legislation. >> private to private sharing site, if it is shared with the government, i always get information and integrated them into three different sneers, government to private private to cover, private to private. the issue is always been should go through seven agency or through the intelligence agencies? i think our view in the passes been the legislation that was in the senate unless you the previous version, the 2014 version would have that run through dhs and generally we were okay with that model, as long as it didn't disrupt existing relationships a lot of times are companies deal with entities like fbi and other parts of government. and i think those long as the proposal would apply for some the existing reestablish relationships to continue, we would've been okay with that approach last year. ..

and share depending what the information is doesn't result in

capital punishment. >> i want to get into the question of the role of the regulator but while we are here and talking about privacy i thought it would be helpful if you could describe how the different pieces of the administration's privacy proposals have together. the legislative proposal and the consumer privacy bill of rights. there are three distinct legislative initiatives that all have privacy at their heart. can you say how those fit together and it is this all add does this all add up to a uniform approach to the issue? >> we are talking about a few different types when we get to the details. on the information sharing

proposal, we are talking about a definition of cyber threat information sharing. and that definition is tied to certain cyber threats and has limited uses when it comes to the government but when you share that information you have the broad ability to share the information notwithstanding any other provision so in the panoply of existing privacy protections that are in place and then replacing it with guidance outlined in the legislation to be written into the future and most of it is before government agencies how they would use that information. they share it among themselves with a set of new privacy

protections we hope will be strong in creating the organization standards and from the guidance from the attorney general and the secretary of homeland security we have a new information that is excluded from the consumer privacy bill of rights. in our draft there is an actual explosion directly for the same definition of cyber threat information because it already has its own regime through this other proposal that we have and the hope is that we have the information in place with this kind of definition and then you would have this exclusion where the consumer privacy bill of rights went through and it is focused on the privacy issue is that issues that we see with new types of online and electronic

commerce where it's shared across from each other because in the united states we have an industry-based privacy regime. we had a lot of holes that pop up on the basic safety net that would be in place to protect information across all these different types of efforts and different industries and so the idea is if you have existing privacy regimes this builds the safety net for areas that do not have privacy protections today so this would be exempt from that. third is in the privacy engineering effort and that is really focused on the fact that a lot of government agencies and other stakeholders have seen that when new products are being built, privacy has come in afterwards and there is the question of how we go about building the privacy and from the voluntary basis approach looking at the risks that are involved and the benefits that

could come from the decisions and this is working on an engineering voluntary effort that could then be used to make the decisions to help government agencies make the decisions easier and you would hope companies might look at that and learn from it as well but it's really focused on kind of looking at these efforts in a way that relates to building new technologies and looking at how to go about doing doing that. >> before we move on to the regulatory piece i want to make one other comment that a lot of people talk about information sharing as being the thing we are trying to achieve in the legislation but it's become a term that encompasses a lot of different issues so the one thing i don't want to be lost on folks is why do companies like ours and others support the information legislation and part of it is because, you know today when we try to stop a cyber threat and it requires our lawyers to get involved in

analyzing different statutes whether it's the electronic communications act, whether it is the communications act and determining what we can do, so a big aspect that isn't talked about as much as information sharing itself is the actual authorization component of the legislation so specifically authorization for the companies to do things like monitor their networks or take actions to stop the attacks or i think in the last panel brian asked a question about the look of protections and if you don't act on the threat, those are critical aspects of the legislation because to that it would provide a legal framework notwithstanding its self but in a legal framework under which we can apply and act on cybersecurity and i don't want it to be lost on folks, so a lot of the reasons why we have been supportive of this legislation is because it clears up that overhang and allows us to act more independently and to streamline the process around security in addition to the information component and i think one area where like i said before we appreciate all proposals and are willing to talk to all parties on the

issue, one that he approved it on the authorization piece because that is a piece that without that, just having information sharing by itself is probably not going to be moving the needle on security in my opinion. a >> i would just add in addition to having been the bureau chief for public safety i also am a former deputy former deputy assistant attorney general for antitrust and so i have had a chance to look at information sharing regime's across other industries and in other circumstances. and it's clear that it makes a difference in terms of lowering costs and improving performance and that's true if you look at the insurance industry and its important sharing of information and the like and it's going to be true i think in connection with cybersecurity. i think it holds the potential to raise the cost of conducting

successful breaches for the bad guys and lower the cost of defense. and on the privacy point, i think the senator was absolutely correct when he says that we all need to care about both of these issues because with the threats out there and the breaches we've seen come and prove to cybersecurity and improved data protection means enhanced privacy as well if done correctly. >> let's talk about regulators. the fcc charts a new working group about a year ago coming up with a new paradigm around cybersecurity, and i know that of course humanity that have been involved in this cause kind of final draft report has been completed. i just tell us what guess tell us what is a new paradigm around cybersecurity, what is the goal

what is the state of play within the fcc's working group lacks >> i will lead let david take that. >> let me set the stage for that if you will. on the working group the report hasn't publicly been released. it will be on march 18 when that advisory committee which is an acronym it to use it it but you would be bored if i try to tell you what it stood for. we set this up when i was the bureau chief about two years ago and it was very much coordinated with industry and what he recognizes the cybersecurity would be based by 2014 and then there's working group which was going to flush it out and give it meaning specifically for the telecom industry was going to become active and spend the next

year trying to develop the report issue information that would make it applicable and usable in positive ways by the communication sector and i think that's what we are looking to. i've had more than a hundred people involved in a very intensive effort and i think that if we are going to see the report that moves the needle and helps establish the telecom industry is one of the leaders making use of the framework and trying to make it usable by small and medium-sized businesses as well as the large businesses. i haven't read it, so i can't comment on its outcome but i think it's been a very positive process and it is going to move the needle. >> i have a few highlights as to how the working group has done over the last year. i know robert chairs the working group that i chaired the lawyer alain group and the way it was structured as we had five groups

for each one of the major segments of the telecommunications sector unless we to massively antiwhite airline working group wireless, cable, satellite and broadcast and so there were five groups for each of the segments and we also had the groups including things like threats. we had a metrics and measurements measurement group that i actually chaired. so we had ten different groups that we were working on with over 100 members of the actual working group and we've been working on it for the last year and of the report that that stated the issue is about a 300 page report that goes through an audit detail and various practices but what we try to do and i don't want to go into a lot of detail because it hasn't been released yet but a lot of what we try to do is come form the framework and prioritize for a viable call for communications critical infrastructure so if you look at the framework and the overarching objective to how do we secure the critical infrastructure meaning if you look at the communications networks and understand it's in interdependency for things like financial services and electricity and water and others

held we secure that infrastructure and make sure that in a large-scale cyber attack that infrastructure is secure and continues to function that was the focus is how do we conform and use it for addressing those issues not to say that other cyber issues are not important but that was the focus of the working group and i think we spent the last year working on that and people show the true example of how our sector partnered with the commission and with others to generate what is going to be a solid work product and set the framework going forward. >> we have a question directed at you. as they shift to the title to regulation will the requirements both the requirements make information sharing impossible? >> first of all we haven't seen or at least i haven't seen the

text of the net neutrality. i think it isn't out yet. it certainly wasn't a day or so ago. i think i would want to refrain from that from getting a judgment on that. but one of the things that's in play everywhere from the federal courts where the case was argued this week in the federal trade commission jurisdiction to enforce under section five of the federal trade commission act privacy data breach reasonability standards is the subject of some uncertainty and attack to the fcc where in october they did their first major data breach case. the uncertainty from the rules and also the legislation that's been proposed. i think in some cases it

delegates to the federal trade commission much more clearly and to some of the legislation i think would be moved from the federal communications commission. so, it is the enforcement. so, what we are seeing is a lot of uncertainty around what the standards are and who is enforcing them and how they apply and i think that we just need to take a look at what comes out of the fcc on the net neutrality order before we draw any conclusions about it. i'm pretty sure that the fcc is going to want to make sure that information sharing is not inhibited. i think the kind of information we are talking about sharing is not at the core of what cpn i is

necessarily trying to protect against and i believe it there. >> any other questions? >> another one online. sure. >> we have a second question here. how did you see this government private industry partnership improving the reliability of the electric system? or utilities and power companies getting onboard? >> we've had a really good relationship with the electric sector in particular. they have been very supportive of the framework. they've done a lot of effort in the space. our plan is to work more closely with them in terms of incident response and trying to make sure

they are getting the information they need in order to respond very quickly. the information we have from the government and the chairing among themselves in order to get information incomes of moving the response more quickly. there are a lot of different people in the space and a lot of different kinds of companies in that space. it's not an easy thing to say. you are working with energy together. but if you can work sector by sector certainly starting with the electric sector makes sense to us and move through those and make sure we are coordinating getting the information we need to move forward. so we are looking forward to doing that. in terms of they also have existing information sharing and analysis centers today to try to share the information. the electric has been growing

and it's been becoming more effective. oil and natural gas has been becoming more effective and we hope we can help them move more quickly as we move the process forward. >> i really want to think this panel. [applause] we will ask the next group of panelists and speakers to come up please. very good.

so, that was an excellent panel and i think you heard the talk about the seminal nature of the framework and i think we are very fortunate to have the panel. add him to the -- going into the future i will refer to add him as one of the architects of the rosetta stone were discover that's quite an accomplishment. i would also like to introduce larry clinton who many of you know as president of the internet security alliance and to somebody who's been an outstanding advocate around the framework for quite some time. brian finch is a partner with pillsbury winthrop and has a lot of experience in five cyber security policy arena. we are happy to have him join us. kevin is the security preparedness program manager for

the american water works association which is one of the lifeline critical infrastructure sectors very much involved in thinking about the framework as it relates to his sector and then finally very happy to have jesse ward who is the manager of the broadband association. he is also one of the leaders on the working group effort that dealt with addressing small and medium businesses. with that i would like to introduce david who is with -- i'm sorry i'm ahead of myself. going to introduce adam who will speak and then we'll have the a panel moderated by david. >> i'm eager to move to the panel, too so i would get through these remarks quickly so we can have a discussion.

