[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
RESTORING THE POWER OF THE PURSE: LEGISLATIVE OPTIONS
=======================================================================
JOINT HEARING
BEFORE THE
SUBCOMMITTEE ON
GOVERNMENT OPERATIONS
AND THE
SUBCOMMITTEE ON HEALTH CARE, BENEFITS, AND ADMINISTRATIVE RULES
OF THE
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
DECEMBER 1, 2016
__________
Serial No. 114-127
__________
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
JASON CHAFFETZ, Utah, Chairman
JOHN L. MICA, Florida ELIJAH E. CUMMINGS, Maryland,
MICHAEL R. TURNER, Ohio Ranking Minority Member
JOHN J. DUNCAN, Jr., Tennessee CAROLYN B. MALONEY, New York
JIM JORDAN, Ohio ELEANOR HOLMES NORTON, District of
TIM WALBERG, Michigan Columbia
JUSTIN AMASH, Michigan WM. LACY CLAY, Missouri
PAUL A. GOSAR, Arizona STEPHEN F. LYNCH, Massachusetts
SCOTT DesJARLAIS, Tennessee JIM COOPER, Tennessee
TREY GOWDY, South Carolina GERALD E. CONNOLLY, Virginia
BLAKE FARENTHOLD, Texas TAMMY DUCKWORTH, Illinois
CYNTHIA M. LUMMIS, Wyoming ROBIN L. KELLY, Illinois
THOMAS MASSIE, Kentucky BRENDA L. LAWRENCE, Michigan
MARK MEADOWS, North Carolina TED LIEU, California
RON DeSANTIS, Florida BONNIE WATSON COLEMAN, New Jersey
MICK MULVANEY, South Carolina STACEY E. PLASKETT, Virgin Islands
KEN BUCK, Colorado MARK DeSAULNIER, California
MARK WALKER, North Carolina BRENDAN F. BOYLE, Pennsylvania
ROD BLUM, Iowa PETER WELCH, Vermont
JODY B. HICE, Georgia MICHELLE LUJAN GRISHAM, New Mexico
STEVE RUSSELL, Oklahoma
EARL L. ``BUDDY'' CARTER, Georgia
GLENN GROTHMAN, Wisconsin
WILL HURD, Texas
GARY J. PALMER, Alabama
Jennifer Hemingway, Staff Director
David Rapallo, Minority Staff Director
Corey Cooke, Counsel
Katy Rother, Counsel
Willie Marx, Clerk
Subcommittee on Government Operations
MARK MEADOWS, North Carolina, Chairman
JIM JORDAN, Ohio GERALD E. CONNOLLY, Virginia,
TIM WALBERG, Michigan, Vice Chair Ranking Minority Member
TREY GOWDY, South Carolina CAROLYN B. MALONEY, New York
THOMAS MASSIE, Kentucky ELEANOR HOLMES NORTON, District of
MICK MULVANEY, South Carolina Columbia
KEN BUCK, Colorado WM. LACY CLAY, Missouri
EARL L. ``BUDDY'' CARTER, Georgia STACEY E. PLASKETT, Virgin Islands
GLENN GROTHMAN, Wisconsin STEPHEN F. LYNCH, Massachusetts
------
Subcommittee on Health Care, Benefits and Administrative Rules
JIM JORDAN, Ohio, Chairman
TIM WALBERG, Michigan ELEANOR HOLMES NORTON, Distict of
SCOTT DesJARLAIS, Tennessee Columbia
TREY GOWDY, South Carolina BONNIE WATSON COLEMAN, New Jersey
CYNTHIA M. LUMMIS, Wyoming MARK DeSAULNIER, California
MARK MEADOWS, North Carolina BRENDAN F. BOYLE, Pennsylvania
RON DeSANTIS, Florida JIM COOPER, Tennessee
MICK MULVANEY, South Carolina, Vice MICHELLE LUJAN GRISHAM, New Mexico
Chair Vacancy
MARK WALKER, North Carolina
JODY B, HICE, Georgia
EARL L. ``BUDDY'' CARTER, Georgia
C O N T E N T S
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Page
Hearing held on December 1, 2016................................. 1
WITNESSES
Ms. Heather Krause, Acting Director, Strategic Issues, U.S.
Government Accountability Office, Accompanied by Edda
Emmanuelli Perez, Managing Associate General Counsel, U.S.
Government Accountability Office
Oral Statement............................................... 5
Written Statement............................................ 8
Mr. Kevin Kosar, Senior Fellow and Governance Project Director, R
Street Institute
Oral Statement............................................... 25
Written Statement............................................ 27
Mr. Hudson Hollister, Executive Director, Data Coalition
Oral Statement............................................... 35
Written Statement............................................ 37
Mr. Stephen M. Kohn, Executive Director, National Whistleblower
Center
Oral Statement............................................... 61
Written Statement............................................ 63
RESTORING THE POWER OF THE PURSE: LEGISLATIVE OPTIONS
----------
Thursday, December 1, 2016
House of Representatives,
Subcommittee on Government Operations joint with
the
Subcommittee on Health Care, Benefits, and
Administrative Rules,
Committee on Oversight and Government Reform,
Washington, D.C.
The subcommittees met, pursuant to call, at 2:06 p.m., in
Room 2154, Rayburn House Office Building, Hon. Mark Meadows
[chairman of the Subcommittee on Government Operations
presiding.
Present from the Subcommittee on Government Operations:
Representatives Meadows, Jordan, Walberg, Massie, Carter,
Grothman, and Connolly.
Present from the Subcommittee on Health Care, Benefits, and
Administrative Rules: Representatives Jordan, Walberg,
DesJarlais, Meadows, DeSantis, Walker, Hice, Carter,
DeSaulnier, Boyle, and Lujan Grisham.
Also Present: Representative Palmer.
Mr. Meadows. The Subcommittee on Government Operations and
the Subcommittee on Health Care, Benefits, and Administrative
Rules will come to order.
And, without objection, the chair is authorized to declare
a recess at any time.
Good afternoon. Thank you all for being here.
And as we will call this to order, in recent years, an
alarming trend has emerged, as we see the executive branch
collecting various moneys for fees, fines, penalties, and
settlements--the use of this money without providing Congress a
clear accounting of how much money is being collected and what
it's being spent on.
For example, according to the President's fiscal year 2017
budget proposal, $231.8 billion in user fee charges go directly
to an agency which subsequently spent the fund without
congressional action, and an additional $302.2 billion in user
fees will be spent according to the legislation that
established the charge. These are enormous sums of money that
have the possibility of being spent without any true
congressional oversight.
This week, Chairman Chaffetz released a report which looked
at the issue of government-collected fines and penalties,
similar to--the user fees, fines, and penalties are not an
insignificant sum of money. The 34 agencies in the survey
reported over $83 billion being collected between 2010 and
2015.
More startling than the sum of money collected was the
complete lack of transparency, a failure of uniform accounting
systems, and a slow agency response time. Some heavy-hitters,
such as the Department of Treasury, were unable to provide the
committee with a complete response regarding its various
bureaus and offices, which is completely unacceptable.
I still have no idea how much the Internal Revenue Service
collected with its fines and penalty authority, which we all
know would be significant. Something that is deeply troubling
is that, given the massive discretion that the IRS has to level
the penalties against American taxpayers, this sum could be
enormous.
Without a complete picture of the funds flowing into the
government, Congress is limited in their ability to appropriate
funds accurately and prevent waste, fraud, abuse, and
mismanagement. The power of the purse is one of the most
important responsibilities bestowed upon Congress in the
Constitution, and we must ensure that this power is not
obstructed by Federal agencies.
Now, while I recognize that Congress has allowed certain
agencies to utilize collected funds to operate, rather than go
through the appropriations process, under President Obama this
has taken on a more meaningful role, as the executive branch
has utilized these collected funds or settlements to the funds
as administrative--as priorities.
So, in my opinion, this executive branch discretion has
gone too far. We have lost the transparency needed to
understand what is being collected and allocated. And, in light
of these concerns, today's hearing is meant to examine the use
of the fees, the fines, the penalties, and settlements by
Federal agencies to engage in activities that have not been
specifically appropriated or authorized by Congress.
We want to hear from our panel of witnesses about the
appropriate legislative solutions to this concern and
specifically hear feedback on the legislative options such as
H.R. 5499, the Agency Accountability Act of 2016, which was
proposed by my colleague, the gentleman from Alabama, Mr.
Palmer.
This is an important topic, that we need to know what the
Federal Government is truly spending and what they are
collecting, in order to reduce the deficit to get the
Americans' fiscal house in order.
I want to thank our panel of witnesses for being here
today.
And I will recognize the gentleman from Virginia, my good
friend, the ranking member of the Subcommittee on Government
Operations, Mr. Connolly, for his opening statement.
Mr. Connolly. I thank my good friend from North Carolina.
And I welcome our witnesses today.
Today's hearing will examine one of Congress' most
important constitutional powers. Article I, section 9 of the
Constitution grants Congress the power of the purse--sole
authority over the direction of public funds. The American
people entrust Congress to wield that power in their best
interests.
Over the course of history, Congress has at times
appropriately delegated these powers to certain government
agencies, and it's not done so carelessly or without
parameters. When Congress has authorized agencies to collect
fees, fines, penalties, or settlements, it's also placed
limitations on those agencies and exercised oversight over
their use of collected funds.
Agency collection of fees is not a new concept. It was not
invented by Barack Obama. The example of Customs comes to mind
as one such authority that has existed since the beginning of
the Republic. Agencies have retained import duty collections
since the first United States Congress in 1789.
The practice of agency retention of collections continued
into the 20th century with land grazing fees, an authority
which has remained with the Bureau of Land Management for range
improvement programs since the early 1900s when Teddy Roosevelt
was in the Presidency.
Today,similar dedicated collections of funds available
without further congressional action can be found in programs
supporting the Department of Justice's Crime Victims Fund, the
National Park Service fees, the Environmental Protection Agency
Superfund settlements, the Tennessee Valley Authority
collections, the Federal Protective Service fees, and the
Federal Aviation Administration Franchise Fund customer fees,
to name but a few.
In all cases, Congress allows agencies to retain
collections and self-sustain certain programs in order to make
government more efficient. Today's proposed legislative
solution, H.R. 5499, the Agency Accountability Act, which has
been referred to this committee, in my opinion, is the anthesis
of efficiency.
From my reading of the bill, it seems that it would require
every single collection currently retained at agencies instead
to be deposited into the general fund and obligated by the
Committee on Appropriations. Every victim compensation award
and every whistleblower reward would require the Committee on
Appropriations to act.
How many times in recent history has Congress failed to
pass appropriations bills and instead passed an omnibus
appropriations bill or a continuing resolution because Congress
could not reach an agreement on critical government funding?
We're about to do it again within the next week.
H.R. 5499 will have unintended consequences, many of which
would be detrimental to the very good government mechanisms
we're committed to on this committee on a bipartisan basis.
