OR; the juvenile assessment centers in
Miami and Tampa, FL; the juvenile justice/treatment network in Denver,
CO; and juvenile drug courts and TASC programs to name a few.
The most cost-effective interventions will take place before the
juvenile breaks the law and before the juvenile becomes drug dependent.
There is considerable evidence that brief interventions can be
effective in helping drug users who are not yet dependent stop their
use. ONDCP is working with Federal drug control agencies to incorporate
brief interventions into a number of social settings, including
schools, community prevention programs, child welfare programs, primary
healthcare programs, and community policing.
On a broader scale, the National Drug Control Strategy is designed
to foster the active and skilled involvement of families, faith-based
and community organizations, anti-drug coalitions, child welfare
workers, civic groups, healthcare workers, and workplaces in delivering
prevention and intervention programs, persuading drug users in need to
seek help, and supporting their neighbors who are in recovery.
______
Questions Submitted by Senator Ben Nighthorse Campbell
national youth anti-drug media campaign
Question. Director Walters, last year this subcommittee carved out
$5 million of the anti-drug national media campaign funding
specifically for efforts to combat the drug ``Ecstasy''. Use of this
prescription drug for illegal purposes has become a widespread problem
in all areas of our country.
What, exactly, are you doing to address this problem?
Answer. Fiscal year 2002 Conference report language directed the
Campaign to allocate $5 million (out of the $180 million appropriated)
``for advertising time and space specifically targeted at combating the
drug Ecstasy.'' ONDCP intends to base this effort on anti-ecstasy
television ads already developed by the Partnership for a Drug Free
America. This anti-ecstasy advertising will be directed toward youth
and will appear on popular youth-oriented network television programs.
Question. How do you plan to spend this $5 million?
Answer. ONDCP intends to base this effort on anti-ecstasy
television ads already developed by the Partnership for a Drug Free
America. This anti-ecstasy advertising will be directed toward youth
and will appear on popular youth-oriented network television programs.
Question. I noticed the ONDCP ads during this year's Super Bowl
game. Those spots are usually pretty expensive.
Why did you decide to purchase time during the Super Bowl?
Answer. We purchased time during the Super Bowl because we could
reach a very large, diverse audience. In the aftermath of the terror
attack of September 11, we realized that few Americans knew of the link
between money spent for drugs and the support of terrorist
organizations like Al Qaeda and the FARC. Twelve of the 28
international terrorist organizations recognized by the State
Department engage in drug trafficking, and many other drug trafficking
organizations engage in widespread acts of terror--kidnapping, torture,
bombings, and the murder of innocents.
Question. Do you have any evidence that these ads actually reached
your target audience?
Answer. The ads have generated a large response from across the
country. Viewers are directed to www.theantidrug.com, which is the
Campaign's parenting Web site, where traffic surged after the ads were
introduced. From the ads' launch on February 3 through February 27,
page views on the site rose more than 21 percent. Visitors to the site
doubled from an average 125,000 per month to 250,000, and the time
spent at the site by visitors rose from an average 6 minutes to 10
minutes. During the same Feb. 3-Feb. 27 period, 1, 282 parents signed
up to receive a weekly parenting tips email. Wave 5 of the Evaluation
Report will provide more details.
Question. Director Walters, the ad which tied drug money to
terrorism was very powerful. The question is, though, whether it had
any impact upon your target audience.
What were the reactions of your test audiences to this ad?
Answer. We subjected the ad concepts to an unprecedented level of
testing to assure their effectiveness with target audiences. The ads
were exposed to more than 1,300 individuals in 20 cities across the
country. Youth that participated in the testing found that the ads
significantly reduced their intent to use drugs in the future (6 of 10
youth said they would not use drugs if they knew about the link between
drugs and terror). Parents said the information gave them timely new
information to use in talking to their children about drugs.
Question. Are you able to tell us whether this particular ad had
any tangible results?
Answer. Wave 5 of the NIDA/Westat evaluation will address the
terrorism ads.
Question. Director Walters, I was chairman of this subcommittee in
1997 when your predecessor requested funding for an anti-drug national
media campaign. It was described to us as a 5-year effort which would
then be transitioned to a private sector responsibility. I have to tell
you that I was concerned that once we started to fund this campaign, it
would become a cash cow.
Director Walters, we are now being asked to fund the 6 year of this
5-year program. While we have all seen the ads and can appreciate the
effort which went into producing them, there is little information to
indicate that the $930 million we have provided so far has had a
specific impact upon drug use by the youth of this country.
Director Walters, why should we continue to fund this program?
Answer. Admittedly, the latest evaluation of the Campaign has
proved disappointing. While the ads aimed at parents are performing
quite well, the ads aimed at teens appear not to have had any
meaningful effect on their attitudes and decisions about drug use. We
are committed to addressing the problems that have been identified and
creating a more effective and robust Campaign. The President, Congress,
and the American people rightly have high expectations for the
Campaign, and it can be one of America's most important tools for
addressing the national priority of reducing youth drug use.
Therefore, we are implementing a number of changes, effective
immediately:
--Prior to being aired, all TV ads will undergo rigorous testing.
--The age target for youth ads will be shifted from 12-13 year-olds
to 14-16 year-olds.
--Sharper, more focused advertising will be created to ensure
effectiveness with youth, especially targeting the drug most
frequently abused by youth: marijuana.
--ONDCP staff will become more directly involved in the message
development process.
No initiative can break through pro-drug attitudes and reduce drug
use without broad public support and strong efforts by parents,
schools, and law enforcement. Although the evaluation has revealed
serious shortcomings, the Campaign has been bolstered by local anti-
drug coalitions across the country joining the cause and building
strong programs that protect local youth from the threat of drugs. New
advertising prepared by the Ad Council supports these efforts. Further,
a number of major corporations are joining the national effort to keep
kids off drugs by delivering the Campaign's messages and resources to
their employees and customers, adding to the chorus of parents,
educators, and youth-serving groups already involved.
It is also important to note that our hard-hitting drugs and
terrorism ads, released during the Super Bowl, were not measured by
this evaluation. These ads were among the most rigorously tested in the
Campaign's history, and we are confident that they will have a positive
impact on reducing youth drug use.
ONDCP will continue to work closely with Congress and key Campaign
partners to ensure that the Campaign plays a significant role in our
effort to achieve the President's goal of achieving a 10 percent
reduction in teenage and adult drug use over the next 2 years, and a 25
percent reduction in drug use, nationally, over the next 5 years.
With these changes, the Campaign will become much more effective
with teens, and its influence with parents will grow even stronger.
Therefore, we will continue to support the budget request of $180
million in fiscal year 2003, and will seek Congressional
reauthorization for the Media Campaign.
Question. Does it need to be reauthorized by Congress?
Answer. Yes. The Campaign is an important tool in reducing youth
drug use to meet the goals of the National Drug Control Strategy. It
should be reauthorized.
Question. If so, what are you doing to secure that reauthorization?
Answer. ONDCP is working with authorizing committees and individual
members in both houses to prepare a reauthorization measure.
government-wide drug control efforts
Question. Director Walters, the Office of National Drug Control
Policy was created to oversee and coordinate government-wide drug
control efforts. As you know, the Office of Homeland Security was
created for a similar purpose with regard to homeland security efforts.
The major difference, however, is that your office has been authorized
by Congress and your duties and responsibilities and authority clearly
outlined by statute.
I would appreciate if you could give us a thumbnail sketch of how
you carry out this coordination effort and what specific authorities
you use.
Answer. The President promulgates a National Drug Control Strategy
and a supporting budget. ONDCP coordinates implementation of the
Strategy within the Executive branch. ONDCP takes seriously its primary
statutory charge to develop national drug control policy and a
supporting budget; coordinate and oversee the implementation of that
policy and budget; and evaluate drug control programs to ensure that
our efforts are coordinated and focused on obtaining measurable
results.
ONDCP is effective in carrying out its coordination function when
it works closely with other Federal Drug Control Departments and
Agencies. ONDCP staff and senior policy officials remain in close
contact with their interagency counterparts, as well as with Congress,
state and local officials, international partners, and non-governmental
organizations. This collaboration enables ONDCP to assist in developing
a coordinated national drug control policy focused on obtaining
measurable results. Specifically, ONDCP is taking a lead role in
mobilizing our Nation's effort to achieve the President's goal of
achieving a 10 percent reduction in teenage and adult current drug use
over the next 2 years, and a 25 percent reduction in current drug use,
nationally, over the next 5 years, as reported by the National
Household Survey on Drug Abuse (NHSDA).
Question. Do you tell other Federal Departments and agencies what
they are expected to do and how much money they are expected to spend?
Answer. Upon assuming the office of Director of National Drug
Control Policy last December, I began conducting an in-depth review of
existing policies and program priorities. The first phase of that
review culminated in the National Drug Control Strategy released by
President Bush on February 12th. At this release, the President
reiterated his commitment to combat drug use and emphatically stated
that reducing drug use is at the center of our national agenda. This
Strategy places a heavy emphasis on obtaining measurable results and
providing accountability to the American people, to Congress, and to
our international partners.
ONDCP's authorization statute requires that by July 1st of each
year we issue funding guidance to Federal Drug Control Program
Departments and Agencies for the next fiscal year and for subsequent
outyears. This guidance highlights broad areas that the agencies should
focus on as they formulate their budgets in order to implement
adequately the Strategy. We rely on that guidance as the bench mark by
which we judge if agency budgets are adequate during our review of
budgets each summer and fall. Working collaboratively with the agencies
during this process assists in ensuring the adequacy of the
submissions.
Question. What happens if they disagree with you?
Answer. ONDCP's focus is to work closely with Federal Drug Control
Program Departments and Agencies when developing budgets and policy to
avoid disagreement. However, ONDCP recognizes that we possess statutory
budget certification authorities that could be employed if absolutely
necessary to ensure that budgets are adequate to implement the
President's national drug control program.
Question. Absent your statutory authority, would you be able to
effectively coordinate this government-wide effort?
Answer. Any coordinating entity is going to achieve the greatest
results when it works collaboratively with its interagency partners.
While the current statutory structure is effective for ONDCP, there are
a number of models, depending on the specifics of the agency mission
(including statutory or Executive Order), that would enable an agency
to coordinate effectively government-wide efforts.
Question. As you noted in your prepared testimony, the National
Drug Control Strategy envisions a 10 percent reduction in teenage and
adult current drug use over the next 2 years AND a 25 percent reduction
over the next 5 years. Those are admirable goals and there are several
departments and agencies which have a piece of the action.
How do you define ``current use''?
Answer. Current drug use is defined in the National Household
Survey on Drug Abuse as using an illegal drug within the last 30 days.
Question. What was the percentage of reduction in current drug use
over the past 2 years?
Answer. According to the National Household Survey on Drug Abuse
(NHSDA), in 2000, 6.3 percent of the household population aged 12 and
older (14.0 million persons) were ``current'' or past month users of an
illicit drug, a level that was unchanged from 1999. Drug use among 12-
17 year olds also remained relatively unchanged--9.8 percent in 1999
and 9.7 percent in 2000.
Trend data prior to 1999 are not directly comparable to these
numbers because a new methodology to improve and expand the survey was
implemented in 1999. However, between 1996 and 1998, past month use of
any illicit drug for the household population increased 4.6 percent for
those aged 12 and older and 15 percent for those aged 12 to 17.
We are confident that we can achieve the President's goal of
reducing drug use by 10 percent over the next 2 years, as our nation
achieved an 11 percent decrease in past month use between 1990 and 1992
for the household population aged 12 and older and a 19 percent
decrease for those aged 12-17.
Question. Five Years?
Answer. Trend data prior to 1999 are not directly comparable to
current data because a new methodology to improve and expand the survey
was implemented in 1999. However, according to the NHSDA between 1993
and 1998, past month use of any illicit drug for the household
population increased 11 percent for those aged 12 and older and 64
percent for those aged 12 to 17.
We are confident that we can achieve the President's goal of
reducing drug use by 25 percent over the next 2 years, as our nation
achieved a 42 percent decrease in past month use between 1985 and 1990
for the household population aged 12 and older and a 50 percent
decrease for those aged 12-17.
Question. What, exactly, do you plan to do to coordinate efforts to
reach these goals?
Answer. The President's National Drug Control Strategy contains
three principal objectives: stopping drug use before it starts, healing
America's drug users, and disrupting the market. Each objective is
described below in greater detail.
Stopping Drug Use Before It Starts.--Every American can play an
important role in the fight against illegal drugs through education and
community action. In homes, schools, places of worship, the workplace,
and civic and social organizations, Americans must set norms that
reaffirm the values of responsibility and good citizenship while
dismissing the notion that drug use is consistent with individual
freedom. The National Drug Control Strategy ties national leadership
with community-level action to help recreate the formula that helped
America succeed against drugs in the past.
Healing America's Drug Users.--The vast majority of the millions of
people who need drug treatment are in denial about their addiction.
Getting people into treatment--including programs that call upon the
power of faith--will require us to create a new climate of
``compassionate coercion,'' which begins with family, friends,
employers, and the community. Compassionate coercion also uses the
criminal justice system to get people into treatment. Americans must
begin to confront drug use--and therefore drug users--honestly and
directly. We must encourage those in need to enter and remain in drug
treatment.
Disrupting the Market.--The demand for drugs tends to vary with
their price and availability. Disrupting this market relationship
provides policymakers with a clear lever to reduce use. Domestically,
attacking the economic basis of the drug trade involves cooperative,
combined efforts of Federal, State, and local law enforcement.
Question. If those goals are not met, who is to blame?
Answer. In announcing the release of the National Drug Control
Strategy this February, President Bush stated the Administration's view
that we need to have clear goals that can be measured, accepted
responsibility for achieving them, and explained how we would meet
them. The President's statement is worth quoting in this context: ``I
told John [Walters] when he signed on, I'm the kind of fellow that
likes to say, what are the results? I like to know, actually, are we
making a difference? And so here's our goal, here's the goal by which
we'll be measured--here's the goal which I'll be measured first, and
then John will definitely be measured if I'm measured. I want to see a
10 percent reduction in teenage and adult drug use over the next 2
years, and a 25 percent reduction in drug use, nationally, over the
next 5 years. Those are our goals. We understand we can't do it alone
here in Washington. And that's why our approach is a community-based
approach. That's why we recognize the true strength of the country is
our people. And we know there's thousands of parents, thousands of
educators, thousands of community activists, law enforcement officials,
all anxious to come together to achieve this national strategy.''
ctac
Question. One of my favorite programs under your jurisdiction is
the Counterdrug Technology Assessment Center. I've seen first-hand how
excited State and local law enforcement offices are about additional
equipment from the Federal Government to make their jobs easier. I
commend you, Director Walters, for requesting money to continue this
program. And, as an aside, Mr. Chairman, we will be able to see some of
this technology at the law enforcement tech display you have scheduled
for April 30.
The President's budget request includes $40 million for CTAC, of
which $18 million is for research and development. That amount is
divided between supply reduction--$4 million--and demand reduction--$14
million.
What technology is currently under development for supply
reduction?
Answer. CTAC's Research and Development (R&D) efforts concentrate
on high priority scientific and technological needs of local, State,
and Federal law enforcement agencies.
Nonintrusive Inspection.--R&D projects for nonintrusive inspection
capabilities are in the areas of chemical based sensors, selective
breeding and olfactory studies of detector dogs, methods to make it
harder to use anhydrous ammonia in the manufacture of methamphetamine,
and a portable capability to detect drugs and contraband in shipboard
liquid filled tanks.
Tactical Technologies.--R&D projects for tactical technologies
include advanced concepts to enhance capabilities in the areas of
miniaturized covert tagging and tracking devices, case management
tools, improved communications systems to share data across platforms,
and communications interoperability technologies. Successful R&D
projects become candidates for state and local agencies through the
Technology Transfer Program (TTP).
Test and Evaluation Support.--Technology testbeds have been
established to develop a central architecture for all systems and
equipment to work together. Items available under the TTP are being
evaluated at the testbed located at the Navy's SPAWAR Systems Center
located in San Diego, CA. Technology applications also are tested in
several operational state and local settings before they are added to
the TTP.
Question. For demand reduction?
Answer. CTAC's overall goal for R&D relating to demand reduction is
to put the capability in place to generate and share neuroscientific
data among those research scientists and to focus their research
efforts on the prevention and treatment of drug abuse. To accelerate
progress, each team will be linked to a central backbone/clearinghouse
so that images, data and research findings can be shared. In addition
CTAC funding stimulates technological advancements to support
neuroscience, specifically to improve the performance characteristics
of systems produced for imaging, to increase our understanding of the
genetic and environmental risk and protective factors to prevent drug
use.
Advanced Brain Imaging Technology.--In conjunction with NIDA,
leading academic and addiction research institutions receive funding to
support medical instrumentation and facilities for research teams to
focus their work on substance abuse prevention and treatment. The
leading academic and addiction research institutions receiving this
equipment have all agreed to concentrate on drug abuse research and
train other professionals who will continue to advance our state of
knowledge and to share their findings with other research teams across
the country.
Data collection systems.--CTAC funding is supporting an assessment
of the effectiveness of drug treatment through the Drug Evaluation
Network System (DENS). The database rich in detail on the profiles of
2,000 patients enrolled in 21 treatment programs and an additional 29
randomly selected treatment programs will provide a nationally
representative sample for research and analysis. The new sites also
support the Random Access Monitoring of Narcotics Abusers (RAMONA) to
allow the size, characteristics, and geographic distribution of the
``hardcore'' drug using population in the U.S. to be monitored over
time.
Question. Of the types of equipment currently available for
transfer, please give us some examples of some that fall into each of
these two categories.
Answer. Congress created the TTP to provide technologies developed
with Federal funding directly to state and local law enforcement
agencies that may otherwise be unable to benefit from the developments
due to limited budgets or lack of technological expertise. Therefore,
demand reduction technologies are not available through the TTP.
Some supply reduction oriented R&D projects will provide improved
capabilities or additional options to systems currently in the TTP:
--The wireless communications interoperability system was
demonstrated in Denver in August 2001. This system provides a
cost-effective option to enable the smaller state and local
agencies to continue to use their existing radios and still be
able to communicate with other agencies using different
communications systems.
--Additional functionality, called CRYSTAL, will be available for the
AG-SMS tracking system currently in the TTP. This system links
criminal and background information derived from drug-related
investigations to geo-positional information in real-time.
CRYSTAL is being tested under operational conditions with the
Rockland County Narcotics Task Force (NY).
Other R&D projects will be completed and considered for transition
to the TTP
--Solutions have been developed to the problem of intercepting
cellular phones operated in ``Push to Talk'' radio mode.
Testing is being conducted under operational conditions with
the Rockland County Narcotics Task Force and Westchester
District Attorney's Office (NY), the Baltimore Police
Department (MD), U.S Customs Service in El Paso (TX), and DEA
Technology Development Unit in Lorton (VA).
Question. The largest part of the CTAC budget is for the technology
transfer program--$22 million. I understand from staff that 3,255
pieces of equipment have been distributed to 2,533 State and local
agencies in the past 4 years.
What kind of technology is provided to state and local agencies?
Answer. There are 22 distinct technologies available under the
program, with varying degrees of complexity and cost that allow state
and local law enforcement entities of all sizes to take advantage of
this program. The following are the available technologies: Air-Ground
Surveillance Management System (AG-SMS); AIRNET32; Audio Surveillance
System; Advanced Vehicle Tracking System (AVTS); Body Worn; Borderline
System; Cellular-Based Surveillance System (CBSS); Drugwipes; LINCOLN
Wiretap System; Mini-Buster Contraband Detector; Multimedia Processing
System (MPS); Night Vision Kit; Pen-Link Analysis Software; PicoDAC;
R3000 Navigator Telephone Surveillance System; Small Look; Suspect
Pointer Index Network (SPIN); Thermal Imager--Handheld; Thermal
Imager--Vehicle; Video Stabilization System; VisuaLinks Software; and
Wireless Communications Interoperability.
Question. What is the most expensive equipment, and how does CTAC
determine who gets it?
Answer. The wireless communications interoperability system is the
most expensive item available under the TTP. These systems cost from
$250,000 to $750,000, depending on the coverage required (citywide or
statewide).
Concerning how decisions are made on each application, Fort
Huachuca, CTAC's contracting agent, receives the applications from the
requesting entity and distributes them to teams of regional experts who
evaluate the choices of the entities to make certain that they are
appropriate. Priority is placed on a first-come first-served basis each
fiscal year for each item contained in the program, with remainder
carried over to next fiscal year.
Question. What equipment is used the most?
Answer. Due to the large volume of requests and the affordability/
utility of the technologies to any state or local law enforcement
entity, the TTP provides more thermal imagers and mini-busters than any
other technology.
hidta
Question. Director Walters, I am also interested in the High
Intensity Drug Trafficking Areas program--called HIDTA. I am very
familiar with this program and have spent time talking with folks at
the Rocky Mountain HIDTA. The concept of a Federal/State/local
partnership has worked extremely well to increase drug-related
investigations and decrease the natural tension between these entities.
Last year, Congress provided $20 million more than requested for
the HIDTA program. Although we did not specify how you were to spend
the money, we expected that each HIDTA program would provide
justification for some additional funding and that ONDCP would consider
applications for new HIDTAs.
The fiscal year 2003 budget does not request the continuation of
that additional $20 million. Given that there is no guarantee that
Congress will again provide more than the budget request, distribution
of those fiscal year 2002 funds becomes more difficult since the
funding may not continue.
What is the status of that $20 million?
Answer. The National Guard (NG) is experiencing a funding situation
in fiscal year 2002 that is causing NG members to be redirected away
from counterdrug missions. A number of Senators and Representatives
have written the Administration asking for assistance. Having obtained
the concurrence of the DOD, ONDCP has transferred $5 million to the DOD
for NG counterdrug enforcement efforts. This is a high priority to
maintain current operational levels for the NG; it will not affect
current funding for existing HIDTAs.
ONDCP prioritized the remaining $15 million based on program
priorities (the allocation is as follows).
--Provide additional funding to bring the HIDTAs designated in 2001
(Nevada and Northern Florida) to $2.0 million. This funding
will enable the HIDTAs to make incremental progress on HIDTA
Program priorities related to combating their regional threat,
including intelligence/information sharing, training, and
communications interoperability.
--Provide necessary funding to support the designation of additional
counties to existing HIDTAs. The following HIDTAs submitted
requests for discretionary funding to support the designation
of additional counties: Gulf Coast, Houston, Milwaukee, New
England, Northwest, Oregon, Rocky Mountain, and Southeast
Michigan. ONDCP currently is leading an interagency review to
determine which, if any, of these requests meet the statutory
criteria for designation. ONDCP anticipates a decision on
additional designations by July.
--Enhance several HIDTA intelligence centers.
--Enhance existing and fund new HIDTA training, community based
prevention, and law enforcement (including money laundering and
General Counterdrug Intelligence Plan) initiatives.