thanks again for having me. these events are helpful for us in terms of hearing what the industry is thinking about particularly the telecom sector that we have representatives from a number of sectors here in the audience so it is very helpful for us. i was thinking a little bit about this event and the title of it which is on gaining traction are falling behind so i was thinking about it and i actually wanted to go back and look at some of the things we were seeing. we could go back many years but i chose to go back to years ago when we were around initially taking off the work of the executive order to develop rosetta stone or the cybersecurity framework. and coincidentally, i found that there was testimony that he gave were my boss at the time dave who is the director. before the commerce and homeland security committees on and what we intended to do in the

framework and the testimony was almost exactly two years ago. it was on march 7 2013. and so i decided to give that a quick look to really try to understand what he had done and if we were hitting some of the marks and expectations that we had set out. and it was helpful to look at this and to think about some of the language we were using and how the approach approach had been developed and if we were hitting the marks in terms of what the expectations were on this part of the executive order. one of the things we had was a heading called why this approach because at the time we had to do a lot of work to convince people this was an approach that would have an impact. and under that heading the director gallagher said this multi-stakeholder approach leverages the respective strengths of the public and private sectors and helps develop solutions in which both sides will be invested. the approach doesn't dictate solutions to the industry but rather facilitates the industry

coming together to offer and develop solutions to private sector is best positioned to embrace. so, two years later i think we are seeing a lot of evidence of how the industry and the government can come together to help develop those solutions. not only through the process that we did in developing the framework in the year-long process where we had an engagement from the industry, we have made around 3,000 participants. but even through the groups which i can say i consider to does stand for. it's about communication security reliability and interoperability council come in particularly the working group for the non- cybersecurity risk management practice and that guidance coming out in about two weeks we think will really help provide guidance to the telecom sector to think about meaningful implementation guidance to a sector that is not only critical

that the broad and diverse and very unique in this space. we were pleased that we could participate with csric. or cheap cyber security advisor with the technical advisor and throughout the process we were happy to contribute our thoughts about what led the industry to the industry group to develop these products. and so, in addition to work like that for that sector and we have seen others come together. kevin is here to think about some of the things the water sector has done. but certainly we have seen the electric sector and financial come together to provide guidance. we've also seen a lot of other examples back in what the director was talking about with the industry coming together to offer solutions. so we've seen things that technology companies coming together to talk about products

and services that could be aligned with the framework. we've seen the auditing community thinking about the framework of the consistent standard they can provide to their constituencies. insurance providers have begun to offer policies x-height to the framework promoting it among their policyholders. and we have seen the states leveraging the framework to improve the security of the infrastructure including in many cases the foundation for the work and cybersecurity for the state emergency. these are all things we are seeing out there that but we are hoping to capitalize and share back and a lot of the material was discussed quite a bit at the forum last month that the president was out in stanford where the panel of ceos discussed this. in terms of what that means for us and how we think we can help in our work for the ongoing year, plus i hope we can get good feedback on it in this

panel we are going to continue our efforts to raise awareness on the framework including by working with other organizations including associations like u.s. telecom and others here today and a lot of that awareness will not only be focused nationally but also thinking about the international audience. one of the top priorities under that will be to develop and share information and training material that can advance the use of the framework and other approaches such as how illustrations and organizations of different sizes, types and capabilities are using the framework and the ability for these organizations to look over each other's soldier to understand the practices that they have been placed in our view as extremely beneficial. and then we are ruled of development material on how the framework can be aligned with business processes including the key challenge and issue of

making sure we can integrate cybersecurity risk management with a broad way in which these organizations think about risk. that's something the stakeholders said was important and there would be more work. then of course in addition to that if you think about what the framework effort was all about it was identifying the best practice deadlines used in the critical infrastructure. it was developing a structure so they could be used more widely in the framework. and then the third piece was always the next step peace when we released a framework we talked about what he called the road map the list of priority projects ranging from supply chain risk management to identification, to technical privacy standards. those are all items we continue to work on and share information back on the progress we are seeing with the hope that in the future this continues to be a living document through these experiences and projects and it can have a rich conversation about what are the priorities moving forward to be able to

react to the priorities of the people that need to manage the cybersecurity risk. in all of these efforts it will be a priority to ensure it can be conducted in the same open and collaborative manner in which the framework was developed. but i think again going to the title of the event and are we gaining traction or moving behind there is a lot of work to do about how to we know that all of this effort is working. based on the advice that we've gotten from the private sector on how to make this effective come our main focus has been to continue to raise awareness and the stakeholders told us more needs to be done. and a lot of that is raising awareness in the sectors that don't have regular events on cybersecurity as much as we appreciate these.

not only about the value of the framework in addressing and reducing risk but thinking about it as the essential first step to getting to true effectiveness we know about this path and how to get to effectiveness because it's much like the efforts that we have seen to improve quality in other fields. the concerns of cybersecurity risk just like quality needs to be integrated into each approach for doing business. there is no single definitive and universal endpoint for approving the cybersecurity. we are recommending the organizations do a serious evaluation of the current cybersecurity practices and develop plans to improve the capabilities, ideally through the use of the framework for some other risk management tool. that process will take a lot of time. because the framework is voluntary, it allows us to flexibility to continue to

increase the number of stakeholders that we work with and that will use the underlining tool. i was relating to some people here i took the train to new york and i think the people across the aisle from me were talking about how they were going to bring the framework the framework of their business enterprise because of the sort of things that we think we see from this approach. the private sector has voluntarily participated actively in the development process, and we have found that they are more than willing to discuss how they are using the framework and sharing those lessons learned. what we intend to do in the future is work with our partner agencies across the government on the assessments and monitor the surveys on the private sector organizations that are already conducted to understand how we can leverage of those and continue to receive information in the workshop meetings that we tend to have like this and all of that information where we are thinking about how we can help

our stakeholders and eventually improve future versions of the framework. so, with that i will close my remarks and i'm really looking forward to the discussion and hopefully that helps to provide some sort of a foundation. i think that -- i think you for having me. thanks. [applause] i'm with cybersecurity with politico. i'm going to be your moderator. we have a great panel. we've all agreed in advance that we are going to be direct, to the point. so let's get to the first? talk about the cybersecurity framework scope. we have two utilities on the panel, so perhaps both of you

could address do you envision this as something that's applied to just to your core infrastructure how would you define that and what about the enterprise systems that you also control? >> the framework has applicability beyond just critical infrastructure and particularly as it is defined in the executive order which is a narrow definitions of what we actually tried to do in this working group is thread the needle. as robert mentioned i could lead to small and medium-sized business group and again we were just looking at small and medium business issues and what we saw is that although many small and midsized businesses may not fall into that strict definition of

critical infrastructure it doesn't mean they can't adhere to the same spirit of this assignment. they can keep the scope the same but the scale is for their operations. so what we are looking at is having each small or midsize business define for themselves what is the critical infrastructure. so for instance when you are talking about small and rural companies it might be that one of those companies defines their switch as the core infrastructure because without that, there wouldn't be communications taking place in a local area. as of again i think that there is applicability beyond just how they defined a framework. i would also say in the working group would we looked at is the framework also has applicability at the enterprise level.

that's good corporate citizenship, that is a good business practice and of course every company wants to be more secure. so as much as they can look at that that would be helpful. >> going out of its way to not discuss enterprise it systems out of a fear as i understand it that might give the fcc some additional leeway regulating what it doesn't regulate? >> from our perspective again what we are looking at is if you are a company that has tan and please delete the -- ten employees who have limited resources and one perhaps technical officer whose the cto of the chief security officer that looks at new business opportunities and if he has limited resources, where should he prioritize that? what we said as he should look at the quarry and critical infrastructure first. but all of the associations and network operators agree that this is a good business practice. and so if they can't come in yes

it should be applied at the enterprise level as much as they can. >> if i could add to that, so we have actually kind of unmarked on this process a little bit before the executive order came out and have been anticipating the need based on work that we have done in the departmental security years ago and not unlike jessie's members we run the gamut from the very small rural communities to washington, d.c. and new york city. so we have to be cognizant of the scalability. and part of that effort there's been a lot of activity and folks can get their hands around some of the enterprise business systems that are operational and the types of things that are are to america. and there has been less talk in the past on the process control systems or the industrial control systems which is where some of the standards are

embodied in this framework and are kind of focused on. so not perhaps unlike what csric did, we developed a process to make the framework more transactional for our members understanding that a lot of them don't have a cio. so putting it into terminology and how they apply the technology in a prioritized manner giving limited resources where should they focus their time and effort so we have created a prioritization tool to help them work through implementation applications of the principles and framework to try to change that behavior and institutionalize it as i think we heard from some of the other speakers today. >> so i think the answer is yes. >> that plays over into the enterprise system as well.

>> are we going to be changing the name of the cybersecurity framework for critical infrastructure anytime soon now that we've established it's not just for critical infrastructure >> i think that you posed your question in terms of how the companies evaluate critical infrastructure within their entities and in the framework they use more broadly and that was one of the discussions that we had in the development of the framework. and as jesse was saying, the different entities view it very differently. some entities will treat how they deliver critical services and separately others take more of an enterprise view and leverage the framework in that way. i think the way we talk about the framework is framework is people do it in different ways and you can set up a different series of profiles in your organization that we are seeing people use it large to small organizations at least based on the feedback we are receiving or we have received and are getting

more utility from the broad application where you can kind of look across the entire enterprise and that is the sort of thing that the auditing and insurance committee also likes to see. they like an approach that shows that you're managing all of the risks for all of your networks. in terms of other organizations using the framework even though it was developed for critical infrastructure that's something we talked about if you look back to the first it was given we talked about using the term general organizations. one of the reasons we did that is we had an expectation that critical infrastructure also evolved as organization businesses changed and they get the different services and move up and down in the marketplace. and as we come from the department of commerce we thought about doing this in a way that could be broadly used

and of course we are excited that it is being used by organizations that may not traditionally be considered critical infrastructure. >> let's get some other folks involved. you talked about the need for the federal government to follow through on it portion of the executive order of developing cost-effective measures. one thing that officials say a lot of and private sector executives as well and that is that the framework is infinitely flexible because every company is a special snowflake. and therefore what constitutes cost-effectiveness necessarily must vary from company to company therefore there can be no federal government cost effectiveness of standard or died or what have you. [laughter]

