You see the results in terms of deteriorated buildings. So we have set out in a number of ways to support HUD's mission.

We in our audit work focus on the most significant issues we can find, and then we hold onto those issues. We do not walk away from them. We try to make sure that the agency actually takes corrective action.

We have been willing to consult with HUD on a number of occasions in an advisory capacity about ways to do better. Instead of being totally reactive in our investigative work, we have been proactive, and we have targeted the major areas of abuse in HUD in order to have a broader deterrent effect.

We put a lot of stock in reviewing draft legislation, rules and regulations, the idea being to try to prevent the problems from occurring, not to go in afterwards.

We have also taken some risk in being willing to look at suspect deals while they are being formulated, rather than waiting until after they are done deals.

We have taken the position of monitoring the HUD 20/20 Reform program at HUD on an ongoing basis, rather than waiting for years until it is done and going in and doing a post-review.

You know, the thing that people always accuse IGs and auditors of doing is bayonetting the wounded. We are trying to do it a little differently.

So, against this kind of background, it is to me somewhat jolting, maybe shocking, that the current Secretary of HUD has exhibited an extremely hostile attitude toward the independence of the HUD OIG, and, as I have detailed in my written testimony, he has, in fact, let this hostility lead to a series of attacks and dirty tricks against the HUD OIĞ.

Recently, the tempo of those attacks and dirty tricks seems to be escalating, and their focus seems to be increasingly that I am a racist.

I think there is more than good reason to believe that the purpose of these attacks and dirty tricks is to force me to leave HUD. I have stayed at HUD not because it is a pleasant work environment. I assure you, it is not. I have stayed at HUD not because I need the job. I assume I could get another job, but if all else fails, I am a career member of the Senior Executive Service, and someone would have to find me a job.

I have stayed at HUD because I fear that if I leave, the Secretary would replace me with someone whose loyalties are primarily to the Secretary, not to the OIG mission. Mr. DeSeve can tell you what the current processes are for selection of IGs, but it is clear to me that Secretary Cisneros was the person who made the critical decision about appointing me, with confirmation by the Senate, of course, as the HUD OIG.

I would say to you that I am trying to fight the good fight, but within the administration, it is clear that I am not in Secretary Cuomo's league.

So someone needs to help. Someone needs to convince the Secretary that I am not an adversary. I am trying to do my job.

I have made some recommendations for statutory changes that I think would alleviate some of the problems we have had at HUD, and I would like to say that there is a provision in Senator Collins'

bill that I really strongly support. And that is the external review, the regular external review of IGs by an independent party.

The reason that is so important is this constant question of who watches the watchdogs and maybe the IGs are out of control. That situation allows an open field for the kind of harassment that I am undergoing at HUD. If there were external reviews, there would be checks and balances that we could all point to, and I think we would all accept.

Mr. Chairman, that concludes my statement. Thank you.
Chairman THOMPSON. Thank you very much.

Senator Glenn.

Senator GLENN. I would like to enter my prepared statement in the record, Mr. Chairman, if I might, so we could get on with the questioning here. Thank you.

Chairman THOMPSON. All right. Thank you very much.

[The prepared statement of Senator Glenn follows:]

PREPARED STATEMENT OF SENATOR GLENN

I am glad we are holding this hearing about the IG Act in the year of its 20th anniversary. This Committee has a long and bipartisan history with the IG community. In fact, I am very proud that I was an original sponsor of the IG Act and author of the 1988 amendments, both of which have played a major role in making our government function more efficiently, effectively, and with greater trust and confidence on the part of the American people. So, it is fitting that we note this anniversary.

I understand that part of today's hearing will be focused on the differences between the way in which the HUD OIG and the HHS OIG operate in their respective agencies. That's fine, and a good exercise given some of the problems that we understand the HUD IG has had with her agency head. I might add that I believe both IGs here today have been doing outstanding work. However, I also hope that we can examine the great successes of the IG program throughout government. I note just some of these accomplishments as follows, from the latest (1996) PCIE report: Inspector General (IG) investigations led to $1.5 billion in "recoveries" in 1995. (This is money which has been recovered by the Government from people who have attempted to defraud it). In addition, based on IG recommendations, agency managers agreed to cancel, or seek reimbursements of, $2.3 billion from contractors or grantees in 1995. Also based on IG recommendations, managers changed how they planned to spend $10.4 billion to maximize return of the Federal dollar. Overall, between 1981-1994, IG's reported $340 billion in recoveries and funds put to better use from their efforts.

In addition to IG work on program improvements, the figures cited above, the report compiles other important IG accomplishments:

$26.8 billion in recommendations that funds be put to better use;

$7.3 billion in questioned costs;

14,122 successful prosecutions;

2,405 personnel actions; and

4,234 suspensions and debarments of persons or firms doing business with the Government.