--Provide $7.5 million in funding to a new initiative: the HIDTA
National Priority Targeting Project. This program will make
funds available to HIDTA initiatives that develop and conduct
investigations against major drug trafficking organizations
affiliated with National Priority Targets and meet the criteria
outlined within this Project. HIDTA funds will be used to
supplement, not supplant existing agency/program budgets.
Question. What instructions have been given to the individual HIDTA
programs with regard to applying for those funds?
Answer. The National HIDTA Program Office informed the HIDTAs of
the availability of the discretionary funding and the need to submit
supplemental budget requests if they wanted to be eligible for funding.
The individual HIDTAs are aware that the $20 million in fiscal year
2002 is supplemental funding that has not been requested for fiscal
year 2003.
Question. A recent Montana newspaper article stated that the Rocky
Mountain HIDTA will be expanded to include five counties in Montana,
and that each of these counties will receive $100,000 a year to fight
methamphetamine use and production.
Is this report accurate?
Answer. ONDCP is reviewing requests for additional counties to be
designated as part of existing HIDTAs, including a request to designate
several counties in Montana as part of the Rocky Mountain HIDTA.
Question. If so, will the Rocky Mountain HIDTA be provided
additional funds for this expansion?
Answer. ONDCP has set aside $1.55 million to provide necessary
funding to support the designation of additional counties to existing
HIDTAs. The following HIDTAs submitted requests for discretionary
funding to support the designation of additional counties: Gulf Coast,
Houston, Milwaukee, New England, Northwest, Oregon, Rocky Mountain, and
Southeast Michigan. ONDCP currently is leading an interagency review to
determine which, if any, of these requests meet the statutory criteria
for designation. ONDCP anticipates a decision on additional
designations by July.
Question. If additional funds are not provided, how will the
expansion be funded?
Answer. Whenever additional counties are designated as part of an
existing HIDTA, there are two options for funding: (1) additional
funding to the HIDTA or (2) the existing HIDTA reallocates from within
existing resources.
Question. Funding was provided last year to conduct outside audits
of the various HIDTA programs. I understand that there have been 13
full-scale audits so far, and that more are planned.
What were the results of these audits?
Answer. ONDCP contracted with KPMG to perform external financial
audits on the HIDTA grantees and Federal agencies. Thus far, KPMG has
conducted 13 full-scope audits and 16 limited-scope reviews. With
regard to the 13 full-scope audits, the HIDTAs grantees received all
unqualified ``clean'' opinions. With regard to the limited-scope
audits, the HIDTA grantees and Federal agencies received no major
findings. In addition to issuing the final audit reports, KPMG will
prepare a Best Practices Report which we will share will all HIDTAs.
The Best Practices Report will summarize the recommendations on how to
improve grantees' internal controls and compliance requirements.
Is the taxpayer money being spent wisely?
Answer. Based on the audit results, we are confident that proper
financial controls are in place. Implementation of the auditing
recommendations will assure us that such confidence can continue.
Question. What types of ``Best Practices'' have been discovered,
and when will they be shared with all of the HIDTA programs?
Answer. HIDTA Program Policy currently directs both internal and
external reviews of the individual HIDTAs. These reviews, when coupled
with ONDCP directed external audits ensure that the HIDTAs are operated
in accordance with applicable directives. They also result in the
identification of ``best practices'' that can be shared with all. As a
result of this interagency policy review, a white paper will be
published that includes information on the HIDTA Program. The Best
Practices Report will summarize the recommendations on how to improve
grantees' internal controls and compliance requirements. We expect to
receive this Best Practices Report by the end of May. Once published,
ONDCP would be pleased to provide that white paper to Congress.
Question. I also understand that ONDCP has begun on-site visits to
the various HIDTA programs to help strengthen management, and that you
plan to share information on best practices.
How do these on-site visits differ from the audits you mentioned
before?
Answer. The KPMG audits are financial audits of the HIDTA grantees
and participating Federal agencies. Internally, ONDCP has begun a
programmatic review process that includes on-site visits to HIDTAs by
ONDCP staff, as well as staff from the Departments of Justice and
Treasury. The on-site reviews help strengthen management at the
individual HIDTAs and at ONDCP. To date, we have reviewed 13 HIDTAs and
we plan to conduct an additional 5 to 6 program reviews in fiscal year
2002 and an additional 5 to 6 in fiscal year 2003. The program reviews
have proven beneficial to the HIDTAs and ONDCP as best practices are
identified and shared.
Question. What exactly are you looking for?
Answer. The HIDTA Program Review Process addresses the following
areas with regard to the individual HIDTAs:
--Support of the National Drug Control Strategy by the strategies and
initiatives of the individual HIDTAs;
--Effectiveness of the HIDTAs' efforts in accomplishing their
missions;
--Efficiency in the use of HIDTA resources;
--Accountability in the use of HIDTA resources; and
--Compliance with ONDCP/HIDTA policies, program guidance, and
directives.
The review process is conducted in three phases. Phase 1 consists
of reviewing the Annual Report and the Strategy, Initiatives & Budget
submitted by each HIDTA. Phase 2 consists of Internal Program Reviews
conducted by the HIDTAs, with results forwarded to the National HIDTA
Program Office. Phase 3 consists of On-Site Program Reviews conducted
at the HIDTAs, coordinated by the National HIDTA Program Office.
Question. Can you give us some examples of the best practices you
have found?
Answer. Best practices have been identified in the following areas:
--Executive Board Involvement/Subcommittees;
--HIDTA Memorandums of Understanding (MOUs) and Standard Operational
Plans/Policies (SOPs);
--Property Accountability Systems;
--Fiscal Tracking Methods;
--HIDTA Facility Layouts; and
--Intelligence Center Locations/Organization.
Best practices are shared with HIDTAs during on-sites visits both
informally and formally via recommendations, with recently designated
HIDTAs, and at HIDTA Directors meetings. At the conclusion of this on-
site review cycle (June 2002), best practices observed during the first
14 on-site reviews will be cataloged and distributed.
the united states anti-doping agency
Question. Director Walters, last night it was my privilege to
attend a dinner honoring the U.S. participants at the 2002 Winter
Olympic Games which were held in Utah. As you know, I have been a
strong supporter of the Games, and of the United States Anti-Doping
Agency.
USADA, as it is called, was created to oversee testing, education,
research, and adjudication on behalf of our country's athletes
competing in international sports events. They reach out to athletes to
educate them on health issues and the ethics of competing fairly in
sports.
The fiscal year 2003 budget requests only $1 million for this
important and valuable function. This is significantly less than what
has been provided in the past.
It is my understanding that USADA needs more than last year, not
less, to continue their work and expand their message to athletes at
the earliest stages of their involvement in sports.
Why was the funding requested for this program significantly
reduced from fiscal year 2002?
Answer. Now that the Salt Lake Olympic and Paralympic Games are
complete, less funding is required. The $1 million requested will
support research and administrative initiatives, educational programs,
and efforts to inform athletes of the rules governing the use of
performance enhancing substances, and the ethics of doping and its
harmful health effects.
general questions
Question. How many Full-Time Equivalent positions are currently on
board at ONDCP?
Answer. As of May 30th, we have 111 FTE on-board.
Question. When do you expect to be fully staffed?
Answer. We expect to be fully-staffed by the end of July.
drug-free communities support program
Question. The Drug-Free Communities Act established a cap on the
administrative costs of that program. The cap was recently increased to
6 percent as part of the Drug-Free Communities Act reauthorization.
Is this sufficient?
Answer. The new 6 percent ($3.6M) administrative cap is sufficient
to ensure effective management of the current and expanded program.
ONDCP signed a Memorandum of Understanding with the Department of
Justice, Office of Juvenile Justice and Delinquency Prevention (OJJDP)
in December for them to continue administering the grant award process.
Question. How are you allocating the six percent?
Answer. Of the total $60.0 million request, only $3.6 million will
support ``administrative costs.'' These activities include grants
management and program evaluation, and program administration. We
anticipate allocating $3.28 million to OJJDP for grants management and
evaluation, up to $120,000 for grant management costs associated with
the National Coalition Institute, and $200,000 to support the DFCSP
Program Administrator and the Advisory Commission on Drug Free
Communities.
______
Questions Submitted by Senator Mike DeWine
Question. How will ONDCP work with the Department of Education to
ensure that the uniform management information and reporting system
required by the Safe and Drug Free Schools and Communities program can
determine which school based prevention programs are effective?
Answer. ONDCP began a policy and program review in March 2002, in
which the Department of Education has been actively involved. The
management information and reporting system is being addressed as part
of that review. To date, the Department's efforts to get states to
base-funding decisions on objective data and to implement research-
based programs have met with modest success. The Department reports
that states and localities have increasingly emphasized research-based
programs in response to the ``SDFSCA Principles of Effectiveness,''
which were incorporated into program regulations in 1998. However, only
baseline data about program implementation are available to date.
To move the program toward the outcome data needed to evaluate
program effectiveness, ONDCP is supporting the Department's formal
assessment of the extent and quality of the data collected at the local
level regarding drug use and violence. The anticipated next step will
be a large scale evaluation of SDFSC programs, based on student outcome
data. In addition, ONDCP is working with the Department to incorporate
uniform outcome measures into program reporting requirements.
Question. Given ONDCP's overall coordinating role for drug policy,
how will your office ensure that the Safe and Drug Free Schools
Advisory Committee effectively administers the program?
Answer. ONDCP began a policy and program review in March 2002, in
which the Department of Education has been actively involved. The
Advisory Committee is being addressed as part of that review and ONDCP
anticipates that it will be operational by the end of the summer. The
Department views the Committee as an opportunity to enhance interagency
and intergovernmental collaboration.
ONDCP will use its role as a key member of the Committee to ensure
that the members are informed of opportunities for needed improvement
in a number of significant areas, including: focusing the program on
research-based approaches; using specific outcome indicators as the
basis for program evaluation; assessing the quality of data at local
level; preparing for a comprehensive evaluation of student outcome data
on youth drug use and violence; incorporating student assistance as
important prevention and intervention component of the program; and
incorporating school drug testing as a component of deterrence in
context of comprehensive prevention.
SUBCOMMITTEE RECESS
Senator Dorgan. We look forward to continuing to work with
you.
This hearing is recessed.
Mr. Walters. Thank you, Senator.
[Whereupon, at 2:46 p.m., Wednesday, April 24, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]
TREASURY AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL YEAR 2003
----------
WEDNESDAY, MAY 15, 2002
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 2:09 p.m., in room SD-192, Dirksen
Senate Office Building, Hon. Byron L. Dorgan (chairman)
presiding.
Present: Senators Dorgan and Campbell.
DEPARTMENT OF THE TREASURY
Internal Revenue Service
STATEMENT OF CHARLES O. ROSSOTTI, COMMISSIONER
OPENING REMARKS
Senator Dorgan. This hearing will come to order. This is
the Subcommittee on the Appropriations Committee dealing with
Treasury and General Government.
This afternoon, we welcome Commissioner Rossotti for what I
understand may be your last appearance before this
Appropriations Subcommittee inasmuch as your term expires later
this year. I think President Bush would be wise to appoint you
to another term, but I understand that you have indicated that
you are going back to the private sector. Let me thank you for
the service that you have given this country.
You took over the Internal Revenue Service when its
reputation was at one of its lowest ebbs. There had been
investigatory hearings by Congress on a range of issues and you
undertook the responsibility to try to bring the Service into
the 21st century. I think, although we are not there yet, you
should be enormously proud of what you have accomplished so
far. If you do leave at the end of this year, Commissioner, you
will have left your successor with a stable foundation upon
which he or she may build.
I want to thank you also on a personal note from the
standpoint of North Dakota. As you know, I have been working
with you and have been concerned about a couple of things. One
is the issue of taxpayer assistance, which is easier to get in
urban areas and harder to get in rural areas and you have put
together a model program in North Dakota extending taxpayer
assistance to rural areas, for which I am grateful.
And also, you have partnered with companies in North
Dakota, particularly one company, to do processing of
information services, which I think is a terrific thing to do.
Rather than have centralized processing in the major cities,
you are doing it around the country and that is beneficial to a
range of interests, especially in North Dakota. The contracts
that you have had there have benefitted Native Americans, have
substantially benefitted people who are coming off the welfare
programs, and so I want to thank you for what you are doing
there.
I think that we are going to have a vote very soon, and
what I would like to do is try to make sure that we get this
hearing in and have the opportunity to ask some questions, so I
think I will recognize you, Commissioner, for your statement.
Your entire statement will be made a part of the permanent
record and you may summarize your statement. I am told that
some of my colleagues will be here. We are having a vote on the
floor right now. I just voted and rushed over. Why do you not
begin, and if and when my colleagues show up, we will invite
them to ask questions, as well.
PREPARED STATEMENT
But again, Commissioner Rossotti, let me understate how
much I appreciate your service. You have been the first of the
professional tax administrators to be appointed to the IRS for
a term certain and I think it is the right thing to do. It is a
good way to deal with the head of our taxing agency and I think
your term of service has been an extraordinary one.
[The statement follows:]
Prepared Statement of Senator Byron L. Dorgan
Good Afternoon, Mr. Director. We welcome your appearance today to
discuss the President's fiscal year 2003 budget request for the Office
of Management and Budget. You may be getting tired of testifying before
North Dakotans, but we appreciate your coming.
This subcommittee is responsible for funding the operations of the
Department of the Treasury and all of its agencies--such as the IRS and
the Customs Service. This subcommittee is also responsible for funding
the operation of your agency--the Office of Management and Budget--as
well as all the other component agencies which make up the Executive
Office of the President. It is also in this subcommittee's bill that we
carry provisions affecting the operations of all Federal agencies. We
will focus on some of those proposals today.
It has been a few years since a Budget Director last appeared
before this subcommittee. That is why we appreciate your willingness to
appear today.
Your task of assembling and producing the budget for the Federal
government is not a task I envy or one to which I aspire. The
government is an enormous entity to watch over and one can see how some
smaller tasks might fall through the cracks. But when this happens, it
gives one pause.
For instance, this budget not only proposes to make a sweeping
change in how the government funds a significant portion of the Federal
retirement system, but it assumes Congressional approval of the
proposal in the budget numbers submitted for each agency. Ordinarily,
this type of change should be submitted to the appropriate authorizing
committees for their consideration and action--then be taken up by the
appropriators. But that is not the case this year when it comes to your
proposal for treatment of retirement accruals. Nor is it the case for
how you want the administration of the Federal worker's compensation
account treated. The authorizers have the expertise on these matters.
These proposals should have been submitted to them for their
consideration and action, not to us. This troubles me.
And your office appears to have had some difficulty getting the
word out to all the agencies about these new proposals. During staff
briefings with each of the more than 30 agencies funded in this bill,
we learned that not every agency was aware of the new treatment of
either the retirement accruals or the worker's compensation proposal or
both. Some of them also did not get the word from your office about the
proposed pay raise. Most were aware that pay disparity was proposed in
the budget, but instead of planning on a 2.6 percent pay raise, some
budgeted for a 3.9 percent pay increase or some other number in
between. Their numbers did not add up, but were submitted as fact on
February 4 when the budget was delivered.
These might appear to be little problems, but to many of the
smaller agencies we fund here, they make a big difference. That is why
I was even more disturbed by some of the ``fact'' sheets your office
produced and delivered to the media when the budget was released.
In essence, your numbers did not add up. Your office claimed that
the Treasury agencies were receiving big increases compared to last
year when in fact most budgets dropped when actual dollars are
compared. For instance, the document your people delivered trumpeted an
overall 5.4 percent increase in funding for the Customs Service between
fiscal year 2002 and fiscal year 2003 with an 18.4 percent increase for
the salaries and expenses account alone. But when real dollars are
compared, Customs funding for fiscal year 2003 is 9.1 percent below
fiscal year 2002 levels. The same is true for the Federal Law
Enforcement Training Center--which you claimed was receiving a 4.9
percent increase, when in fact it faces a 14.6 percent decrease.
The list goes on. Perhaps many of these agencies do not need huge
budget increases. Perhaps cuts are justified. Perhaps Customs should
have a year to pause and hire and deploy the people it needs at the
borders before we require additional hiring.
But the fact remains that all of these indicators give me reason
for concern.
--Asking appropriators to carry sweeping authorizing language is
putting the cart before the horse.
--Not getting specific budget direction to every Federal agency is
more than careless.
--And playing semantic games with the numbers casts a larger shadow
on the veracity of the budget requests.
--Individually, they can be explained perhaps. But taken together
they are very troubling. This makes it even harder to support
requests which would further reduce the amount of information
already being provided to the Congress.
But we will dig into these issues during the questioning rounds. We
welcome you here this afternoon, but first let me turn to my Ranking
Member, Senator Campbell, for any statement he would like to make.
Senator Dorgan. Commissioner Rossotti, you may proceed.
STATEMENT OF CHARLES ROSSOTTI
Mr. Rossotti. Thank you very much, Mr. Chairman, and let me
also thank you for the support that you have given me and the
agency, also for your comments, especially since I know that
you were head of a agency yourself. I know that you really
understand some of the challenges and also some of the things
that we should be doing, so I really do appreciate your
comments.
I do think that we are improving our performance in the
agency across the board and we are trying to do that by
leveraging through better management and fundamental
reengineering the resources that we have as opposed to just
simply always asking for massive amounts of new resources. That
is the theme that we are pursuing in this year's budget.
Just to note a couple of things that, I think, show some of
the progress we have made, we have certain surveys that track
the public's view of our agency. There are two of them plotted
on this chart. One of them goes back to the early 1980s by the
Roper Starch organization, and as you can see, as you noted
yourself, Mr. Chairman, our rating as viewed by the public
really reached an unfortunate low point in the mid-1990s, and
as you can also see, it has rebounded quite a bit. It is also
shown in the red line University of Michigan survey.
PUBLIC RATING OF IRS
I do not want to put too much emphasis on surveys, but I do
think that the public's rating of how the IRS is doing its job
is important for the health of the tax system. I do not think
it is acceptable for the government agency that affects more
Americans than any other agency to also be the lowest rated. So
that was the mandate that we were given by RRA--one of them--
and I think that we are starting to deliver on that, although
we certainly have a way to go.
In terms of internal management, there was also a report
that just came out today called the Federal Performance Project
that was sponsored by George Washington University and
Government Executive magazine. They do this elaborate analysis
of all dimensions of management and we were just given a rating
of B-minus, which is certainly not something we are satisfied
with, except for the fact that the last time they did it, we
were down in a C or C-minus, so I think the trend is coming up.
There are a lot of things that are needed to be done to
continue that trend. I think that one of them that helps us
both on productivity and on customer satisfaction is electronic
filing, electronic tax administration. We had a very nice
result this year with 46 million returns filed electronically.
We have a legislative proposal in the President's budget to
help us move forward even more on that, which would extend the
filing date for those who pay and file electronically until
April 30. That has been passed by the House, and when it gets
to the Senate, we hope that the Senate will give that favorable
consideration.
FISCAL YEAR 2003 BUDGET REQUEST
Now, turning to the budget request itself for 2003, it is
for $10.4 billion and 101,000 full-time equivalent personnel,
which is a $482 million increase. I want to point out this
chart, which I think you also have copies of, shows what we are
trying to do here, and I think we are succeeding, to deliver
more bang for the buck. A simple way to look at that is that we
are proposing that we would fund $259 million worth of
programmatic increases, that is, direct tax administration for
customer service and compliance. Most of that would be funded
through internal improvement efficiencies and reallocation,
such as electronic filing and other results of our
modernization program, such that about 76 percent of the total
programmatic increase would be self-funded and only requiring a
quarter of that, roughly, in net appropriations from the
Congress.
I do need to point out, Mr. Chairman, that this approach
will only work if the funds are actually appropriated for
mandated items, such as pay raises and other legislative items
which, frankly, has been a bit of a problem in the past.
The other big part--really, the only other part of our
request that is a programmatic increase is $58 million for the
Business Systems Modernization Program, which in turn is the
foundation for our future productivity increases, and I want to
turn briefly to that program. We have in the last year begun to
graduate from the planning phase into the delivery phase.
As shown in the chart there in the green blocks, it shows
that in 2001 and 2002, there are three critical building blocks
that we plan to put in place. One of them we already have,
which is our new telephone system to handle customer inquiries
coming in by the telephone, which is our biggest single source
of requests from taxpayers.
MODERNIZATION AND SECURITY
This year, we plan to do two other big things. One is to
move, for the first time, some of the records of taxpayers out
of a 1960s tape-based system into a modern, reliable database,
and the second one is to establish a security system that will
reliably allow us to communicate and access data internally and
externally.
These things are very, very important and fundamental
building blocks of the modernization program. Getting them in,
getting these initial deliveries in is difficult and it is
complex and it is risky, but it is also, I think, without
question, something that when we succeed, will leave lasting
value for the whole tax system. The lack of these building
blocks has really been one of the fundamental millstones around
the neck, if you will, of the IRS for many years.
We are also addressing issues that have been raised by
ourselves, as well as by GAO, in our capacity to manage this
program going forward. There are weaknesses that have been
identified in our ability to reliably predict schedules and to
manage some of the configuration control as we put more and
more systems into production. We are giving equal attention to
fixing those as to delivering the specific deliverables.
So to just sum it up, we think the 2003 budget request by
the President does reflect our twin goals of delivering
improved performance in the near term while modernizing to
improve further in the future. We are attempting to do that to
the maximum extent possible through internal reallocations and
efficiency improvements and only requesting from the Congress
what we believe is absolutely necessary.
So that sums up our request, Mr. Chairman, and, of course,
I am happy to answer your questions.
Senator Dorgan. Commissioner Rossotti, thank you very much.
We have been joined by my colleague, Senator Campbell.
Senator Campbell, do you have an opening statement?
STATEMENT OF SENATOR BEN NIGHTHORSE CAMPBELL
Senator Campbell. I think, with your permission, I will
just put my complete statement in the record since I arrived
late, Mr. Chairman. I apologize for that. I was right over
there on time to vote. How did you get here so quickly? You
must have taken a fast train. But anyway, I do apologize for
missing part of the Commissioner's statement.
Let me just say one thing, and I am reading from the
Government Executive magazine honoring your service as
Commissioner, since you will soon be going back to private
life. The article stated that, ``He,'' meaning Commissioner
Rossotti, ``did not take the job for the vain glorious rush of
policy making at higher levels but rather for the challenge of
reforming the internal structure and management of an important
institution in our government.'' I think that was really praise
worthy. I think they hit it right on the button. When you do
retire, you can retire knowing you did a job well done.
I only heard you mention just in passing some group that
gave you the measurement of a B-minus. Well, the college I was
in, many of us would have aspired to be a B-minus.
PREPARED STATEMENT
So, do not worry about the B-minus. I think that is
considerably up from where the IRS was when you took the job,
so thank you. Thank you, Mr. Chairman.
Senator Dorgan. Senator Campbell, thank you very much.
[The statement follows:]
Prepared Statement of Senator Ben Nighthorse Campbell
Thank you Chairman Dorgan. Good afternoon, and again, Welcome
Commissioner Rossotti. My statement will be Brief. Commissioner
Rossotti, it is a pleasure to have you appear before the Committee to
express the needs, concerns and accomplishments of the Internal Revenue
Service (IRS).