>> the reality is that if we are going to have a voluntary system in a capitalistic economy, it is going to have to be cost effective. there is no other way to deal with this and this is what every single study that has looked at cybersecurity tends to find. csi s. cut price waterhouse cooper, cio magazine, the list goes on and on and on. companies big decisions based on cost-effectiveness and the one modification i might make building off of one of adam's comments where we need to integrate the framework into the risk that's true but really we have to think closer to what senator johnson said at the very beginning. we need to integrate the framework and other security steps into profitability and into growth and innovation. these are all one in the same thing. as to whether or not we can offer any guidance on this this

is what we do with everything we do in the private sector now. companies look at environmental regulation activity or disabled regulation activities and they make a cost-effectiveness reservation and so we have to do this. now my guess is that we could come up with some fairly useful guidance because frankly the electric utilities don't look very much like it companies, defense companies don't look very much like some other manufacturing companies etc.. i think that we can do some useful studies and we have proposed that this be done in a collaborative fashion integrating the sector specific agencies with the coordinating councils to jointly come up with a mechanism so that they can together determine what either most cost effective way to

implement the framework within their particular sector and by the way we have gone further and found that various sizes of companies even within the category of small businesses find different things to beat cost-effectiveness. so we have looked at companies with one security personnel such as jesse was pointing out and we found there are certain things that can be done in a smaller company that are cost effective but are not necessarily the same thing as if you have ten security people. so, the reality is that if we are going to get truly broad-based voluntary option of the framework, we are going to have to address this at the economic level and integrate this into the overall mission of our economy which is growth, innovation, security, profitability all tied together. >> so guidance by industry sector and guidance by industry

size. >> those are two of the most obvious in my opinion ways that we could subdivide the sorts of things. i am sure there are lots of others but i would be happy to start the pose. >> so they are not as special as they like to think? >> we are all individually special. [laughter] at but every single one of us probably does well if we exercise, watch our diet and a variety of things that are effective for us. we are all probably pretty good notwithstanding our individuality if we study. that is true even with regards to the framework. >> first i would like to note that i am opposed to exercising,

dieting -- [laughter] and studying and doing my homework. it's very interesting building on the comments. the framework can be extremely flexible. i think it is an excellent representation about of how the companies can begin to start to think about cybersecurity. i think the number of people dedicated to cybersecurity internally is a bit misleading focusing on that in terms of how useful the framework would be if you have one ten 10,000 etc. you still are all being breached in any given moment. so it's not necessarily about preventing the event it is about recovering and managing that risk as much as anything when it comes to cybersecurity and the

utility of the framework. and i think in my opinion looking at the framework and looking at it for critical infrastructure etc. i don't think that it came as a big surprise or as something truly innovative for the larger utilities and companies added that is not in any way shape or form to denigrate the great work that has been done and what adam has done. they've done a fine job and it's very helpful for the smaller and medium-sized businesses that really just sort of have no clue where to start when it comes to cybersecurity. usually we get the answer should we input from the internet, what firewall should we buy etc.. and so you know i like to look at the framework from that perspective. the other thing that i think is important to note and i have seen at him make comments on this as well as a lot of times when people talk about the framework they talk about well we have adopted the framework.

we fully integrated it into their systems and then we will see comments in the media from lawyers mostly who say if you don't adhere to the framework can't by you violated the de facto standard of care and that's the benchmark for determining liability when it comes to cyber risk. and i just don't think that is the case. i don't think that it represents a standard of care. i would call them shelters and i am not against schilling. it's not that they are charlatans or what have you, but it's just i think it is a fundamental misunderstanding about what the framework the frameworks intended purpose is to understand the risk and how to maybe generally organize yourself but it's the implementation at the end of the day. it's like a golf swing. i can watch a video of the old tiger woods as many times as i wanted to try to mimic it but

i'm never going to get it right so i'm never going to go another 340 years down the fairway and i guarantee you this never happens in my life. it usually takes me three shots to get 340 yards down the fairway. so, when we are looking at the utility of the framework were talking about expanding the use becomes critical infrastructure to the enterprise we have to understand that it's one piece of the puzzle just like information sharing is one piece of the puzzle. we talk about the threat signatures or indicators of compromise etc.. that is all well and good but it's not going to provide you complete cybersecurity just because you are getting threat information. there's a lot of good information and bad information and useless information. so it's all about how you actually execute at the end of the day and while the framework will be helpful in some context it really comes down to how does the company implement. and that's where the rubber meets the road.

>> so this brings up a question about how do you measure that or are we measuring it? there's been a lot of talk about the measurement and that's because the framework is individually implemented in the universal set of measurements is it possible or it could measure the wrong thing that we have heard that the different sectors have commonalities. business horizontals have commonalities. there is a common ground for some kind of measurement, isn't there? >> i'm going to take this opportunity to keep this brief and i will do a little bit of schilling myself. one of the things that we recently put up with a frequently asked question from a very lengthy and other questions for future forms that you can use from here.

let me read the response. how can organizations measure the effectiveness of the framework lacks the framework effectiveness depends on each goal and approach in its use. is the organization seeking an assessment of the cybersecurity related policies and processes and isn't seeking a specific outcome such as better management of cybersecurity with suppliers or confidence in its assurances to customers effectiveness measures the circumstances accordingly the framework needs a specific measurements to the user's discretion. individual entities may develop quantitative metrics for use within the organization or its business partners that there is no specific model recommended for measuring effectiveness. so that's where we are and that's what we have heard from the stakeholders and that is our overall thoughts on that issue and it's something we can certainly study and discuss and work with our partners to think about what these common measurements are and if that is

something we are very interested in seeing as people use the framework with other risk management tools than the steps they put in place to help evaluating and measure how they are doing. >> let's go down the line. >> i just want to jump in quickly to the great. again as i usually do with my close friend on issues like this and i think that is exactly right. not only can they be measured in following the outline that adam just laid out, but they will be measured. every single corporate -- we do work with corporate directors focused on the framework and we endorse that in the publication and every single one of those corporate boards comes to these decisions and they want to operate based on metrics. can an individual company come up with their goals? of course that is what every single company does with virtually every single business

decision they make. where should we open a new store, with new products should we launch, should we use an international supply chain or domestic? all of these things are measured in terms of their effectiveness and their cost and unless we integrate both of these as i'm telling you the company is well then we are going to miss the boat. what i am saying is we can do a substantial solid, we could do a favor for the private sector companies and in particular the smaller companies if we gave them some samples that they could work from to say we did a study of small water systems and we found out that this set of best practices was most cost-effective and this one is

not people then look at that and now they know where they can go to implement the framework for their own particular use in a way that is most likely going to benefit them and by the way they will then study it on their own to see whether that was true in that particular case and they will make adjustments moving forward created that's how we integrate the flexibility of the framework which is one of its major pluses with the end hair and obligations of the businesses which are maximizing shareholder value. we have dual stress here. we have security and profitability. we must integrate them and as i mentioned in my question to senator johnson, that is difficult in the digital age because a lot of the things we do to drive innovation and productivity actually undermine security so we have to look at these pre- carefully study them and come up with ways to move

forward. >> again kind of playing off the planes that adam made and others made on the individual nature and flexibility i think that's the beauty of the framework and the opportunity that provides entities, utilities, electric companies, telecom to apply to practices that are applicable to the operating environment. and in the studies that we have done with our members in looking at their operating systems there's a significant amount of variability in the types of things that i view and so the controls that are applicable to this particular utility may be only half of them are political just because of the way they operate. so the abrogation of the data outside of the individual use becomes apples and oranges.

so here's the question what are we drawing to measure. are we trying to measure that i tie my shoes and put on my shirt right-handed or left-handed first is that important or is what's important important that the entities are taking the appropriate risk management activities through application of the principles in the framework that are laid out in the guidance that we have designed to help supply in the framework so there's different measures of activity whether it is process related i think that is good that the individual entity that's how they can do their internal benchmarking but at the accurate level we try to see a change in how it is integrated into the business practice and that is through some form of adoption to use that term loosely so that's how

we have approached it in our sector. >> i every. you are looking at an aggregate level have the companies utilize the framework come is it improving the security posture, is it succeeding and better securing critical infrastructure in the core networks making sure the network is still available? when you look at it in terms of the framework of the category at the category control level it doesn't -- what one company does compared to another might be very different. for instance, if you are a small telescope serving defense contractors the security you might need for your network is greatly very different from a small middle america who has different customers, different institutions and different needs. so i think we are also having a discussion about the tricks that

the framework we've been talking about for two years and it's something we are very familiar with in the language. but when you talk about the framework this is still a nascent concept to those outside of the beltway or instance i spoke about this just a few weeks ago and i use the term nist and i have to define that the audience. so it's early to have a conversation about measuring. we need to focus on education and awareness because again from our perspective our members are 900 across the u.s.. they've been doing security for many years and all of them want to be more secure. they want to protect their core network. they want to protect the customer's data and personal information. the question of assisting them with doing that more effectively and efficiently. >> when you're talking about the tricks with respect to the framework i think ultimately it comes down to a critical point which is that the framework is about risk management and not

risk elimination. every company has a corporate risk managers they don't have an eliminator. why don't you have a corporate risk eliminator? because you cannot eliminate risk and so then when you apply the framework of the individual corporate level you have to utilize it in a couple of buckets. you have to define the threats and the type of attack etc. that you can suffer that you can protect against. you might be able to protect against and those that of those that you cannot protect against and the last is nationstate attacks. nobody in this room not even the federal government can withstand a concerted nation states attacked so when you're looking at metrics it's more about incident response. when you are in that middle area where the nationstate may be organized crime it is kind of a mix between incident response defenses and then there's the threat that you should be able to protect against commonly available individuals etc.. but ultimately it's looking at

the risk and how to utilize the framework to appropriately protect themselves whether to stop it at the printer. one thing i want to outline is an article you wrote about a month ago or so that we are sort of dancing around a little bit here talking about some of the responsibilities of the software developers as well. there was an article about google potentially releasing zero days after a certain time frame but they've come to discover. that is important to remember as well that as much as the companies can do to protect themselves whether it is through the response there's lots of moving parts and part of the problem that we have to confront is that a lot of times the companies are receiving the software that have unlimited vulnerabilities and they are opting to be able to discover them on their own so this is a

shared burden throughout the entire supply chain and you have to look at that holistic picture if we are going to get closer to truly managing this race. >> audience questions? stomach more of a comment and a question since i was chairing the metrics group and i think jesse made a good point of the education awareness especially by the beltway totally agree with that. on the metrics piece one thing that frustrates me about the conversation is that people focus on are you doing the framework or how are you using the framework and the question ought to be what is the outcome that is driving because it is really about the metrics should be focused on outcomes nobody comes can see ... were you busy this year yes we all were but the fact that you are using the framework and actually it's almost irrelevant to the fact

are they using it as an effective tool to drive the particular outcome and that's why when were doing work in the group we focused heavily on things like resiliency and integrity because those are things you can measure as opposed to just activity. >> we have a question from the online audience and i will read it out and directed to you adam that anyone can jump in. considering the vast amount of breaches that have occurred and are known to the media and also taking into consideration the breaches that are not publicized, how confident are you that awareness into the use of the cybersecurity framework in the public and private sector will help reduce the number of incidences in the future? ..

the reason why we have those five functions, and we talked so much about respond and recover is everything from the security community there is a wide understanding that you can't prevent incidents. but understanding hasn't always made its way to corporate leaders and to policymakers. so having the processes in place to respond and recover from an

incident, we also see are critically important. and then i think to the point of the question i think we have to remember if you go back to the presentation earlier in the day this is one ally but of many that are going on that industry is undertaking, that the federal government, the state government, international governments are undertaking to help manage this problem. and we think together we hope that obviously it will be approach of making things better out there. >> if i could build on those comments come, and i agree particularly the last one about how many things we are dealing with here. thinking about the title of the event, whether we are gaining traction or losing ground i think we are both gaining traction and we are losing ground. the problem is so complicated and the bad guys have all the

advantages. cheap, after the fact, no return investment to things we prevented. and virtually no law enforcement. and apropos of jesse's comment about having to go into the cutie outside the beltway antiwar awareness and education, that's so true. i mean, this past week mr. clapper said that cybersecurity is a bigger threat to our nation than international terrorism. and i think that that's probably true. but the spending in our government which by the way does get it and is expert is about 10 times more on terrorism than is on cybersecurity. all the efforts that adam and most of us in the room are making in this space are not nearly enough. we need much more efforts. we need much more funding. we need much more investment. we need much more thinking about this otherwise we will continue to fall behind.