One essential good governance mechanism to which this
legislation would render serious harm is the protection of
whistleblowers, a cause championed by this committee. Much of
government fraud detection relies upon whistleblowers. We'll
hear from an expert today on how whistleblower funds sustained
via agency collections are crucial to protecting and
incentivizing those willing to shed light on fraud, waste, and
abuse in our government, a mission that goes to the very core
of this committee's mission.
We will hear that whistleblowers are only willing to risk
their careers and blow the whistle if there is some protection
in the form of an award. That's why Congress authorized
agencies to issue those awards to whistleblowers--to guarantee
that one of the incentives for whistleblowers to come forward
is never in doubt and never tied up in uncertain appropriations
processes. The effects of this bill would be to gut the
guarantees to whistleblowers and the services they provide.
That alone is reason enough to question H.R. 5499.
I believe the sponsors of that bill intend to increase
transparency. I don't doubt their motivation. That's a laudable
goal. But H.R. 5499 is more than that; it's a sweepingly broad
and radical proposal that I believe would seriously impair the
ability of government to function.
Thank you, Mr. Chairman.
Mr. Meadows. I thank the gentleman.
The chair welcomes the participation of our colleague, the
Representative Mr. Palmer from Alabama. He's actually the
sponsor of H.R. 5499, the Agency Accountability Act of 2016,
which we look forward to discussing today.
I ask unanimous consent that Mr. Palmer be allowed to fully
participate in today's hearing.
And, without objection, so ordered.
The chair now recognizes the ranking member of the
Subcommittee on Health Care, Benefits, and Administrative
Rules, Mr. Boyle, for his opening statement.
Mr. Boyle. Well, thank you, Mr. Chairman.
And welcome to our witnesses. I look forward to hearing
from you today.
As my esteemed colleague Mr. Connolly has stated, the
ability of agencies to retain collections is not new. Congress
has authorized agencies since the Nation's very beginning, and
it has become a mechanism by which we ensure that the necessary
work done by our Federal Government is financially self-
sustained.
Congress alone makes the decision to authorize certain
programs to retain and spend funds. Congress has made that
decision many times--everything from the National Park Service
user fees to antitrust settlements at the DOJ, from
whistleblower protections of pollution on ships to consumer
protection funds at the newly created--I guess it's not so
newly created--CFPB.
H.R. 5499, the Agency Accountability Act, was referred to
this committee, and the chairman has called this hearing to
consider the bill. This bill would put an end to that practice
and prevent Congress from authorizing agencies to retain
collections of user fees, fines, and settlements in the future.
It is a solution in search of a problem.
It is also radical. This bill states, and I quote,
``Notwithstanding any other provision of law, an agency that
receives a fee, fine, penalty, or proceeds from a settlement
shall deposit such amount in the general fund of the
Treasury.'' Quote, ``Notwithstanding any other provision of the
law,'' unquote, is as broad and sweeping a term as can be used
in the law. In this case, it means ``notwithstanding the
history of our country.''
H.R. 5499 would damage mechanisms Congress has created to
promote good governance. As my colleague Mr. Connolly stated,
whistleblowers are crucial to government accountability. The
bravery of whistleblowers to do the right thing and shine the
light on fraud, waste, and abuse helps our government in its
important efforts to increase transparency. H.R. 5499 would
have the effect of disincentivizing whistleblowers from coming
forward with helpful information.
Make no mistake about it, this bill is reckless. It will
cost taxpayers more money, because it will discourage
whistleblowers from coming forward to expose fraud. If
transparency is a goal of this bill, then I support that goal,
but there are better paths forward that would do none of the
harm this heavy-handed bill would cause.
Now, with that, Mr. Chairman and to Ranking Member
Connolly, I'm happy to yield the rest of my time.
Mr. Meadows. I thank the gentleman for his remarks.
I will hold the record open for 5 legislative days for any
member who would like to submit a written statement.
We'll now recognize our panel of witnesses.
I'm pleased to welcome Ms. Heather Krause, Acting Director
of Strategic Issues at the U.S. Government Accountability
Office.
Welcome.
Ms. Krause will be accompanied by Edda Emmanuelli Perez,
Managing Associate General Counsel at the Office of General--
U.S. Accountability Office. Her expertise on this issue will be
important for the subject matter of this hearing, so she will
be sworn in as well.
Mr. Kevin Kosar, senior fellow and governance project
director at R Street Institute.
Welcome.
Mr. Hudson Hollister, executive director of the Data
Coalition.
Welcome. It's good to see you again.
And Mr. Stephen M. Kohn, executive director of the National
Whistleblower Center.
Thank you for your work.
Welcome to you all.
And pursuant to committee rules, all witnesses will be
sworn in before they testify. So if you would please rise and
raise your right hand.
Do you solemnly swear or affirm that the testimony you're
about to give will be the truth, the whole truth, and nothing
but the truth?
All right. Thank you. Please be seated.
And let the record reflect that all witnesses answered in
the affirmative.
In order to allow enough time for discussion, we would
appreciate it if you would limit your oral testimony to 5
minutes. However, your entire written statement will be made
part of the record.
Ms. Krause, you are now recognized for 5 minutes.
WITNESS STATEMENTS
STATEMENT OF HEATHER KRAUSE
Ms. Krause. Thank you, Mr. Chairman.
Chairmen Meadows and Jordan, Ranking Members Connolly and
Boyle, and members of the subcommittees, thank you for the
opportunity to discuss our work on Federal fees, fines,
penalties, and settlements.
Congress exercises its constitutional power of the purse by
appropriating funds and prescribing conditions for their use.
As you know, Congress provides agencies with budget authority
to make financial obligations for specified purposes. Budget
authority may be provided through appropriations acts or
through other laws that constitute permanent appropriations.
In addition to tax revenues, the Federal Government
receives funds from a variety of sources, including fees,
fines, penalties, and settlements. These collections involve
billions of dollars annually and fund many programs, including
those integral to our Nation's security, the security of our
financial systems, and the protection of natural resources.
The design and structure of the statutory authorities for
these collections varies widely. My statement today focuses on
four types of statutory authorities that establish how agencies
can use their fee, fine, and penalty collections and the
varying degrees of agency flexibility and congressional
control.
These types of are: one, collections deposited to the
Treasury as miscellaneous receipts; two, collections dedicated
to a related program and available subject to a further
appropriation; three, collections dedicated to a related
program and available without further congressional action;
and, four, collections available based on a combination of
these authorities.
First, Congress has specified that certain fees, fines, and
penalties be deposited to the Treasury as miscellaneous
receipts. These funds are not dedicated to the agency or
program under which they are collected and are used for general
support of Federal Government activities. For example, $2.7
billion in civil monetary penalties collected from financial
institutions for certain enforcement actions were deposited to
the Treasury as miscellaneous receipts from 2009 to 2015.
Second, Congress has specified that some collections be
dedicated to a related program but cannot be used by an agency
without further appropriation. For example, cargo importers pay
merchandise processing fees to Customs and Border Protection.
These fees are deposited in the Customs user fee account and
are only available to CBP through annual appropriations.
Third, Congress has authorized some agencies to collect and
use their fees, funds, and penalties without additional
congressional action. This is considered permanent funding
authority. Agencies with this authority have varying degrees of
autonomy, depending on the extent to which the statute limits
when, how much, and for what purpose funds may be used.
For example, USDA's Animal and Plant Health Inspection
Service is authorized to set and collect user fees to cover the
cost of Agriculture Quarantine Inspection services. These
collections are available without fiscal year limitations and
may be used for inspection-related purpose without further
appropriation.
Even if an agency has a permanent authority to use
collections, Congress can still place limitations on the funds
in any given year. For example, in recent fiscal years, annual
appropriations acts limited the amount of fines and penalties
from the Crime Victims Fund that could be used to fund victims
assistance programs and other activities.
Last, in some cases, Congress has provided agencies with a
combination of different authorities. For example, each year,
the Drug Enforcement Administration deposits the first $15
million in fees that it collects from drug manufacturers and
other registrants to the Treasury as miscellaneous receipts.
Fees collected beyond that amount are available to the agency
and used to recover the full cost of DEA's Diversion Control
program.
These different design options involve different tradeoffs
on agency flexibility versus congressional control. For
example, Congress gains more oversight opportunities when it
requires collections to be annually appropriated. Conversely,
if Congress grants an agency authority to use collections
without further congressional action, the agency may be able to
respond more quickly to customers or changing conditions.
This concludes my statement. My colleague Edda Emmanuelli
Perez and I would look forward to answering any questions.
[Prepared statement of Ms. Krause follows:]
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Mr. Meadows. Thank you, Ms. Krause. You said her name much
better than I did, so I appreciate that.
Mr. Kosar, you are recognized for 5 minutes.
STATEMENT OF KEVIN KOSAR
Mr. Kosar. I thank the chairman and ranking member and the
rest of the committee and its staff for having me here. My name
is Kevin Kosar. I'm a senior fellow at R Street Institute, a
think tank here in Washington, D.C. And previous to that, I
spent 11 years at the Congressional Research Service.
In my current position, I co-direct the Legislative Branch
Capacity Working Group, a nonpartisan gathering of scholars and
congressional experts who aim, as we like to put it, to make
Congress great again. We meet each month here on the Hill to
discuss aspects of congressional capacity, produce research on
it, and we do all this in the hopes that Congress will empower
itself to carry out its constitutional duties and do what the
public expects of it.
So I'm obviously delighted to be here today, because the
power of the purse is a fundamental legislative authority. It's
a power that aims to limit executive power, encourage agency
accountability to elected officials, and to curb corruption.
And it is a power, unfortunately, that Congress has delegated
away, in many instances.
I was asked to testify on the subject of Federal agencies
and their self-funding activities, and it's a large and
obviously complex topic, to say the least. The President's
budget reports the government collected $516 billion from the
public this past year in the form of fees, user charges, and
the like, which is a significant portion of the government's
total revenues.
Now, the principle that the collection expenditure of the
funds should flow through Congress is longstanding. It is in
our Constitution. All authority for collecting moneys from the
public and expending it are explicated in Article I, which
established the legislative branch. One will find no
authorities over spending or collecting money in Article II.
Instead, the President is to ensure that the executive branch
take care that the law be faithfully executed.
The principle of congressional control over spending is
also expressed in Miscellaneous Receipts Act, first enacted in
1849. It obliged executive agents who collect funds from the
public to promptly deposit the moneys in the Treasury,
whereafter Congress may reappropriate the funds or not and also
may direct to what the funds will be appropriated.
While the principle is age-old and clear, congressional
practice has frequently veered from it. As I note in my written
testimony, the very first Congress passed a law that allowed
customs officers and collectors in our young Nation's ports to
pay themselves from the moneys they collected on the ships that
arrived at the ports.