Since your 5 year tenure will end later this year, I would like to
thank you for doing a great job in reorganizing the IRS. The IRS has
never been an agency with a lot of friends; in fact, the IRS may have
been without any friends at all. But, as you move on to greener
pastures, you will carry with you the accomplishments of:
--Reorganizing the IRS by eliminating nearly 4,000 Jobs without a
reduction-in-force;
--Receiving an ``Unqualified'' opinion on the financial statements
for both the revenue and administrative accounts from the GAO
for the past 2 year;
--Aligning the IRS along business, rather than geographical units;
--Business system modernization is moving from the planning to
implementation stages;
--Transitioning of the old taxpayer records to a modern database;
--Improving customer service and compliance; and
--Providing better service for innocent spouse relief.
There was a recent article in the ``Government Executive Magazine''
honoring your service as Commissioner. The article stated that ``he did
not take the job for the vainglorious rush of policy-making at high
levels, but rather for the challenge of reforming the internal
structure and management of an important institution in our
Government''. That was truly a praiseworthy article and I agree with
the interpretation of your commitment and for that, I commend you for a
job well done.
The IRS is requesting $10.418 billion which is an increase of 4.1
percent over fiscal year 2002. Of that amount, $1.676 billion is for
information systems, $450 million for business systems modernization,
$3.988 billion for tax law enforcement, $4.150 billion for processing,
assistance and management and $154 million for the earned income tax
credit compliance initiative.
All of these accounts are really big ticket items and we understand
the need for the IRS to be able to improve the timeliness and accuracy
of IRS'S ability to interact with taxpayers.
In the 2001 Tax filing season, there was noticeable improvement. A
recent news release stated that the 2002 tax filing season was one for
the record books. If these reports are correct then the IRS is moving
forward in the right direction even though there is still a lot to be
done.
The final analysis is that taxpayers should always receive
courteous, accurate and expeditious service and I will continue to lend
you my support.
Thank you Mr. Chairman.
FEDERAL PAY RAISE
Senator Dorgan. Mr. Commissioner, the President's budget
proposes a 2.6 percent pay adjustment for Federal civilian
employees and a 4.1 percent pay adjustment for those in the
military. There will be a discussion here in Congress about
whether to provide pay parity for civilian employees in the
military. If the Congress were to choose to provide Federal
civilian employees the same pay increase or pay raise that the
military were provided, what would that cost the Internal
Revenue Service?
Mr. Rossotti. We are estimating it would cost slightly in
excess of $70 million, which is a very substantial amount for
us. If you look at it compared to what I just showed you on the
chart, it basically reverses most of the programmatic increases
we were hoping to gain.
So I would say--and, of course, last year, we had a 1
percent difference, which was $40 million, and, of course, that
continues into the following year. So together, if you add
those two together, you are up over $110, $115 million.
My recommendation, or, I guess it could be a plea to the
Congress would be, certainly, it is in the Congress's
prerogative to decide what the pay raise should be, but in an
agency like the IRS, which is heavily dependent upon personnel,
if the pay is made higher, that the Congress would appropriate
the funding for it. Without that, what we are doing is really
just undermining the rest of the program.
ABUSIVE TAX SHELTERS
Senator Dorgan. Commissioner Rossotti, there are more and
more stories that appear in our papers these days about abusive
tax shelters and about tax advisors who tell corporations that
they can go right up to the line, in some cases too close to
the line, with respect to sheltering their income. I just came
from a 4-hour hearing on the Enron Corporation. The Enron
Corporation, I believe, was running something like 600
subsidiaries out of a single post office box in the Cayman
Islands.
So how prepared is the Internal Revenue Service to attack
these abusive tax shelters? Do you think you have a ghost of a
chance to make a difference there? Are you dealing with it
aggressively? Can you tell me about that?
Mr. Rossotti. Yes, Mr. Chairman. First of all, let me just
say that I think we have better than a ghost of a chance. I
really think that we are very clearly focused on this. There
are a variety of different kinds of tax avoidance devices. The
kind that you were referring to tend to be used mainly by large
corporations and a few----
Senator Dorgan. They tend to be what?
Mr. Rossotti. They tend to be used by mainly large
corporations and very wealthy individuals. I call them the
designer tax shelters. There are other kinds of tax avoidance
devices for middle-income and other people, such as using
credit cards to hide income and offshore accounts. We have, at
the present time, I think, very clear strategies and focus on
both of these kinds of devices.
With respect to the corporate-type shelters, the key thing,
I believe, that has been a problem for us up until now. We are
starting to make some progress on getting disclosure on these
shelters. We had a regulation----
Senator Dorgan. What do you mean by getting disclosure?
Mr. Rossotti. Well, finding out about them, finding out who
is using them, which taxpayers are using them. They are complex
and they can be very--corporate tax returns are very huge and
sometimes we, just because of the time it takes to audit these
returns, do not get--we are not as current as we would like to
be on which years we are auditing. We can simply miss or too
much time can go by before we find out which corporations are
using which shelters, and that hurts us in terms of reversing
improper use of shelters on the taxpayers' past returns. It
also causes a delay in shutting these down for the future.
I think we are making some real progress on that. We had an
initial regulation that was issued which was not as well
complied with as we would have liked. Recently, we had a
disclosure initiative, and I can report to you that we have
close to 1,000 taxpayers now that have come forward, corporate
taxpayers, some individuals that have disclosed these returns.
Treasury and the IRS worked together to come up with a
proposal, which was outlined about a month ago, to require even
more disclosure. Some of those would require legislation. Some
of them can be done administratively.
With disclosure, which we are now starting to get, and the
Treasury's proposals implemented even more successfully, we
will do two things. One is we will go back to the taxpayers
that have used these in the past and require them to pay to the
extent that they are verified to be actually abusive shelters,
and then we will shut them down for the future.
I think we are on the case. I do think we need the help of
Congress to pass the additional request that the Treasury has
submitted legislatively to ensure disclosure.
Senator Dorgan. There is a study out of Florida which I
have last year added some funds so that we will
institutionalize that in a short period to provide some
additional information----
Mr. Rossotti. Right.
TRANSFER PRICING
Senator Dorgan [continuing]. But they feel very strongly
that we are losing $30 to $40 billion a year, and that actually
is through price transfers or transfer pricing, as it is
called, and they study these things and show that companies
that have United States subsidiaries are buying and selling
from themselves and charging prices like $50 for a piano, $7.60
for a tractor tire, $15 for a toothbrush.
They overprice or underprice a product in order to zero out
any income in the United States, and, therefore, they pay no
income tax in the United States. They do this through a
sophisticated scheme called transfer pricing, and for you to
get to the bottom of it, you have to take the equivalent of two
plates of spaghetti and connect the ends of the spaghetti. It
is impossible to do. I do not think you can do it. I do not
think you are doing it.
And yet, the Treasury Department, as a matter of policy,
they look around and act moon-faced and say, gee, things are
just great. They are not great. You need more resources and we
need a different strategy. What we need is a formula-based
system rather than the arms-length system. But you will be long
gone and I will still be debating this, and I probably will not
win, but I am not going to quit because that is also part of
abusive sheltering of income. What the big interests do not
pay, the little folks end up paying in income taxes. It was
therapeutic for me to say that, and I will----
Mr. Rossotti. The transfer pricing is one aspect, but I
think more generally, the use of various international
techniques, if you will, a variety of them try to move income
outside the United States is part of the problem, without
question.
Senator Dorgan. Is inversion legal, corporate inversion,
where a corporation renounces its U.S. citizenship, pays a few
bucks to a tax haven, becomes a citizen of that tax haven, and
calls its operations in this country a subsidiary and then
plays around between itself and its subsidiary in the United
States as a foreign corporation? You know that inversion is
happening.
Mr. Rossotti. Yes, I do.
Senator Dorgan. Is it legal?
Mr. Rossotti. Well, first of all, let me just be
cautionary. I am not--this gets into one of the most highly
technical areas of the law that there is, and----
Senator Dorgan. Yes, but I am in the middle of it, so----
Mr. Rossotti. I know, and----
Senator Dorgan. It does not mean I understand it. I am just
asking----
Mr. Rossotti [continuing]. And I do not want to overstep my
level of expertise.
Senator Dorgan. Well, go ahead.
Mr. Rossotti. As far as I know, there are techniques that
make some of these kind of inversions legal under current law.
That is what I have been advised. Now, there probably are a
wide range of facts that affect any individual one, so you can
never comment in general, but my understanding, as I have been
advised, is that, for the most part, people are following the
letter of the law and they do have the right to do this.
I will say that some of these transactions are taxable when
they do them, I do know that, so that it does require a payment
of capital gains tax at the time the inversion is done. That is
part of the law.
But this is an extremely complex area and it really
requires, I think, some careful analysis by the appropriate
committees as well as Congress.
POST 9/11 SITUATION
Senator Dorgan. Let me ask your judgment about it, though.
Post-9/11, when we are fighting terrorism and so on and we have
a company that says, you know what I would like to do? In order
to save on our tax bill, I would like to renounce my American
citizenship. What is your impression of that?
Mr. Rossotti. Well, I think as a citizen, that is not an
appealing thing for somebody to do. I am speaking as a personal
matter. Our job in tax administration is to administer the laws
as they exist. There are plenty of them that I do not
particularly like, but I have made up my mind that I would take
the oath of office and administer them as they were passed.
Senator Dorgan. I understand. I am asking the question
because I find it pretty outrageous, frankly. I mean, the issue
of patriotism is an important issue in this country----
Mr. Rossotti. I agree.
Senator Dorgan [continuing]. And the companies that do an
inversion and essentially renounce their U.S. citizenship, who
are they going to call, the Bahamian navy when they are in
trouble? I do not think so. I mean, the best they get to offer
is a post office box in these countries. All right. But you are
nearing the end of your term and you can say whatever you like.
Mr. Rossotti. What I have said many times, and I think it
is not just on inversions but any misuse of the law or skirting
of the tax law by people that have access to very sophisticated
tax advisors or devices that are promoted in any form to not
pay taxes that they should be paying, I think is probably the
worst thing that can happen as far as the tax system is
concerned for the very reason that you say. Most people have to
pay their taxes. Most people do pay their taxes.
We hear this all the time, not only anecdotally, but just
going out and talking to people out in the community. They say,
why are you guys picking on the little guy? Why do you guys not
go out and really get the people that are really abusing the
system? I agree with that. It is just that, sometimes, people
are using laws as opposed to abusing laws and we can only deal
with the ones that are abusing the laws. Without legislation,
we cannot deal with the ones that are using the laws as they
exist on the books.
Senator Dorgan. Mr. Commissioner, I have a series of
questions I will submit to you.
CONTRACTING OUT
One last question, and then I will call on my colleague.
The Office of Management and Budget is proposing that every
agency meet a contracting out quota, 5 percent of their
commercial jobs in fiscal year 2002 and 10 percent in fiscal
year 2003. You are in the middle of a major reorganization. I
am wondering, do you think these arbitrary contracting out
quotas are good? Are they a good tool at this point or are they
restrictive and difficult?
Mr. Rossotti. We are attempting to manage this process in a
way that will be as constructive in terms of our real
objectives as we can. I mean, it is a quota of those jobs that
you designate as being potentially outsourceable. It is not the
whole agency, and so what we have been trying to do is to be
very careful, and we are putting significant effort into
analyzing those things. There are some, frankly, the ones we
have identified in the first 2 years are reasonable to look at
for outsourcing and they are commercial activities, like
distributing forms, for example. We have some distribution
centers that distribute forms. That is something that can
reasonably be done by an outside group.
I think that as long as we can manage this in a way that is
reasonably consistent with our objective for increased
productivity without making them arbitrary, then I think we
will be fine.
Senator Dorgan. Senator Campbell?
Senator Campbell. Thank you, Mr. Chairman.
Let me ask a few simple questions that will not tax your
level of expertise, although I do not think here in the Senate
that is a problem, because we do it every day.
The IRS is looking into the feasibility of outsourcing some
of the collection process to private collection agencies. I
think that is what Senator Dorgan alluded to. In that 1996
pilot program, expenses were equal to the revenue generated
and, therefore, you did not make any money. At least, that is
what I figure. What can private debt collection agencies do
differently this time to collect more than it is costing?
Mr. Rossotti. That is exactly the issue we are studying,
and I think it is a good illustration of how we are trying to
handle this, responding back to the Chairman's question. We are
not going forward and doing the same thing that was basically a
failure in 1996. What we are doing is, as part of our
modernization of collection process, which is one of our
modernization processes, we have invited private sector
companies in. Let me just say, I can only go so far in this
because I have an ethical conflict here and a recusal, so I can
only comment at a very general level on this subject.
But the basic idea is that we have invited these people to
look at the way the process works and to determine whether
there would be a business case and what portion of the
collection process we would do before we actually do a project
and study it and actually outsource it. So that is the process
that we are following.
I think as an intelligent way to manage it, it is
reasonable, because we are getting the input from people that
are in the business of doing private sector debt collection. We
have them actually look at the way it works in the Federal
Government and determine if there is, in fact, some portion of
the debt that could be profitably outsourced, before we go just
jumping in and saying this is what we are going to do.
Senator Campbell. How do you ensure privacy when you
outsource?
Mr. Rossotti. Well, that is one of--what we have given
through the process of consulting, we have actually put out an
RFI, which is a request for information, a definition. We asked
them to respond, and one of the key things that the vendors are
looking at and coming in to tell us about, and they are not
telling me because I am recused from the process, but what they
are telling our staff is how they would, if they did come in,
meet a variety of things that are particular to the Federal
situation and privacy is paramount. Taxpayer rights is another
one. The Congress has passed a lot of taxpayer rights
provisions that are part of the----
CONTRACTING OUT
Senator Campbell. Do you have some way of monitoring that
with companies that are outsourced?
Mr. Rossotti. Well, we have not gotten down to that point
yet, but what we are asking the companies that are thinking
about doing this business is to tell us how or if they could
comply with these requirements, such as privacy and taxpayer
rights, and then how we would ensure compliance if we went
forward.
Let me mention one other point, Senator, and that is that
this would require legislation. The issue of outsourcing, that
particular outsourcing of debt collection, we have been advised
by Counsel would have to come before the Congress. It would
require legislation.
Senator Campbell. What you did was a demonstration project.
Mr. Rossotti. Right.
OFFERS-IN-COMPROMISE
Senator Campbell. The offers in Compromise, I guess it is
called, the OIC program, which includes collecting that which
could be reasonably collected at the earliest time with the
least cost, meaning avoiding a costly litigation, I assume,
things of that nature, gives taxpayers a fresh start to let
them voluntarily comply----
Mr. Rossotti. Right.
Senator Campbell [continuing]. What was the total amount
collected through that program in fiscal year 2001?
Mr. Rossotti. That is a number that I would have to get you
for the record, Mr. Chairman. I do not think I have the exact
number.
Senator Campbell. Then maybe you could tell me how you
measure the effect of this, of offers as a collection tool.
Mr. Rossotti. What we do, and let me just preface this by
saying this is a relatively new program, or it is not
completely new, but it was dramatically expanded in RRA. I have
to be honest and say we have been struggling with this
program--I do not want to mislead anybody--to get it in an
efficient state so that it will accomplish its objectives, and
I do not think we are quite there yet, but I think we are
getting close.
What the basic idea of this program is and a measure of
effectiveness is if a taxpayer is willing to pay but cannot pay
the full amount of their debt, which happens, there are a lot
of reasons why people can get behind----
Senator Campbell. It is cheaper to take what you can get
rather than putting them in jail and going through all the
litigation or all that stuff.
Mr. Rossotti. Exactly. Let us take what we can get, and
that is measured by something that is called the reasonable
collection potential, which is a calculation that we can go
through with a taxpayer to determine, based on their income and
their assets, how much they could pay. If that is less than the
full amount, then we compromise. We settle on that, we wipe it
off the books and they get a clean slate.
The difficulty has been that we have gotten a huge upsurge
of these offers since RRA was passed and we have gotten a
backlog of them which we are now just starting to work down.
The other thing that we have had difficulty with is
figuring out how to efficiently calculate what this reasonable
collection potential is and coming to a conclusion, and we have
put a lot of work into that. We have now got two sites that are
set up specially to do this, and we just recently, in the last
few months, made some additional decisions about how we can
streamline this process. We really expect--right now, we have
an inventory of 103--I think it was about 100,000 claims of
these in process and we hope to get that down to about 55,000
by the end of this year, cut it in half.
Senator Campbell. So you do not actually know if the costs
of monitoring it and doing this has collected more revenue
than----
Mr. Rossotti. Oh, it would be collecting more revenue than
it is costing, but I will have to get you--I can get you, in
fact, the numbers. I just do not have them with me today.
Senator Campbell. I know it works sometimes, because when I
was a young man, long before politics, Mr. Chairman, that
happened to me, not through any fault of mine, but the guy that
prepared my tax returns missed it by about $20,000 and I was
called down and told that I owed $20,000 and I did not have any
money. I just told them, well, send me to jail because I did
not have any money and needed a vacation anyway. But they
worked something out so I would pay part of it and pay part of
it on time and all that and it worked pretty good. So they got
more out of me, so I imagine it works with other people the
same way.
Mr. Rossotti. There is no question. I was one of the great
proponents of doing this. It is just that it turns out to be a
little complex on a case-by-case basis to actually come to a
conclusion as to what the right amount is and get it off the
books. But there is no question about the value of the program.
TAX RESOLUTION ISSUES
Senator Campbell. According to the 2001-2003 Wage and
Investment Strategy and Program Plan, the IRS plans to hire and
train tax resolution representatives to provide a greater range
of services. They will be expected to assist taxpayers with
claims for innocent spouse relief. Have you presently trained
and deployed these people in field offices yet?
Mr. Rossotti. We have. We have trained and deployed some of
them. We did some of them in 2001 and some of them in 2002. The
budget is, of course, the constraining factor as to how fast we
do them, but we definitely have established the position. I can
get you the numbers on how many. I do not have it right here
with me. I can get the numbers----
Senator Campbell. I would also be interested in knowing the
results, too, if you have any.
Mr. Rossotti. The results, I think, are already--although
we do not have perfect measurements--I think, without question,
the response we have gotten from the public is very positive,
because if you remember, I think we came out to your district--
--
Senator Campbell. You did. You talked to widowers, I
remember, and a widow.
Mr. Rossotti. And part of that was that there was no one
that they could go to in person to get this problem resolved in
one place, and that was the whole reason that we set these up.
It is a new position in the IRS and I think it has a lot of
value, and the idea is that someone can come in, make an
appointment if they want to, and get one person to resolve
their case.
Senator Campbell. Instead of talking to a computer or a
machine or something.
Mr. Rossotti. Right----
Senator Campbell. There are people in Colorado----
Mr. Rossotti. We will get you the numbers on how many have
been deployed so far.
Senator Campbell. All right. Thank you. That trip you made
to Colorado years ago, there are people that were in there that
got a chance to talk to you personally about their problems.
Some of them still come in the office and say how beneficial
that was to them, how much it helped them.
Mr. Rossotti. We learned a lot, too.
WALK IN TAXPAYER ASSISTANCE
Senator Campbell. Thank you, Mr. Chairman.
Senator Dorgan. Commissioner Rossotti, as I indicated, we
will submit questions to you. One last point. As you know, last
year, I added some money to the Inspector General's account and
asked that he conduct an audit every second month of your walk-
in taxpayer assistance centers, and the reason I did that is I
was at home late in the evening reading an Inspector General's
report prior to a hearing and discovered that the report showed
that of those who showed up at these walk-in taxpayer
assistance areas around the country, 73 percent, I believe it
was, either got the wrong answer or no answer. I was very angry
about that and said that that cannot continue. So I put money
in the Inspector General's account and asked that every second
month, he do a similar investigation and report the results
back to us.
One such investigation has now been done. It shows marginal
improvement. It is an improved situation, although still not
anywhere near where you and I would want it to be. I am going
to monitor that very closely all year. Every second month, I am
going to get a report, an investigative report. I know you are
working on this very hard.
If you have a tax law and expect people to comply with it,
if they seek out the Internal Revenue Service and ask for
assistance and get the wrong answer or get no answer or get
treated rudely, as happened in a couple of cases, it is exactly
the wrong thing and it upsets me as a lawmaker and I know it
upsets you as a Commissioner.
I just wanted to underscore with you again how important
that is to me. You and I have had several discussions about it
and these investigations will be relentless over the 12
months----
Mr. Rossotti. I understand.
Senator Dorgan [continuing]. And there is no way to escape
them because they are in law, but I think it is good for you
and good for us to have this done.
Mr. Rossotti. We are using the results of those, as you
know, very carefully, and we have been working closely with the
IG. As I think we have discussed on some other occasions,
getting the correct answers in tax law questions in the in-
person sites is one of the harder pieces of the puzzle, just
because they are dispersed in 400 locations, 250 of them are
small enough they do not even have a manager on site, and, of
course, there is a wide range of questions that people can ask.
So what we have done is quite a few different things to try to
improve the quality, first of all, let me say, at two levels.
The first level of quality is that people are treated
properly regardless of the exact answer to the question. There
is no excuse to have any level of failure in that area, and I
think we did have some in the past. Very honestly, that
particular part of the IRS was not given a lot of priority. As
you can see from the report you have been given, we have
largely, although not 100 percent, fixed that part of the
problem. I think people, for the most part, are getting service
and getting treated properly, and if there are isolated
incidents where they are not, we are going to fix it.
The next piece of it is to make sure that they not only are
treated right and get an answer but that they do not get the
wrong answer, that they get the right answer, and we have also
made some progress on that. That is a harder problem because
that involves technical questions and tax law training and
repetitive work with employees to get the answers right.
TAXPAYER ASSISTANCE QUALITY
I think we have some encouragement from what has happened
on the telephone system because most of the people who contact
us for tax law questions actually call by telephone. A few
years back, we did not even have a measurement system for it,
and when we did measure it, the results were no better than
what you heard from the IG on the walk-in sites. This year, so
far, on telephones, we are up to about an 83 percent correct
response rate, which is still not as good as it should be, but
it is way, way up from where it was.
I think if you look at what percentage of the ones in the
walk-in sites are correct now, they are probably down around
the 60--of those that are answered, that it is probably around
60, 65 percent or somewhere in there. So I think we clearly
have a ways to go on both of these, but I think we are working
on it very diligently.
One of the things I would point out is structurally what we
have done with the IRS so that it carries on is to have
somebody that is in charge of it full time and that you know
who they are and they are accountable for it.
In the old IRS, these walk-in sites, there were 400 of
them, they all reported to different people, they were an
afterthought. We now have one chain of command. I know who--and
I would be glad to introduce him to you if you would like to
meet him--who is in charge of these walk-in sites, and then he
has a few people under him. They work full time, every day,
trying to make this better, and that will carry on year-after-
year-after-year. I think that is a fundamental structural
change that we have today in the IRS that we did not have, and
that is true of the other programs, too. The taxpayer phone
service, there is somebody else in charge of that.