These facts suggest that IGs are doing the job we intended them to do, in spite of the fact that they are operating in a very difficult and more complex environment. The data also support the fact that the IG's first responsibility continues to be program and fiscal integrity; they are not "tools" of management. Even though, in this day and age, IGs need to make themselves "relevant" to both Congress and the agency, they first must help to make good programs work better, target those most vulnerable to waste and fraud, and help achieve savings wherever they can find them. The record proves this is clearly what the IG's have been about.

The progress I have mentioned is particularly important since, if anything, the IG's role has only become more difficult in a new political culture dedicated to improving management. With the passage of the CFO Act, the Government Management Reform Act (GMRA), and the Government Performance and Results Act

have some responsibility to ensure that we have accurate, reliable, and complete financial information on which to base our policy decisions and, down the road, which measure how well each program achieves its goal and at what actual cost. In that context, IGs have a unique role in helping to solve management problems throughout the Federal Government. The test of their success in this new mission is much like the one applied to their old one and—as I have indicated-the measure of their success is already evident.

As I approach my last months as a U.S. Senator, I look back with great pride on the accomplishments we have made so far among the more than 60 statutory IGs. I am the first one to admit that the IGs do not function perfectly. In fact, any government operation can always stand improvement. But I strongly believe that we now have in place a fair, effective, and useful-if partial-solution to some very serious management problems in government. To me, this represents a singularly important success for the Congress and the American people, and one upon which I am hopeful we will continue to build into the 21st century and beyond.

I welcome today's witnesses and look forward to their testimony.

Chairman THOMPSON. Senator Collins, do you have anything to say preliminarily.

OPENING STATEMENT OF SENATOR COLLINS

Senator COLLINS. Thank you very much, Mr. Chairman, and I want to thank you for holding this very important hearing and salute your leadership and that of Senator Glenn on the issue of Inspectors General.

I have a lengthy opening statement which I will ask be submitted for the record. I just want to make a couple of quick points.

As Chair of the Permanent Subcommittee on Investigations, I have had the privilege and the honor of working very closely with the IG community. I have been very impressed with their professionalism and believe that their actions have saved the taxpayers literally hundreds of millions of dollars. They play a very valuable role, and it has been a success story, but the record of the IGs is not without blemish, however.

We know from an investigation that PSI conducted into the Treasury IG that there is a need for the kind of external review that IG Gaffney just talked about, to answer the question of who is watching the watchdogs.

We have worked particularly closely with Inspector General Brown, and I want to acknowledge that we have worked very closely with HHS IG's office on a number of investigations involving Medicare fraud and other issues.

I have found both of these IGs to be highly professional, and I appreciate your inviting them to testify before us today.

Thank you.

[The prepared statement of Senator Collins follows:]

PREPARED STATEMENT OF SENATOR COLLINS

Mr. Chairman, I would first like to thank you for holding this hearing to examine the function Inspectors General perform in the Federal Government and how their role should evolve to meet changing needs.

Historically, this Committee and particularly the Permanent Subcommittee on Investigations, which I chair, has worked closely with Inspectors General. In many ways, the Inspectors General are the eyes and ears of the Committee as we work to detect and prevent waste, fraud, abuse, and mismanagement in Federal programs. As guardians of the public purse, Inspectors General are watchdogs for the taxpayers, fighting wasteful spending and enforcing Federal criminal laws across the country.

For the most part, the creation and expansion of Inspectors General offices throughout the government has been a success story. During the past 2 decades, the

IG community has made thousands of recommendations, saving taxpayers literally billions of dollars. As an example, in the first decade of the Inspector General Act, the Inspectors General identified dollar savings or funds that could be put to better use of more than $100 billion.

Investigations by Inspectors General have also resulted in the recovery of billions of dollars from companies and individuals who defrauded the Federal Government. These investigations resulted in thousands of successful criminal prosecutions, debarments, exclusions and suspensions. This is an impressive record of accomplishments-simply put, the Inspector General community, as a whole, has served the public very well.

The record of the Inspectors General is not, however, without blemish. For example, this successful record was tarnished last year by the activities of the Treasury Department's Office of Inspector General. After an extensive investigation, the Permanent Subcommittee on Investigations found that the Treasury Department Inspector General violated Federal laws in the sole-source award of two consulting contracts, engaged in a pattern of careless management, paid for work unauthorized and subjected two U.S. Secret Service agents to an unwarranted investigation and negative publicity. The Subcommittee also found that the Treasury Inspector General misled Congress about the nature of this investigation and that official documents were destroyed. The Subcommittee concluded that the Treasury Inspector General failed to meet the high ethical and performance standards expected of an Inspector General. The Inspector General resigned shortly after our hearings were completed.