Over the past 200-plus years, Congress repeatedly has
enacted exceptions to the principle that all funds should flow
into the Treasury, and the rationales have been many and
varied. Here are just a few of them:
One rationale is that allowing the agency to expend some
portion of its fees is logistically more sensible and that it
creates incentives for higher productivity. Such was the case
with the aforementioned 1789 customs act. Customs officials
were actually compensated based on the number of ships they
inspected, and it was at a rate that was written into the law.
In the second instance, Congress' rationale has been that
an agency should be a self-funding commercial enterprise and
its activities should not be borne by the taxpayers as a whole.
And, therefore, if it's to operate in a financially self-
sustaining manner, it needs to have broad discretion over the
spending of its receipts and immediate access to their use. We
see this with the Postal Service.
A third rationale one finds is a political one. And this
one is much more complicated, in that we often will have a
majority in Congress who wants to insulate agency spending from
congressional influence by the minority because the minority
may disagree with what the agency is going to do with the
spending.
The Consumer Financial Protection Bureau may well be an
example of this line of thinking, wherein it is able to derive
revenues through the Federal Reserve, but then it also has this
fund, through which it can use these moneys for very, very
broad purposes put in the statute. It is largely insulated,
therefore, from appropriations.
Now, assuredly, these aren't all the reasons Congress has
created exceptions to the principle but just a few.
To anyone but experts in this room and appropriators, the
government's practices for collecting funds from the public are
bewildering, but I think the basic takeaway is fairly obvious:
The progressive delegating away of the power of the purse, by
definition, diminishes legislative authority. By how much I am
not sure, and I think that would be something that would be
interesting to discuss. It seems a difficult thing to quantify.
It is heartening, therefore, to see Congress discussing
this topic and discussing H.R. 5499. And I'm hopeful that
fruits of these discussions are that Congress can reclaim some
of its powers of the purse.
Thank you.
[Prepared statement of Mr. Kosar follows:]
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Mr. Meadows. Thank you, Mr. Kosar.
Mr. Hollister, you're recognized for 5 minutes.
STATEMENT OF HUDSON HOLLISTER
Mr. Hollister. Chairman Meadows, Ranking Member Connolly,
Chairman Jordan, Ranking Member Boyle, thank you for inviting
me to testify today.
In 1802, President Thomas Jefferson wrote to Albert
Gallatin, the fourth Secretary of the Treasury, supporting
Gallatin's plan to, quote, ``simplify our system of finance and
bring it within the comprehension of every Member of
Congress.'' President Jefferson believed that Federal spending
information had become so complex and so fragmented that only
the experts could understand it.
But Jefferson had a solution. By expressing Federal
spending as, quote, ``one consolidated mass'' he wrote, ``We
might hope to see the finances of the Union as clear and
intelligible as a merchant's books so that every Member of
Congress and every man of any mind in the Union should be able
to comprehend them and consequently to control them.''
Two hundred and fourteen years later, we face the same
problem, and we need the same solution. The Federal Government
is the largest and most complex organization in human history,
but by expressing all Federal spending information as one
consolidated data set, we can use commercially available
software to make it, quote, ``clear and intelligible'' so that
Congress and the people can comprehend it and control it.
The Federal spending information is complex and fragmented.
Hundreds of agencies separately report their receipts and their
account balances to Treasury, their budget information to the
White House OMB, and their contracting details to the GSA. But
2 years ago, this committee unanimously approved the Digital
Accountability and Transparency Act, or DATA Act, which directs
Treasury and OMB to create a single government-wide data
structure for all Federal spending information.
In May 2017, this May, when every agency begins to report
standardized spending information using that structure, they
will create a single electronic picture of all spending. In a
few minutes, I'm going to show you what that picture should
look like.
I know this committee is particularly interested in
nonappropriated receipts--fines, fees, penalties, settlements
that agencies receive outside the appropriations process. So
far, the DATA Act structure focuses on money going out,
expenditures, not on money coming in, receipts. So that single
picture, the single electronic picture, won't be able to
provide full detail on how fines, fees, penalties, and
settlements are spent.
However, this information already exists. It is already
being reported to Treasury. It is maintained in the Central
Accounting Reporting System at Treasury. And it could be
reflected in the DATA Act structure. Congress can direct
Treasury and OMB to expand the DATA Act to accommodate that
information, and, in my view, Congress should.
When I served as counsel to this committee, I worked on the
first version of what became the DATA Act. I resigned from the
staff in 2012 in order to start the Data Coalition and helped
then-Chairman Issa and Ranking Member Cummings to get the DATA
Act passed.
The Data Coalition is a trade association of nearly 40
companies whose commercially available software can inform
decisions, illuminate fraud, and automate compliance--but only
if we have consolidated and standardized data to work with.
Starting in May 2017, if all goes well, commercially available
software will use that single data set to portray an electronic
picture of Federal spending.
And I want to ask if we could have slide 7 displayed for
just a minute. This will be very familiar to Chairman Meadows,
who has demonstrated this himself.
The DATA Act should allow us to navigate from the entire
government all the way to specific agencies, specific
appropriations. This picture you see is interactive. If you
click on one of the agencies or you click on one of the items
there, you can go down all the way to individual items. You can
navigate from the entire HHS to a particular contract. This
level of interactivity will be possible across the entire
executive branch.
Now, the reliability of this picture is going to depend on
how well agencies comply with the DATA Act starting in May
2017. They have to report high-quality data.
As I mentioned, even after the DATA Act, there will be some
limitations. The data structure that Treasury and OMB have
created focuses on expenditures, not receipts. That means we
won't easily be able to differentiate between appropriated and
nonappropriated funding sources. It is possible for Congress to
amend the DATA Act to direct Treasury and OMB to expand the
data structure so that it does include receipts.
I asked our Data Coalition members to come up with a
prototype visualization that shows what an expanded electronic
picture of Federal spending might look like. And I would like
to ask for slide 14 to be displayed, please.
Here we see a navigation that itemizes the Federal
Government's nonappropriated receipts, and it allows us to zoom
in on a particular agency, programs within that agency. This
information comes from the information Treasuryis already
collecting and maintaining, but if this information's
incorporated into the DATA Act, this means we can see the
connection between the receipts and the outlays. We can follow
this all the way to the contracts and the expenditures.
The coalition has prepared recommendations for the
committee on how to amend the DATA Act to expand the data
structure and ensure that receipts and payments are brought
into the picture.
By tracking all the complexity of Federal spending using a
single government-wide data structure and by publishing all
that information as one data set, we can realize President
Jefferson's vision of, quote, ``one consolidated mass,'' quote,
``clear and intelligible.'' This committee began that work by
passing the DATA Act. By holding the executive branch
accountable to follow the law and by expanding that law where
necessary, the committee can finish it.
Thank you.
[Prepared statement of Mr. Hollister follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Meadows. Thank you, Mr. Hollister. And thank you for
illuminating what we may be able to do in terms of giving
greater transparency. We look forward to seeing the progress as
we--I know the ranking member and I have been very in tune in a
bipartisan way of following your work.
Mr. Kohn, you are now recognized for 5 minutes.
STATEMENT OF STEPHEN M. KOHN
Mr. Kohn. Thank you. Thank you, Chairmen, Ranking Members,
members of the committee----
Mr. Meadows. If you can pull that a little closer to you.
Yeah.
Mr. Kohn. Thank you Chairman, ranking members, members of
the committee, for this opportunity to share with you the
benefit of my 32 years of representing whistleblowers and how
H.R. 5499 may impact on those cases.
This committee has a long and distinguished bipartisan
record of supporting whistleblowers, and I am confident that
you will ensure that nothing will inadvertently harm the
existing statutory structure that works extremely well, is
transparent, and saves the taxpayers billions of dollars.
To understand how this process works, we need to look at
the current laws and why whistleblowing is so effective.
The Founding Fathers were true visionaries. They understood
the importance of using citizens as a bulwark for ensuring
accountability. On July 30, 1778, the Continental Congress
passed perhaps the world's first whistleblower law, encouraging
every American and declaring it their duty to report crimes and
misdemeanors to appropriate authorities.
The very first Congress, starting in 1789, passed 18
whistleblower reward laws. They didn't call them whistleblowers
then; they called them informants. Eighteen. And that structure
of those laws has been passed on, and the modern whistleblower
laws that are most effective are modeled on what the Founding
Fathers did.
And let's see why it works. Slide 1, or my chart 1 in my
testimony, shows how fraud is actually detected in real life.
As in my testimony, these are statistically verifiable numbers.
And you'll see to the far right, the tip, or the whistleblower,
is the number-one source of all fraud. Without a program to
encourage fraud detection by tipsters or whistleblowers, crime
will pay.
Slide 2, which is, again, statistically verifiable, shows
the real life of what happens at the job. And it shows that
only 2 percent of the witnesses to fraud and misconduct
actually report that fraud outside their agency--2 percent. And
that's to anyone, not going to the proper law enforcement
authority.
If you want to have an effective accountability system, you
need to figure out how to make that 2 percent real and
effective. And guess what? The model used by the Founding
Fathers works.
And if we can go to the next slide, which is chart 5 in my
testimony.
When Chuck Grassley passed the False Claims Act in 1986 and
reinstated these models used by the Founding Fathers, which
permits a reward to the whistleblower paid immediately from the
collected proceeds, not through an appropriations process--they
get the reward based on the fruits of their original
information, the sacrifice they go through, the risks they
take--look what happened. These are the Department of Justice
figures to the penny. The ability to detect fraud skyrocketed.
The ability to hold fraudsters accountable skyrocketed. Look
how it went from a handful of millions before you activated the
whistleblower to billions and billions every year.
The final chart shows that--the next slide shows that,
today, 70 percent of all fraud detection coming in is coming
from the whistleblower.
The legislation being proposed does not take the reality of
whistleblowing into consideration, but I know this committee
will act and make sure it is protected.
I also want to state that there is an appropriate oversight
for these funds, and whistleblowers are dependent upon them.
And I look forward to working with the committee to have better
oversight.
Thank you.
[Prepared statement of Mr. Kohn follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Meadows. Thank you, Mr. Kohn. I can assure you that
whistleblowers are a vital part of what we do, from an
oversight standpoint. There is not a month that goes by that I
don't get a call on my private cell phone from some
whistleblower somewhere suggesting that we look at something.
And so, with that, let me make sure I understand. So if we
were to exempt out the whistleblower provision in this and make
sure that it's not included in Mr. Palmer's piece of
legislation, you wouldn't have an issue with this legislation.
Is that correct?
Mr. Kohn. Well, I'm only here--I'm only really an expert on
the whistleblower part.
Mr. Meadows. So if we exempted it, you wouldn't have an
issue. Is that correct?
Mr. Kohn. Exactly. As National Whistleblower Center, that's
our concern.
Mr. Meadows. Okay. Well, I think we look forward to hearing
from others on that, but I believe that a friendly amendment
that would protect our whistleblowers would be in order. And I
know I've talked to the gentleman from Alabama about that very
subject, and he seems very willing to accommodate.