PREPARED STATEMENT AND ADDITIONAL COMMITTEE QUESTIONS
So at the very least, as time goes on, we are not going to
forget about this. We are going to have people that are
measured every month and every quarter on how well they are
doing in delivering these services.
Senator Dorgan. Mr. Commissioner, thank you very much for
your testimony today.
[The information follows:]
Prepared Statement of Charles O. Rossotti
budget summary
Mr. Chairman, I want to take this opportunity to thank the
President and Treasury Secretary O'Neill for their continued support of
our critical mission on behalf of the American people and our efforts
to modernize the Internal Revenue Service.
During this time of national sacrifice and resolve, I am most
grateful for the funding contained in the proposed IRS budget. The
President's fiscal year 2003 budget request of $10.418 billion for the
IRS will enable us to stay the course we embarked upon more than 3
years ago. We will be able to continue to make short-term improvements
in service, compliance and efficiency as well as investments in our
long-term Business Systems Modernization (BSM) program.
Mr. Chairman, let me also express my gratitude to you and the
Members of the Subcommittee. After careful review, you have
consistently approved a level of funding consistent with the requests
of the President. Moreover, you have expressed a growing confidence in
our ability to better manage the BSM program in spite of the challenges
we confront. This was clearly demonstrated last year when you released
a full year of funding for BSM. We still have much work to do to meet
the high standards and goals you set, but this tangible vote of
confidence is most appreciated and we will endeavor to earn it every
day.
introduction
Mr. Chairman, 3 years after the passage of the IRS Restructuring
and Reform Act of 1998 (RRA 98), we have developed and are carrying out
a modernization program of short- and long-term improvements. They are
designed to achieve the overall objectives of improved service, better
treatment of taxpayers, more efficient and effective compliance and
greater overall efficiency.
We are proving that the long-standing problems at the IRS are not
insolvable. We are gradually improving our performance across the
board--not through massive infusions of new resources, but by
leveraging our limited resources through better management and a
fundamental reengineering of business processes. We have been able to
reallocate precious resources and personnel to where they are needed
most, such as improving customer service and stabilizing critical
compliance activities.
During fiscal year 2001, returns, payments and refunds were
efficiently processed. The telephones were better answered. We tore
down more barriers and added more incentives to electronic filing of
returns and payment of taxes. More taxpayer problems are being solved
in a telephone call or visit. We simplified some forms and regulations.
We better administered RRA 98's taxpayer rights. We stabilized some key
compliance activities. We worked to ease the burden of those affected
by the September 11th terrorist attacks.
However, if we look back on the progress we made in fiscal year
2001, we also clearly see how far we still have to go. The IRS
Oversight Board, the GAO and Treasury Inspector General for Tax
Administration (TIGTA) have reported on numerous deficiencies. We still
are not consistently providing service at a level that taxpayers expect
or deserve. We still are not ensuring that everyone's neighbor or
competitor is complying with the tax law and paying what he or she
owes. We have many jobs that we must perform at higher quality and
efficiency.
There are no shortcuts to achieving our goals. The IRS' problems
developed over a long period and are too widespread, deep and complex
to yield to simple, quick remedies. We must carefully lay a foundation
that will allow us to succeed in our rebuilding efforts. We have now
restructured our organization, reducing management layers and achieving
more customer focus and greater management accountability. We have
developed and implemented a new set of balanced performance measures.
Our biggest remaining task is to modernize all of our business
processes using the appropriate and best technology. The real tangible
benefits of modernization will materialize over the remainder of the
decade in carefully planned and executed projects. The first of these
were delivered this past year; taxpayers will see more in 2002.
To ensure the success of IRS modernization, we must stay focused
and committed to the intent of the Restructuring Act, making
adjustments as necessary; but not losing sight of the goal which is to
provide quality service and proper treatment to every taxpayer while
collecting the taxes that are due under the law. The scope of the task
ahead is still enormous but so is our resolve to finish the job we
started in July 1998.
service improvements made
We want to improve the entire way the IRS serves taxpayers--from
filing and paying taxes to getting information and assistance to
protecting their rights. More than the sum of its parts, the highly
successful 2001 filing season continued to demonstrate how we can build
on positive trends in service to taxpayers, especially as our major
technology and organizational initiatives take effect.
Indeed, a government-wide survey released in December 2001
demonstrated improved customer satisfaction among individual taxpayers,
especially among those who file their returns electronically. The IRS
posted an 11 percent increase in satisfaction among all individual tax
filers since 2000 and a 22 percent increase since 1999. It was the
largest favorable gain of the 30 Federal agencies surveyed by the
American Customer Satisfaction Index (ACSI) Survey. (Please see
attached chart.)
Electronic Tax Administration (ETA)
In 2001, a little more than 40 million taxpayers filed
electronically--a 13 percent rise from last year. Since 1997, e-filing
increased by 110 percent, and on-line filing grew by a staggering 1,700
percent. Clearly, the value taxpayers receive from all our e-programs
is one reason behind the growth. Faster refunds, positive
acknowledgement of receipt and fewer errors that require time consuming
letters and telephone calls to correct are key benefits to taxpayers.
One of the important reasons for the strong showing in the ACSI
survey was the very high satisfaction rate among electronic filers. It
was 77.2 points--higher than the previous year and the third year in a
row that e-file taxpayers expressed increased satisfaction.
For the 2001 filing season, we added 23 additional forms to the
1040-e-file program. And we achieved a major milestone in the 2002
filing season--virtually all 1040 forms and schedules can be filed
electronically and no paper signature document is required. We are also
expanding the electronic payment options available to taxpayers by
accepting credit cards to pay installment agreements and delinquent
taxes. In addition, we are repeating a popular option from the 2001
filing season. Taxpayers who need a filing extension can get one
automatically by making a simple phone call.
In 2001, we also better served the business community's ETA needs.
In September we introduced EFTPS OnLine (Electronic Federal Tax Payment
System), which allows businesses to enroll in the system, securely make
Federal tax payments and check their electronic payment history over
the Internet. And businesses can now file electronically their Form 941
(Employers Quarterly Federal Tax Return), as well as Form 1065
(Reporting Partnership Income) and Form 940 (Employers Annual Federal
Unemployment Tax Return). Individual taxpayers who make quarterly
estimated tax payments could also use the system, eliminating paper
forms and receiving on-line access to payment history.
Taxpayer use of our web site also smashed all records. Four years
ago, irs.gov received 260 million hits. This year, we estimate that it
will post 2.6 billion hits with more than 317 million forms and
publications downloaded. It has also been helpful in alerting taxpayers
to a number of scams that are being perpetrated upon them, such as the
bogus slavery reparations scheme.
In 2001, we also launched the Small Business and Self-Employed
Community web page. It is dedicated to the needs of this important
group of taxpayers who often confront more complex tax issues than
those who have their taxes withheld by an employer. And we recently
unveiled a revamped IRS web site that will eventually take us from
being an information-only portal to a world-class transaction based
gateway.
The Administration also proposes in its budget submission ``an
easy, no-cost option for taxpayers to file their tax return online.''
Unfortunately, there has been some confusion regarding this proposal.
The Administration's proposal to give taxpayers the option to file
their tax returns on-line without charge is based on two principles: no
one should be forced to pay extra just to file his or her tax return
tax, and the IRS should not get into the software business.
In a statement issued on January 30, 2002, Treasury Secretary
O'Neill stated, ``I don't intend for the IRS to get into the software
business, but rather to open a constructive dialogue with those who
already have established expertise in this field. In the end, this
effort should come up with a better way to save time and money for both
taxpayers and the government.'' The IRS totally concurs with the
cooperative approach enunciated by the Secretary and we will follow it
to the letter.
Telephone Service
Many taxpayers prefer telephoning the IRS, and our inability to
deliver this basic service contributed significantly to the public's
lack of confidence in the IRS in the 1990s. During that time, up to 80
percent of taxpayer calls were met with a busy signal, and according to
Roper Surveys, the public's rating of the IRS declined to an all-time
low in 1998.
Since 1998, we provided extended hours of telephone service during
the filing season. We also put on more assistors at peak hours, rather
than just during normal business hours. Almost 108 million taxpayers
called on one of our toll-free lines during fiscal year 2001. We
received 76 million automated and Teletax calls, and our live assistors
handled 32 million taxpayer calls. Our San Patricio, Puerto Rico call
site became fully operational in 2001 and will greatly assist us in
providing better access and service to Spanish-speaking taxpayers.
Nearly all callers now have almost immediate access to automated
services, although some callers are forced to wait longer to receive
assistor service. For taxpayers who wanted to reach an assistor in the
2001 filing season, the overall wait time was 5 minutes and they
reached an assistor 63.9 percent of the time, which often required them
to call back. During the summer, a very large volume of telephone calls
related to the special advance refund reduced the average service to
below the previous year. And this level of service is still
unacceptable to both taxpayers and the IRS. We are using every method
at our disposal, including modern technology, to address this problem.
Once connected, taxpayers must get prompt, accurate and courteous
answers to their account and tax questions. Here, too, we have made
substantial progress towards providing better service to taxpayers. The
telephone quality rates for tax law and tax account questions showed a
marked improvement in fiscal year 2001. They were up to 75.1 percent
and 69.1 percent respectively as compared to 73 percent and 60 percent
over the same period last year. Although we would agree with the GAO's
assessment that we have not yet attained a world class customer service
level, we believe that we are on the right track to achieving that
goal.
To increase productivity and quality of service, we must give our
employees the technology and tools they need to do their jobs at a high
level. The first of the BSM projects, Customer Communications 2001
(CC01), was deployed in July 2001. It improves the efficiency and
effectiveness of our systems for receiving, routing and responding to
millions of taxpayer telephone calls. CC01 helped us increase the total
number of calls answered, which surged by 32 percent over the past year
due in large measure to the advanced tax refund. We must also give our
assistors specialized knowledge so they can better answer taxpayer
questions about a very complex, difficult and changing Tax Code.
In-Person Service
For those taxpayers who prefer to visit an IRS office, service is
available at more than 400 locations nationwide. At many sites, in-
person service is offered on Saturdays during the filing season.
In the past, the IRS did not place a high priority on what were
called ``walk-in'' sites. The services offered at them were limited and
often of poor quality. However, under our new Field Assistance concept
of operations, we will better serve taxpayers at our taxpayer
assistance centers. We will help them meet their filing and paying
responsibilities including answering their tax law questions and
providing forms and limited courtesy return preparation.
Throughout the year, and at a variety of locations, we also
schedule the highly acclaimed Problem Solving Days to resolve long-
standing taxpayer issues for those who cannot take advantage of weekday
problem solving services.
Problem Solving Days have an excellent track record. However, every
day should be problem solving day at the IRS, not just three or four
times a year. That means using a cross-functional approach to resolve
most tax account issues with a single visit or phone call at any time
throughout the year.
To help us meet this need, we created a new job at the IRS, ``Tax
Resolution Representative.'' These IRS employees will receive the
training and authority to provide ``one-stop-service'' for a broad
range of issues ranging from answering tax questions to resolving
payment problems.
Our Stakeholder Partnership, Education and Communications (SPEC)
organization is also now working to energize the Volunteer Income Tax
Assistance return preparation program. Last year, we worked with more
than 18,000 volunteer sites across the country to assist an estimated
4.3 million taxpayers wanting this service.
Burden Reduction
We are also working to provide immediate and far-reaching burden
relief. For example, in fiscal year 2001, we overhauled the old,
complicated rules governing the required minimum distributions from
individual retirement accounts. Also, millions of taxpayers are no
longer required to file the 54-line Schedule D, ``Capital Gains and
Losses.'' The ``checkbox'' burden reduction initiative, which enables
taxpayers to authorize the IRS to discuss their returns with their paid
preparers, also made a very strong showing in its inaugural year. In
addition, we provided burden relief to small businesses through a
number of initiatives, including permitting many of them to use the
cash versus the accrual method of accounting.
However, burden reduction goes beyond filing and payment issues. It
also means helping taxpayers with the sometimes complex RRA 98's
taxpayer rights provisions, such as the innocent spouse and offers in
compromise programs and enhanced due process rules. We are still
working very hard to administer these provisions better. However, along
with some remaining management challenges, there have also been some
successes.
Faced with a mounting backlog of 40,000 innocent spouse claims, we
took several steps to promote greater efficiency. The innocent spouse
program was centralized at one location in Cincinnati and we provided
the necessary staff to dig out from under the backlog. The Innocent
Spouse Program is now operating at a reasonable level of service and
efficiency.
Burden reduction also means communicating with taxpayers in plain
English. As part of our continuing effort to improve our correspondence
to taxpayers, and following RRA 98's directions, the IRS began sending
out this year six redesigned notices, including those dealing with math
errors, balance due, overpayments and offsets. These notices affect
both individual and business taxpayers. The new notices should reduce
the number of times taxpayers need to contact the IRS, be easier to
understand, and help resolve inquiries. We continue to redesign 24
additional notices. We plan to release four of them in January 2002,
seven in July 2002 and the remaining 13 in January 2003.
Advance Refund and September 11 Response
Last year, the concept of service to taxpayers went far beyond what
is normally expected of the IRS. Two events--the issuance of millions
of advance refund checks and our response to the tragic events of
September 11--demonstrated how we could provide service to taxpayers
under extraordinary circumstances.
For the advance refund, the IRS coordinated an unprecedented
outreach to America's taxpayers, an intricate computer programming
project, a flurry of news releases, an updated irs.gov site and
additional assistors to handle record call volumes.
Following the September 11 national tragedy, IRS and Treasury
Department employees did their best to minimize the distraction of tax
issues for the victims. By September 14, 3 days after the attack, we
provided administrative relief to the victims in the form of extensions
to file returns and pay taxes. We also suspended for 6 months many
enforcement actions for the affected taxpayers. In addition, we
established special toll-free numbers to answer any questions, and we
set up a special disaster relief page on our web site.
Before and after the terrorist attacks, the IRS' Tax Exempt/
Government Entities (TE/GE) Operating Division also helped educate the
public on the legal requirements organizations must meet to qualify for
tax-exempt charitable status.
On September 18, we placed a new, easy-to-understand publication on
our web site that provided information to assist the public to make use
of charitable organizations. We also announced that we would speed
processing of requests for tax-exempt status from new charities formed
to assist the victims. Although we expedited the process, we did not
lower our standards for new organizations applying for the tax-exempt
status.
In addition, we worked with the September 11 charities in getting
donations to the victims' families. On November 16, we issued interim
guidance that recognized the unique circumstances caused by the
tragedy. We wanted to send a clear message that charitable groups that
act in a reasonable and good-faith manner to help the victims would not
endanger their tax-exempt status.
stemming the decline in compliance
Our tax system depends on each person who is voluntarily meeting
his or her tax obligation having confidence that his or her neighbor or
competitor is also complying. However, we simply do not have the
resources to resolve every case of non-compliance. We must apply our
resources where non-compliance is greatest while still maintaining
adequate coverage of all other areas. Our near term goal in 2001 was to
stabilize the level of our key compliance activities while beginning to
focus on the areas of greatest risk to our nation's tax system.
After careful study we identified and are addressing four important
areas of systematic non-compliance. They are: misuse of devices such as
trusts and passthroughs to hide income; use of complex and abusive
corporate tax shelters to reduce taxes improperly; failure to file and
pay large accumulations of employment taxes; and erroneous refund
claims.
Although major and systematic areas of non-compliance are our top
priority, it is also important that we use all available tools to
detect, correct and deter non-compliance of all kinds. For example, in
2002, the IRS will begin processing and matching K-1s reporting almost
$700 million of income and importantly, reported losses on trusts and
passthroughs.
However, no matter how effectively we use our resources and new
techniques to identify and prevent problems, some cases require
intervention by IRS compliance personnel. Although 80 percent of the
individual income is reported by third parties, the remaining 20
percent, mainly business income, are not reported and often require in-
person auditing to verify. Also, business income, including that of
passthrough corporations, partnerships and trusts can only be verified
through auditing.
Compliance activities began to stabilize in fiscal year 2001. The
number of liens filed and levies issued increased by 49 percent and 103
percent respectively over the previous year. Large corporate
examinations and returns examined by correspondence increased by 27
percent and 65 percent respectively. We also made 10 percent more
determinations for innocent spouse cases and processed 40 percent more
offers in compromise. However, the significant exception to achieving
our compliance goals was our in-person examination rate, which declined
about 20 percent.
We also hired 568 Revenue Officers and 733 Revenue Agents in fiscal
year 2001. This was the first time in 6 years that we were able to
replenish these critical compliance positions. By stabilizing the
number of compliance personnel, reengineering processes and setting
clear goals, we believe that compliance activity levels will increase
over the next 3 years. We will also be able to better identify and
focus on key compliance problem areas. Research and other programs will
support compliance operations. Taxpayer education, published guidance
and pre-filing agreements will help us prevent compliance problems in
the first place. However, compliance operations will not yet rise to
the desired level of efficiency and effectiveness.
In the long term, we will rely on our BSM program to increase the
effectiveness and efficiency of these activities. Business Systems
Modernization will enable us to increase coverage from audits and other
income verification techniques with modest increases in staff. We also
have the opportunity to allocate our compliance resources more
efficiently, both in specific cases and around patterns of non-
compliance. And when intervention is necessary, we can use
analytically-based techniques to assist in determining the appropriate
action.
National Research Program
Last month, the IRS proposed to reestablish a key component of its
ongoing compliance effort to help ensure fairness for America's
taxpayers. The National Research Program (NRP) is designed to
accurately measure tax compliance while minimizing the need to contact
taxpayers during the process.
The NRP is developing innovative approaches to measure taxpayer
compliance with the tax law. It will: (1) be far less intrusive and
burdensome on taxpayers than previous compliance studies; (2) help the
IRS build better compliance programs to more effectively catch tax
cheating and help ensure all taxpayers pay a fair share; and (3) help
reduce audits of taxpayers who filed an accurate return by at least
15,000 tax returns a year.
As part of ongoing compliance operations, NRP will focus on
measuring three key areas of tax administration--filing compliance,
payment compliance and reporting compliance. A key element involves
measuring the accuracy of reporting information on tax returns. The IRS
has overhauled the reporting component to minimize disruptions to
taxpayers during the study.
Ultimately, this project will help all taxpayers by giving the
agency timely, accurate information about tax compliance. This
information will allow the IRS to replace outdated audit formulas and
develop compliance efforts directed toward the tax returns most likely
to have errors, rather than those from honest taxpayers.
In late fall of this year, the NRP will begin reviewing a small,
statistically valid sample of individual returns from the 1040 family.
The IRS will work closely with tax practitioners, Members of Congress
and other key stakeholders to finalize the project.
productivity through a quality work environment and modernization
On January 30, 2001, the IRS Oversight Board approved the IRS
Strategic Plan. It lays out how we will use our limited resources to
achieve the greatest benefits in performance. Moreover, we will meet
these goals while continuing to shrink in size relative to the economy.
Indeed, we are planning most of our performance improvement from
internal management improvements and modernization, not increased
resources. Balanced measures in line with our strategic plan will have
been rolled out to most of the new organization.
Business Systems Modernization Program
Our Business Systems Modernization effort is the largest ever
undertaken in the public or private sector. And more than updating our
antiquated technology, the modernization program changes the entire way
the IRS interacts and conducts business with taxpayers and
stakeholders.
Key to BSM's success is the Tax Administration/Internal Management
Vision and Strategy (TAVS/IMVS). It provides a clear, integrated view
of how the IRS should work in the future. In 2001, the IRS Executive
Steering Committee also approved the Enterprise Architecture--a
strategic view of the initiatives that are managed by BSM. It will
enable us to design and build new business and technology projects that
will be the backbone of the modernized IRS.
The BSM program was officially inaugurated on June 28, 1999. In 2
years, we graduated from strategic planning and systems design to
business results. In fiscal year 2001, we put two projects into
production, including the Customer Communications fiscal year 2001
Project that greatly improves the efficiency and effectiveness of our
systems for receiving, routing and responding to millions of taxpayer
calls. We also deployed a commercial tax computation software package,
the Customer Relationship Management Exam. It was sent to over 500
revenue agents in our Large and Mid-Size Business (LMSB) operating
division and allows them to make accurate tax assessments for complex
tax calculations. It will provide time and resource savings for both
taxpayers and the government. The feedback we have received from
Revenue Agents on the software has been overwhelmingly positive. Copies
of the software will be delivered to the rest of the LMSB revenue
agents by the end of fiscal year 2002.
In 2002, the BSM program will achieve two extremely important and
difficult milestones. And they are both firsts: the first movement of
records of some taxpayers out of the old 1960's tape-based system to a
modern, reliable data base; and the first establishment of an IRS-wide
security system providing both internal and external secure access and
communications to IRS systems.
These two deliveries represent two of the most essential and most
difficult building blocks of the entire modernization program. Given
the scale, complexity, and fragmentation of existing IRS systems, and
the sensitivity of storing and accessing taxpayer data, it was not
surprising that developing and deploying new IRS-wide systems for these
two key components eluded the IRS for decades.
The lack of these two essential components severely impeded the
ability of the IRS to modernize its systems and imposed enormous risks
and costs on the whole tax administration system. For this reason,
achieving these two milestones will represent a tremendous success for
the BSM program. And as BSM progresses, these two essential building
blocks will continue to be enhanced and deployed on an ever-increasing
scale until they eventually support the entire tax system.
I want also to stress that due to its enormous size, complexity and
sensitivity, the BSM Program involves considerable risk. However, the
fact that risk exists does not mean that the program will fail. It
means that the program could fail if the risks are not adequately
identified and appropriate action taken to address them on a timely
basis.
We are actively identifying and managing the risks in BSM, and we
have not hesitated to make changes in programs when necessary. There is
a critical point to understand about managing risks in this program:
making constant adjustments to plans is an indication that they are
being addressed and managed. It is one of the hallmarks of a successful
systems program.
stewardship & resources
America's taxpayers, the Congress and the Administration expect us
to be able to properly account for their money and property. I am very
pleased to note that the GAO rendered an ``unqualified'' or clean
opinion on the IRS' fiscal year 2001 Financial Statement for both the
Revenue and Administrative accounts. This means that for the second
year in a row, the IRS could properly account for $8.3 billion in
appropriated funds; over $2 trillion in revenues collected; and over
$190 billion in refunds. Having a tax agency that performs this task
honestly and accurately is an enormous asset to our nation.
Over the past 8 years, the IRS oversaw 500 million remittances
without a major problem. However, in 2001, more than 70,000 taxpayer
checks valued at $1.2 billion were determined to be missing at the
Mellon Bank Pittsburgh Lockbox site. The Lockbox Program is a network
of financial institutions that process taxpayer remittances for the
IRS. Operated through an agreement with the Department of Treasury's
Financial Management Service, the system helps accelerate the flow of
funds to the Treasury.