>> last question. >> a small company in virginia. a couple comments. i mostly disagree with the panel on metrics. chris i agree with you it's measuring outcomes. with the framework being the rosetta stone, it is the ideal framework for measuring progress and outcomes among different organizations. even though they do it differently, and if you want to know how it is one measurement that it would ought to be measuring, which is how do they respond, how fast do they respond and do they respond to those priority indicators of a security breach? because they don't -- >> if they can detect them. >> well, those breaches, there are indicators of compromise. target at two times they could have prevented it. so there are indicators.

we miss them and he goes back to what brian finch said losses control, management is great. you want to talk about -- >> i hate to do that but for time if you have a question. >> thank you very much. come talk to me about how to measure. >> i will just respond to the, because i think there's one thing, one point i would make is if you think about a lot of our efforts it is about reducing complexity. the goal of getting these things out there is not to add more guidance, a tad more people for people to go through. but make these conversations a little easier because we all understand what we're coming from. that is the role standards because we think a lot of these efforts are really important. that's one of the things we think will be really helpful. in the long run even in terms of reducing costs when these products and services and standards coming into can we think we have a much richer conversation.

>> please join me. [applause] >> all right, folks. i'm going to say thank you all for attending in person. i want to also acknowledge all the folks who attended via live stream your i will want to thank all the panelists who were involved today. i thought it was excellent and and for a set of panels and discussions. and i want to also announce that, you heard a lot today about the work of working group come which will be released on march 18. on march 19 u.s. telecom love another national policy cyber forum to talk about that event. so look for that on our website. we will be pushing the information out as well. thank you, and have a great day. [applause] [inaudible conversations]

>> live coverage today on c-span includes a conversation on the affordable care act and the federal and state exchanges where people can buy health insurance. that is live at noon. at 2:15 p.m. eastern on c-span, president obama. he is at benedict college in columbia, south carolina, for a town hall meeting on the importance of community involvement. and tonight at eight eastern on c-span the supreme court oral arguments this week on a lawsuit challenging government subsidies for people who buy insurance on the federal exchange. spent here are some of our future programs for this weekend on the c-span network.

>> the head of the government accountability office went before congress last month to discuss his agency's investigations into government waste and inefficiencies. he testified before the house oversight committee followed by irs commissioner john koskinen and officials with the pentagon and energy department, medicare and medicaid and nasa. >> we have an important hearing today. we appreciate the many people that are here to participate in that. we also appreciate the patience with votes on the floor that got called a little bit later. that always serves as the primary thing we did in the afternoon around here. so we appreciate your patience but nevertheless we do have a very important hearing highlighting the general accounting office high risk report 25 years of problematic problematic practices.

this year marks the 25th anniversary of the gl's high risk list. i have a full statement but in essence of time am going to insert those comments into the record and would invite other members to the same about now like to recognize the ranking member, mr. cummings if he has any opening statements. >> thank you, mr. chairman. i'm going to do the same. i want to thank all our witnesses and i will submit my statement for the record. i want to always as usual thank u., mr. dodaro, and all the gl employees who do a great job in helping so much. without i yield back. >> thank you. i will hold the record open for five legislative days remember would like to submit a written statement. would now like to recognize our first witness. so please will come the honorable gene dodaro, comptroller of the united states government accountability office. is a country by panel of experts from the gao and on behalf of both of us in this whole body we thank the thousands of men and

women who serve in the gao to really work hard to create a work product and present it here today. so we welcome all. pursuant to committee rules the witness will be sworn in before he testifies your we will also swear in the panel behind it should their input be needed during the question. if you could all rise please. [witnesses were sworn in] >> let the record reflect all the witnesses have answered in the affirmative. mr. dodaro, you have testified before committees several times. we'll give you great latitude but we would appreciate your summarizing your comments and then your entire written statement will be made a part of the record. you are not recognized. >> thank you very much, mr.

chairman to good afternoon to you, ranking member cummings all the members of the committee. i'm very pleased to be a today to discuss gao's latest high risk update it we do this with the beginning of each new congress to identify areas we believe are at high risk of fraud waste abuse and mismanagement in the federal government or in need of broad-based transformation to our report today discusses solid, steady progress in most of the 30 high risk areas that we've had on the list since our last update in 2013. of all the areas we rate according to five criteria to get off the high risk list. you have to of leadership commitment top level attention you have to have the capacity the resources of the people with the right skills to be able to fix the problem. you have a good corrective action plan that addresses root cause, good monitoring effort milestones and metrics engage progress and you have to demonstrate you are fixing the problem. you don't have to be 100% fixed

but we have to be convinced that we're on the right tab to rectify the problem and reducing the risk and eliminating waste and improving government services. of the 30 areas, 18 have at least partially met all five criteria. and 11 of those 18 have at least fully met one or more of the criteria partially met the others. into areas where recognizing progress so that we are narrowing the scope of the high-risk area first is on fda's oversight of medical devices. we are pleased with their efforts to get the recall process under better control and discipline and also to have a good progress to review the applications for new devices anymore risk based approach. we are still concerned about the needs of overseas global marketplace for medical products

and trucks. 80% of the ingredients of active drugs come from other countries. about 40% of finnish drugs, about half of medical devices. they need to do more there and also to address drug shortage issues. secondary his contract management. we believe the department of defense is focused more attention on top leadership on contracting the tools and techniques and reducing the risks associate with contracts with a start contract work without having a clear agreement with the contractor or they're using time and materials which is a risky contract approach without having deliverables. they still have to improve their areas in their acquisition workforce service acquisitions and improve their use of contracting in the operational environment to support military operations and theater. we are adding two new areas to

the high risk list this year. first is the provision of health care service for veterans. we are very concerned about this area. it defies -- identified fundamental problems and consistent processes, inadequate oversight of monitoring of the activity. i.t. challenges, inadequate training of staff, and unclear resource needs and allegations. congress has passed legislation recently to give them additional $15 million help address this problem and legislation has to be a limited properly. we have over 100 recommendations that we make it to the event yet to be fully implemented. this is an area that needs congressional oversight and continued attention. second, our i.t. acquisitions and operations across the federal government too often the federal government and we enumerate this in a report. there's a litany of efforts that

have failed after spending hundreds of millions of dollars in many years. they are terminated. there's a longer list of problems with a cost overrun where they feel fill deliver the promised functionality and make improvements in the program that is supposed to and delivery of services. here again the congress passed legislation late last year. this committee was instrumental in passing the legislation of federal information technology to give cios additionaadditiona l authority. put in place better practices, have more disciplined approach is. here again just in the last five years alone we have made 737 recommendations, only 23% of them are fully implement. so believe this is a critical area. we're expanding to areas in the administration we've been focus on the tax gap which alaska was

$385 billion. we are extending that to include identity theft and the irs was able last year to stop about $24 billion in fraudulent returns essentially but they missed by their own estimates about $5.8 billion. we've got some fixes to this we can talk about in q&a. we're also expanding cybersecurity, critical infrastructure protection to include privacy issues. initially we designated computer security across the entire federal government, for some ever did that. 1997 we had a critical infrastructure protection so it's most of the computer assets are in the private sector and 2003 now there's a lot more incidents involving personally identifiable information. the number of incidents have doubled over the last five years. privacy law was passed in 1994 sorely in need of updating. we have a number of other

recommendations to protect the sensitive information. the american people deserve their information to be protected properly while we are dressing cybersecurity issues. i thank you for the opportunity to be here today and look forward to answering your questions. >> a key. i appreciate that. i want everything is the gentleman from georgia for five minutes. >> thank you, mr. chairman. just one quick question for you and thank you for joining us this afternoon. since the enactment of the veterans access, choice and accountability act i have a number of veterans in my district who because of their location where they live, they have not been able to utilize va medical centers and so they have opted to use non-va doctors and so forth. and one of the issues they're facing our significant delays from the va to pay those medical

providers. is there anything that you that the gao plans to do in the future to evaluate this issue and to report on in the future? >> actually already addressed that issue. we have issued a report talking about the problems they were having in paying providers in a timely manner. we are also concerned about the fact that the va doesn't always have information enough to make sure that they're making the right decisions in terms of whether they should be providing the care or going online for health provider both for access purposes and for making sure that it's a cost effective approach. are expert in this area however talk about the recommendations we made but we have addressed this issue. we plan to follow up. >> we actually conducted work about a year or so ago and we made a number of recommendations around the infrastructure surrounding the non-va care. a lot were not paying claims promptly and so we do have

concerns about non-va care and we have concerns that may not be the panacea that people envision it to be. because there's not really the infrastructure in place or it wasn't in place when we took look at the work. you are talking about putting people, that the system is a very difficult system to navigate so now you're asking people to navigate another system that is outside of the va. there's a lot of issues around now in va care. the other issue is that wait times for non-va care is not really track. no one really knows how long people are waiting to get care in their community. there's just a lot of issues and it is something we will be looking at. the choice act has several mandates. >> obviously the concern is that these payments are slow and didn't receive. at some point i'm fearful that our veterans will receive diminished health care across the board, and that is the concern. i yield my time.