The chair recognizes the gentleman from Michigan, the vice
chair of the Subcommittee on Government Operations, Mr.
Walberg.
Mr. Walberg. Thank you, Mr. Chairman.
And thank you to the panel for being here today.
In my other life, other committee work, chairing the
Subcommittee on Workforce Protections, we look at regulatory
issues and the high cost of regulations that go on. So this
discussion today focuses very clearly on additional costs
resulting from regulation.
Mr. Kosar, last year, I believe it was, you authored an
article on increasing Federal regulations and how Congress
should reassert their authority in the regulatory process.
I recently introduced a series of regulatory reform
measures which focus specifically on harmful labor regulations.
When you see the costs last year, approaching almost $2
trillion of regulatory costs to business alone--that's it--not
including collections and everything that goes on, it's an
important thing to consider.
One of the measures that I introduced, H.R. 6325, the
Workforce Regulatory Review Act, creates an independent
regulatory review commission tasked with removing a third of
all the regulatory obligations created by Department of Labor
alone.
So let me ask you, Mr. Kosar, do you have any thoughts on
proposals to establish commissions tasked with reviewing and
eliminating regulations?
Mr. Kosar. Thank you for the question. I have not reviewed
your piece of legislation, regrettably, but I will say, as a
general proposition, yeah, I favor commissions to take a look
at these things.
I mean, when you consider the size of the corpus of
regulations, no human being could fully appreciate or
understand what's in there. And it just seems self-evident that
there is some value in having a group dedicated to looking at
it and going through and saying, this is anachronistic, or,
guess what, this regulation didn't actually work out and we
should consider getting rid of it.
Mr. Walberg. Any other ideas beyond a commission like that
that you might have that could more effectively monitor the
output of new regulations and the costs that are inherent in
those regulations?
Mr. Kosar. Well, I think two leading proposals, the ones
that have certainly gotten a lot of discussion, are some
mechanism similar to a REINS Act, wherein, you know, you would
look at a whole ball of these things and figure out which ones
are problematic or undesirable for whatever reason and then
have a fast-track-type authority to run them through. That's a
commission version or the REINS Act, which has the tripwire
where a regulation of a certain size, with a certain quantity
of cost, cannot actually take effect until Congress
affirmatively acts upon it. So that would be another way to go.
And then regulatory budgeting.
Mr. Walberg. Yeah. Certainly familiar with that and
supportive of it.
Your written testimony mentions that the complexities for
collection of fees and settlements had increased as government
has grown. Could you elaborate further on this point?
Mr. Kosar. You know, that line is self-evident but is one
of those things that came out as I have this past week stuck my
nose back in the President's fiscal year 2017 budget. It's
unbelievably complex.
And there's a basic principal-agent relationship between
legislative branch and executive branch. As the persons who
authorize the taking of money from the public, the legislators
want to keep an eye to make sure that the money is being well-
spent. When that amount grows to $4 trillion or some such
number, it's really hard to keep track of all those dollars,
especially if you're not doing the appropriating.
Mr. Walberg. So your method of simplifying the complexities
of collecting fees and settlements specifically is what?
Mr. Kosar. Well----
Mr. Walberg. Review that for us.
Mr. Kosar. The first thing that I find vexing is the
separation, the kind of conceptual separation, that's been
around since at least 1967 between government receipts and then
the offsetting receipts and collections, and how is an
offsetting collection different from an offsetting receipt.
And, in fact, Congress has often written into statute
exceptions to these rules, so something that should be a
receipt is instead a collection or something like that.
Maybe in an effort to be too precise, we got too complex.
You know, if you have smart people in this town who are looking
at the Federal budget and having a hard time understanding it,
I don't quite know how the rest of the country can understand
it.
So I know some folks who are working at a Brookings budget
group, and one of the ideas that's being frequently brought up
is we need to simplify budget concepts, we need to rethink,
because we're relying on stuff that was ginned up a long time
ago.
Mr. Walberg. Thank you.
Mr. Chairman, I yield back.
Mr. Meadows. I thank the gentleman.
The chair recognizes Mr. Connolly for his questions.
Mr. Connolly. Thank you, Mr. Chairman.
Mr. Kosar, I want to make sure I understood your testimony.
Is it your testimony that Congress has been too whimsical or
careless over the years in devolving these powers to agencies
and ought to re-arrogate them back to itself through the
appropriations process?
Mr. Kosar. I would suggest that the various incidents where
the authority has been delegated away should be reviewed. Do
the rationales that originally propelled the delegation still
make sense, or have they become anachronistic, or has it just
not worked out?
Mr. Connolly. Fair enough.
It is not your contention, however, that you or R Street
Institute have looked at in depth the other impacts, the
negative impacts, on agencies that currently engage in that
practice legally through the delegation of authority by the
Congress. For example, you haven't looked at the potential
impact of doing that in the Department of Justice's Crime
Victims Fund.
Mr. Kosar. Oh, no. No, we have not done an assessment, and
we certainly----
Mr. Connolly. Right.
Mr. Kosar. --haven't looked at each program and tried to--
--
Mr. Connolly. Or what it might do to the Superfund clean-up
process.
Mr. Kosar. Correct.
Mr. Connolly. Or Tennessee Valley Authority collections and
what it uses those for.
Mr. Kosar. Uh-huh.
Mr. Connolly. Right?
Mr. Kosar. You're right.
Mr. Connolly. And likewise the Federal Protective Service
program through the use of its fees.
Mr. Kosar. Correct.
Mr. Connolly. Or the Federal Aviation Administration
Franchise Fund customer fees.
Mr. Kosar. No, sir, we haven't looked into those.
Mr. Connolly. Right. Okay. I just want to make sure. It's
one thing to say: Yeah, we looked at it, maybe some of these
authorities are too broad. But that's not the same as
testifying: I've looked in depth at the impact and it's
negligible, or it's tolerable. We don't know, sitting here.
So we can--not that you are, because you've just clarified
your testimony. But one needs to be careful, in terms of
impacts. And my view is, before we do any of this, we have to
understand what the impacts would be. Because over well over
200 years of history, this has a lot of entanglements and
commitments, and the disruption could be profound to the
operations of government, which is my contention. That doesn't
mean don't do some of it. It might not even mean don't do all
of it. But we've got to know a lot more than we know right now.
Ms. Krause, I want to make sure I understand what you're
testifying to. GAO looked at this why?
Ms. Krause. This is really based on--we have a body of work
that's looked at fees, fines, and penalties, often individual
ones. But we also have a body of fee work that's looked at
design principles to consider when you're establishing fees. It
also applies to fines and penalties. So things to consider in
structuring these, especially related to congressional control.
As I mentioned in my oral statement, one of those decisions
is related to what triggers the use--the congressional trigger
of use of funds, so whether it requires further appropriation
after it has been collected or whether an agency is allowed to
use it through----
Mr. Connolly. But it's not your testimony this practice
should end.
Ms. Krause. We don't take a position, no.
Mr. Connolly. And nor do you contend in this study, like my
questioning of Mr. Kosar, that you've looked in depth at the
potential impacts of curtailing or conditioning or revoking
these authorities that we've delegated.
Ms. Krause. No.
Mr. Connolly. No.
Ms. Krause. We have not.
Mr. Connolly. Thank you.
And, Mr. Kohn, your testimony is that if we had a carve-out
for whistleblowers you'd be fine?
Mr. Kohn. Well, as I say, I don't have a position on the
entire bill----
Mr. Connolly. Right.
Mr. Kohn. --but it absolutely needs a carve-out for
whistleblowers.
Mr. Connolly. Right. But I'm bigger than whistleblowers,
though I share your concern, as you heard my opening statement.
I think that's an unintended consequence, but my concern is
there could be lots of other unintended consequences, and we
haven't looked at them.
So to act with haste on a bill that I think is well-
intentioned and that makes a good point about the kind of
willy-nilly delegation of authority that has crept up over the
years--that is worthy of examination, and I share my friend
from Alabama's commitment to doing that. I think this bill
raises a very important subject we ought to reexamine.
But revoking those authorities or putting them on ice,
whether it's whistleblower or any of the other fees I listed--
there are plenty of others we could talk about--I think would
be very disruptive.
And I just want to be clear. You're not saying, give me a
carve-out and you've got my acquiescence and all the rest?
You're only addressing your own issue, which is whistleblowers.
And your testimony is limited to the fact that this would have
an unintended but devastating impact on whistleblowers and
contravene the intent of the Whistleblower Protection Act.
That's your testimony. Is that correct?
Mr. Kohn. Yes, that's correct.
Mr. Connolly. I thank you.
Thank you, Mr. Chairman.
Mr. Meadows. The chair recognizes the chairman of the full
committee on Health Care and Administrative Rules, Mr. Jordan,
the gentleman from Ohio, for a series of questions.
Mr. Jordan. Thank you, Mr. Chairman. Thank you for having
this hearing.
And, Mr. Palmer, thank you for bringing a good piece of
legislation forward.
Thank you to our witnesses.
And, Mr. Kohn, I agree with you. There's nothing wrong with
an amendment that would carve out the whistleblowers, much like
Mr. Palmer's legislation already exempts the Patent Office and
the Postal Service. But I want to try to get a handle on the
overall picture here.
So, as I understand it, there are three major categories--
there's fees, there's fines and penalties, and then there's
settlements--money that the people's representatives don't get
a direct say on what happens with that money when it comes to
the Federal Government.
So, Director Krause, what is the total number--let's just
go in that order. Fees. What is the amount of fees collected in
fiscal year 2017 by the Federal Government and all the various
agencies?
Ms. Krause. Unfortunately, that number is unknown. When we
have looked at issues particularly related to fees, government-
wide sources don't necessarily track back to the specific legal
authorities related to the----
Mr. Jordan. Here's what the President said. The White House
said it was $534 billion. Are you familiar with that number?
Ms. Krause. I am not familiar with that number.
Mr. Jordan. This is from their budget. For 2017, the table
shows that total offsetting collections and offsetting receipts
from the public are estimated to be $534 billion.
Do you accept that number?
Ms. Krause. I would have to take a look at it closer to
understand it.
Mr. Jordan. Is the White House right or wrong?
Ms. Krause. I don't--unfortunately, I don't----
Mr. Jordan. Is it in the ballpark?
Ms. Krause. Like I said, when we have--so we have work
ongoing----
Mr. Jordan. For the sake of argument, let's accept what the
White House said. It's their budget. They are the head of the
executive branch. They're saying it's--that's a lot of money.
Do you know how much we spend in discretionary spending
each year? Or last year, do you know how much we spent in
discretionary last year?
Ms. Krause. I don't know that number off----
Mr. Jordan. One-point-two trillion. So we have a number
that's collected in just fees, just one-third of the three
areas, that's almost half of what we spend annually in
discretionary spending. That's a pretty big number. That $534
billion is approaching what we spend on national defense each
year.