Once detected, we took swift action to alert potentially-affected
taxpayers to the problems. More importantly, these taxpayers will not
be penalized by what occurred. They will be made whole, and the
Treasury will receive its funds. The incident, although isolated, will
be used to improve procedures and prevent any such problem in the
future.
challenges remain to quality service
The IRS Oversight Board has stated that, ``service to taxpayers is
inadequate'' and we do not take issue with their position. In spite of
the short-terms gains we achieved, we are still not providing service
to taxpayers at a level that they expect and deserve. The facts speak
for themselves.
We received 108 million telephone calls on our telephone lines,
covering a very wide range of subject matter. The quality of that
telephone service--while improving--is still not on a level with what
taxpayers receive in the private sector. Treasury Secretary Paul
O'Neill characterized it as ``unacceptable.'' He is correct.
Not only must we continue to improve taxpayer access to our toll-
free lines, we must improve the accuracy of the response we give to tax
law and account questions. Unfortunately, this problem is not confined
to telephone assistance. We also have a steep learning curve at our
taxpayer assistance centers. The GAO testified in April 2001 that
``walk-in sites are continuing to provide poor tax law assistance.''
We are not providing adequate service in other areas. For example,
employers, particularly first-time employers, are often discouraged by
the delays and difficulties in obtaining an Employer Identification
Number (EIN).
As previously noted, we are now administering RRA 98's 71 taxpayer
rights provisions. Many of the provisions, such as innocent spouse
protection, due process in collections and offers in compromise, would
individually be considered major projects. Collectively, they represent
a challenge of learning new ways of doing business for nearly every one
of our 100,000 employees. And during this process, we encountered a
number of problems and demands that we are still addressing.
RRA 98 added requirements that lengthened the offer-in-compromise
(OIC) process. Over the past few years, the OIC Program's over-age
inventory continued to grow in spite of applying more resources. To
improve quality, timeliness and efficiency, we centralized OIC
processing at our Memphis and Brookhaven Service Centers. By using
revised procedures at the new consolidated sites, we hope to streamline
the processing of over 120,000 applications submitted each year.
RRA 98's collection due process provisions also presented new
challenges and have resulted in a backlog of cases. However, through
the training of additional Appeals Officers in collection processes and
procedures, we believe we will be able to clear up the case backlog in
2002. Improved resource allocations, case development practices, better
management, communications and technology should also provide for more
efficiency, greater productivity and better results.
It will take time, resources and management attention to solve the
challenges that RRA 98 presents. However, our Strategic Plan squarely
addresses these issues. More importantly, it improves our quality and
productivity through modernization and reengineering of our technology
and business practices with minimal increases in resources.
fiscal year 2003 resource request
Mr. Chairman, the IRS budget request for fiscal year 2003 is
$10.418 billion and full-time equivalent employment (FTE) of 101,080.
The request is $482 million more than last year's $9.936 billion
appropriation. The largest programmatic component of this increase is
$259 million to enhance customer service and compliance, of which $196
million will be funded through a redeployment of resources within our
base budget.
Overall as shown in the attached chart, the IRS is proposing to
achieve $259 million in increased program resources and program
delivery at a net requested increase of only $63 million. Therefore, 76
percent of the improvement is being achieved by improved internal
efficiency and redeployments.
The funding increase request also maintains momentum in the IRS
Business Systems Modernization projects with $58 million. The budget
increase for fiscal year 2003 will allow us to fund these critical
projects as they move from the planning and design phase to development
and implementation. The remaining increase would fund pay raises, and
inflation, $10 million for Tier B Projects (see p. 21) and adjustments
for Homeland Security funds appropriated in fiscal year 2002.
In addition, $39 million of the total increase is requested as part
of a legislative proposal to change the accounting of pension and
retiree benefits costs. Please note that although the increase of $39
million is the incremental change from the fiscal year 2002
appropriation (as adjusted), the actual increase to our fiscal year
2002 base for this proposal will be $503 million. These costs are
transfers of funds that were previously included in other agency
budgets and do not represent any net increases in IRS programs.
To help create a ``World Class Treasury Department,'' Secretary
O'Neill challenged each bureau to review all programs on a continual
basis and redirect resources to meet needs, rather than asking for
funding increases. Budget and performance integration, as part of the
President's Management Agenda, requires this kind of business review,
with an emphasis on best results at the lowest total cost.
Indeed, let me stress the process that underlies the fiscal year
2003 request. For the first time, we fully integrated the development
of our budget with the establishment of performance measures. First, we
determined the highest priority resources needed to increase customer
service and compliance. In addition, as part of the budget process,
IRS' senior team conducted a review and prioritization of agency-wide
needs for fiscal year 2003 and searched for the most efficient
allocation of resources. The realignment of resources woven throughout
the fiscal year 2003 budget comes through reengineering, efficiencies
and investment in modernized systems. To this end, the review developed
2,287 FTE that could be re-deployed to high priority areas in customer
service and compliance.
operations
highest priority resource needs
Customer Service and Workload Increases (+1,595 FTE, $91M)
In fiscal year 2003, the IRS must build on the gains it has made in
customer service if we are to achieve our first strategic goal, ``top
quality service to each taxpayer in every interaction.'' We are still
not providing a consistent high level of service that taxpayers expect
and deserve. We must continue to improve taxpayer access to our toll-
free telephone lines and the accuracy of the responses we give to tax
law and account questions. We must continue to improve the service at
our taxpayer assistance centers. We must further reduce taxpayer
burden. We must continue to increase e-file options. We must better
administer the RRA 98 taxpayer rights provisions. And we must give our
employees the training and tools to meet these needs. The highlights of
some of the following initiatives will help us meet our goals.
--Increased Offer in Compromise (OIC) Cases.--This initiative is
designed to address the escalating OIC inventory by
centralizing and streamlining the processing. Cases sent to the
field will include all background financial data needed to
conduct the investigation, thereby reducing the amount of time
that revenue officers must spend on gathering this information.
--Telephone Level of Service.--Taxpayers must still speak to live
assistors to answer tax law and account questions as well as
Automated Collection System (ACS) inquiries. Additional FTE are
necessary to address current demand and to meet taxpayers'
legitimate expectations that they receive service comparable to
what is offered by the best private sector companies.
--Multi-Lingual ACS.--The Multi-Lingual Automated Collection Service
(ACS) will help meet taxpayer growing demands for timely,
accurate and efficient services in languages other than
English.
--Improving Correspondence.--We are improving the clarity of our
communications with taxpayers through a redesign of 24 of our
notices over the next 2 years.
--Filing Services.--We must continue to provide filing services--from
e-filing to submission processing to timeliness of refunds--and
handle a projected increase in the number of returns filed.
Enhanced Compliance Strategies (+1,857 FTE, $125 M)
In 2001, we began to stabilize the long-term decline in compliance
activities while beginning to focus effectively and efficiently on the
four key areas of non-compliance and maintaining adequate coverage of
other areas. However, we still must address a number of challenges. For
example, from 1993 to 2001, the number of returns reporting adjusted
gross income in excess of $100,000 grew by 163 percent. We must keep
pace with this increase by expanding the number of these returns that
are examined in IRS field and office programs. We must also tackle the
$66 billion in our total potentially collectable inventory. And we must
focus on the proliferation of tax scams ranging from sophisticated
illegal offshore trust programs to the slavery reparations scheme being
perpetrated upon African-Americans. The following are the highlights of
our enhanced compliance strategies for fiscal year 2003. A detailed
description can be found in our congressional justification.
--Stabilize Audit Rates.--The IRS will devote resources to stop the
overall declining audit rates and will dedicate more resources
to auditing partnerships and other passthrough entities.
--Abusive Trusts.-- Experts estimate that the revenue loss to our
nation due to abusive trusts could run into the tens of
billions of dollars. We now have a coordinated strategy to deal
with this growing problem using a full range of tools from
public education to civil and criminal enforcement against both
promoters and participants.
--High-income Returns.--From 1993 to 2001, the number of returns over
$100,000 and $1 million dollars grew by 163 and 259 percent
respectively. However, IRS examination of these returns has not
kept pace and we must now narrow the gap.
--Highest Priority Collection.--To address the mounting employment
and income tax gaps, the IRS will dedicate more resources to
high priority compliance and collection cases involving unpaid
employment taxes.
--Fraud Referral.--Referrals and leads generated from the Lead
Development Centers and the Fraud Detection Centers will
produce more quality criminal investigations cases and help
ensure public confidence in the fairness of our of tax
administration system.
--Automated Underreporter.--To improve voluntary reporting on
individual income tax returns, the Remote Automated
Underreporter Program will utilize a national rotational
inventory approach for case selection.
--Employment Tax.--To combat non-compliance with employment tax laws,
the IRS will boost resources for legal source tax crime cases
with a special emphasis on emerging problems, such as the use
of temporary employment agencies/employee leasing agencies to
evade employment and income taxes.
--Money Laundering.--IRS Criminal Investigation (CI) was delegated
primary investigative jurisdiction in all money laundering
investigations where the underlying conduct is a violation of
the income tax laws.
--e-Crimes.--CI must continue to develop investigative knowledge and
techniques to keep pace with the growing number of e-crimes,
such as fraud and theft.
--Criminal Tax Cases.--Continued development of a close relationship
between Chief Counsel Criminal Tax and CI will help to ensure
that legal errors in the investigative process are minimized
and the chances for successful prosecution are maximized.
Contract Services (+$44M)
The IRS must also pay for a number of non-labor program increases,
many of which are mandated by Executive Order or departmental
regulations. For example, in response to concerns raised by GAO and
TIGTA, we must provide for enhanced guard services at our submission
processing and computer centers. In addition, we are requesting funding
for physical security upgrades such as more secure gates and entrances,
and barriers that can be raised and lowered. Other items include the
Public Transportation Subsidy, which was increased from $65 to $100/
month.
resources re-deployed through increased efficiency and productivity
A combination of strategic redeployment of staff and labor saving
programs will allow the IRS to improve its level of taxpayer service
without commensurate increases in the number of FTE applied. Targeted
improvement projects, such as Reengineering/Quality efforts and labor
savings from e-file and e-Services can be reapplied to other high
priority programs. Technology modernization programs will generate the
bulk of the FTE savings.
Improvement Projects (Redeployment of 1,779 FTE, $107M)
The IRS identified FTE redeployments from improvement projects that
are expected to come to fruition in fiscal year 2003 and are
highlighted below. The FTE will be reinvested to fund the top priority
needs identified below:
--Reengineering/Quality Improvements.--Reengineering and Quality
Improvement projects and programs will focus on redesigning
internal processes, policies, and procedures. Updating the
antiquated workload selection system will, for example, reduce/
eliminate the substantial number of returns that are ordered,
classified, and never worked.
--e-file.--In addition to the many taxpayer benefits, e-file also
provides clear cost savings and burden reductions for the IRS,
enabling us to redirect precious resources from processing to
customer service and compliance programs. In addition to
expanding electronic filing for individual taxpayers, the IRS
will promote the electronic filing of all business tax returns
in fiscal year 2003. Our ultimate goal is to convert all
business transactions with the IRS to fast, accurate, paper-
free electronic methods. Through e-Services, we will also
provide to tax practitioners easy-to-use electronic products
and services.
--Customer Relationship Management.--The funding for this project
will pay for training travel, operating travel and support
costs related to bringing IRS staff quickly up to speed on the
newly improved Corporate Tax Analysis software. The software's
main strengths are its capacity to do carryback/carryover
calculations for net operating losses (and other losses), the
interaction of losses and charitable contributions, alternative
minimum tax calculations and the foreign tax credit
calculations-- including carrybacks and carryforwards.
--Information Technology Projects. Two projects are expected to begin
realizing savings in fiscal year 2003: the Employee Plan
Determination System Redesign (EDSR) and the Remittance
Transaction Register (RTR). EDSR is expected to reduce cycle
time and improve quality of determination letters. RTR is
projected to improve efficiency in submission processing by
providing all Lockbox payment information online soon after
receipt, reducing from 1 month to just 3 days response time for
reconciling payment information and responding to payment
information queries.
Workload Decreases (Redeployment of 508 FTE, $50.5M)
--Reduced Field Innocent Spouse.--The initial high inventory of
Innocent Spouse cases is expected to decline to a point where
they can be processed without significant delays on our part.
Revenue Agents and Tax Auditor FTEs assigned to this program
will be re-deployed to address compliance in other areas.
--Reduced Filing Season Support.--We will reduce the FTEs in the
Small Business and Self-Employed operating division planned for
customer service details.
--Narcotics Program.--With redeployments realized from the narcotics
program realignment, 67 FTE will be used in the Fraud Referral
Program and 18 FTE will be used in the Money Laundering
Strategy Program.
--Reduced Tax Court Cases.--The number of cases filed in the Tax
Court is declining. Emphasis on pre-filing resolution of cases
through programs such as Advance Pricing Agreements is also
expected to moderate increases in Tax Court litigation in the
future, as well as Refund and Appellate litigation.
Targeted Efficiency Improvements (Redeployment of $39M)
Redeployment is expected from the Treasury's approach to better
business practices to remove or reduce current efforts that do not have
significant programmatic value. This is targeted to produce $39 million
in redeployments.
maintain current operations
The IRS is still a labor-intensive organization and a stable work
force is critical to carrying out our mission. We must maintain current
operations, protect the integrity of the tax filing season, oversee tax
administration programs and continue to implement organizational
modernization. To do so, the IRS must have the resources to pay for the
inflationary costs associated with statutory pay and other mandatory
increases described below .
--Maintaining Current Services Level (+$295 M).--Needed to maintain
fiscal year 2002 program levels in fiscal year 2003 by funding
pay, benefits, and non-labor inflationary costs.
--Within-Grade Increases (+$37M).--To cover the costs of within-grade
pay increases for on-board employees.
--Homeland Security (+$10M).--For the enhanced security arrangements
required by the Homeland Security supplemental. These funds
were appropriated as a consequence of the September 11, 2001
terrorist attacks and other related security concerns.
--Homeland Security Non-Recur (-$31M).--Funding in the amount of $31
million from the fiscal year 2002 will be non-recurred in the
fiscal year 2003 budget.
earned income tax credit initiatives
In fiscal year 2003, funding requirements for the Earned Income Tax
Credit (EITC) Compliance Initiative Appropriation are projected to be
$154,346,000, an increase of $406,000 over the fiscal year 2002 funding
level of $153,940,000. The FTE level of 2,353 is unchanged from fiscal
year 2002.
This appropriation provides for customer service and public
outreach programs, enforcement activities and research efforts to
reduce overclaims and erroneous filings associated with the EITC.
business systems modernization and other information technology
projects
The IRS' antiquated computer systems do not efficiently or
effectively serve America's taxpayers, nor meet today's business needs.
They are one of the fundamental obstacles to providing consistent top-
quality service. Failing to modernize IRS's tax administration business
systems would require a significant increase in resources to maintain
the old legacy systems while not addressing their underlying
deficiencies that will only worsen with time.
Business Systems Modernization will update our antiquated
technology and change the entire way the IRS interacts and conducts
business with taxpayers and stakeholders. Indeed, we do not view
systems modernization as a separate entity, but rather as one of the
major ways we can achieve all of RRA 98's goals within realistic budget
resources.
Over the past 2 years, BSM graduated from strategic planning and
systems design to business results. The successful deployment of
Customer Communications 2001 and the ongoing roll-out, deployment and
training for Customer Relationship Management Examination in 2001
provided IRS front-line staff with the right tools to do their jobs
more efficiently and effectively. Valuable lessons were learned as we
developed and implemented these projects utilizing the rigorous
management processes of the Enterprise Life Cycle, while at the same
time ensuring that all BSM projects adhere to the Enterprise
Architecture.
The proposed IRS fiscal year 2003 budget provides continued funding
for BSM and builds upon last year's achievements. For example, we will
continue to phase in the deployment of the Customer Account Data Engine
and move additional filers into the modernized system. The IRS will
also greatly strengthen its core financial systems through the
deployment of the first phase of the Integrated Financial System. These
projects coupled with entire BSM portfolio will deliver on IRS'
commitment to meet the nation's revenue collection needs and provide
world class service to our taxpayers.
I want to stress, Mr. Chairman, that we will continue to use a
formal methodology to prioritize, approve, fund and evaluate our
portfolio of BSM investments. This methodology enforces a documented,
repeatable and measurable process for managing investments throughout
their life cycle. Investment decisions are approved by the IRS Core
Business System Executive Steering Committee, chaired by the
Commissioner.
Fiscal year 2003 BSM Request
The proposed $450 million fiscal year 2003 BSM budget request
includes an increase of $58.4 million over last year's appropriation.
Let me summarize the key BSM projects that are addressed in the funding
request. A complete description of each can be found in our
congressional justification.
Customer Account Data Engine (CADE)
CADE is the foundation for all of IRS' tax administration systems.
It will replace the tape-based Master Files that currently contains the
only authoritative information on all individual and business tax
accounts. The IRS dependence on this 1960s Master File system today
constitutes an insurmountable barrier to efficient service and
compliance operations and is a very serious risk to the whole tax
system.
CADE will incrementally move individual filers from the 1960s tape
system to a modernized database. CADE Individual Master File (IMF) will
build the database that will replace the existing IMF processing
systems. CADE will create applications for daily posting, settlement,
maintenance, refunds processing and issue detection for taxpayer tax
accounts and return data. The database and applications developed by
CADE will also enable the development of subsequent modernized systems
that improve customer service and compliance. Once implemented,
modernized applications, such as Customer Account Management (CAM),
will allow on-line posting of data in addition to daily batch
processing.
CADE will be deployed over time in five releases, each related to a
specific taxpayer segment, phased in over a period of 6 years. At the
conclusion of Release 5, CADE will have replaced IMF.
Mr. Chairman, let me point out that due to a number of technical
difficulties and schedule delays, Release 1 of CADE Production has been
delayed by 6 months. We discovered in December 2001 a significant issue
with Procurement of a Business Rules Engine (BRE). A key part of the
overall CADE development strategy was predicated on the use of BRE
software that would be used to generate some programming code.
Unfortunately, the PRIME was unable to procure the BRE in time to be
used in the development of Release 1 and we were forced to proceed
using standard development language. We began mitigation on this
situation.
In addition to the technical difficulties, we encountered in late
March 2002 an additional 1-month slippage to July 2002. We notified our
Executive Steering Committee and Oversight Board of the problem and our
corrective actions. The delay will provide time for the development,
testing and implementation of the Release 1 pilot this summer.
Currently, most of the software has been developed and testing has
begun. Planning for production implementation in conjunction with the
startup of the 2003 filing season has also started. The release will
include both 1040EZ electronic and paper single refund filers--about 10
million taxpayers. Therefore, based on this plan our most important
business objective, which is to move the first block of taxpayers onto
a new data base will be achieved.
Integrated Financial System (IFS)
IFS has three clear goals: (1) provide core financial capabilities
and financial reporting; (2) meet Joint Financial Improvement Program
requirements; and (3) provide an integrated framework for retirement of
current financial systems.
IFS will be accomplished in two releases, each representing a
distinct usable segment. Release 1 will replace the Core Financial
Systems (CFS) as defined by the Joint Financial Management Improvement
Program (JFMIP). In addition to CFS, Release 1 will include budget
formulation as well as implementation of a Cost Accounting System to
allow the IRS to move into compliance with Statement of Federal
Financial Accounting Standard Number 4. Release 1 creates a logical
design for the core financial applications including Cost Accounting.
The core financial applications consist of General Ledger (G/L),
Accounts Payable (A/P), Accounts Receivable (A/R), Cost Management,
Funds Management, Core Financial Management and Financial Reporting.
Custodial Accounting Project (CAP)
GAO identified the lack of an acceptable accounting system for the
$2 trillion collected in tax revenue as one of the most significant
material weaknesses in IRS' financial management. CAP will provide the
IRS with the critical control and reporting capabilities mandated by
Federal financial management laws.
It will also support the appropriate custodial subledgers
containing data from tax operations and help the IRS meet compliance
issues with both the Federal Financial Management Improvement Act
(FFMIA) and Federal mandates related to custodial revenue management.
CAP will also help us to better manage, control and focus resources.
Enterprise Data Warehouse (EDW)
The ability of the IRS to make effective use of information about
its operations is limited by the numerous fragmented databases that
evolved over time. EDW provides the foundation for data mining and
decision analytic tools. In addition, it enables risk-based analysis
for case selection and provides the tools to report on IRS balanced
performance measures.
e-Services
The e-Services project will support our ability to meet the overall
goal of conducting most transactions with taxpayers and their
representatives in an electronic format, as required by RRA 1998. e-
Services will provide to third parties over the Internet the four most
requested applications: electronic taxpayer identification number
matching, electronic transcript delivery, disclosure authorization and
Electronic Account Resolution. e-Services also directly supports the
President's Management Agenda's government-wide initiative to expand
electronic Government.
Customer Account Management (CAM)
The Customer Account Data Engine cannot be deployed beyond its
initial limited releases without Customer Account Management. CAM
allows us to go into CADE and update the data and will help taxpayers
to receive timely and accurate responses to requests and inquiries.
The CAM Individual Assistance and Self Assistance Operating Models
will provide improved technology and business processes that will
enable the IRS to: (1) better manage customer service functions; (2)
maintain and utilize customer data to improve taxpayer interactions
with the IRS; (3) provide comprehensive account and tax law assistance
to taxpayers and practitioners; and (4) manage the case work flow of
customer inquiries.
Delivering customer assistance through a live IRS Customer Service
Representative (CSR) is the Individual Assistance operating model's
main function. In order to provide world-class service, CSRs must be
equipped with the tools to access taxpayer information quickly and
accurately in response to complex customer inquiries. Individual
Assistance will provide this capability from a desktop information
system.
By being able to access and update comprehensive, current account
information, CSRs will be able to respond quickly and accurately to
customer inquiries. Workflow management tools and processes will also
allow them to automatically inform relevant parties throughout the
organization of actions taken on a particular customer's account and
manage outstanding cases for follow-up work or to identify the status
of an inquiry for a taxpayer.
The CAM Self-Assistance operating model delivers many of the same
capabilities. The main objective, however, is to provide taxpayers with
the flexibility and convenience of accessing by telephone or the
Internet on a 24/7 basis IRS-related information to resolve relatively
simple inquiries.
Filing and Payment Compliance (FPC)
FPC is an end-to-end strategy to resolve collection issues quickly
and fairly. Using industry best practices, it augments, refines and
replaces existing processes and technology to enable the IRS to
interact with taxpayers in a seamless and efficient manner. Protection
of taxpayer rights is an important component of this strategy. The
ultimate goals are to resolve all balance due cases above a minimum
threshold, shorten the filing compliance lifecycle to ensure resolution
before the next filing due date and shorten the payment compliance
lifecycle to 6-months for non-enforcement cases.
Information Technology Projects
The Business Systems Modernization program is aimed at developing
major, IRS -wide systems that are the underpinnings of overall tax
administration. BSM also sets forth the enterprise architecture that
defines required standards of equipment, software, communications and
data. This program is not intended to meet every need for every
business application in the IRS, even in the long term. However, by
establishing a well-defined architecture, it assures that specific
business applications developed for specific business purposes will
operate consistently and use common equipment while meeting required
standards, such as security.