>> i'm concerned, too. we will stay on top of it. >> we will not recognize the ranking member. >> thank you very much, mr. chairman. mr. darwell, one of my major concerns -- dodaro, has been drug shortage. what the memos of congress know it, but 90% of all hospitals in this country have drug shortages, and there are people, mr. dodaro, as you know who unbeknownst to them getting second, third grade drugs and even in my own district with one of the number of hospitals in the world from johns hopkins, they have told us that they have those problems. can you comment briefly on that, where we are at that what can we do about that? >> that's a very important issue here one of the things we've always suggested to the congress and have acted on before drug manufacturers didn't have to notify fda until the potential shortages, and now they have to

provide adequate notice ahead of time. that was one step in the right direction. marcia crosse come are expert in the area can will talk about of the work we've done an recommendations we made to address this issue. it's one of the reasons fta is on the high risk list. >> we agree it's a big concern and drug shortages one of the areas that's keeping fda on the high risk list. as the comptroller general mentioned congress to take action to require advanced notification to fda if a manufacturer was going to seize producing a drug. congress just a little over a year ago also enacted the drug quality and security act that we believe can help particularly with this issue of substandard drugs because it's connected requirements for tracking of drugs through the system. that can help reduce the possibility of a grey market drugs that i know you have been concerned about, and also counterfeit drugs getting into the system because they will be

a system of tracking. it's still not implement. it will take a number of years for that to go into effect. but that at we think also has potential to address that. we are continuing to track sure of shortages and with ongoing work looking at it. we know the number of shortages is coming down but there are still some that are persisting for long periods of time for multiple years for certain drugs. >> i'm glad our committee a few minutes ago we plan to look at generic drugs. begin every single member of congress has this problem and probably many of them don't know it, that generic drugs are going up sometimes as much as 800 times in a matter of a day, which is ridiculous. it's about greed. a lot of it is about greed. let me go into another issue. the whole issue of cyber you know, i just want to read from your report mr. dodaro, and you

all say this, quote increasing sophistication of actors and others with malicious intent and the extent to which both federal agencies and private companies collect sensitive information about individuals have increased the risk of personal, personally identifiable information being exposed and compromised. that's an active statement, is that right? >> yes. >> your report goes on to say a number of reported security incidents involving federal agencies increase significantly in recent years and a number of high profile pieces have occurred and commercial entities. for these reasons we added protecting to the high risk area. your report highlights attack against both public and private sector entities. and one thing these attacks seem

to have in common is that the hackers want access the personal information, as many americans as possible. that's a major problem is that right? >> that's exactly right and that's why we're adding the list. there are projections by informed parties that the amount of information that is collected, stored and disseminated will double and triple every two or three years. so this problem is on a trajectory to get a lot worse before it gets under control. >> the sources of these hackers could be anywhere in the world is that right? >> yes. >> they could be state-sponsored, international criminals? they could be domestic hackers or any of the above, right? >> yes. >> i see you have your fellow -- >> my cyber expert andy. >> what can we do about that? and please identify yourself. >> my name is gregory wilshusen

and i think there's a number of actions that both the congress can do as well as federal agencies to collect this type of information. first with the federal agencies, agencies need to implement effective international -- that protect the confidential and integrity of the information to include not only personally identifiable information with other sensitive information. we found over the years that an agencies have not done a good job of this. for example, in fiscal year 2014, 17 out of the 24 agencies that are covered by the chief financial officers act reported either a material weakness or significant deficiency in their information security controls for financial reporting purposes. igs at 22 of the 24 agencies identified cybersecurity information security as a major challenge for the agency. >> all right. thank you mr. chairman. >> i will not recognize the gentleman from texas for five minutes.

>> thank you, mr. chairman. and thank you for being here today. i enjoyed reading your report was the outrageousness of some of the things that are listed in the. one of the questions i have about 80% of the administration's -- goes to maintain legacy systems. many of the systems most americans would think would be incredibly out of date. what's a more appropriate investment to maintenance? >> well, we've said what we've said is that this should be under operational reevaluation every year. there are ways to drive down technology costs in a lot of areas of the costs are decreasing if you're making proper investment and reinvestment we find a lot of duplication with the systems are being duplicated because of a lack of oversight and a portfolio assessment that congress has underscored the need to be able to do this in

the agency. but, unfortunately, the trends are going in the wrong direction. there's additional spending in the operations and maintenance area rather than coming down as it should be in the area. they can talk about more specific recommendations that we have made. >> to highlight the trends, we are spending 80 billion, only spending about 50 million on new development. mainly going towards operations amid as. that's what and a high risk report many areas where we of inefficiencies. data center consolidation, there's about seven to $10 billion on the table if we consolidate data centers are probably. >> on that question, the report highlights shy of 10000 data centers. where should that number be? >> i think the plan is to close about 4000 of those 10000 roughly. that's a game plan for all the major federal agencies right now. the gameplay is to say the least

$7.5 billion through 2017. that's right around the corner. we have a lot of duplication this committee is focused on over the past couple of years. there's probably another 5 billion in savings so you can easily get over $10 billion in savings. move that inefficient spending out of o&m and into the development and more modernize government, more a properly. >> and my question along those lines cios play an important role in oversight of this project are our federal agencies effective and what tools do they need to become more effective? >> i think what the federal cio is a mixed bag. we see some that are quite successful and others are not. that's what the legislation committee within snow in passing which strengthened the authority which would instrument going forward. spin the cios need to be more involved and they need to be held accountable for these

efforts and it needs be more uniform across the government. if this legislative successful implement it we should achieve those goals. >> on the area of accountability, mr. dodaro, how long have you been with the jailed? >> this june it will be 42 years. >> have you seen anybody in the federal government fired for cause or overrun? >> i'm trying to think. i'm sure there will be people who will be in big trouble as a result of the. i can tell you that. i know about that. i can't think of any specific personnel actions offhand, but there have been people have been under a lot of scrutiny and have been you know, suddenly retired. so yes, there have been people that have been moved out. >> i yield back my time. >> would my colleague yield to be? >> yes. >> i think my colleague. you brought up to very important points on cios and on legacy

systems. and data consolidation. the bill does address all three things and mandates status on consolidation of also requires there are 250 people with the title cio spread out over 24 federal agencies. imagine that. our bill says there ought to be one primary was a candle and has authority. that's what mr. dodaro was talking about, hopefully with the implementation of the bill will see some progress in something hope we will monitor. i know mr. meadows and i intend to do that on the subcommittee. thank you. >> the gentleman gives back. now recognize the gentleman from the district of columbia, ms. norton, for five minutes. >> thank you very much, mr. chairman. my colleague asked about cost overruns. these people got fired for cost overruns have the defense department would be gone.

they have most of the cost overrun in our country. i'm interested in this high-risk list because i didn't go be deeply listening to this list for a long time. and i never knew much about how you get on it and how you get off of its would like to to the olympic about, particularly considering that gao must look at, what must be hundreds thousands of agencies in order to draw its risk. i must say whenever there's good news, it seems be this committee to be the first to notice but i did note that highlight of the almost on the first page it says solid, steady progress. has been made in the vast majority of high-risk areas. i don't believe i've seen that kind of language before. in your report. you say that more than one-third of the areas previously designated as high risk have been removed. so i'd like to know, you how you

get on it and how do you can remove? >> first of all, we have published criteria that we vetted with the executive branch years ago about how you get on and how you come off. how you get on is we look at the significance of the risk of both in quantitative terms, in other words, the rest be at least $1 billion in risk. there has to be issues that either of public safety issue like oversight of medical products, food safety we have on the list has to be important to national security, economic security for the country, has risk of program failures, programs actually not the cheating object is because there on the high-risk list. so there's a long list of factors that we consider. we also look as to whether or not the agencies have corrective action plans in place. if they do have a plan that looks like it would be a good plan and they may be successful, we may hold off on putting them

on the list and give them an opportunity to fix it. you come off by five country. proper leadership commitment. there has to be a commitment by the top leaders in the agency. they have to have the capacity the people at the number of people and the right skills and the right numbers of resources to be able to fix the problem. i have had a good plan coming corrective action plan that addresses the root cause of the problems. you have data monitoring effort to interim milestones and metrics and you have to then demonstrate that you are fixing the problem. if you meet those five criteria you come off the list. if you do that in part of high-risk area we narrow the high risk area for those areas that happened, like we mentioned issue we did into areas. so that's how you do that. >> i notice the second criteria mentioned the word resources. would it be fair to say that a

significant challenge for getting off the list would be a scarcity of funding these? >> well, by resources we mean the skills necessary. >> so it doesn't mean funding at all. is fun a significant challenge for agencies implement in your recommendation and getting off the list of? >> it could be but it could be that they're not using the funds that they have very well. it's not necessarily mean they need more funding. >> excepted. could i ask you what congress can do assuming that congress is not going to do much about resources, i will take an area of specific interest to me, real estate. that is the area the federal government's handling of its real estate portfolio has been under constant criticism. could you tell me how

considering the billions of dollars involved in leasing and construction how real estate portfolio is doing? >> yes. first, i would say on the high-risk list we have asked the areas with the congress needs to take action in order to open address the area. so there's a substantial number of the third two areas that we've already designated the postal reserve was -- postal service reform is one. the infrastructure system is another one. we designated major areas where congress needs to be part of the solution. the real proper area where congress can do, one of the areas that is on the list is the overreliance on leasing. we've tried to convince the agencies particularly csa, to put forward a case to the congress that says look it would be cheaper to own this

particular property rather than to lease these properties that have been reluctant to do so within congress ought to mandate that they do that in the area. they are also underutilized properties that the cops could get additional authority and kind as to try to provide these things. there's a lot of barriers we've identified that congress could help alleviate for the agencies to do this, but they need a good strategic plan to a have not yet presented congress with a good strategic plan on how to address this area. we have recommended it. they are working on the plan right now for the first time and so we're hopeful to see it this year and hopefully it will provide a good roadmap for them and for the congress. >> thank you. very useful. >> now recognize the gentleman from texas for five minutes. >> florida florida. nice warm spirit don't mess with

texas. >> great state. i would rather be from florida. >> mr. dodaro, have you ever seen the movie groundhog day? >> yes. over and over. [laughter] >> well, i'm sitting here. i swear a lot of the recommendations are the same recommendations you brought us before. i segue from this norton's and your comment. in fact, i just read the chairman myself and we've been interested in excess property and you can't get people to move on dealing with excess property. i think we found 14000 gsa when we did the first hearing. i put an x. through and i put 13,999. we have done about six more in vacant properties, some of them

moving. i'm only going to be here so long but even this guy is young. we can do a hearing on every property. what concerns me, and she just said it in your report omb in conjunction with landholding agencies could improve its capacity, and for many with excess or underutilized property, to develop a strategic plan. they have not done that, omb has not done that. i discussed this mr. chairman briefly with mr. denham in the bill that there were two bills offered mr. chaffetz offered one, i worked with mr. bennett and he offered another. but we need a requirement that they have a plan and then maybe some annual action on the plan and the recommendation. some triggering mechanism, would you agree? >> yes. >> the stuff just sits there but

it sits there and sits there. so i can back again and we're having groundhog day excess property. finally, on the administration -- this is the commission shall released the results of a freeze on footprint policy which the indicated reduce the conference office and warehouse space. they did report. you analyze that report and they claim reduced the federal warehouse space by 10.2 million square feet. then you said they didn't. can you elaborate? >> our leader on that. >> one of things we like to do is go behind some of this kind of estimate, take them apart and try to see where some of the flaws are. in looking at the footprint data we saw something so are miscounted, also things that were taken by vendor account separately in gsa's database. one of the things that really underscores and because i before