And, again, the people's representatives in the United
States Congress don't have a direct say on how that money is
spent once it's collected, right?
Let's move on to fines and penalties. Do you know how much
we collect annually in fines and penalties?
Ms. Krause. I do not know that based on the data sources
that are available.
Mr. Jordan. Yeah, that's stuff we need to know. But the
study the committee did over a 5-year period determined that
number was $83 billion over a 5-year period. So, again, we're
talking billions of dollars.
Now, what's interesting in what the committee found out is
Treasury couldn't give us any numbers. Specifically, Treasury
and the IRS couldn't give us the numbers. This is the IRS. They
collect a few fines and penalties, my guess is, some amount. So
then you have this $83 billion figure that excludes the
Internal Revenue Service and any numbers coming from Treasury.
And then, finally, you have the third category,
settlements. Which now we know ``settlements'' is a nice way of
saying, for some people--particularly when you think about the
Justice Department--``settlements'' is another word for a
shakedown. Certain companies have reached a settlement with the
Justice Department, and then they tell this particular company:
It's not just about penalizing you or compensating the real
victims. We want you to give money to some nonprofit that we
deem as appropriate, and we're going to call it a donation.
Interesting use of the word ``donation.''
So, when you add all these together, could you even hazard
a guess, how much money in fees, fines and penalties, and
settlements the Federal Government collects in 1 year?
Ms. Krause. As I mentioned, when we've looked at this,
there isn't a government-wide source that would allow us to
give a reliable total on the amount.
Mr. Jordan. So who can give us that number?
I mean, this is what Mr. Palmer's legislation gets to the
heart of. We can't even get someone in the Federal Government
to tell us what that total number--we know fees, based on what
the White House told us, is roughly equivalent to what we spend
on national defense each year. It's roughly equivalent to half
of all discretionary spending we did in 2017. We know it's a
big number just in the fees category alone. But we'd like to
know what it is, fees, fines and penalties, and settlements,
what that number totals up to.
So who can give us that number?
Ms. Krause. That is something--we have ongoing work looking
at what we call backdoor spending authority, and it is to do an
inventory of the accounts that are out there, the budget
accounts that are out there, for funding that supports outside
of the----
Mr. Jordan. Does anyone else on the panel know?
I mean, I would think Office of Management and Budget
should be able to give us that number. I would think someone at
the Treasury Department, the department in charge of the
Nation's money and how we--I would think someone there could
give us that number.
Why can't we get that number in an important hearing on an
important piece of legislation that Mr. Palmer has brought
forward?
Mr. Hollister, it looks like you want to offer a----
Mr. Hollister. I sure do. Mr. Jordan, my understanding is
that the Treasury Department's fiscal service has that
information, it's maintained by the Central Accounting
Repository Service, and that, on the other hand----
Mr. Jordan. Well, Mr. Hollister, why won't they give that
information to this nice lady over here, Director Krause, so
that she could come here today and give it to Mr. Meadows in
this committee?
Mr. Hollister. If I understand right, there are some
organizational problems that exist between Treasury's leg.
affairs office and their fiscal service.
Mr. Jordan. What does mean?
Mr. Hollister. That means that sometimes the fiscal service
and the leg. affairs office don't get along.
Mr. Jordan. Does that mean they're just not going to--well,
you know, Mr. Meadows is a nice guy, but we're not going to
give him the information? Is that what they're saying?
Mr. Hollister. Well, what it does mean is that the
information that's in the President's budget that you cited and
the information that's in the monthly Treasury statement that
comes out every month that has at least a line item for
miscellaneous receipts, that's coming from somewhere. It's
coming from the system that Treasury maintains.
Mr. Jordan. Yeah. Well, we'd like that information so that
we can actually get moving on Mr. Palmer's legislation with the
appropriate amendments, like Mr. Kohn has offered. But this is
exactly why the gentleman from Alabama is on the right track
with an important piece of legislation.
With that, I yield back, Mr. Chairman.
Mr. Meadows. I thank the gentleman.
The chair recognizes Mr. Boyle for 5 minutes.
Mr. Boyle. Thank you, Mr. Chair.
And I wanted to narrow in specifically on this
whistleblower portion of it, because beyond just the two pieces
of legislation that we're talking about today, I think it's
actually important for reasons far beyond that and for all the
members who are here to better understand this.
Because just in--I was interested in reading all of your
testimony, particularly the charts, but the exponential growth
has been staggering in the amount of money collected--we're
talking about from the early 1990s, roughly 1990-1991, until
today. So, over 25 years, by my back-of-the-envelope math, a
nine times increase in the amount of revenue.
I'm curious what specific rewards or programs within the
umbrella of whistleblowing would you say has been most
effective in cutting out waste, fraud, and abuse and, of
course, generating revenue?
Mr. Kohn. Thank you.
And that growth is triggered by empowering the insiders,
who are critical for fraud. Fraud is designed to be hidden.
Mr. Boyle. Right.
Mr. Kohn. You need the insider.
The False Claims Act is really the model, because it has
been around for 30 years and you can test it. And the
Department of Justice, unlike, apparently, in other programs,
to the penny figures out how much the whistleblowers are
bringing in and how much the government is finding on its own.
Because they have to--if the whistleblower brings it in, they
have to give the reward.
Mr. Boyle. Right.
Mr. Kohn. So these numbers are literally to the cent. And
it's just incredible, the growth.
Other programs that are more modern, they don't have the
track record, but the SEC is reporting incredible findings. The
Chair is talking about blueprints and unbelievably high-quality
information. Why? Think about it. If your reward is based on
the truthfulness of your information, the accuracy of your
information, and the quality of your information, you're going
to be weeding out, you're going to get the best sources, it's
going to help the government, it's going to get the big fish.
SEC is seeing that, although they're still relatively new.
In offshore illegal accounts, illegal Swiss banking, one
whistleblower, Bradley Birkenfeld, literally broke the bank--
$780 million fine to UBS. They had 18,000 illegal U.S.
accounts. And that triggered a voluntary program of 50,000
Americans, millionaires and billionaires, coming back and
paying fines. I totaled it up to about $13 billion--triggered
by a whistleblower because the people didn't want to get
caught.
If you empower the insider, the positive results are truly
remarkable.
Mr. Boyle. Another way of thinking about this is
essentially we've created a market where the insider now can
bring this information forward, and there's essentially a
market for this information that previously did not exist at
all.
I'm--you wanted to add to that?
Mr. Kohn. Absolutely true. The University of Chicago, their
school of economics--you know, these are no liberals--you know,
these guys looked at it and concluded that without rewards
there's no incentive. And, in fact, they couldn't even
understand why anyone would blow the whistle.
But with those rewards--and they've studied every major
fraud case in a period of time; it was an incredible study--
they said they worked, they worked remarkably well, they're not
frivolous, and they recommended expanding the use of that
process.
You're talking about, to just put it bluntly, the goose
that lays the golden egg. And I'm just saying, don't kill it.
Mr. Boyle. So let's take the next step then. If it were
killed, either purposely or inadvertently, through this or any
other legislation, what specifically would be the
ramifications?
Mr. Kohn. I will tell you, I will have a $500 hammer I can
sell you. It's as simple as that.
When you look at the state of Federal procurement before
Senator Grassley fixed it, if you look at that state, it was so
bad. Yet I have the opportunity to talk to people within
business, and they tell me the impact, far from just the
recoveries--the increasing compliance programs; the fear of
detection making people do the right thing; and guess what,
making honesty pay, making the markets more fair, where people
who are cheating can get caught so the honest businesses aren't
at a disadvantage.
The benefits are literally overwhelming. Every regulating
agency that has looked at this has turned around and said,
whoa, this is great.
Mr. Boyle. I thank you.
Mr. Chairman, I see my time has expired, so thank you.
Mr. Kohn. Thank you.
Mr. Meadows. I thank the gentleman.
The chair recognizes the gentleman from Florida, Mr.
DeSantis, for 5 minutes.
Mr. DeSantis. Thank you, Mr. Chairman.
Mr. Kosar, what is the reason why the Founding Fathers put
the power of the purse with the Congress?
Mr. Kosar. Well, they had had plenty of experience of abuse
at the hands of the crown. And I think there was just more
philosophical agreement that, if money was to be taken, it
should only be taken by elected officials who are, therefore,
accountable and could be taken out of office if they take more
than they should.
Mr. DeSantis. So you have an executive--and they believed
in separation of powers. So you have an executive branch. If
the executive branch is acting in a way that's contrary to
either the interests or the rights of the public, then those
elected representatives in the legislature would be able to
remedy that by simply refusing to provide funds going forward,
correct?
Mr. Kosar. The wealth and property of individuals would be
better protected under a scheme by which only those who are
able to be recalled through election or put out of office are
able to extract it, yes.
Mr. DeSantis. And I think the problem with what we've
pointed out here--and I commend the chairman for doing this--
is, when you have the agencies that are effectively on
autopilot with fees and whatnot--and we saw this with the
dispute about illegal immigration, when the President, even
though he had said 20 times, you know, you can't do this, was
then effectively issuing legal status unilaterally to certain
people who were in the country illegally. The Congress said,
wait a minute, you can't do that. But it turned out--we said,
we're not going to fund it. Well, it turned out we didn't even
need to take an affirmative act to fund it. They already had
the fees through the USCIS, and it was just on and on they went
without any need for congressional appropriation or
authorization.
And the problem with that is that that takes the default--
the default should always be, if we just simply decide not to
act, then the offending conduct stops. It should require
Congress to take an affirmative act to appropriate funds for a
given activity.
And the way we've gone, we're insulating the Congress--
well, we're insulating the agencies from accountability from
the Congress, but, more importantly, from the American people,
because they don't have a direct way to hold the agencies
accountable.
And I think that what frustrates me is that it's not like
Congress had this power taken from us. Congress has given away
the power and has offered to do this over the years.
Mr. DeSantis. So let me ask you this. Well, this could be
for anyone that wants to jump in. In terms of transparency,
some agencies are not transparent at all, some are very
transparent. What agency would you say is the most transparent?
Examples?
Mr. Hollister. Mr. DeSantis, I would point to--we were
doing a lot of work on the overall spending and the
transparency of expenditures as is going to be required
beginning this May under the DATA Act, and I would point to the
Small Business Administration, for instance. They have been
able to take all of their spending information, they've been
able to conform it to the new data structure, and they're now
able to navigate seamlessly from their appropriation all the
way down to each grant they issue and put all of that in a map
in one click.
Mr. DeSantis. Anyone else? Go ahead.
Mr. Kohn. Sure. Under the False Claims Act, those
settlements are all made public, they're subject to court
approval. Every dime given to the whistleblower is accounted
for in a public document. It's been around for 30 years, and I
don't know of any time that a Member of Congress or even the
public has said the way the whistleblower was awarded was
somehow bad, except for a whistleblower claiming they should
have gotten more, but--so there is transparency in the False
Claims Act.