Through the strategic planning process, the IRS operating units
identify specific business needs and prepare business cases for
business applications that will not be met through the overall BSM
process. There are many more projects with high returns than can
possibly be funded. Therefore through the strategic planning process,
these are then evaluated and those with the highest returns are
selected. Many of the gains in performance projected in fiscal year
2003 and fiscal year 2004 are enabled by these so-called Tier B
projects. Tier B project implementation time is 2 to 3 years and the
projects are monitored within the Business Performance Review process.
The President's fiscal year 2003 budget includes a $10 million
increase for Tier B projects beyond the fiscal year 2002 operating
level of $39.8 million. They cut across the entire spectrum of IRS
activities and functions. For example, Information Systems projects
will support Criminal Investigation's activities by modernizing the
equipment used to analyze forensic evidence. They will support the
electronic filing of business forms and schedules and e-services will
provide products and services to practitioner as well as the foundation
for safe and secure electronic customer account management.
Other projects will redesign and consolidate systems to support
casework and the Taxpayer Advocate Service. Correspondence will be
imaged and we will be able to convert existing collection systems to
electronic case processing. The Employee Plan Determination System
Redesign will also reduce cycle time and improve the quality of
determination letters from our Tax Exempt and Government Entities
operating division. The Remittance Transaction Register will improve
submission processing efficiency by providing information payment
online.
legislative proposals and proposed adjustments (no net increase in irs
programs)
The President's budget requests $503 million (a $39 million
increase over the fiscal year 2002 appropriation as adjusted) for
proposed legislative changes that change the accounting of certain
pension and retiree benefit costs. These costs are transfers of funds
that were previously included in other agency budgets and do not
represent any net increases in IRS programs. The $39 million increase
will be used as follows:
--Federal Employees' Compensation Act (FECA) Surcharge (+$3M).--The
fiscal year 2003 President's Budget includes language in the
General Provisions of the Treasury-Postal Appropriations bill
to permit the Department of Labor to add an administrative
surcharge to the amount it charges each agency for its Federal
Employees' Compensation Act (FECA) benefits. Previously this
administrative cost was borne by the Department of Labor.
--Legislative Proposal on Full Costing of Retirement and Health
Benefits(+$32M).--The budget also proposes legislation to
require agencies, beginning in fiscal year 2003, to pay the
full Government share of the accruing cost of retirement for
current CSRS, CIA and Foreign Service employees, and the Coast
Guard, Public Health Service and NOAA Commissioned Corps.
--Inter-Departmental Reimbursements (+$5M).--This adjustment will
allow permanent transfers of funds from the General Services
Administration, the National Archives and Records
Administration and the Department of Agriculture for services
provided to IRS.
conclusion
Mr. Chairman, in conclusion, the President's proposed fiscal year
2003 budget for the IRS reflects the Administration's continued
commitment to modernization of the agency. Moreover, it underscores
that through new technology, improved management and reengineering our
business practices, we can perform our mission efficiently and
effectively with only limited increases in resources. Three years ago,
the Restructuring Act set an important new direction for the IRS.
Today, I firmly believe that the IRS is on the right track and this
budget will help us stay the course. Thank you.
Questions Submitted by Senator Byron L. Dorgan
business strategy adjustment
Question. Secretary O'Neill has mandated that each Treasury
Department agency achieve a certain level of savings through what he
refers to as a ``Business Strategy Adjustment.'' I understand that for
the IRS this adjustment would amount to the IRS finding an additional
$39 million in savings.
How do you plan to meet this goal? What cuts in people, programs or
service will you have to make?
Answer. The IRS expects to meet this goal through improved business
practices: more effective uses of human capital, better financial
management practices, expanded applications of technology uses across
the Department, and competitive sourcing of appropriate business
efforts.
bi-monthly audits of irs walk-in sites
Question. The first bi-monthly audit of IRS walk-in taxpayer
assistance sites, issued last month by the Treasury Inspector General
for Tax Administration as a result of funds we added to their budget,
states that of the 84 visits made to 40 taxpayer assistance centers
correct responses to questions posed were only received 46 percent of
the time. The audit observes improvement in other areas such as
courtesy of the IRS employees and cleanliness of the facility, but I am
sure you will agree that getting an incorrect answer to a tax inquiry
more than 50 percent of the time is still outrageous.
What steps are you taking to improve the assistance provided to
taxpayers at the assistance sites?
Answer. Based on TIGTA's March and April visits to 37 TAC offices,
we continue to show improvements in providing correct answers to tax
law questions. However, we believe the statistics in the report do not
reflect the accuracy of our answers. We disagreed with the TIGTA
assertion that a referral to a publication is the same as providing an
incorrect answer. We also disagree that referrals to publications
should be included in computing the accuracy rate. The percentage of
correct answers based on the March and April TAC visits, without
counting referrals to a publication as incorrect, is around 65 percent
as opposed to the 55 percent identified in the report. This is clearly
an unacceptably low accuracy rate, and IRS is committed to make
improvements.
During early February we met with TIGTA representatives to review
the results of the January audit. After that meeting, we conducted a
series of meetings with executives and managers at all levels advising
them of January accuracy rates, soliciting ideas to improve tax law
responses, and establishing zero tolerance for unprofessional conduct
and performance. We added a requirement for all technical employees in
Taxpayer Assistance Centers to complete one hour of uninterrupted,
self-directed learning time each week. This hour is dedicated to tax
law issues in: earned income credit, dependent qualifications,
education credits, social security income, pension income, capital
gains, filing status, individual retirement accounts, child care
credits, child tax credit, rate reduction credit, student loan
interest, and itemized deductions. The technical employees used
Publication 17, Your Federal Income Tax, as their primary study guide.
To supplement self-directed learning time, we are obtaining additional
training aids, publications, and compact discs. The aids will include
practice scenarios on a wide range of tax law topics including those
mentioned above. We are including in this initiative Small Business/
Self-Employed Division Employees assigned to work the customer service
counter in Taxpayer Assistance Centers. We are also developing a
training program, with some assistance from the North Dakota State
University, that would allow remote access to electronic training.
aggressive audits of eitc recipients
Question. Some Members have rightly expressed concern that, in a
period when audits appear to be declining, the IRS is taking steps to
aggressively increase the number of audits of EITC (earned income tax
credit) recipients as opposed to taxpayers earning over $100,000 a
year. I have seen reports that 1 in 50 EITC recipients are audited.
This is about triple the rate of audits of taxpayers earning over
$100,000. Secretary O'Neill blamed Congress for this increase in audits
of EITC recipients.
Do you think it is fair and just to audit aggressively the poor yet
take a pass on auditing the rich?
Answer. We audit EITC returns because IRS studies have found errors
on nearly 50 percent of the returns filed.\1\ The Congress has
appropriated specific funds to be used to improve EITC compliance. The
funds are used to educate and assist taxpayers in determining if they
are eligible for EITC, as well as funding examinations of those returns
that appear to have claimed the EITC in error. During the 5-years the
EITC appropriation for compliance, outreach, research, and educational
efforts has been in effect, we protected and/or collected about $5
billion in revenue from math error adjustments and compliance
activities. However, noncompliance is still an issue. Our most recent
study on compliance estimates that taxpayers overclaim up to $9 billion
a year in EITC.
---------------------------------------------------------------------------
\1\ Compliance Estimates for Earned Income Tax Credit Claimed on
1999 Returns (February 28, 2002).
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Our Service Center Tax Examiners generally conduct EITC
examinations by mail. This methodology differs significantly from the
examinations that our Tax Auditors and Revenue agents conduct in our
field offices. The examinations conducted in our field offices tend to
be more complex and the scope of the examination is not limited to a
few issues, as is the case with EITC examinations. Examinations our Tax
Auditor/Revenue Agents perform in our field office are interviews with
the taxpayer and/or his representative either in the IRS office or at a
place of the taxpayer's choosing. This method tends to limit the number
of examinations we can complete. In the service center, lower-salaried
employees can work correspondence examinations and review documentation
sent in by taxpayers on all shifts. Since this type of audit does not
require person-to-person contact, more examinations can be started,
worked, and closed.
Our interaction with low-income taxpayers is not limited to audits;
we also make taxpayers aware of tax benefits to which they may be
entitled. We send notices when we receive tax returns that show the
taxpayers might be eligible for the Earned Income Tax Credit. The
notices allow the taxpayers to review the EITC eligibility criteria and
determine to claim the EITC. We have also increased our number of
partnerships with non-profit groups, faith-based organizations, and
local governments to provide information about EITC and free tax return
preparation. For example, the local governments in Chicago and Los
Angeles have partnered with us to provide information to their citizens
about EITC. They have partnered in turn with local non-profit groups to
provide free tax preparation. Additionally, we have placed public
service and paid radio and television ads about EITC from January
through April 2002. These ads have run on network and cable television
stations, and we have received a positive response from taxpayers and
community organizations. These radio and television spots have provided
information to individuals who may be eligible for EITC but who do not
have a filing requirement. The ads reached a population that would not
have any reason to contact us, and provided them the basic eligibility
requirements for EITC. Also, we broadcast a thirty-minute paid
television show about electronic filing that included EITC information
on cable stations, including Telemundo (a Spanish television station).
We undertook this effort based, in part, on research that reported
Hispanic individuals are not claiming the EITC due to lack of
knowledge.
We are focusing significant resources on noncompliance in the high-
income population even though our systems and workload identification
methodologies are limited by the age of our compliance data. We will
continue to make the most informed resource allocation decisions
possible, using all available compliance research information. We will
supplement this information by conducting short-term targeted studies
to help us select the best strategies for addressing identified areas
of high compliance risk.
As reflected in our strategic priorities for fiscal year 2003, we
are refocusing our compliance resources to address issues with high-
income taxpayers:
--In fiscal year 2002, we began matching Schedule K-1 information for
taxpayers who invest in partnerships, S-corporations, and
trusts. We are using this data on a limited basis to help
identify for examination taxpayers who underreport this income.
We plan to expand significantly the use of matched K-1 data
significantly in fiscal year 2003.
--We plan to continue to address promoters of and investors in
illicit schemes designed to improperly eliminate or reduce tax
liabilities.
--We plan to institute a program to address taxpayers with incomes
greater than $1 million who use flow-through entities to
structure transactions that mask or improperly reflect taxable
income.
Through the National Research Program, we will begin to gather
comprehensive compliance data for the first time since 1988. We intend
to use this data to develop new cost-effective strategies for
allocating our enforcement resources to improve the compliance of
taxpayers in all income groups. In addition to ensuring a more
efficient use of our resources, we expect that these strategies to
reduce taxpayer burden associated with unnecessary audits.
Question. Is the IRS performing sufficient audits and are you
targeting the right groups for audits?
Answer. To determine optimal audit rates, we must quantify the
direct and indirect revenue effects of all enforcement and non-
enforcement activities. Unfortunately, our ability to quantify those
effects is in its infancy. We have to overcome significant data and
statistical problems. We cannot yet determine the administratively
optimal audit rate, or more precisely, the optimal mix of audit rates.
Nonetheless, we are very concerned that recent audit rates have
been below what most everyone agrees would be optimal. As a result,
taxpayers who timely meet all of their tax obligations bear an
inordinate share of the overall tax burden. As a first step in
increasing these audit rates, the President's Budget Initiative for
fiscal year 2003 reallocates 635 FTEs for the examination of abusive
trusts (400 FTEs) and high income returns (235 FTEs). More than 50
percent of these FTEs result from redirecting Examination reengineering
savings.
Through the National Research Program, we will begin to gather
comprehensive compliance data for the first time since 1988. This new
data will allow us to update our workload selection formulas, develop
new cost-effective strategies for improving compliance for all taxpayer
segments, and more accurately allocate enforcement resources to areas
of high compliance risk.
We will continue to analyze our processes and identify ways to
improve the efficiency and effectiveness of our examination programs.
Traditionally, we developed field examination work plans by return type
and activity code. Starting in fiscal year 2003, we will develop
examination work plans around specific non-compliance issues including:
--Understatement of business income
--Abusive Tax Schemes (including Abusive Trusts, Off-shore Activity,
and Domestic Promotions)
--Non-filing
--Use of flow-through entities (Partnerships/S Corporations) by high
income taxpayers to create structured transactions designed to
reduce or eliminate tax liability.
A key weakness of our current return selection process is the
inability of Discriminant Function (DIF) to identify returns with a
high potential for unreported income. Almost 60 percent of the gross
individual income and employment tax gap for Small Business/Self-
Employed (SB/SE) taxpayers arises from the understatement of business
income, due to the underreporting of gross receipts and the
overstatement of business expenses. SB/SE and the Office of Research
recently completed testing of new Unreported Income DIF formulas
(UIDIF) they designed to identify returns with a high probability of
unreported income. The higher the UIDIF score, the greater the
probability of unreported income. The UIDIF formulas create a new work
source for SB/SE field examination. We will begin using the UIDIF
formulas on October 1, 2002.
By the end of fiscal year 2003, we will have completed the
reengineering of our SB/SE Examination processes. A key component of
this effort involves enhancing our return selection system to reduce
taxpayer burden by focusing our resources on the most non-compliant
returns. It also introduces new inventory management practices and
enhanced auditing techniques that will further improve the quality and
timeliness of our examinations.
business systems modernization
Question. Your budget requests an additional $450 million to
continue your agency's systems modernization program. By the end of
this year, the IRS--and the American taxpayer--will have invested
nearly $1 billion in this modernization effort.
What has the average taxpayer experienced as a result of this
effort?
Answer. Over the past 2 years, BSM graduated from strategic
planning and systems design to business results. We have put several
projects into production.
--In fiscal year 2001, the Customer Communications fiscal year 2001
(CC01) Project was placed into operation. This project greatly
improved the efficiency and effectiveness of our systems for
receiving, routing, and responding to millions of taxpayer
calls. The project went ``live'' just in time for the issuance
of the advance tax refund notices and the resulting onslaught
of telephone calls. We successfully handled over 39,000 of
these calls during CCO1's busiest hour the first day of the
job. This new capability also helped us better route callers to
our 9/11-disaster hotline.
--In fiscal year 2002, we are fully deploying a commercial tax
computation software package, the Customer Relationship
Management- Examination software. This software allows revenue
agents to quickly and accurately calculate tax assessments for
very complex tax scenarios, such as loss and credit carryback/
carryforward, Alternative Minimum Tax, and Foreign Tax Credit.
It also allows them to effortlessly re-compute the tax
liability often required during the final stages of an
examination. This will save time for the taxpayer and the
government and increase accuracy. The software is a known and
respected tool used by the private sector (taxpayers,
accounting and legal firms.) We deployed the software and
provided training to 2,777 Revenue Agents in our Large and Mid-
Sized Business Division. The remaining LMSB Revenue Agents will
receive the software and training by September 1, 2002
--In fiscal year 2002, we implemented a new Internet-based service
that allows taxpayers who filed Form 1040, Form 1040-A or Form
1040-EZ and are due a refund to find out if we have processed
their tax returns and when we will mail or direct deposit their
refund. Taxpayers can also learn if a problem exists with their
refund, find steps to resolve problems, and see if their check
was returned to the IRS as undelivered. This new application is
available through the IRS web site 24-hours a day from anywhere
in the world. This capability marks the first time taxpayers
have been able to access their accounts directly through the
Internet in a secure environment. This web application, which
we expect to be fully operational for the 2003 filing season,
is a major step forward for IRS modernization. By the end of
July we have had over 500,000 inquiries. The management
information reports and on-line user-survey included with this
application reveal:
--Over 85 percent of the taxpayers are satisfied with the ease of
this application.
--10 percent of the IRS refund inquiries since deployment are coming
via the Internet.
--95 percent of the users receive response within 5 seconds.
--71 percent of users receive response within 1 second.
--This summer we will begin the pilot stage of the Customer Account
Data Engine (CADE), using a modernized database. CADE will
create applications for daily posting, settlement, maintenance,
refunds processing, and issue detection for taxpayer tax
accounts and return data. With CADE, taxpayers will receive
faster refunds and our employees will have access to more
accurate data. Due to the size and complexity of the software
that analyzes and posts data onto the Master Files, and to
minimize the risk of potential problems, we will first move
simple accounts onto the CADE database, beginning with a subset
of Form 1040EZ filers. Access to timely, consistent, and
centralized corporate data is the key to modernization and CADE
is the implementation vehicle. The CADE pilot will ensure
readiness for the 2003-filing season. CADE will be deployed
over time in five releases, each related to a specific taxpayer
segment, phased in over a period of 6 years. At the conclusion
of Release 5, CADE will have replaced the Individual Master
Files. Subsequent releases of CADE will eventually replace the
Business Master Files and Non-Master Files.
--Because of enhancements to our security and telecommunications
infrastructures, the e-services project will have its initial
release late in 2002, offering some web-based products to tax
practitioners who actively participate in the IRS e-file
program, such as self-filing registration. These web based
business products will encourage third parties to increase
their e-filing. In addition, these enhancements will allow IRS
to better manage its stakeholder relationships and conduct
marketing and educational outreach activities to integrate
information, coordinate activities, deliver service and measure
performance. The e-services project will allow practitioners
the ability to complete applications, submit disclosure
authorization requests, make taxpayer inquiries for notice and
account problems, verify taxpayer identification numbers (TIN
Matching), and request and receive taxpayer transcripts. It
will be easier for practitioners to transact business with the
IRS and to receive faster responses from us. E-services
functionality will be delivered in two releases, the first
scheduled for late 2002 and the second planned for the spring
of 2003.
Question. If Congress appropriates these additional funds, what
further enhancements to their service can they expect to see in the
next year or two?
Answer. See below:
--In fiscal year 2003, we plan to launch an Internet EIN application
to provide a web-based opportunity for employers, tax
practitioners, and financial institutions to apply for and
receive a validated employer identification number (EIN)
directly from the IRS. This initiative will initially
complement and eventually reduce the number of paper,
facsimile, and telephonic requests for EINs. Businesses will be
able to log onto a secure, government website from their
office, bank, or state agency and file an electronic request
for an identification number. The IRS will initially issue an
EIN to the filer via the mail.
--Over 5 years, releases of the CADE project will result in faster
refund processing and authoritative account data for 1040
returns filed on paper or electronically. The additional
funding will enable us to continue the buildout of the new
customer accounts data base (CADE) and ongoing retirement of
the Individual Master File. Hence, an increasing number of
taxpayers will receive refunds faster and improved customer
service.
--The additional funds will also be directed toward design and
development work on a new customer service and e-filing
capabilities, although these projects will not deliver benefits
until they are implemented in fiscal year 2004
--In addition to direct taxpayer benefits, a major portion of the BSM
Program is dedicated to improving our internal operational
effectiveness and remedying material weaknesses. These
improvements are necessary to meet the requirements of the
Federal Financial Management Improvement Act. For example:
--The Custodial Account Project (CAP) will integrate taxpayer
account information with the general ledger and make it
accessible for analysis and reporting for the CFO. This
project will provide integrated, reliable, and timely tax
operations data to support evolving analytics, performance
measurement, and management information needs.
--The IFS Project (Integrated Financial System) will implement a
commercial-off-the-shelf financial system for the general
ledger, accounts payable and receivable; funds management,
budget execution and formulation; cost management;
financial reporting; core financial management; and
property and asset management.
--The HR Connect Project will pilot new human resources online
functionality, enabling self-service capability for many
routine HR transactions.
These projects will significantly improve compliance with
applicable Federal Financial management laws and standards and support
to GAO audits.
impact of september 11 on the irs
Question. The IRS was one of many Federal agencies directly
affected by the tragic events of September 11. Many of your operations
in New York were interrupted and Congress has appropriated over $38
million to assist in the recovery efforts.
How has the recovery effort gone? With so many critical records now
contained on computers, what efforts are you undertaking to provide for
systems back-up and redundancy in the event of a future incident along
these lines? How secure are your systems from a terrorist or cyber
attack?
Answer. Following the catastrophic events of September 11, we moved
quickly to repair and re-equip the offices destroyed in the WTC area
for approximately 200 employees. We provided grief counseling for
employees in the Manhattan area and other areas throughout the Nation.
Enhanced physical security for all IRS buildings, which was put in
place immediately following September 11, will continue to be a high
priority, as will proper screening of all new employees. Following the
September 11 attacks, we collaborated with other federal agencies to
provide non-reimbursable related emergency assistance to taxpayers in
the Manhattan area.
The anthrax attacks impacting U.S. Post Offices and some Federal
offices presented us with yet another challenge, since we process
millions of pieces of mail during the first five months of each year.
To protect our employees, and ensure that we can continue to respond
timely to taxpayers, we conducted a Campus Security Readiness
Initiative to help prepare campuses to safeguard against potential
biologic attacks through the mail. This preventative program was multi-
organizational and included:
--Redesign and construction to isolate campus mail handling
facilities
--Review and update of disaster recovery, business resumption and
occupant emergency plans at every campus
--Distribution of gloves, coats, and masks to campus mail workers
We undertook a similar initiative to prevent and handle potential
biological attacks at IRS field offices. As a result of these efforts,
campuses reported a significant increase in the number of incidents
involving suspicious activities during the filing season. However, the
impact on tax processing operations was minimal, and we safely
completed the tax filing season.
The IRS has long maintained intense focus on protecting taxpayer
information. We continue to take short and long-term actions to further
protect our personnel, facilities, and information. However, we need
more safeguards to fully address the threats inherent of increased
terrorist activities within the U.S. We take a comprehensive approach
to protecting our information systems, beginning with the physical
security of key processing locations, careful screening of personnel,
security within the information systems themselves, and internal
reviews to ensure employees follow policies.
To improve the security of IRS assets, we have:
--Improved adequate backup capability to support core tax processing
recovery at IRS computing centers. The systems affected
represent the entire customer database for all operating units.
Our efforts are focused on real-time backup of these computer
center systems to provide improved disaster recovery
capability. We received funding to support this effort as part
of the special Congressional appropriation, and the project is
well underway. Procurements are scheduled for completion by
June 30, 2002, with full implementation of the backup
capability expected by December 31, 2002.
--Increased guard services at IRS mission critical infrastructure
facilities. However, to adequately protect the facilities from
increased threats and risks, we may need additional guard
forces. An independent Guard Force Analysis, completed in 2001,
detailed additional requirements to adequately protect critical
facilities. We are re-validating this study to consider the
changes in the threat environment since September 11. If
necessary, we will reprogram to cover unanticipated fiscal year
2003 needs.
--Taken or will soon take actions to further fortify physical
security in Computing Centers, including installing stronger
entrance protection, surveillance cameras or alarms, etc. The
National Critical Infrastructure Assurance Office designated
three IRS facilities as Critical Assets, necessitating these
upgrades. These upgrades will provide safeguards that are
commensurate with the increased threat. We will fortify high-
risk facilities to better withstand the most common type of
terrorist attacks. This fortification includes strengthening
windows to either withstand blasts or minimize injuries as a
result of blasts.
--Prioritized our major business processes. We are identifying the
vital records associated with critical processes and supporting
information systems to ensure we have adequate redundancy and
backups in place to continue our operations, including those
relying on paper records.