Let me stress that, in my view, problems like the ones in the Treasury Inspector General's office are not widespread in the Inspector General community. However, an Inspector General is not like any other government manager. Inspectors General are the officials in government responsible for combating waste, fraud and abuse in Federal programs. And as such, Inspectors General should be held to a higher standard. To do their job effectively, Inspectors General must be above reproach, must set an example for other government managers to follow, and must not create situations where there is even the appearance of impropriety. Credibility and effectiveness are lost when the office charged with combating waste and abuse engages in the kind of activity that the Inspector General is responsible for deterring.

During the past 20 years, the Inspector General community has grown from 12 in 1978 to 57 Inspectors General today.1 These 57 Inspectors General receive more than $1 billion in annual funding from the Congress and employ over 10,000 auditors, criminal investigators, and support personnel. The Congress must ensure that these resources are properly managed and directed. The Office of Inspector General is charged with tremendous responsibilities which must be exercised by competent managers and well-trained law enforcement professionals.

In June, to increase the efficiency and accountability of Offices of Inspector General, I introduced S. 2167, the Inspector General Act Amendments of 1998. As this Committee examines the role of Inspectors General and exercises its oversight responsibility, I suggest that we focus our efforts on some of the key issues this bill is designed to address. specifically:

• To increase both efficiency and accountability in the Inspector General community, S. 2167 establishes a 9-year term of office for Inspectors General, with the option for renewable service based on re-nomination by the President and reconfirmation by the Senate. This provision will encourage Inspectors General to stay longer in their positions as well as provide Congress a statutory framework to review the performance of an Inspector General.

• To further promote the efficiency of Inspector General operations, the bill revises IG reporting requirements. Some semiannual reports to the Congress total 150 pages and contain information that is of limited use to Members of Congress or their staffs. Simplifying the contents of reports and requiring they be submitted annually rather than semiannually would save money, streamline the reporting process, and provide more useful information.

• To further increase accountability of Inspectors General, S. 2167 requires that the General Accounting Office or some other neutral agency be responsible for systematically reviewing OIG operations. At the conclusion of the Permanent Subcommittee on Investigations' recent review of the Treasury Department's,

1 The IRS Reform Act of 1998 created a statutory Office of Inspector General for the new Tax Administration. This position is currently vacant. This would bring the total number of Offices

Senators, Executive Department employees, and taxpayers were asking "who is watching the watchdogs?"

• To promote greater efficiency, the bill combines some of the smaller Inspector General offices with larger, statutory Inspector General offices with similar missions. I believe this provision will increase the stature of IGs, reduce overhead, and improve accountability to the Congress. For example, it is difficult to justify why the National Endowment for the Arts and the National Endowment for the Humanities each have separate, highly paid Inspectors General who supervise just two and four employees, respectively. In contrast, Inspector General Brown supervises approximately 1,250 employees across the country.

The Offices of Inspectors General today are very different than they were 20 years ago. The demands placed upon these offices today are far greater than they were 20 or even 10 years ago. Congress should consider granting certain Offices of Inspector General expanded authorities needed to accomplish the additional requirements that the Congress and the Administration continue to place upon these agencies.

In particular, Congress should carefully consider granting statutory law enforcement authority to selected Offices of Inspector General which provide the Congress with an adequate justification for that authority. For example, with respect to the Department of Health and Human Services Office of Inspector General, à Medicare fraud investigation conducted by my Subcommittee revealed the dangers faced by HHS-IG Special Agents. These IG agents work side by side with the FBI and other Federal law enforcement agencies, and the Congress should examine the best way to provide them with the tools necessary for them to do their jobs both safely and effectively. Recently, I received two letters from respected law enforcement groups supporting this authority for HHS-IG agents-one from the Fraternal Order of Police and the other from the Federal Law Enforcement Officers Association. I would ask at this point Mr. Chairman, that these letters be made part of the hearing record.1

I applaud you, Mr. Chairman, for holding this hearing, and I look forward to working with you and the Committee on this important issue.

Chairman THOMPSON. Thank you very much.

Before we get into some of the troubling details of the things that Ms. Gaffney has pointed out, I would like to ask a couple more general questions and get your response.

It seems to me that in looking at this and coming at this kind of new, as I have, as opposed to so many others who have spent so much time at this, I am struck by certain things and it has to do with the difficulty of the position that you are in, as well as the importance of what you are doing. Someone said what you are doing is like straddling a barbed-wire fence, and it appears to me that maybe you are straddling more than one fence because you really do have a unique balancing act that you are trying to carry out.

From a policy standpoint, you are trying to get away from playing "gotcha" and just catching things on the back end and creating bad press, as the agencies would consider it, to getting into more of a preventative policy focus that perhaps prevent those things from happening to start with.

So how much time and effort do you spend there on each of these things that compete for your time? Also, how much time do you focus internally as far as the Department is concerned versus the outside, the people that the Department is dealing with?

We know that several contractors have been guilty of fraud and caught at it because of the work the IGs have done.

Also, you are independent, but you have responsibilities with regard to the agencies and also Congress which certainly requires a balancing act.

1 The letters referred to appear in the Appendix on page 81 and 82 respectively.