Mr. DeSantis. Let me ask about examples of Congress
relieving agencies from the appropriation process, as I
mentioned. When did this start? Ms. Krause, is that--I think
you had mentioned it.
Ms. Krause. Sorry. I was looking back to my colleague.
Ms. Perez. Actually, there--excuse me. There have actually
been examples going back----
Mr. Meadows. We'll get you a chair. Okay.
Ms. Perez. Oh, thank you. Sorry about that.
There have been examples going back to, as was mentioned
earlier, the Customs officials early on in the republic. There
have also been a number of authorities just in this past 100
years where agencies are collecting fees, and Congress has
either provided limitations on how they can use them or made
them available without further appropriation.
Mr. DeSantis. And that process has become more conspicuous
over the last hundred years? Is that fair to say?
Ms. Perez. Yes, that would be fair to say.
Mr. DeSantis. Okay. Well, look, I think that my friend from
Alabama has a good bill. I think at some point, if we want to
be anything more than a debating society, we're going to have
to start reclawing some of this authority. You know what? It
requires Congress to do more work. You actually have to
legislate more, you've got to make more decisions. Some people
don't like going on the record as much, but that's just the
reality. And it's easier to kind of say that just let
everything run on autopilot. And I think some of the fees, it's
not all bad the way it's done. Sometimes it is within law, but
other times it's simply government on autopilot, and that is
not, I think, what the Constitution envisions, and I think it's
up to us to start to claw this back.
So I yield back.
Mr. Meadows. I thank the gentleman.
The chair recognizes the gentleman from Georgia, Mr. Hice,
for 5 minutes.
Mr. Hice. Thank you, Mr. Chairman.
Ms. Krause, I just want to make sure. You stated that the
GAO does not know how much is collected through the fees and
fines and all that sort of thing. Is that correct?
Ms. Krause. There are data out there about individual ones.
It has not been aggregated into a total. It's a very involved,
complex process in terms of understanding the underlying
specific legal authorities associated with those funds.
Mr. Hice. Well, in the first place, it seems like that
would be information that not only you should have, but you
would want to have. But secondly, this bill would correct that
problem as well, if we're able to move forward on it.
And, Mr. Hollister, right along the same line, I want to
just--for clarification, I want to make sure that you stated,
you testified a while ago that the Treasury can provide an
accurate number for the fees, fines, and settlements. Is that
correct?
Mr. Hollister. Mr. Hice, yes. My understanding is the
Treasury can. The information that the Treasury receives from
agencies is often in the form of summaries. So Treasury might
give you amounts, but Treasury might not be able to walk that
back all the way to the specific complexities of the legal
authority under which each bunch was collected. Treasury,
however, could give us, from the central accounting reporting
system, could give us aggregations. And my testimony was that
Congress could direct Treasury to include that in the overall
spending structure.
Mr. Hice. Okay. Mr. Chairman, I think it'd be wise for us
to request that number from the Treasury just to have an idea
of what we're dealing with here.
Mr. Kosar, let me ask you, regarding the fines and fees,
penalties, settlements, all this sort of stuff, do you have any
idea how much that has increased over recent years?
Mr. Kosar. No, I do not.
Mr. Hice. Who would have that information for us? Does
anyone chart the increase of fees, fines, and settlements?
Mr. Kosar. I would think OMB would have a number to use,
and then presumably we could get some better data from
Treasury.
Mr. Hice. I would also like for us to get that information,
if we can.
And let's just, for the sake of being in here, is it fair,
do you think, to make the assumption that fees and penalties,
fines, have increased over the years? Is that a fair
assumption?
Mr. Kosar. I would say so. And I would say so probably as a
proportion of the budget it has increased.
Mr. Hice. Right. I would say so as well, because we're now
watching some agencies actually live off of those things. And
so with the assumption that is more than likely accurate that
the fines, penalties, fees have increased, how does that,
number one, enable these agencies to operate independently? But
also, how does that impact Congress's role?
Mr. Hollister. Well, Mr. Hice, it reminds me of Thomas
Jefferson's letter to the Treasury secretary complaining that
the spending, even at that time in 1802, the Federal
Government's operations had gone beyond the comprehension of
Congress. The complexity at that point had already grown to the
point where Congress couldn't comprehend it.
And in this case we see--because Congress has over the last
200 years delegated authority in very complex ways to agencies,
we have a great deal of difficulty in getting that
comprehension. I think we could help--we could start to regain
it by consistently tracking that information and asking for
that information to be put into the whole picture, integrated
into the whole picture.
Mr. Hice. Well, I would absolutely agree. And it seems to
me, with the complexity that you mention, the more complex this
whole scenario is, the more difficult it is to have oversight
over it. And it gets out of hand rapidly, it seems. And that--
you know, this whole thing--and I'll just pick up on what Mr.
DeSantis said. You know, this ultimately comes down to a
constitutional issue. And fair enough, Congress over the
decades has yielded some authority to these agencies, but we
are on the verge of a genuine constitutional crisis now where
those who are representatives are not having oversight and
accountability, because those who are unelected in very
powerful agencies are now able to operate independent from
Congress and do multiple things, and they're not even elected
by the people. And all of this creates a potential enormous
constitutional crisis. Would you agree with that? Mr. Kosar?
Mr. Kosar. I would say it creates basic questions of
legitimacy and concerns along that line. And it also leads, I
think, to the perspective that, you know, where does the real
power lie, which branch? Eyes more and more turn to the
executive branch. I mean, each time in an authorization, say,
you allow an agency to collect fees for a particular purpose
and spend it for a particular purpose, okay, you're directing
the congressional spending, but because it's put into an
authorization statute, if that agency misuses the money or has
too much of it, well, you're going to have to pass another law
to get that back. And as we know in this environment, passing
legislation is very difficult. So the more that that is kind of
toggled in one direction, the more toggles you've got to pull
back if things don't work out right.
Mr. Hice. Well, I thank the panelists.
And I thank my colleague from Alabama for this bill, Mr.
Chairman. I appreciate your indulgence. I yield back.
Mr. Meadows. The gentleman from Tennessee, Mr. DesJarlais,
is recognized for 5 minutes.
Mr. DesJarlais. I thank you, Mr. Chairman. And thank you,
Mr. Palmer, for bringing forth this legislation.
Ms. Krause, if you would, your 2015 report illustrates the
DOJ sidestepping Congress and providing deposits from Federal
fines and penalties to be immediately used to fund agency
programs, correct?
Ms. Krause. Yes. That's our report.
Mr. DesJarlais. Do you feel Mr. Palmer's legislation
adequately addresses this issue?
Ms. Krause. The recommendations that we made in that report
dealt a lot with the obligated balances, so the balances the
agency holds that--to manage the programs and the fees that
come in. I'm not familiar--or I wouldn't know how that applies
in the bill context.
Mr. DesJarlais. Okay. So we already know the DOJ has taken
advantage of using their fines to fund initiatives within their
agencies. Do you know what percent of their budget that
represents?
Ms. Krause. I believe in that report we talked about it
being 15 percent of the budget in 2013.
Mr. DesJarlais. Do you have a list of other government
agencies that have also circumvented Congress and used fines,
fees, and penalties without congressional authorization?
Ms. Krause. We have individual reports that we've--we have
in terms of those that have authority where they've been
granted authority to use funds without further appropriations.
We don't have a comprehensive list. We have examples of that--
--
Mr. DesJarlais. Can you name a couple?
Ms. Krause. What----
Mr. DesJarlais. Can you name a couple?
Ms. Krause. Yeah. Sure. Some of those that include, I think
we mentioned the National Park Service, the recreation fees,
that the National Park Service is allowed to use those for
repair and maintenance. You also have the USDA agriculture
quarantine fees. Those are examples of fees that they do not
require any further appropriation beyond their current
authority.
Mr. DesJarlais. Is MHS one?
Ms. Krause. MHS being?
Mr. DesJarlais. Mining.
Mr. Meadows. Mining Health and Safety.
Ms. Krause. I believe that is, yes.
Mr. DesJarlais. Who determines the amount of the fine
that's levied?
Ms. Perez. So that depends on the statutory authority. In
some instances, Congress will set the percentage or the amount
of the fee. In other situations, Congress has by statute
designated that the agency will follow a particular process for
determining a fee. And so agencies use a variety of factors for
that.
Mr. DesJarlais. Okay. Mr. Jordan had mentioned the term
``shakedown'' in the process of these fines being levied and
then sometimes negotiated. Who's authorized to negotiate, let's
say, a fine that's levied of $1 million and scares the heck out
of businesses, and really there's never any intention of
collecting $1 million, but that gets their attention? Who
negotiates the actual fee or fine that's paid?
Ms. Perez. That also will depend on the statutory authority
of the agency that is either imposing a fine or following the
process to assess a fine. So in those situations, you know,
depending on that statute, the agency will be able to, you
know, make decisions about how much of a fine they need to
seek.
Mr. DesJarlais. Do you think that's fair and effective, to
purposely mislead or levy a fine in instances to companies that
obviously can't afford to pay that? I've seen it happen in
nursing homes, I've seen it happen in mines, it happens in the
Department of Justice. That's a problem America has with
overregulation in the Federal Government, is they feel like
they're simply at their mercy. And I think the process of
coming in and determining a fine--the EPA does this all the
time, that you have people that clearcut some timber and it
happens to go beyond an acre, and they come in with a huge fine
that they know they can't pay. And then when they negotiate it
down to something still unreasonable, they are somehow expected
to feel good about it. Do you think that's a fair process?
Ms. Perez. We actually haven't done the work to be able to
determine of any specific case where that happens.
Mr. DesJarlais. Well, can you tell me if any of these fines
and fees are used within the agency? We know they're used to
fund some of their own initiatives. Do the employees that go
out and levy these fines that start the shakedown, if you will,
do they ever get bonused by the very fines that they levy?
Ms. Perez. We're not aware of those situations.
Mr. DesJarlais. Can you say that there's not? Because this
was a question I posed in a previous hearing and we didn't get
an answer, even though there was evidence that this was
occurring. So you've never heard of that?
Ms. Perez. We're not--I'm not aware of any particular
situation, sir.
Mr. DesJarlais. Okay. So even though the DOJ has used this
to fund their own initiatives, you don't have any evidence that
the people who work for the DOJ benefit from these fines?
Ms. Perez. No. We don't--we don't have any particular cases
in mind. We have received a request for a legal opinion from
Chairman Chaffetz of the committee to look at some supplemental
agreements that are made with respect to the EPA, and so that's
a project we're working on.
Mr. DesJarlais. Okay. But, again, you can't tell me
specifically who comes up with the amount of the fine and who's
able to negotiate the actual settlement?
Ms. Perez. No, not in a general sense. Again, that would
depend on the very specific statute and program and how that
would be authorized.
Mr. DesJarlais. Do you feel that's something that needs to
be addressed? Or Ms. Krause?