--Focused efforts on improving our response and recovery processes by
implementing situation awareness and management centers in four
IRS locations. These centers contain information,
communications, and other decision support for emergency
situations.
--Implemented a computer security incident response capability that
works with the IRS's information technology owners to monitor
IRS network and Internet activity 24 hours a day, seven days a
week.
--Centralized the reporting of computer security and physical
security incidents to a single location. Events that threaten
the safety of personnel or interrupt business operations are
reported through this center and are immediately sent to an
executive who evaluates the threat and determines appropriate
actions.
--Implemented a layered defense to protect our critical assets. That
is, we use various methods at different entry points to prevent
attacks to our systems or facilities.
--Actively sought information regarding notices of hardware or
software vulnerabilities so we can take steps to implement
appropriate safeguards. We have an ongoing security awareness
program to remind our personnel of their security
responsibilities. We also significantly improved our virus
protection program over the last year and now manage it
centrally, which allows us to provide the latest virus
protection updates to computers connected to our network.
We continue to aggressively identify and evaluate threats and
vulnerabilities related to our personnel, facilities, and systems to
prevent of mitigate any damage.
homeland security
Question. Your budget request includes $10 million to annualize the
costs for enhanced security arrangements associated with the Homeland
Security Supplemental.
What role does the IRS play in Homeland Security?
Answer. The IRS's role is:
--Maintaining taxpayers' confidence in government agencies and
continuing to collect and account for internal revenue critical
to running our government. We have several infrastructure
protection assets that are essential to the economic security
of the United States.
--Assisting other federal law enforcement agencies in investigating
terrorists' financial activities and providing computer
forensic support when requested.
--Supporting Homeland Security through the IRS Criminal Investigation
(CI) division's participation in the Federal Bureau of
Investigation's Joint Terrorism Task Forces (JTTF) and
``Operation Green Quest,'' the Department of Treasury's
initiative to identify, disrupt, and dismantle terrorism
fundraising activities.
--Providing IRS special agents to support security efforts at
important national events such as the UN 50 Celebration and the
Olympic Games.
In the aftermath of the September 11 attacks, CI:
--Assisted the FBI in the investigation of the attacks.
--Detailed agents to the FBI's Financial Review Group and Strategic
Information Center (SIOC) to help evaluate financial
information.
--Provided agents to assist in recovery efforts at the World Trade
Center and the Staten Island landfill where debris was examined
for evidence and to identify victims of the attack.
--Helped the Office of Foreign Asset Control develop evidence to
block the bank accounts of Hawalas and other organizations used
by terrorists or suspected of engaging in terrorist fund
raising activities.
--Helped protect employees and enhance security at Federal buildings
and IRS Service and Computing Centers.
--Detailed 67 special agents to support the Federal Air Marshal
Program.
--Assigned 205 special agents to enhance security at the Winter
Olympic Games.
--In May 2001, CI purchased an exclusive license to update and
maintain the source code for the ILook Investigator computer
forensic software. ILook is a suite of software tools that
allows a computer forensic examiner to analyze and extract
files from images of seized computer hard disks and other
storage media. It is the most technically advanced computer
forensic analytic tool available today. Under the terms of the
license, CI is obligated to make ILook available free of charge
to other law enforcement agencies. (The license also prohibits
any sale or other commercial distribution of ILook outside the
law enforcement community.) In the last year, the use of ILook
within the law enforcement community has increased
dramatically. CI has approximately 5,000 licensees in over
thirty countries. ILook is in use in all of the Treasury law
enforcement bureaus and has been adopted as the primary
computer tool by the DOD Computer Forensic Laboratory, NASA,
and the FBI. Since September 11th, CI has established a strong
working relationship with the intelligence community, which is
using ILook to analyze computers seized in military and
intelligence agency operations overseas. Most of the computers
seized in recent terrorist-related investigations have been
analyzed using ILook. ILook has been designed to allow the
insertion of foreign language character sets so that documents
in Arabic, Farsi, several dialects of Chinese, and many other
languages can be searched and printed.
Question. What is your relationship, and the IRS relationship, with
Governor Ridge and the Office of Homeland Security?
Answer. We do not have a direct relationship with the Office of
Homeland Security (OHS). We support the OHS at the invitation of the
Department of the Treasury. For example:
--We worked with Treasury to respond to the Homeland Security
Advisory System (HSAS). We drafted protective measures
associated with the proposed HSAS levels that integrate our
physical security, incident management, or law enforcement
personnel's response to terrorist threats. We are awaiting the
final HSAS guidance before implementation.
--We also worked with the OHS during a recent two-day conference,
hosted by the RAND Corporation, for law enforcement, first
responders, and health care professionals. During this
conference, we provided comments and recommendations about law
enforcement vulnerabilities within the area of economic crime.
--On April 11, 2002, we provided to OHS an overview of CI's criminal
jurisdiction, investigative expertise, and a summary of efforts
to combat terrorism.
funding for cash transaction reports
Question. Since September 11, tracking large cash transactions has
become increasingly important to our national security. It is my
understanding that the Currency Transaction Reports (CTRs) that
document the transaction of large amounts of money by banks and other
financial institutions are processed through the IRS Computing Center
in Detroit. I am aware that there is concern within the IRS that there
may not be sufficient funding in this fiscal year to continue the CTR
processing at its current level of activity. Further, I am told that
the fiscal year 2003 budget request may also not be adequate to process
these documents. I consider this function of the IRS a very high
priority and do not want to see any reduction in the processing of the
CTRs.
Please explain in detail whether there is adequate funding in this
fiscal year to continue the processing of CTRs through the end of
September without any reduction in the effort, and provide the
Subcommittee with an estimate of the shortfall, if you predict there
will be one.
Answer. We do not expect a shortfall in funding to process CTRs in
this fiscal year.
Question. Also, please address whether the fiscal year 2003 budget
request for this processing function will be adequate.
Answer. At this time, we believe the fiscal year 2003 budget
request will be adequate to maintain the basic level of service for
this processing function.
contract with und
Question. I am interested in knowing the status of the IRS
workforce training initiative that will be implemented, in part, at the
University of North Dakota (UND).
Can you provide to the Subcommittee a description of the tasks to
be performed, the timetable, the status of the contract with the
University, the proposed overall budget and the portion of the budget
that would be dedicated to the work conducted at UND?
Answer. The task directs the contractor to develop a blended
learning solution to train employees in our customer service telephone
operations who respond to inquiries about account adjustments from
individuals and businesses. The learning solution will combine web-
based, self-directed e-learning, classroom training and related
instructional forms and resources as appropriate. We plan to award the
contract by July 1, 2002, and to complete the tasks by the end of the
calendar year. The overall budget for this effort is $1.2 million; we
expect the University of North Dakota to receive at least $500,000 of
the contract.
Question. It is my understanding that the workforce training model
being developed calls for the conversion of traditional instructional
methods to an e-learning delivery platform. Do you feel that this is a
model that could be replicated in other federal agencies?
Answer. The contract is part of the IRS Enterprise E-Learning
Strategy. The strategy supports the government-wide E-Government
Strategy, announced by the Office of Management and Budget in February
2002. OMB's ``E-Gov'' initiative involves twenty-four high-payoff
initiatives to improve the efficiency and effectiveness of the federal
government through the use of improved technology and includes ``E-
training'' as part of the strategy in support of the President's Human
Capital initiative.
The IRS, in coordination with the Department of the Treasury, is a
member of the Training Technology Implementation Group at OPM. The IRS
is partnering with Government On-Line (GO) Learn to meet our Learning
Management System (LMS) and e-learning content development needs. We
will be using the Specialized Technical and Technology Users Services
(STATUS) contract at the Department of Transportation. IRS is also
partnering with the Advanced Distributed Learning Co-op Lab (ADL CoLab)
to establish standards and specifications for e-learning solutions that
could be used governmentwide.
Strategic Human Resource (SHR) developed criteria that considers
the number of employees who would use the training, potential travel
savings, portability and reusability across business units, and
increases in productivity (reduced time spent in training to achieve
the same level of competency) to maximize return on the E-Learning
investment.
______
Questions Submitted by Senator Jack Reed
Question. Mr. Commissioner, many Federal agencies have been
encouraged to work in an environment with less resources and less
staffing, but still accomplish the same amount or even more work than
in the past. It has been noted before that IRS staff has decreased
significantly in recent years, while the number of tax returns has
increased. How does the Service continue to expect to reconcile those
two facts, while still maintaining its goal of higher customer
satisfaction? Do you feel that the Service has an appropriate amount of
staffing and other resources to continue to work to achieve this goal?
Answer. There will always be far more potential work then can be
handled regardless of how many resources are applied. But, we have re-
engineered our business practices and used technology to perform our
mission more efficiently in line with the best private and public
sector practices. Reengineering has also helped us to leverage
resources against workload so we can achieve higher levels of service
without significantly increasing staffing.
Some of our other cost-saving initiatives include:
--Reducing the number of Submission Processing centers as the number
of paper returns decrease and e-file returns increase.
--Expanding our use of automated telephone service to address the
downstream impact of increased filings (increase in telephone
calls and correspondence inquiries).
--Developing Internet applications that allow taxpayers to secure
information on-line. This effort will allow more customers to
receive service on basic inquiries without affecting our
resources. For example, the recently released Internet Refund
Fact of Filing (IRFOF) program allows taxpayers to determine
the status of their refund on-line. Resources that we would
have used to respond to this inquiry can now be reprogrammed to
work on other high priority programs.
--Decreasing the number of tax returns prepared in our Taxpayer
Assistance Centers. In fiscal year 2002, we had a 10 percent
decline in demand for return preparation services. Our expanded
partnerships with volunteers in our Volunteer Income Tax
Assistance (VITA), Tax Counseling for the Elderly (TCE), and
English as a Second Language (ESL) programs have allowed us to
reprogram some of the resources we previously used to prepare
returns.
In addition, we have developed partnerships with other external
stakeholders who have communication channels in market segments with
the highest compliance risks. This effort allows us to reach a much
larger audience and deliver educational and informational messages to
the market segment while having a minimal impact on our resources. For
example, we recently provided briefings to representatives of the AMA,
ADA and Construction Industry on Tax Schemes and Scams. By partnering
with these representatives we are able to reach larger numbers of
taxpayers through their newsletters.
Question. Mr. Commissioner, there has also been some attention
recently to efforts by some people to encourage individuals and small
businesses not to pay taxes, based on the erroneous assumption that the
Constitution does not mandate it. Do you think those efforts are
catching on at all? What is the IRS doing to counteract these efforts?
What other actions in the realm of enforcement does the IRS plan to
emphasize in the coming year?
Answer. The number of taxpayers using the classic Constitutional
arguments of the 1st, 4th, 5th, 13th, 14th, and 16th Amendments have
remained relatively stable. Newer arguments against taxation, such as
the Internal Revenue Code (IRC) Section 861 argument that Americans are
exempt from taxation on income earned within the United States, caught
on during the late 1990's and we received substantial filings of Zero
Tax cases.
In fiscal year 2000, we created the Frivolous Return Unit (FRU) at
the Ogden IRS campus to focus specifically on combating false and
frivolous claims. The Frivolous Return Program (FRP) centralized the
processing of these claims and has protected $3 billion of revenue for
fiscal year 2001. It also developed nationwide employee training keyed
to this problem.
Other IRS activities to counteract these abuses include:
--Identifying the promoters and the schemes through summonses of
records, audits of promoters, disclosure regulations, and
active analysis of leads from all sources
--Identifying participating taxpayers by auditing promoter records,
screening tax returns, and matching of documents
--Establishing an Abusive Tax Schemes Lead Development Center (LDC)
within the Small Business/Self-Employed Division to increase
our vigilance on web-promoted tax schemes. A key role of the
LDC is to conduct Internet research to identify and develop
potential Abusive Tax Scheme ``leads.'' The LDC began operating
in early April 2002. We anticipate the LDC will provide
significant new leads on abusive promoter cases and greatly
enhance those leads identified from traditional sources.
--Providing specific warnings to the public and to potential
promoters through issuance of official notices and disclosure
regulations to the media, partnerships with practitioner and
business groups, and letters to potentially affected taxpayers
--Linking our www.irs.gov web site to the Criminal Investigation
``Tax Fraud Alerts'' page on the Treasury web site to alert
taxpayers and tax practitioners to tax scams and fraud schemes.
This site contains in one location a wealth of information on
these schemes, and case summaries of those convicted of
committing the crimes.
--Taking enforcement action against promoters, including civil
injunctions, civil penalties, and criminal investigations.
Since last year, we have worked closely with our colleagues at
the Justice Department to establish a parallel approach where
we can seek civil injunctions while criminal actions are
proceeding. This will be a major breakthrough as promoters
often continue to operate while criminal investigations are
taking place.
--Taking enforcement action against participating taxpayers,
including audits, civil penalties, and criminal investigations.
--Taking action to measure the size of the problem and improve
identification methods for the future.
Question. Mr. Commissioner, in my State of Rhode Island, we have
had some very good feedback concerning the work of the Office of the
Taxpayer Advocate. Are you satisfied with the work overall of the
National Taxpayer Advocate? Do you see any room for improvement? Are
their recommendations for legislative actions (such as for family
status issues, joint and several liability, alternative minimum tax for
individuals, etc.) outlined in their annual report being taken
seriously by the IRS?
Answer. I found the National Taxpayer Advocate's fiscal year 2001
Annual Report to the Congress to be a comprehensive and thoughtful
document that accurately portrays the problems taxpayers face in trying
to comply with a complex tax code and receive quality service from the
IRS. Last year's report identified tax code complexity as the top
problem facing individual and business taxpayers. This year, the
concept of tax complexity is incorporated into every aspect of the
National Taxpayer Advocate's report. Of the top 5 ``Most Serious
Problems Encountered by Taxpayers,'' three dealt with EITC eligibility
and multiple definitions of ``qualifying child.'' We are devoting a
great deal of attention and resources to both the service and
complexity problems identified by the National Taxpayer Advocate.
Question. Mr. Commissioner, about eighteen months ago you testified
that you did not believe the IRS should get into the business of
electronic tax preparation software, saying that this would erode the
Voluntary Compliance system and would be a serious burden for IRS to
assume. You testified that there was ``no gray area'' about that policy
conclusion in your judgment. However, in a memorandum from the Office
of Management and Budget in July 2001 to the heads of all executive
agencies, they set forth their objective to have the federal government
take on the function of providing ``automated tax preparation''
services over the Internet. Since the OMB proposal runs counter to the
declared policy position taken by the IRS (through your earlier
testimony), do you still hold the position you testified to in October
2000?
Answer. Yes. Although there has been much confusion, the Secretary
of the Treasury and I have clarified the purpose of the EZ Tax Filing
proposal (which is for private industry to offer free tax preparation
and electronic filing options). We have stated publicly that the
Department of the Treasury and the Internal Revenue Service have no
intention of expanding their roles in the tax advisory or preparation
business. As the Secretary of the Treasury stated in a January 30, 2002
press release, ``The Department of the Treasury does not intend for the
IRS to enter the software business but rather to work with established
expertise in private industry.''
The Administration proposed in its fiscal year 2003 budget
submission ``an easy no cost option for taxpayers to file their tax
returns on-line.'' Through the EZ Tax Filing initiative, the IRS is
committed to partnering with private industry representatives who have
proven expertise in the tax software business. The objectives of this
initiative are to:
--Assure access to a free and secure electronic preparation and
filing option for additional taxpayers, building on the free
electronic tax preparation and filing options available in the
commercial market today
--Make tax return preparation and filing easier and reduce the burden
on individual taxpayers
--Support the RRA98 goal of having 80 percent of Federal tax and
information returns filed electronically by the year 2007
--Provide greater service and access to taxpayers
--Implement the proposal in the President's fiscal year 2003 budget
to encourage further growth in electronic filing by providing
taxpayers the option to file their tax return on-line without
charge.
We achieved a major milestone by receiving over 46 million
electronically filed returns in 2002 with the assistance of the
taxpayer professional community. However, we know we need to do much
more to encourage the remaining taxpayers to file their tax returns
electronically.
Question. In declaring its objective to have the government begin
offering ``automated tax preparation'' services to the public, the OMB
has indicated that they wanted initially to cover all EZ tax returns
the first year, and expand to take on the preparation of all income tax
returns over a period of years going forward. What would be the total
budgetary impact on the IRS of the OMB EZ Tax Filing proposal in its
initial phase? What would be the ongoing budgetary costs in the out
years as the program progresses and is expanded?
Answer. The initial phase of the EZ Tax Filing initiative involves
establishing a consortium web page on the IRS' web site (irs.gov) and
Firstgov.gov that contains links to commercial web sites offering
eligible taxpayers free electronic tax preparation and filing options.
As a result, the budgetary impact of this initiative on the IRS for
fiscal year 2003 will be minimal. If the consortium agreement between
the IRS and industry remains consistent in future years, the budgetary
impact for the IRS will remain low.
Question. What is the current status of the OMB proposal for the
government to provide ``automated tax preparation'' services?
Answer. The Government and Industry recently completed a proposed
agreement to offer a variety of free electronic tax preparation and
filing options to a significant number of individual taxpayers. We will
make these offerings available to taxpayers through a Government
managed consortium web site located at irs.gov and Firstgov.gov. We
anticipate that the web site will be available for Filing Season 2003.
______
Questions Submitted by Senator Ben Nighthorse Campbell
business systems modernization
Question. Will the IRS still need the entire $450 million to fund
business systems modernization for fiscal year 2003? If yes, what
assurance can the IRS provide us that the $450 million will be managed
effectively?
Answer. Yes, we need the full $450 million to continue the
Modernization program and fund the necessary program management
activities to improve business operations and improve delivery of
services to taxpayers. $450 million would enable us to provide a
reasonably balanced program that builds out essential infrastructure,
delivers taxpayer value, improves internal operations, and is within
our ability to manage and implement.
Our oversight partners have noted steady progress in the overall
management of the program. BSMO progress has been marked by significant
improvements, adjustments, discipline, and our exceptionally open
relationship with our oversight partners. In the 3 years since the
program began, management processes have greatly matured and will
continue to show progress as we gain more experience and continue to
reexamine our commitments. We have addressed many of the
recommendations made by GAO, such as prudently slowing some projects,
and deferring new ones when management capacity is inadequate to
proceed within acceptable risk.
We believe we have good governance--Control Boards, Core Business
Systems Executive Steering Committees and Sub Executive Councils,
Advisory Councils, the IRS Oversight Board- and a foundation in place
to ensure a planned, repeatable modernization process. The established
financial controls, the discipline of the Enterprise Life Cycle, a
defined architecture, the required compliance architecture, security
certifications, and the controls on when projects should advance within
their life cycle are our tools for managing the Modernization program.
These controls and governance, and our own management judgment,
ensure that we have adequate management capacity and an acceptable risk
before starting future work. Valuable lessons have been learned as we
have developed and implemented the modernization projects. Making
adjustments to plans is an indication that the risks are being
addressed and managed.
We are improving the quality and rigor of our management processes.
We have established plans and schedules to implement fully
Configuration Management, Risk Management, quality assurance, and cost
and schedule estimating processes, as well as recommendations in human
capital management and other areas. BSMO has launched a performance
management program this past year to both track the ongoing level of
performance during a project's lifecycle (such as quality, timeliness,
cost, and schedule compared to plans), and to look at value delivered
after an application has been deployed and compare that to the business
case. In addition to the dedicated staff assigned to these
improvements, both the IRS and PRIME have appointed senior executives
to coordinate within and across our respective organizations to ensure
we give top priority to completing their implementation.
We firmly believe that we are making progress on all our
commitments; are leveraging our precious resources; and are managing
the considerable risk inherent in a program of the enormous size,
complexity, and sensitivity as BSM. We have not, and will not hesitate
to make changes when necessary. However, it takes time to establish and
mature processes, procedures, and management controls. Sufficient funds
are essential to maintaining the momentum and the continuity of the
program so the projects can continue in an orderly manner. The
extensive executive involvement and reviews, oversight, governance, and
management controls and processes in place will ensure the proper use
of the funds.
Question. How will the IRS assess accountability if it is not?
Answer. The BSM Program has been steadily working on managing
program and projects based on best practices in cost and schedule
planning, configuration management, risk management, management
progress reporting and acquisition management. We will adjust our plans
as we mature and learn from this large and complex business systems
modernization program. However, we feel the established best practices,
coupled with our strong governance process, and the rigorous and
documented life cycle, will strike the proper balance between
delivering business value, building critical infrastructure, and
ensuring control and effectiveness.
Question. What is the PRIME's schedule for implementing mature
processes and what is the IRS's plan for ensuring that this happens on
schedule?
Answer. The PRIME already has mature processes in place.
The PRIME uses both the Software Engineering Institute's Software
Acquisition Capability Maturity Model (SA-CMM) and the Software
Engineering Capability Model (SW-CMM) to measure the maturity of its
processes. The models provide a framework for measuring process
maturity and providing a roadmap for improving how the PRIME conducts,
develops and acquires software to modernize IRS business systems. The
models include a series of key process areas that measure how a program
is managed. They include defined practices applied to documentation,
training, oversight, and evaluation throughout the life cycle of the
project. The PRIME uses the SW-CMM as well as the SA-CMM to bring
continuous improvement to how it develops, acquires, manages, delivers,
and maintains software to improve IRS services to the taxpayer.
Within this environment, the PRIME manages the development and
acquisition of software development services that fit into the
Enterprise Architecture 2.0 blueprint for IRS modernization and follow
the defined series of development steps as defined by the Enterprise
Life Cycle, a key CSC software development methodology modified for IRS
requirements. PRIME management applies rigorous Process Management,
Configuration Control, and Change Control to software as it proceeds
throughout the Enterprise Life Cycle.
In 1999, the CSC Civil Group became the first organization in the
world to acquire SA CMM Level 2. In 2000, the CSC Civil Group was rated
again at level 2. The PRIME participated and was singled out as being
well on the way to a higher maturity level. In April 2002, the PRIME
conducted a self-assessment and developed a Process Improvement Plan
based on identified weaknesses. The PRIME is aggressively working to
correct weaknesses. This self-assessment is for a Software Capability
Evaluation in August. If successful in August, the PRIME will become
the first organization in the world to acquire SA CMM Level 3. In 2001,
the CSC Civil Group attained an SW-CMM level 4 rating, a significant
accomplishment considering the size of the organization evaluated and
the inherent difficulty in achieving that rating.
The IRS has engaged the Software Engineering Institute (SEI) to
lead a formal evaluation (Software Capability Evaluation or SCE) using
the SA-CMM in August of this year to reassess. The formally chartered
BSMO Process Improvement Management Steering Group (MSG) chaired by
senior BSMO executives oversees PRIME's process assessment and
improvement initiatives on a regular basis.
Question. Until this is done, what steps is the IRS taking to
mitigate the risk associated with the PRIME not having the processes in
place?
Answer. Because the PRIME already possesses mature processes in
both software engineering and software acquisition, no specific risk
mitigation actions are necessary. However, the PRIME's effective
implementation and improvement of these processes and good acquisition
oversight is a key tenet of IRS's management of the PRIME. Toward that
end, the IRS is on a path to improve its acquisition management
capabilities.