subcommittee previously is the real problem with the date on the property. >> we foundproperty. >> we found in fact wanted to know what property they had. they did know the condition of the property that they had. they didn't know the status of it would be eligible for either future utilization, current or keep an inventory. right down the line. they did not know. in fact, they gave us a list that we checked and you check that showed that what they were giving us was totally incorrect. is that not correct? >> that is correct. >> this is something else we've got to get is some requirement to the agencies. and if omb will not do a weekend of statutorily. i know mr. chaffetz is committed to get a bill through the house and the senate that will get a handle on it but we have to have triggers, we have to have some measure of them achieving the

goal or performance. am i wrong? >> i agree. in any major management reform that's been successful over time has a statutory underpinning. and that will transcend administrations and congress. >> coming soon. thank you. >> now recognize the gentleman from virginia for five minutes. >> thank you, mr. chairman. and thank you mr. dodaro, for being here. this is maybe, i actually look forward to this hearing every year. and i congratulate gao for the intellectual underpinning of identifying these risk categories. i think it's an incredible, helpful public policy document. and i hope it's a youth -- useful management tool. it guides us and especially this committee, so much of what you are talking about is all about our agenda. so hopefully we will also take it to heart and respond

accordingly. mr. dodaro, you actually endorsed our bill how important is it to you that that get implemented? >> it's very important. that's a critical, that's one of the reasons actually we put acquisitions and operation on the list is to have a petition to make sure that the bill is implemented -- >> what was that last part? [laughter] >> but it doesn't have attention and i'm also concerned because we are coming to the last two years at this administration. it's got to be sustained in the next administration. having a statutory underpinning is critically important and he gives us and the congress the means to hold people accountable over time. so it is absolutely critical to rectifying this problem that

we've identified. >> you are real potential savings if we can make this work, is that not correct? >> absolutely, absolutely. in the billions spent in the billions, mr. chairman. i know we work on a bipartisan basis to act with oversight hearings on government haitian. i think is really good. mr. dodaro with respect to the whole subject you are someone with a 25-point implementation plan that was issued in december 9, 2010? >> yes, you kindly with it and i'm joined by dave was her i.t. expert spent i assume you both, let me not assume. was that a helpful document in terms of laying out goals? >> yes. >> you concur. >> it sets the foundation for going forward. >> and for example, when it

talks about we ought to approve funding of major i.t. programs only when it needs three basic criteria right? have a dedicated program manager a fully staffed in integrate program team, using module approach with use of mobile phones how to deliver every six month but i think they mean by that breakup huge multi-year complex systems integratiintegrati on contracts so that they are easy to manage. and thirdly, you specialized i.t. acquisition professionals. do you think those are three helpful criteria when we're looking at issuing a major -- >> i do absolutely. >> did we follow that advice from the white house itself when the website for the health care rollout was occurring? >> no, we did not. >> we did not. so hopefully our bill, but also in the guidance that was issued from the white house going for

years ago might have spared us some of the greek and embarrassment that, in fact occurred. >> we have issued nine factors that are critical to successful efforts that have place. there's guidance, gao guidance best practice. the basic problem that i've seen over the years is there's a lack of discipline to follow good practice. we get off the rails and nobody is held accountable during that period of time. modular development of incremental development cios was one of the basic tenets of the 1996 legislation that helped congress work on that it just has been implemented. i commend this committee for your recent legislation. i look forward to working with you to make sure its successor of limited that it will require congressional oversight, and i look forward to that. >> i will point out as the

chairman is an the ranking member knows, when we put together this bill, bipartisan bill, and we said a lot of what we did was codified recommendations that came out of the white house itself. it was not a hostile bill. so hopefully it will be seen that way as a useful management tool and we look forward working with you as we followed and monitor the application because there are enormous savings to be had and some very significant inefficiencies. >> better services to the public. >> thank you, mr. chairman. >> now recognize the gentleman from tennessee for five minutes. >> well, thank you, mr. chairman. and i will take just a moment. i want to say mr. dodaro, i think you do a very good job and i appreciate the work the gao does. you have been very helpful to me on this committee. i've been here 26 years. when i tell these newer members they look at me like i'm from outer space. my main committee has always been transportation and

infrastructure. iver dr. dillingham testify more than public any other witness. he seems like a good name. i just want to say that i think gao does a great job, and i appreciate what you all do. that's all i wanted. thank you, mr. chairman. >> into very much. the gentleman yields back. now recognize the gentlewoman -- >> mr. chairman quick i know there are other witness who want to know what mr. dodaro's magic is. [laughter] >> will never again is the gentlewoman from the virgin islands for five minutes. >> yes, thank you mr. chairman. good afternoon, sir. >> good afternoon. >> i really wanted to thank you for all the work that you agency does, and to talk to you about one of the primary things that you all do is uncovering waste and fraud and abuse come and identification of the risk of integrity of the federal program. we know, however that there is also best practices that your

agency tries to identify not only for the public sector but for the private as well. we understand now the cyberattacks notches on the federal agencies but also on private. we know we've heard about home depot and the compromise about 56 million companies in the credit card and debit card as well as and from the nation's like a large the insurance company with more than 80 million records that were compromised. i see that one of your colleagues is coming over to assist you. this is our cyber expert, greg wilshusen. we set aside a question. >> you said it very well. one of the things i wanted to talk to but is this notion of segregating. if you could briefly explain for us what that concept is and how that works? >> that's been one of the major problems that we might benefit over the years. greg can explain the importance of it. >> is a vitally important to

assure assistance and information are adequately protected on authorized modification. and it basically relates that the activities of one individual or group are countered by the activities or overseen if you will by the activities of another group. so one group does not have full control of the transaction or of a process in which it can then perform unauthorized activities without detection. within the cyber realm that often relates to having, for example, software developers being able to operate in the production environment where real life actionable data is processed because they can potentially make and detected changes to the software processing the data. you don't want that to happen. to software developers industry should be confined to a development environment. >> so my understanding, and my

children will tell you i have i have no technological knowledge, but kind of like a submarine where when there's a leak in one area you can close off that section and in another area where the leak occurs doesn't affect the other areas with the segregation of duties. is that occurring now in the federal agencies with the i.t.? >> yes. in several agencies there are instances where the weaknesses and i think it's about 14 agencies that have weaknesses in segregation of duty controls. in the example you highlighted actually also speaks to defense and offense. that's another security principle that agencies should put layer upon layer of security controls so in the event that one later may be circumvented or penetrated, that other controls help to protect the data and systems and back one of the reasons i mentioned home depot

and anthem, we know this has occurred in other private sector areas is what is the relationship that you all have with trying to assist those private sector individuals and best practices? because at the end of the day all these systems connect with one another. >> actually the department of homeland security that has an overriding role within the federal government for helping and assisting with critical infrastructure industry, and protecting their information and their systems. in addition for certain retail companies, it may also be the federal trade commission also provide assistance and guidance to those entities. >> we have been encouraging for years more dialogue and information sharing between the public sector and the private sector. both have been reticent for different reasons, to share information, but that's really

the only way this problem will eventually be solved. congress have made some overtures in this area. we believe more legislation could be helpful in this regard. >> i'm hopeful this body will assist in making sure that that happens, and i yield the balance of my time. >> now recognize that gentleman from massachusetts for five minutes. >> thank you, mr. chairman. and ranking member. and mr. dodaro, good to see you again and all your cohorts. i agree with mr. collins remarks that this may not be the most sexy -- [laughter] hearing of the year but -- >> objection. [laughter] >> i think it may reflect that's the core mission of this committee, however. i do notice in your list of areas of concern you've got a list of the 2015 high risk list that the va health is on that

list for the first time i know it's one of the two new areas and this designation comes in light of a long-standing and systemic witnesses weaknesses excuse me, in accessibility and quality of care. we saw the problems we have down in the phoenix va terrible situation there. and we also have, quite frankly, a huge increase in the number of veterans that are now for the first time in their lives relying on the va for the health care. we went from six to 8 million veterans in 2002 the 9.4 million enrollees in 2015. so it's but a huge amount of pressure on the system, including 1.4 veterans from operation iraqi freedom and enduring freedom in afghanistan. and mindful that most of those folks did multiple tours.

i was in kandahar province not long ago and asked how many folks are on their first tour, their second tour. i got all the way up to seven tours of duty before i ran out of marines. most of them have been there three or four tours of duty. so that repeated cycle of deployment does a lot of damage i think to the you know the psychiatry of serving among our young men and women, and i think we're going to see reverberations and health care system as a result of those multiple deployments. but i am looking forward i am actually the ranking democrat on national study subcommittee is going to address those and i look forward to your good work, continuing in that area. especially with some of the new implementations that we have had allowing veterans to be treated

at non-va facilities if we do have a backup in appointment time. and that's been a constant problem for us not just in the northeast but all across america. i know florida is all backed up because of the number of retirees down there. they've had a very long backlog there. some of the areas in texas as well. virginia, my friend mr. connolly, a huge number of veterans in his district as well. and also we've got another provision that allows them to go to non-va facilities where their travel to a va facility is more than 40 miles. so it all builds up to a greater reliance on our ability to conduct oversight in the va health care system. i look forward to working with you. you've got a great staff. you've got a good cohort of people behind you that have worked tirelessly over the years. i'm looking forward.

we've got no shortage of issues to work on coming and i just appreciate the work that you do every single day. thank you and i will yield a. >> i would ask my friend to yield? >> short. >> mr. lindstrom how many times have you been to afghanistan and/or iraq? >> i would say iraq about 14 times, and i would say afghanistan about 12 times. often times with folks that mr. dodaro works with, special inspector general's of iraq construction or afghanistan do inspections well spent i just want to say from you, you have been a model of oversight commitment for work in both countries at personal risk to yourself and i honor you for that. thank you. >> well, thank you. >> i would just say in terms of the picture that you paint not

only have we had more veterans coming back with multiple tours, but they are going to be living longer thanks to modern medicine but this problem will occur over decades. and we need to get a handle on it right now. there will be more veterans coming back so this is really a very significant long-term issue, and that's one of the reasons we put on the high risk list. >> thank you. now recognize the gentleman from new york for five minutes. [inaudible] >> late to the debate because i was at a meeting on cybersecucybersecu rity, which is really one of the biggest challenges we face as a nation and i think it's an area that we agree in a bipartisan way can work together to address. i want to mention the ss that you have found for dealing with cyberattacks. your report found that many agencies had come and i quote

inconsistently implemented policies and procedures for responding to a data breach involving pii there can you explain those areas in which gao found agencies were inconsistent in the application of policies for responding to data breaches and what do we do about it? >> yes greg will address the. user expert in that area. >> we conducted the review at several federal agencies over the procedures and policies for responding to security incidents involving personally identifiable information. and one of the things where genocide is the agencies did not consistently identify the risks to the affected individuals and the harm that could occur the impact that could occur to those individuals. in addition they were inconsistent at what point do they provide additional services to those individuals. for example, whether not to provide credit monitoring services or other types of services in order to help those who have been misinformation had

been compromised. >> and to the point what can congress do to assist you, gao, and advocating the federal agencies to be consistent in carrying out policies that respond to these breaches? >> we believe that the privacy act which was originally passed in 1974 needs to be updated and congress should take that upon the responsibility to the agencies are collecting more information than what was contemplated in the privacy act because privacy act deals with records of information, now through social media and other means more information is being collected that just wasn't countably when the act was passed. ..