Ms. Perez. I mean, certainly GAO is always--you know, we're
definitely in favor of, you know, looking into, you know,
particular programs and the authorities and how agencies use
them.
Mr. DesJarlais. Okay. I thank you for your time.
Yield back.
Mr. Meadows. I thank the gentleman.
Let me verify one thing. You said it's according to
statute. A lot of these fines are not dictated by statute, I
mean, in terms of what they are to fine. Is that correct?
Ms. Perez. Right. And that's why what we were saying is
that depending on how the statute authorizes the agency to
either impose a fine or assess a fine, then we would need to
look at a specific situation to see what authority the agency
had in that case.
Mr. Meadows. So it just depends on that agency's statute?
Ms. Perez. Yes, that's correct, sir.
Mr. Meadows. Do you not see that there would be a problem
with lack of equality there?
Ms. Perez. You know, certainly that would be something to
look into in terms of how an agency carries out those
functions, carries out their statutory authorities. We just
don't have any examples to be able to give you a specific
example of one where there might be such a problem.
Mr. Meadows. I'm going to yield to the ranking member for
just a--very brief, and then we'll come to Mr. Grothman.
Mr. Connolly. Two quick observations. I come from local
government. It is the practice of local government throughout
the United States to levy fines, for example, on restaurants or
food handling establishments when they find nonhygienic
conditions: Rat droppings, cockroaches, or unsanitary
conditions in the kitchen. Maybe some people want to call that
a shakedown. I can tell you where I live, my public thinks
that's a measure of public safety and protection to make sure
that food is sanitary and healthy----
Mr. Jordan. Mr. Chairman?
Mr. Connolly. --not disease prone.
Mr. Meadows. The gentleman from Ohio. I can see where this
is going.
Mr. Jordan. We----
Mr. Meadows. Go ahead.
Mr. Jordan. Yeah. If it's going to the--if the fine is
going to the local government, but what--that's not what's
happening at DOJ. There is a settlement and then DOJ tells the
party who has supposedly done something wrong, you need to give
the money to this nonprofit organization, which just so happens
to have political leanings of--well, may have political
leanings. That's the problem. And they call it a donation. When
you're forced to do it, it's not really a donation. I think
it's a shakedown, the term I used before.
Mr. Meadows. All right. We're going to go to the gentleman
from Wisconsin, Mr. Grothman, for 5 minutes.
Mr. Grothman. Okay. This is a question for any one of you.
Next year's budget--obviously, it'd be nice if we had more
detail here. It kind of surprises me the amount of funds that
are going around that we don't even know the amount that's
being spent. Can you make suggestions how--and I guess it would
be Donald Trump's first budget--how in his submission to
Congress, we can begin to see more clearly how funds are
collected and spent or requirements we should put on that
budget request?
Mr. Hollister. Yes, sir. I'd recommend that Congress insist
that the budget be expressed not just as a document, but also
electronically, that it conform to the electronic structure
that this committee has spent a great deal of time and effort
mandating under the DATA Act of 2014 so that the budget can be
electronically compared to the records from the previous year.
Mr. Grothman. Okay. Mr. Kosar, in your testimony, you
mentioned that the government collected $516 billion from the
public last year, right?
Mr. Kosar. Correct.
Mr. Grothman. To what degree do these--may be outside the
normal collections is included in that amount?
Mr. Kosar. I honestly don't know, because I find the
categories that are used so confounding. And what we find in
the President's budget is aggregate numbers in many cases.
You'll have a line specifying a particular agency if it has a
particularly large number, but then, you know, smaller amounts
collected by agencies for other activities get rolled into one
big ball. And so I would say it would be very nice if we had a
better breakout and it was connected to the set of authorities.
Mr. Grothman. Do you think we should do something
statutorily to mandate a more clear delineation of where the
funds are coming from?
Mr. Kosar. I would favor that.
Mr. Grothman. Okay. That's good.
Mr. Hollister. Mr. Grothman, if I may, I would also add
that there's a--the connection between the receipts and how
they're ultimately spent is crucial. That's one thing that
we're missing today. We don't have any kind of system--even
though Treasury has a system back behind there that does track
what agencies are doing, we don't have a system that shows--
that connects those receipts from nonappropriated sources to
their ultimate expenditure. We know that that is
technologically possible. We believe Congress should mandate
that.
Mr. Grothman. Well, I hope it's technologically possible.
In other words, when they have money coming in, even though
some of that money is dedicated to a given purpose, that's not
necessarily apparent from their budget?
Mr. Hollister. It won't be apparent from the system the way
the system's structured today.
Mr. Grothman. You know, it never ceases to amaze me how
screwed up the Federal Government is. I tell everybody back
home, I was a state legislator for 20 years, Washington is so
much more screwed up than Madison, Wisconsin, you can't believe
it, and one of them is how little information we get.
We'll ask all of you again, are there agencies with funding
streams outside the appropriation process? And I guess this
kind of goes to you. Which agencies in particular do you think
could give us more transparent budgets?
Mr. Hollister. Well, anecdotally, sir, we do know that some
of the agencies that have independent research facilities,
Defense Department in particular, but Energy Department
certainly, there are often difficulties in comparing the
budgets of those independent but federally funded research
centers with wrapping them up and rolling them up to the
overall budget of the agency.
Mr. Grothman. Okay. Well, I'll see if we can do something.
One other comment. One of the Congressmen asked, I think
maybe rhetorically, why they gave the power of the purse to
Congress. And I guess I'll say the reason you want things in
two different places is I think our forefathers were
antithetical to the government growing at all. I mean, that's
why, you know, the senators were supposed to be appointed by
the--you know, why there were so many checks and balances. I
think that's obviously why. It should be very, very difficult
for the government to spend any money or hire any new people,
and the more things are spread out, the more difficult that
will be.
But we'll yield my remaining minute----
Mr. Jordan. Will the gentleman yield?
Mr. Grothman. --to Congressman Jordan.
Mr. Jordan. I appreciate it.
I would just--I'm just struck because no one seems to be
able to give us an amount. We had a colleague ask, has it been
increasing, the fees, the fines, the penalties, the
settlements? Has that number been going up? We don't--the
answer is, from our panel, we don't know. When asked the total
amount in fees, fines, penalties, and settlements, the answer
is, we don't know.
Maybe the best way to get the information is to pass Mr.
Palmer's legislation. Right? Because then we would know,
because they got to all send it to the general fund, and we'll
know what the amount--and with the appropriate amendments, Mr.
Kohn, but we pass this bill, now we'll now. Right? Because now
it'll be--that's the whole--that makes the point why Mr.
Palmer's legislation is so darn good, because we'll know and
then we'll know year to year if that number's going up or down.
This is why this is such a common sense thing and so
constitutional. And as Mr. Hollister said, States are doing
this, they're transparent. In Ohio, we know what's happening
with fees and fines and penalties and settlements. It's just
the Federal Government we don't know. All the more reason to
pass the legislation, then we'll know.
I yield back.
Mr. Meadows. I thank the gentleman.
The gentleman's time from Wisconsin has expired.
The gentleman from Alabama is recognized for 5 minutes.
Mr. Palmer. Thank you, Mr. Chairman. And I want to thank
all my colleagues for attending this hearing, and for the
witnesses.
And, Mr. Kohn, I want you to rest assured. I've read your
testimony, and I actually called my chief of staff and told him
that we needed to make sure that whistleblowers are compensated
and that that's protected. So you can rest assured that we'll
take care of that with a friendly amendment.
I would like to ask Ms. Krause this question: Article I,
section 9, clause 7, says, ``No money shall be drawn from the
Treasury, but in consequence of appropriations made by law; and
a regular statement and account of the receipts and
expenditures of all public money shall be published from time
to time.''
Are fees collected by the Federal Government public money?
That's not a hard question.
Ms. Krause. No. I was going to turn it to my counsel.
Mr. Palmer. Okay.
Ms. Perez. Yes, sir. The fees that are collected by
agencies under the authority of Congress are considered to be
appropriated funds.
Mr. Palmer. No. The question is are they public money?
Ms. Perez. Yes, sir. They're considered to be public.
Mr. Palmer. Okay. They belong to the public, not to any
individual, not to any agency director. They belong to the
public. Is that correct?
Ms. Perez. Right. Appropriated funds----
Mr. Palmer. How about fines?
Ms. Perez. --is synonymous to public money, yes.
Mr. Palmer. Fines? That would--would you answer in the
affirmative on fines, that's public money?
Ms. Perez. Yes. Unless Congress----
Mr. Palmer. How about settlements?
Ms. Perez. Unless Congress has specifically designated that
they not be considered public or appropriated, they would be
considered appropriated, yes.
Mr. Palmer. Okay. And, I mean, settlements, revenues from
the sale of government assets. That would be considered public
money, wouldn't it?
Ms. Perez. Any time Congress has designated sources of
funding and said that----
Mr. Palmer. Okay.
Ms. Perez. --agencies can use them, those are considered--
--
Mr. Palmer. All right.
Ms. Perez. --public money, yes, sir.
Mr. Palmer. Thank you.
I just want to make the point that H.R. 5499 is not a
radical proposal. It is consistent with the Constitution. It's
a constitutional proposal. And as my colleagues on both sides
of the aisle have acknowledged, it's the duty of Congress to
direct spending and not the agencies. And H.R. 5499 is not only
consistent with that principle and that constitutional
requirement, it advances it. It advances that responsibility.
All my bill does is--all H.R. 5499 says is that all fines,
fees, settlements, all unappropriated revenues shall go to the
Treasury identified with the agency where they originated
subject to being appropriated by Congress. It doesn't in any
way diminish the fact that an agency might have access to those
fees, but what it does is it puts the responsibility back where
it belongs. It restores oversight to Congress over the
agencies, but more fundamentally, it restores accountability of
Congress back to the people. And that's one of the main things
that we've avoided over the years by delegating spending to
agencies, whether it's through spending fees, fines,
settlements. But we also are required by the Constitution to
give a statement and account of all receipts and expenditures
of all public money.
And with all due respect to my--to the GAO and my
colleagues, my friends there, and I have--I really like what
the GAO does, you can't answer that question. You've been asked
repeatedly and you can't give an answer to that.
So I'm just--what H.R. 5499 does is it would require
Congress to review the unappropriated spending, it would give
us the accurate number of how much we're actually collecting.
And it may be that some agencies would be authorized or
reauthorized on spending some of these fees. I don't dispute
the use that some of these fees are necessary, but the use of
the funds should also be proper. And if Congress is not
appropriating and not exercising oversight, whether or not it's
necessary, it's not proper.
So I just think on too many occasions, you know, agencies
have circumvented the will of Congress and Congress has
shielded itself from being held accountable by the public by
allowing this to continue. And I think H.R. 5499 would hold the
agencies accountable, but more fundamentally, it would make
Congress accountable to the people.