The IRS is working to achieve a Software Acquisition Capability
Maturity Model (SA-CMM) rating. IRS Business Systems Modernization's
immediate goal is SA CMM Level 2. In addition, the IRS has
institutionalized a number of very disciplined management processes
applying SA-CMM principles to how we acquire the services of the PRIME,
and subsequently how we manage ongoing activities during the life cycle
of developing a new modernized capability for the IRS.
The IRS uses a series of oversight bodies, including the Core
Business Systems Executive and Sub-Executive Steering Committees, the
Business Systems Modernization Configuration Control Board, the
Business Systems Modernization Project Control Board and the BSMO
Process Improvement Management Steering Group (MSG) to ensure we
monitor and track the status of modernization initiatives and process
improvement plans.
And finally, as a result of a recent GAO report addressing IRS
management weaknesses, the IRS has developed and is implementing a
comprehensive action plan to address every weakness the GAO identified.
If the August SCE identifies remaining weaknesses, we will require
the PRIME to update its Process Improvement Plan to address them. We
understand process improvement is a long term and ongoing task.
Question. How many Tax Resolution Representatives (TRR) have you
presently trained and deployed in the field offices?
Answer. 1,409
Question. What assurance does the IRS have that trained TRRs will
be available to assist taxpayers with innocent spouse claims in all
field locations?
Answer. Based on projections from the Innocent Spouse Project
Office sufficient work does not exist to warrant training the number of
employees we originally contemplated for processing innocent spouse
claims. Field Assistance will use TRRs already trained to work cases
they receive. In the future, TRRs will encounter the Innocent Spouse
Issue as they expand their duties to conduct office examinations. We
will add a lesson on Innocent Spouse issues to TRR training. TRRs can
also use a software application to perform accurate determinations on
these claims.
Question. What were the IRS's actual audit rates in fiscal year
2001 for low-income, middle-income, and high-income non-business, self-
employed individual taxpayers?
Answer. The fiscal year 2001 audit rates of self-employed
individual taxpayers for examination and other compliance contacts
(correspondence examination, in-person examination, and automated
underreporter) was: 1.05 percent for income less than $25,000; 1.77
percent for income from $25,000-$100,000; and 2.78 percent for income
$100,000 and over. The overall rate was 1.83 percent.
Question. What are the IRS's expected audit rates for fiscal year
2002 for low-income, middle-income, and high-income non-business, self-
employed individual taxpayers?
Answer. The fiscal year 2002 expected audit rate of self-employed
individual taxpayers for examination and other compliance contacts
(correspondence examination, in-person examination, and automated
underreporter) is: 1.28 percent for income less than $25,000; 2.47
percent for income from $25,000-$100,000; and 4.02 percent for income
$100,000 and over. The overall rate is 2.54 percent.
Question. How does the IRS measure the effectiveness of offers as a
collection tool?
Answer. Our critical performance measure is disposition of cases.
Through April 2002, we disposed of 74,343 cases. This amount includes:
--Accepted offers of 17,498;
--Rejected offers of 8,685;
--Returned offers of 26,160;
--Unprocessable offers of 13,992, and;
--Withdrawn and terminated offers of 8,008.
The fiscal year 2002 goal for Offer in Compromise (OIC)
dispositions is 142,500 cases.
Two other effectiveness measures we use for OIC are the percentage
of cases closed within 6 months and the quality of the cases, based on
the following criteria:
--Clarity of the taxpayer action
--Timeliness of case action
--Completion of financial analysis
--Determination of an acceptable offer
--Use of appropriate negotiation skills
--Observation of taxpayer rights
Through April 2002, 34 percent of the cases we handled in OIC were
closed within 6 months. The fiscal year 2002 goal for timely processing
is 67 percent. For the same period, the quality of the field OIC cases,
as reviewed by our Collection Quality Measurement System (CQMS), was
79.8 on a scale of 100. We have not set a fiscal year 2002 goal for OIC
case quality.
Question. What was the total amount of revenue collected through
OIC in fiscal year 2001?
Answer. For fiscal year 2001 we accepted OICs in the amount of $341
million. Payment terms can extend past the remaining life of the 10-
year statutory period for collection. Some offers have collateral
agreements that may require additional payments at an indefinite time
and for an amount not yet determined (for example, the taxpayer will
pay a percentage of future income over a specified dollar amount for
the next 3 years). Our manual tracking reports show 95 percent of
taxpayers who submit OICs comply with their payment terms. Therefore,
of the $341 million offered, we expect to collect $324 million.
Question. What were the total costs of the OIC program in fiscal
year 2001, including staff hours spent by counsel, independent
reviewers, managers and taxpayer advocate?
Answer. In fiscal year 2001 we applied 1,138 Field FTEs plus 22
FTEs for Independent Reviewers to the OIC program. Based on the average
salary and benefit costs associated with OIC in the field and in the
centralized sites, this translates into a cost of about $83.5 million.
Staff hours for Counsel and Taxpayer Advocate are not recorded
specifically for the OIC program and, therefore, are not included in
the $83.5 million. Other costs we cannot quantify separately for OIC
include form production, mailing, computer system maintenance, and
software support.
Question. How does IRS monitor taxpayer compliance with the terms
of accepted offers?
Answer. We enter follow-up dates for payments into our Automated
Offer in Compromise system. Employees monitor this system to ensure
taxpayers pay on time. If payments are not submitted, we contact the
taxpayer. If the taxpayer fails to bring the payments up to date, the
OIC is in default.
We also monitor for timely filing of returns through a system that
generates transcripts of account history. Again, if the taxpayer does
not file a return on time, we contact him or her. If the taxpayer still
does not file the return, the OIC is in default.
These are both labor-intensive operations. We are enhancing our
automated systems to reduce the administrative burden of these
compliance checks.
Question. How does the IRS monitor whether the quality of offer
decisions is being adversely affected by its efforts to speed up the
OIC processing?
Answer. The IRS is developing a complete suite of balanced measures
(business results, customer satisfaction, and employee satisfaction)
for the OIC program. To ensure that we fully implement Balanced
Measures for the OIC process, we monitor the quality of OIC field
casework through the Collection Quality Measurement System (CQMS). We
are also expanding this quality measurement to include the cases
handled by the Centralized OIC sites. We also plan to study the
effectiveness of process changes and associated cost benefit/risk of
future changes made to the OIC process.
Question. What steps, if any, is the IRS taking to reach delinquent
taxpayers sooner so that taxpayers can resolve their tax debts before
an offer becomes necessary and so that the IRS can improve it ability
to collect past due taxes?
Answer. We are using education programs to send key messages to
taxpayers about collection alternatives, such as the installment
agreement program. Through our expanded outreach efforts we have set up
various partnership channels to assist taxpayers in timely complying
with the tax laws. To better address those taxpayers who are likely to
become delinquent, we have conducted research to profile various
balance due and nonfiler market segments. This research, which is
ongoing, provides an opportunity for us to determine the key
demographic and compliance characteristics of these taxpayers and to
facilitate tailored outreach methods and messages.
In 2001 we issued a CD-ROM advising taxpayers of their rights and
alternatives, including collection alternatives and alternative dispute
resolution vehicles. In addition, we are redesigning our SB/SE website
to provide information on collection alternatives. We are also
developing new messages to emphasize the broad range of Collection
options taxpayers should consider before contemplating an Offer in
Compromise.
CONCLUSION OF HEARINGS
Senator Dorgan. This subcommittee is recessed.
[Whereupon, at 2:45 p.m., Wednesday May 15, the hearings
were concluded, and the subcommittee was recessed, to reconvene
subject to the call of the Chair.]
LIST OF WITNESSES, COMMUNICATIONS, AND PREPARED STATEMENTS
----------
Page
Bond, Senator Christopher S., U.S. Senator from Missouri,
question submitted by.......................................... 94
Bonner, Robert, Commissioner, U.S. Customs Service, Department of
the Treasury................................................... 193
Opening remarks.............................................. 197
Prepared statement........................................... 200
Buckles, Bradley A, Director, Bureau of Alcohol, Tobacco and
Firearms, Department of the Treasury........................... 126
Prepared statement........................................... 127
Questions submitted....................................... 177, 187
Campbell, Senator Ben Nighthorse, U.S. Senator from Colorado:
Prepared statements............................ 29, 56, 98, 241, 298
Questions submitted by....42, 93, 172, 176, 180, 183, 186, 233, 283, 333
Statements of...................................... 56, 98, 240, 297
Daniels, Mitchell E., Jr., Director, Office of Management and Budget, Executive
Office of the President........................................... 53
Opening statement................................................ 56
Prepared statement............................................... 57
DeWine, Senator Mike, U.S. Senator from Ohio:
Prepared statement.............................................. 242
Questions submitted by.......................................... 291
Dorgan, Senator Byron L., U.S. Senator from North Dakota:
Prepared statements............................. 3, 54, 97, 239, 294
Questions submitted by........ 30, 74, 169, 173, 177, 181, 184, 226, 275, 323
Gurul�, James, Under Secretary for Enforcement, Office of Enforcement,
Department of the Treasury....................................95, 193
Opening remarks.............................................99, 195
Prepared statement........................................... 101
Questions submitted to....................................... 169
Hackenberry, Paul, Acting Director, Federal Law Enforcement
Training Center, Department of the Treasury.................... 152
Prepared statement........................................... 154
Questions submitted to....................................... 184
Institute of Makers of Explosives, prepared statement............ 188
Kingman, Edward, Assistant Secretary for Management and Chief
Financial Officer, Office of the Secretary, Department of the
Treasury....................................................... 1
Landrieu, Senator Mary L., U.S. Senator from Louisiana, questions
submitted by................................................... 89
Marx, Michele C., Director, Financial Management, Office of
National Drug Control Policy, Executive Office of the President 237
O'Neill, Paul H., Secretary, Office of the Secretary, Department
of the Treasury................................................ 1
Prepared statement........................................... 7
Statement of................................................. 4
Reed, Senator Jack, U.S. Senator from Rhode Island:
Prepared statement........................................... 4
Questions submitted by........................39, 92, 187, 279, 330
Statement of................................................. 4
Rossotti, Charles O., Commissioner, Internal Revenue Service,
Department of the Treasury..................................... 293
Prepared statement........................................... 308
Statement of................................................. 295
Sloan, James F., Director, Financial Crimes Enforcement Network,
Department of the Treasury..................................... 143
Prepared statement........................................... 145
Questions submitted to....................................... 181
Stafford, Brian L, Director, U.S. Secret Service, Department of
the Treasury................................................... 112
Prepared statement........................................... 114
Questions submitted to....................................... 173
Stevens, Senator Ted, U.S. Senator from Alaska, question
submitted by................................................... 94
Walters, John P., Director, Office of National Drug Control
Policy, Executive Office of the President...................... 237
Prepared statement........................................... 247
Statement of................................................. 243
SUBJECT INDEX
----------
DEPARTMENT OF THE TREASURY
Bureau of Alcohol, Tobacco and Firearms
Page
ATF:
Accomplishments, fiscal year 2001............................ 130
Terrorism case examples...................................... 129
Budget request, fiscal year 2003...............................127, 130
Bureau-wide initiatives.......................................... 138
Collect the revenue due.......................................... 136
Critical infrastructure projects................................. 140
Integrated violence reduction strategy (IVRS)/project safe
neighborhoods.................................................. 131
President's management agenda.................................... 141
Protect the public............................................... 137
Terrorism and homeland security.................................. 126
Federal Law Enforcment Training Center
Additional committee questions................................... 169
Area site progress, Washington, D.C............................152, 157
Border agency consolidation...................................... 187
Budget resources are inadequate for responsibilities............. 189
Business strategy adjustment....................163, 164, 168, 170, 174
Cheltenham facility.............................................. 187
Cooperation with other Federal agencies.......................... 167
Electronic crimes task force..................................... 174
Explosives permits............................................... 159
Facilities:
Construction master plan..................................... 186
Master plan study............................................ 154
Master plan/five year construction plan...................... 158
Federal:
Agency coordination, need for................................ 191
Air marshal training......................................... 165
Financial war on terrorism....................................... 169
Fiscal year 2002 achievements.................................... 156
Fiscal year 2003:
And the USA PATRIOT Act...................................... 166
Budget....................................................... 184
Request....................................................152, 155
G.R.E.A.T. grant program......................................... 178
Gang resistance education and training program................... 163
Government Performance and Results Act (GPRA).................... 155
Gun show sales, background checks for............................ 160
Increase in protective details................................... 162
Interest of the IME.............................................. 189
Joint border agency.............................................. 171
Maintenance and renovation request............................... 159
National:
Instant criminal background check............................ 161
Special security events....................................175, 178
Office of Homeland Security..........................164, 171, 179, 184
Overtime......................................................... 162
Overview of operations........................................... 156
Protection of the U.S. currency.................................. 174
Relocation, New York field office..............................163, 175
Research......................................................... 191
Rulemaking concerns--closing the import marking loophole......... 190
Rural law enforcement project.................................... 187
Shortfalls to the budget......................................... 177
Staffing......................................................... 179
Strategic goals.................................................. 190
Supplemental funding............................................. 178
Terrorist funding................................................ 183
Training capacity for air marshals............................... 166
Transportation:
Screener training............................................ 166
Security:
Agency................................................... 186
Training...............................................153, 158
Treasury counterterrorism fund................................... 170
Workforce retention:
And workload balancing....................................... 162
Annualization of new hires................................... 173
Workload:
Growth....................................................... 153
Increase..................................................... 152
Financial Crimes Enforcement Network
Accomplishments, fiscal year 2001................................ 148
Bank Secrecy Act, administering the.............................. 149
Budget request, fiscal year 2003................................. 147
Counterterrorism investigations.................................. 143
Financial crime trends and patterns, identifying................. 149
FINCEN'S:
Requlatory mission........................................... 144
Top priority--supporting counter-terrorism investigations.... 146
Fostering international cooperation.............................. 150
Management support, strengthening................................ 150
Money laundering, cooperative efforts to deter................... 147
Supporting the financial aspects of investigations............... 148
Technology, use of information................................... 144
USA PATRIOT Act.................................................. 144
Of 2001...................................................... 146
Internal Revenue Service
Additional committee questions................................... 307
Budget request, fiscal year 2003................................. 296
Business:
Strategy adjustment.......................................... 323
Systems modernization......................................325, 333
And other information technology projects................ 318
Challenges remain to quality service............................. 314
Contract with UND................................................ 330
Contracting out................................................302, 303
Earned income tax credit initiatives............................. 317
EITC recipients, aggressive audits of............................ 323
Federal pay raise................................................ 298
Fiscal year 2003 resource request................................ 314
Funding for cash transaction reports............................. 329
Highest priority resource needs.................................. 315
Homeland security................................................ 328
Impact of September 11 on the IRS................................ 327
IRS:
Public rating of............................................. 296
Walk-in sites, bi-monthly audits of.......................... 323
Legislative proposals and proposed adjustments (no net increase
in IRS programs)............................................... 320
Maintain current operations...................................... 317
Modernization and security....................................... 297
Offers-in-compromise............................................. 304
Operations....................................................... 315
Post 9/11 situation.............................................. 301
Productivity through a quality work environment and modernization 312
Resources re-deployed through increased efficiency and
productivity................................................... 316
Service improvements made........................................ 309
Stemming the decline in compliance............................... 311
Stewardship & resources.......................................... 313
Tax:
Resolution issues............................................ 305
Shelters, abusive............................................ 299
Taxpayer assistance:
Quality...................................................... 307
Walk in...................................................... 306
Transfer pricing................................................. 300
Office of Enforcement
Border security.................................................. 101
Budget request, fiscal year 2003................................. 99
Combating money laundering....................................... 107
Countering narcotics............................................. 108
Disrupting and dismantling terrorist financing................... 102
Enforcement organization......................................... 110
Operation Green Quest............................................ 100
President's management agenda.................................... 109
Preventing terrorism and reducing violent crime.................. 105
Reducing firearms violence....................................... 108
Strategic goals and performance measures......................... 110
Tariff and trade laws, enforcing................................. 109
2002 Winter Olympics............................................. 100
Office of the Secretary
Abusive tax practices............................................19, 24
Additional:
Committee questions.......................................... 30
Funding requirements for FLETC............................... 26
Adequacy of ATF budget........................................... 23
ATF databases for firearms tracing, use of.......................40, 22
Automated commercial environment.................................41, 50
Business strategy adjustment.....................................30, 42
Cobra user fee:
Increase proposal............................................ 52
Proposal..................................................... 30
Counterterrorism fund............................................ 31
Use of the................................................... 51
Cuban travel..................................................... 15
Customs Service spending plan.................................... 51
Disclosure of enforcement actions................................ 16
Earned income tax credit program................................. 36
Elimination of corrupt gun dealers............................... 41
Federal Law Enforcement Training Center requirements............. 34
Gang resistance education and training (G.R.E.A.T.).............. 50
Gun shows........................................................22, 39
Health of the American economy................................... 27
Information systems security..................................... 37
IRS:
Customer service, compliance and workload initiative......... 49
Resource requirements........................................ 49
Joint border agency..............................................17, 31
Law enforcement resource requirements............................ 32
Legislative proposal on retirement and health costs.............. 13
Modernization and improvement of IRS systems..................... 42
National instant criminal background check system (NICS)......... 21
NTIA narrowband mandate.......................................... 32
OECD and tax havens.............................................. 25
Office of Foreign Assets Control................................. 43
Policy for importation of firearms...............................23, 40
Progress of ACE modernization system............................. 23
Reaction to Immigration and Naturalization Service publicity..... 14
Secret Service workload balancing................................ 33
Sporting gun firearms for importation, exclusion of.............. 22
Tax shelters..................................................... 37
Tax-exempt bonds financing of recycling facilities............... 37
Trade deficit.................................................... 29
Use of technology at the borders and ports of entry.............. 35
Visiting Customs ports of entry.................................. 35
Youth crime gun interdiction initiative program.................. 50
U.S. Customs Service
ACE funding...................................................... 231
Additional committee questions................................... 226
Anti-terrorist money laundering.................................. 208
Arming National Guard detailees.................................. 223
Automated commercial environment (ACE)........................... 210
Border security.................................................. 202
Business strategy adjustment and pay parity...................... 227
COBRA user fee shortfall......................................... 231
Container security initiative (CSI).............................. 228
Customs:
Automation modernization..................................... 221
Tax increase................................................. 226
Trade partnership against terrorism.......................... 221
Forced child labor.............................................214, 232
Jewelry marking.................................................. 223
Joint border agency.............................................. 227
Mexican long haul trucking....................................... 225
Monitoring of strategic exports.................................. 208
National Guard................................................... 230
Assistance to Customs........................................ 215
Other core mission responsibilities.............................. 211
Overtime cap for inspectors...................................... 231
Port security.................................................... 229
Post-September 11 border crossing wait times..................... 220
Proposed COBRA fee increase...................................... 217
Safeguarding the economy; improving the flow of trade............ 209
Sea container:
Inspections.................................................. 218
Security initiative.......................................... 215
U.S. Customs' top priority: counter-terrorism.................... 201
USA PATRIOT Act.................................................. 228
U.S. Secret Service
Acquisition, construction, improvements, and related expenses
(ACiRE)........................................................ 115
Counterfeit United States currency............................... 113
Cyber-crime...................................................... 113
Fiscal year 2003 appropriation request........................... 114
Forward edge program............................................. 113
Human resources and training..................................... 123
Investigative:
Mission...................................................... 112
Program...................................................... 116
Missing and exploited children................................... 113
Mission funding, Secret service.................................. 112
National special security events................................. 112
Office of Protective Research.................................... 121
Protective program............................................... 115
Salaries and expenses (S&E)...................................... 114
Workload retention and workload balancing........................ 114
EXECUTIVE OFFICE OF THE PRESIDENT
Office of Management and Budget
Additional committee questions................................... 74
Administration's pay policy...................................... 61
Agriculture and payment limits................................... 87
Army Corps of Engineers.......................................... 89
Border Security Agency........................................... 75
Capitol Hill, Ridge testifying on................................ 83
Child care and adoption.......................................... 90
Competitive sourcing............................................. 70
Consolidated Executive Office of the President appropriation..... 59
Corps of Engineers............................................... 86
Customs user fee................................................. 74
Defense.......................................................... 88
Electronic government (E-Gov).................................... 59
EOP consolidation............................................65, 69, 72
Ergonomics....................................................... 93
Rule......................................................... 68
Federal:
Accounting Standards Board................................... 80
Employees Compensation Act (FECA) proposal................... 66
Retiree costs, full funding for.............................. 58
Forest Service emergency firefighting funds...................... 63
General Flowers.................................................. 84
Government downsizing............................................ 83
Government's human capital crisis................................ 82
GREAT grant program.............................................. 77
Homeland security................................................ 60
Funding...................................................... 66
House budget resolution.......................................... 68
Improving the current Federal budget............................. 91
Low-income home energy assistance program (LIHEAP)...............67, 92
Measuring performance and delivering results..................... 58
Office of:
Financial Assets Control (OFAC).............................. 77
Homeland Security........................................62, 75, 90
OMB:
Budget....................................................... 58
Representation account....................................... 78
Outsourcing Federal jobs......................................... 82
Pay parity....................................................... 76
President's management agenda.................................... 81
Regulatory oversight............................................. 79
Renewables....................................................... 89
Risk analysis.................................................... 84
Shared responsibilities with Congress............................ 83
Small business loans, scoring of................................. 78
Transportation funding........................................... 87
Treasury counter terrorism fund.................................. 77
Two-front war against terrorism.................................. 57
U.S.:
Corps of Engineers........................................... 71
Customs Service.............................................. 69
Postal Service............................................... 65
Veterans......................................................... 85
Office of National Drug Control Policy
Additional committee questions................................... 274
Anti-doping efforts.............................................. 245
Counterdrug:
Intelligence executive secretaries........................... 245
Technology Assessment Center...............................243, 286
Drug:
Free Communities Act......................................... 279
Problem in our Nation, assessing the extent of the........... 248
Trafficking:
Areas, high intensity.................................... 268
In New England........................................... 279
Treatment..................................................271, 278
Drug-free communities support program..........................245, 291
Federal drug control budget...................................... 246
Fiscal year 2003, national drug control budget, the consolidated. 249
General questions................................................ 291
Government-wide drug control efforts............................. 284
High intensity drug trafficking areas (HIDTA)..................246, 288
Media campaign................................................... 259
Methamphetamine in New England................................... 280
National:
Alliance for Model State Drug Laws........................... 246
Drug court initiative........................................ 245
Youth Anti-Drug Media Campaign..............244, 272, 275, 281, 283
ONDCP's fiscal year 2003 budget request.......................... 252
Parent Corp...................................................... 277
Performance measures development................................. 246
Prescription drug abuse.......................................... 270
President's national drug control strategy....................... 247
Substance among youths in the juvenile justice system............ 282
United States Anti-Doping Agency................................. 290
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