so they know how to act once an incident will occur in our work has shown the number of incidents involving the federal agencies is prime into free agency is affected by that and that could include having a dedicated team available but has the role and responsibility identified and trained in those

responsibilities in order to act appropriately and timely when incidents occur. and finally how can the congress be most useful in ensuring that this is fulfilled and they take the necessary actions. one is the comptroller general mentioned to update the federal law protecting person identified of information and another is holding oversight hearings. if anybody has questions for the panel we would like to thank the g. 80 and the great work that so many of you and your staff to change the table i've actually like to mention something we do in the essence of time.

again, thank you. you are excused. go ahead and make the change. i want to talk about the artwork that you see in here and make a bit of a statement and commotion as we change out the names and please if you are on the second panel, take a seat. we made some alterations to the art work here and part of what i was trying to do is highlight the people that we observe rather than the past committee chairman. those are the type of people that we should be inspired by so i would like to introduce the next panel and i will tell you that they are all real

photography using photos and i would like to start with this one. it's the ben franklin bridge in the philadelphia skyline taken by a photographer from the ben franklin bridge that expands connecting philadelphia to new jersey. contrasting the urban setting we have a new photo that was taken actually in my congressional district in utah. it does look like a painting that it was a photograph that was taken in january. it was taken along the river there in the distance and we live in a very beautiful setting. and i think the contrast between the urban setting and the more goalsetting as part of i wanted to highlight. going here on this site is the photo that was taken published in march of 1966. lauren loeffler was a photographer for u.s. news & world report and the images of most of the workers loading mailbags up for delivery and a good number of people for

decades have been doing good work in the postal service in and the responsibility this next photo back over here is the copper miners. they are using a drill machine in utah. this next photo was taken in afghanistan the american flag capturing waste or from one of the peaks of the cow tail on the outskirts of kabul afghanistan in honor of veterans day it was shot november 11, 2010. not a professional photographer that is one of the most beautiful patriotic shots i've ever seen. i appreciate the service that paul offered this country and the photo that he took took the

that day honoring veterans day above the hill in the mountains outside of kabul. we have had thousands of americans served overseas and in afghanistan and we honor them and should be thinking of them regularly. this next photo at the back of the room is actually a civil rights process and one of three marches in montgomery alabama this was first published in 1965. they've made a lot of progress and i love the patriotic nature of carrying the flags in that photo and appreciate the library of congress providing that to us as well. the next one is of the golden spike actually happened in utah and was taken may 10 1869 by joining the central pacific and union pacific lines in 1860. it was driven to join the first

continental railroad across the united states bridging the east and the west together. the next photo is the only portrait that i would consider here but interestingly enough this was first published in 2006 from the library of congress and the lincoln norio was one of the best we have in this country but he served in the post office committee and the expenditures in the department of war committee that preceded the government reform committee. it's interesting to me that abraham lincoln when he served in the house of representatives served on what is now known as the oversight of government reform committee and inspiration to a lot of people. moving over here we have two more. this photo was taken we aren't sure who the photographer was.

it was published between 1914 and 1918. it's up to women making fiber powder containers for 3-inch guns during world war i taken at the ritchie & co. facility in chicago illinois. and again a great deal of sacrifice has gone on in this country and actually i love the patriotic nature of that one as well. and finally, i want you to look closely at this photo if you have a chance. this was a steelworker on the frame of the enterprise state building. the photographer was first published in 1930 and comes to us from the national archives. not exactly osha compliant he is

sitting on the precipice of death working hard to build this country without a safety harness or the type of things that our workers have no but a good deal of people have made these dedications and sacrifices and i'm glad they captured a photograph of it rather than the committee chairman so we made those changes and help the committee appreciate that and i'm honored to have these photographs here and i think the numbers for the indulgence. we would now like to recognize the second panel of witnesses. when you told me that you were going to select those photos, i didn't know what you were going to do. i must tell you and all of those

that had anything with selecting the photographs, they are absolutely beautiful. i used to say that my father who only had a second grade education who educate all seven of his kids i used to say that i was inspired by his aspirations and when we look at these pictures, the ones of hard-working americans in the pursuit of happiness and building the country i believe that they are in storage just looking at them should inspire all of us to be the very best that we can and to lift up their lives and people like them and then, you know, you look at the other ones that show our

environment and i think it should be a reminder that we do have a sacred duty to pass on to our children and environment which is just as good as or better than the one we inherited. it said that we do not inherit our environment from our ancestors. but we borrow it from our children and i say the same thing about our democracy. and so and mr. chairman, you did a hell of a job when you put it right there because it just reminds me every time i look at it of for years before that and baltimore is reminds me of us marching. as little kids we were marching

trying to integrate the pool and we were beaten but yet still we march in the pursuit of happiness. and so i tell told that to say i am hoping that this will be these that address will be. now back to the business i think the five gentlemen that joined us and i would like to recognize the panel and i'm pleased to recognize the honorable commissioner of the internal revenue service. the honorable al in principal deputy undersecretary for defense for acquisition

technology and logistics at the united states department of defense. mr. john mcwilliams, senior advisor to the united states department of energy and then sean devine pronounced that properly i know that you testified previously. it's the deputy administrator and director of the center for program integrity of the centers for the care and medicaid services. and mr. robert lightfoot junior associate director of the aeronautics and space administration. thank you for your patience. it's been a while to get you to the panel to that handled pursuant to the committee rules all witnesses sworn in before the testimony if you could raise your right hand do you swear or affirm the testimony you're about to give will be the truth of, the whole truth and nothing but the truth? let the record reflect all

witnesses answer in the affirmative and you may be seated. labels are with you is your full statement will be introduced into the record that we would ask that you please limit your testimony to five minutes and we will go from there. if you think you chairman, ranking member cummings and members of the committee. thank you for the opportunity to discuss the government accountability office's high-risk list as it pertains to the irs operations. i am delighted to know that one of our programs business systems modernization was resumed from the list -- removed from the list after being on the list since 1985. this removal came about because of the advances the irs has made over many years and the information technology and financial management capabilities. turning now to the tax enforcement, the gal has identified this as a high-risk area because of the size of the tax gap and the difficulty over time and narrowing that gap.

the most recent study of the tax gap released in 2012 finds that it was $385 billion for the tax year 2006. the irs is preparing a new study that covers the tax year 2010 and will be based on the audits done between 20 of eight and 2010. we expect this report to be released in the first quarter of 2016. one of the key findings from our ongoing research on the tax gap has been the compliance rate is very high for income subject to information reporting. income subject to third-party reporting is under reported only about 8% of the time. that number jumps to 56% for those that are not subject to the third-party reporting or holding. another thing we learned from the research is the biggest portion of the tax gap involved the under reporting of business income by individual taxpayers that total $122 billion in 2006. the evidence is clear that the

lack of reliable and comprehensive reporting and withholding on this type of income is the main reason for such a high level of underreporting. a good example of the recent efforts to improve the compliance in this area involves the legislative requirement for electronic payment processors credit card companies to send us information for business credit card receipts in the new form 1099 k.. programs such as 1099 reporting our usual not only because they help the irs lacks the correct amount of tax but also because they encourage volunteer he compliance. and the importance of the voluntary compliance cannot be overstated. about 1% increase in the level of the voluntary compliance brings in about $30 billion annually on the tax receipts. even with these and other

efforts i would note that it is not possible to eliminate the tax gap completely. getting to 100% tax compliance would require a huge increase in audits and significantly greater third-party reporting and withholding then we have now. realistically that wouldn't work because the burden on taxpayers and the strain on the resources would be far too great. our situation represents a serious challenge to keep making progress on this front in order to absorb the required reductions this year the irs has taken a number of difficult steps including the loss of attrition of about 1800 key enforcement personnel that translates into fewer audits in the collection cases and we estimate the government will lose $2 billion in revenue that otherwise would have been collected. additionally the reduction on the funding has forced us have forced us to make cuts in the taxpayer service. this is also troublesome because if we can provide the services can't taxpayers need to fulfill their tax obligation with voluntary compliance.

this concludes my statement and i would be happy to take questions. >> thank you mr. chairman, renting member cummings, members of the committee i appreciate the opportunity to appear before you to discuss a couple of areas of high risk identified by the gal specifically the management weapons acquisition. the department of department of defense is a measurable progress in addressing these areas as well as the areas of contract management as mentioned and infrastructure. the department is dedicated to improving the supply chain acquisition process supply-chain acquisition process to ensure effective support for the fighters value to the american taxpayer. supply-chain management and weapon acquisition or complex areas that by their nature until a level of risk. we develop and sell the best weapon systems in the world. and our our largest escape abilities are logistics could be far unparalleled as demonstrated in the last 13 years of war. due to the scale and complexity of this inside the department of defense signals levels of

importance there will be some deficiencies. therefore we must continually strive to improve. today the supply-chain is simultaneously sustaining forces in afghanistan in a supporting the about supporting the war on isis and -- completing the mission to hezbollah. we provided 1.1 million gallons of fuel cost 445,000 meals a day delivered medical supplies construction materials and spare parts to sustain the combat at record levels. dod manages over 5 million items valued over $90 billion. our action is to improve inventory performance while maintaining overarching focus of reducing risk to the war fighters to help reduce the substantial results that have been acknowledged by the gal. for example in 2010 dot dod has been implementing the comprehensive inventory management improvement plan. since 2012 we reduced the government inventory by $14.4 billion, the first reduction in the government inventory since the '90s.

they are implementing a new forecasting methodology which is producing improved material availability, decreased backorders and reduced procurements. with that said, there is more work to be done on improving the supply-chain performance and we remain focused on doing so. second area of high risk i want to address is the weapon system acquisition. to recognize the weapon system acquisition process has provided the united states with dominant literary capabilities. the rise of the foreign capability coupled with our ongoing combat operations on in the global commitments and reduced budgets is jeopardizing our technological superiority. our weapon system acquisition process must deliver these combat activities to the war fighters as effectively as possible. our program for the continuous positive improvement in this area that we call better buying power is focused on that goal. gal has their own main concern of the acquisition areas crossed and a schedule of growth.