And I just think that the fact that we fail to pass
appropriations bills does not diminish the fact that Congress
is not exercising the oversight and the appropriation authority
required by the Constitution, and that's what we're trying to
reestablish here. Congress needs to be held accountable for the
way the agencies operate. We need to exercise due diligence in
our oversight. And if Congress can give the authority, it can
take it away. But I believe H.R. 5499 is a reasonable step
toward restoring constitutional oversight of our agencies and
Congress being held accountable by the people.
And I appreciate again your indulgence, Mr. Chairman, and
for the committee holding this hearing, and I appreciate the
witnesses' testimony. I yield back.
Mr. Meadows. I thank the gentleman, and thank the gentleman
for his interest in this important topic.
The chair's going to recognize himself for a few questions,
and then we'll be prepared to close with closing statements.
So, Mr. Hollister, let me come back to you, because I think
in your testimony, you indicated that the Department of
Treasury actually has monthly statements where the total fines,
fees, and settlements, I guess, as it relates to--it may not be
able to be tracked back to the genesis of where it started, but
there is a total number. Is that correct?
Mr. Hollister. That's correct, sir. There is a total number
and there are detailed tables. The trouble is it's a static
document.
Mr. Meadows. It's a what?
Mr. Hollister. It's a static document. You can't----
Mr. Meadows. Okay. A static document. And we know that your
fine group is not static, right? One of the reasons why I get
so excited about what you're doing is it adds a level of
transparency where we'll be able to drill down and really start
to look at it in a real meaningful way. Would you agree with
that?
Mr. Hollister. It ought to be interactive, sir.
Mr. Meadows. So as we look at that, can you explain any
reason why Treasury would not be able to give this committee,
in response to a request that we made, the total amount of
fines and penalties that they've collected? What would be a
reasonable rationale for them not being able to give this to
this committee?
Mr. Hollister. My best suggestion, sir, would be that the
Treasury Department tried to minimize the scope of the request,
as leg affairs offices have been known to do--I've worked for
the committee, I know how that works--and interpreted the
request as a request for just the Treasury Department's own
receipt of fines, fees, and settlements, which involves all
sorts of----
Mr. Meadows. So what you're saying is we have a failure to
communicate?
Mr. Hollister. Yes, sir.
Mr. Meadows. So if we have a failure to communicate, I
think it would be prudent for us to make sure that as a staff--
and they've already indicated they're going to reach out to
Treasury to get this number, because as my colleague, the
gentleman from Ohio, Mr. Jordan, mentioned, we're talking--it's
starting to add up to real money here. We're talking about $600
billion. Is that correct? Based on the testimony from the White
House budget and the $83 billion that we got in a report, $600
billion. Would you agree----
How about this, Ms. Krause. Would you agree that $600
billion is a large sum?
Ms. Krause. That is a large sum.
Mr. Meadows. All right. And being that the President-elect,
Donald Trump, wants to spend $1 trillion on infrastructure,
that gets us half the way there with fees, fines, and
settlement, doesn't it? You don't have to answer that. I'll
just leave it at that.
But--and so as we go here, I guess I use the humorous
example in one area that's not so humorous to me. So let me
come back to GAO. MHS was mentioned earlier. And the reason why
I drilled down on statute and what we can do with fines, fees,
is because there is no guideline for MHS in terms of the fines
that they may give and the scope of that. It depends on the
individual inspector on what he would give.
And what I was troubled with is--and I didn't know this
because I was just a new Member of Congress going out to find
out what was happening out there. And as I've recently found
out, that actually there was an empty Coke can on a desk at a
mining group, that they got a fine of well over $500 for having
a Coke can sitting on their worktable. That happens in my
office probably on a regular basis. So if MHS had come in and
fined me, I would have had this unbelievable fine. And then I
went up on the----
Mr. Connolly. Wait a minute. Can we get the address of your
office?
Mr. Meadows. Yeah. Well, I'm sure it's in Rayburn, because
you've got plenty of seniority.
And so as we look at this, here's my concern. If we leave
it up to a nonspecified, arbitrary fine and fee schedule, it's
one thing to say, okay, a fee covers the cost of this
particular thing and this is where we collect it and it goes,
that's one issue. But the other is, the gentleman from Ohio
pointed out, on the settlement and the fines, that's a number
that could go up or down based on no particular criteria. Would
you agree with that? How many of the agencies have a defined,
if you do X, it's going--the fine is Y?
Ms. Perez. I don't know the absolute number.
Mr. Meadows. Does the EPA have that?
Ms. Perez. I don't know specifically.
Mr. Meadows. I know the answer, but, I mean, do they have,
if you violate a particular rule, that it always--the fine is
always a set amount? In your experience, would you say that
there is--that you could make an analysis that is linear in
terms of their fee and fine structure?
Ms. Perez. I don't know that we could, sir.
Mr. Meadows. Okay. So here's what I would ask of each one
of you. We would ask each of you to report to this committee,
if you can, three recommendations on what you would like to
see. And if you would get back to this committee. And that
might even include looking at the particular piece of
legislation and problems that you may have with that
legislation that may not fulfill the intended consequence.
Mr. Kohn, I'm sure you can weigh in on that. There's a
couple of others that the ranking member and I have talked
about. But three recommendations that we have.
Here is the other question that I would ask for you, is to
prepare at least two questions that we can ask OMB, the IRS,
and Department of Treasury when we have the follow-up hearing
for them to be able to hopefully illuminate on some of these
unanswered questions. Because you would think if any group
would have a proper accounting of what's coming in and what's
going out and where it's coming from, it would be OMB,
Treasury, and the IRS. Would you all agree with that?
Mr. Hollister. Yes, sir.
Mr. Meadows. Most of you are nodding your head yes, and so
let the record reflect that all witnesses answered in the
affirmative.
And so as we go with that, I just want to thank you. I'm
going to recognize the gentleman from Virginia for his closing
statement.
Mr. Connolly. I thank the chair. And it's an intriguing
hearing. And I thank our colleague from Alabama for really
bringing before us, I think, a very legitimate issue, worthy of
much further examination.
I guess I'd make three points. One is, we talked about the
Constitution and the role of Congress and the power of the
purse. There has been no court ruling, that I'm aware of, in
the history of the Republic that has challenged or questioned
the constitutionality of Congress's right to delegate those
authorities. So the fees and settlements and penalties in
question so far apparently pass constitutional muster. So
that's not the issue. The issue is, has it gone too far? Is it
de facto creating a situation where we're not doing our job?
And if so, what's the remedy?
What we have not examined here today, which you've heard me
pursue, is, okay, what are the downsides? What are the
consequences? If you cut off the TVA's ability to collect fees,
what does it do to the mission of the TVA and the people it
serves? And is that minor, is it trivial, is it easily
correctable, or is it something much more serious and
significant that we have to contemplate, we have to take
responsibility for?
And, finally, I think we're putting a lot of faith in our
own appropriations process. The fact of the matter is Congress
is derelict in its duty, not so much by delegation of these
fees and collections, but in our inability, frankly, to pass a
normal appropriations process. And that's a bipartisan
dereliction of duty. I worked in the Congress in the Reagan
administration, and I can remember Ronald Reagan putting a big
stack of papers, which was the omnibus funding bill that year,
and talk about how shameful it was. That was over 30 years ago,
and we do more of it and that stack of paper would be even
bigger today.
To assume that we're going to take on more responsibility
by proving every whistleblower payment or every settlement
agreement or every fee to be charged, to me is maybe something
that constitutes a noble goal, but it is not something that's
practical in this Congress or any future Congress, given our
past record of performance in that regard.
So I think there's a lot we have to think through before we
act on this bill, but I do thank our colleague from Alabama for
whetting our appetite and forcing us to deal with this subject,
and I look forward to further investigation. And, Mr. Chairman,
thank you for this hearing.
Mr. Meadows. I thank the gentleman.
The chair recognizes the gentleman from Ohio for his
closing statement.
Mr. Jordan. I thank the chairman.
I just wanted to respond briefly to the ranking member, our
good friend from Virginia. He talked about no court case has
said Congress cannot delegate, that's accurate, but there was a
court case in 1976, United States versus McCollum, which said
the Supreme Court has repeatedly affirmed, quote, ``The
established rule is that the expenditure of public funds is
proper only when authorized by Congress, not that public funds
may be expended unless prohibited by Congress.''
So it's not a passive, it's an active role that Congress is
supposed to play in this effort.
Never forget what happens here. We have three categories:
Fees, fines and penalties, and settlements. No one could tell
us what the total amount is. But we do know that the fees,
according to the White House, just that alone is $534 billion,
roughly half of what we spent in discretionary spending last
year. We know fines and penalties is $83 billion over 5 years,
and that excludes Treasury and the IRS. So we know that's a
substantial number. And we know settlements just at DOJ is in
the millions and millions of dollars, what they've required
companies to pay, and not only pay to the DOJ but to pay to
some favorite nonprofits that the DOJ recommends that they give
a, quote, donation to.
So that's why what the chairman said just a few minutes ago
is so important, that we get OMB in here, that we get Treasury
in here, someone from the IRS, who can answer our questions.
That's plain and simple.
And it, again, underscores, as I said earlier, why Mr.
Palmer's legislation--maybe it needs some amendments, I haven't
seen many bills that come in front of Congress that don't need
some changing--but why it's so important and so valuable.
Maybe we also need the inspector general, Mr. Chairman, the
inspector general from Justice Department to come in here and
explain to us how this settlement game works when DOJ shakes
down some companies. I'd like to know that too.
So this is an important subject. I want to commend the
chairman for having this hearing, and I particularly want to
commend the gentleman from Alabama for bringing this
legislation. This is something we need to pursue. We need to
make sure this bill gets done, gets passed, becomes law,
because, like I said, if no one else will give us the number,
when we pass the bill, we'll get the number, and that will help
the taxpayers.
So with that, I yield back, Mr. Chairman.
Mr. Meadows. I thank the gentleman.
I want to mention, the ranking member and I just had a
conversation, and so we will be sending a bipartisan letter to
request that information of Treasury. And so hopefully we'll
get a little bit more specificity on that particular item.
And I want to close by saying this: One, thank you all for
your interest in transparency, for your interest in this
particular subject.
Mr. Kohn, thank you for your support of whistleblowers,
specifically. It is a critical nature. Your graphs were very
illuminating, and certainly we don't want to go backwards
there. And I can tell you that I for one am committed to make
sure we don't go backwards on that issue. I believe Mr. Palmer
agrees with me on that particular item as well.
For my friends at GAO, the follow-up hearing that we will
be having, I would ask that you just be prepared, because
you're going to be part of that, because the fourth leg of that
chair needs to be GAO and what we have and have not been able
to acquire. And so as we look at that, I just want to thank all
of you for your interest.
And if there is no further business before the
subcommittees, they stand adjourned.
[Whereupon, at 3:46 p.m., the subcommittees were
adjourned.]
[all]