the department sets up the affordability level on the major weapon systems. we are tracking their performance against established caps to ensure compliance to the affordability gap's title to the requirements and drive the active engagement to the of the opposition and requirements leadership that would be the operator is in the weapon system. during the weapon system development to ensure that requirements associated with the program addressed the war fighter needs and in an affordable way. we have revised the principal acquisition policy that dod instruction 502 which institutionalizes bdp and the improvements resulting from the weapon system acquisition reform act including the emphasis on the systems engineering the cost analysis and testing. in addition to the actions already mentioned, we are measuring our own performance. the first two annual report on reports on the performance of the defense acquisition issue system have provided the data that the department is using to

increase the performance of the acquisition process and the gal is also using those reports. in summary, dod will continue to work with the gal to address the underlying causes that have resulted in a high risk designation. we are and continue to be focused on removing ourselves by correcting our deficiencies. for the benefit of the war fighters and the taxpayer. thank you for the opportunity and i look forward to your questions. >> thank you chairman and ranking member cummings members of the committee. i appreciate the opportunity to appear before you today to discuss the department of energy efforts into improving our management of our capital asset projects. this is a topic of great importance to the secretary and our deputy secretary sherwood randall. the dod manages some of the largest most complex and talent to meet the challenging projects in the public or the private sector due to its diverse

mission. the portfolio of large projects undertaken by the doe is unique not only from other projects in the public and private sectors but also each project is unique from other doe projects. these projects are truly one-of-a-kind with uncommon challenges such as handling radioactive conditions or producing extremely bright x-rays. in light of these challenges the doe struggled with project contract management and we have been on the gal high-risk list since the inception in 1990. we have made some important progress, however, that has been recognized by gal and others. in the 2009 we were removed -- they removed the office of science from the high-risk list and in 2013, the gal and narrowed its focus to projects

over $750 million in the department's office of environmental management and the national nuclear security administration. the department remains very focused on getting off of this list entirely. to meet this challenge the secretary is instituting changes to improve the departmental performance on major projects and one of the first actions he took when he became the secretary was to create an undersecretary for management and performance to focus specifically on improving project management and providing direct supervision of many of the most challenging projects. in august, 2013 the secretary also established a working group which he asked me to lead to conduct an in-depth analysis of the project management. this working group was comprised of the seniormost project management experts and we took a very comprehensive look at the challenges that dod faces and

the group provided opinions as to why projects either fail or succeed in the dod environment. the working group findings were issued in a report was that was released in december and that report you can find on our website at the department of energy. the edwards led to several implementation efforts to improve project management. first come only strengthened the energy system acquisition advisory board. we will now review all projects with an estimated cost of $100 million up. it used to be we only looked at 750 million up into the board is chaired by the deputy secretary and deputy secretary and comprised of the seniormost departmental officials will now meet at least quarterly and focus on projects that are deemed to be at risk of not meeting their performance baselines. second we have established a new committee in the project management risk committee. this is comprised of the senior

project managers who are the same folks that wrote the report i just referenced and that is providing risk assessment advice to the department's senior leadership reviewing and analyzing projects before all critical decisions in the baseline change proposals and providing the peer reviews and in-house consulting to the projects across the department. finally, the secretary of state industries of actions aimed at improving lines of responsibility and improving the peer review process department is improving accountability by ensuring that for each project the appropriate undersecretary must now designate a clear owner who has budgetary and programmatic responsibility. there must also be a clear line of responsibility that extends from the undersecretary to the project owner to the federal project director. in addition where it doesn't exist already come each undersecretary is now establishing a project assessment office.

of the reforms into the processes that we were instituting with respect to project management are critical steps to meet our solemn responsibility to be responsible stewards of taxpayer dollars. we are encouraged by the work that has been done over the last year which has been focused on affecting permanent structural and cultural change in the way that the department manages its projects. thank you and i would be pleased to answer your questions. >> members should be advised there is a vote on the floor and we have three votes. the intention is to have the next two gentlemen who gave their opening statements that we will not give to the questions until after the votes. so we anticipate that that will happen no sooner than 5:15. each of you gentlemen have up to five minutes. please be swift and your full statements will be entered into the record. >> thank you. chair and ranking member cummings and members of the committee, thank you for the

invitation to discuss the centers of medicaid and medicare services operations of these programs. we share the committee's commitment to protecting beneficiaries and taxpayers dollars to preserving the programs for generations to come. we appreciate the work of the gal, medicare is a large and complex program serving 54 million beneficiaries and working with over 1.5 million providers. we pay over 1 billion claims per year from these providers. why all the gal continues to classify as a high-risk program there is good news to report. the last two years of the slowest growth in the real per capita national health care expenditures on record. the 2014 medicare trustees report projects that the trust fund which finances medicare hospital insurance coverage will remain solvent until 2030. for years beyond what was projected just last year. they are also promising improvement on the quality of care for the beneficiaries. cs initiatives contributed an estimated 80,000 fewer patient deaths in hospitals, and

1.3 million fewer hospital acquired conditions. saving $12 billion over three years. ethical review strategies have resulted in over $5 billion of savings in just the last fiscal year create a cms is working to transform medicare to a high-value payor payment policies based on quality not just volume. and we remain focused on preventing waste abuse and fraud before it occurs. these issues are not not merely about cost. a person beneficiary health through the services substandard care cut interest prescribing and a host of other problems. since 2011 cms has been using its broad prevention systems to apply advanced analytics on all medicare fee-for-service claims. the system incorporates beneficiary complaints made through 1800 medicare and works with numerous other inputs to generate and prioritize leads for the further review and investigation. a cms then swiftly takes administrative action to stop automatic behaviors through the suspension of payments, medical review of claims and removal from the program. as we recently reported in

congress are advanced analytics system has generated a 5-1 return on investment. another component is a strengthened provider enrollment by verifying the legitimacy of new or existing medicare providers through a risk based approach. we are screening those that pose the highest risk to the program using routine data checks of life and promote records scheduled and unscheduled site visits and fingerprinting. as a result we have removed over 450000 medicare enrollment since 2010. and importantly denied thousands of enrollment applications which means that these providers never gained the ability or lose the ability to build a medicare program. these unprecedented examples of success have been positively acknowledged by the gal. additionally we are engaging with the private sector in many ways to better share information and the action. the providential partnership is made up of 38 private federal state members and continues to gain membership. the partnership has completed

the studies that led them to take substantive action and developing additional studies based on these results. the president budget includes a proposal to allow for both republican private partners to support this partnership by providing funds. beyond the partnership, they've made important progress in integrating the proven private sector causing our operations including advanced protective analytics can't prior authorization and the use of automated prepayment claim edits. these initiatives have nearly hundreds of millions of dollars in savings every year they they've finally, they are focused on moving the medicare program away from the misaligned incentives of the fee-for-service reimbursement like being the number of tests performed instead of for quality and outcomes. cms is testing different payment models where the providers are held accountable for the quality and cost of their care and providers have a financial incentive to coordinate care for their patients. for the first time, they've also set an explicit goal for this work. cms has a goal of tying 30% of traditional fee-for-service nicotine and to the quality and

the alternative payment model by the end of 2016 and a times 50% by the end of 2018. as a physician myself i'd ultimately care most about the health of patients which i am reminded of dalia as i work with cms colleagues to improve the delivery of healthcare services. our healthcare system should offer the highest quality and most appropriate care possible to ensure the well-being of individuals and populations. i look forward to answering questions. thank you for the time. >> thank you. ranking member cummings members of the committee appreciate the opportunity to appear to discuss the efforts to improve acquisition management. we develop a developed nations indicated police to expand the frontiers of knowledge, capable of the opportunities. by the very nature of the mission of the activities are inherently high risk. at the same time we recognize the critical importance of managing the project is as effective stewards of taxpayer dollars. this means managing the projects to deliver them on cost come on

schedule and identify the risk as quickly as possible so we can implement appropriate corrective action. we've made significant improvements managing the projects and preparing managers. these improvements are already yielding results particularly with our small and medium class missions. we've seen a significant reduction in the number of projects that achieve their baselines and in fact several projects have launched within the baseline including juno and the atmosphere evolution and just two weeks ago the soil moisture active mission. our larger more complex projects typically involve the development of a number of technologies which present greater technical risk. but even the james webb space telescope, the next great observatory in space which was originally confirmed on the whole cost policy that we used and it exceeded its original baseline has benefited from our improved process created a space telescope has remained on track to meet the new cost and schedule baselines of the established in accordance with the new policy three years ago.

the policy devolved to probable joint cost and schedule confidence level of analysis. the strength confidence level analysis enables an asset to estimate the probable that he is completing a project in a certain lifecycle cost of the schedule based on the individual projects unique technical and programmatic characteristics. the key benefit to this policy is what it brings to the analysis process driving an integrated analysis of the cost schedule and technical risk. nasa has also taken steps to enhance the earned value management capabilities. earned value management guidance is provided to the community in the recently released project management handbook as well as through the handbook nasa currently reviews the management data in the formal regular recurring meetings at the center at the mission and that the agency level as well as an ad hoc meeting should be issues arrive. nasa relies on the knowledge we gained with each new project to improve the project management practices. and introduces new tools to

assess whether the projects are on track to meet the cost and schedule commitments. i would like to think the gal for their hard work and their valuable insights. we appreciate the open dialogue we've had the last few years as we have both worked to improve and refine the project management capabilities. as a result violating that there's still a lot of work and we are on the right track to improving the program management at nasa. thank you for the opportunity to be here. >> think the gentleman. the committee will stand in recess. when the votes conclude we will continue and we thank you again for your patience. >> in the second panel of the house oversight committee hearing on government waste and inefficiencies, the witnesses were iris commissioner john and officials with the pentagon energy department for medicare and medicaid and nasa. >> i'd like to start by recognizing the gentleman from north carolina on the subcommittee of government operations. the gentleman from north

carolina mr. meadows for five minutes. >> thank you mr. chairman and each of you for being incredibly flexible today. really i guess the underlining concern that i have is as we are celebrating the 25th anniversary we have to figure out a way to get off of the high risk list. it's not a very high benchmark. really if you look at the components of that it is just making a real concerted effort and so i'm looking forward to each one of you putting together a plan to make sure that we can do that. let me come to you. i sent you a tech and i want to compliment you can actually i sent you an e-mail and want to compliment you on the fact on the weekend you responded via e-mail, which was shockingly surprisingly surprising and i want to say thank you. do you have the automatic re- enrollment numbers that i've

been requesting from cms? have they given those two you click >> mr. meadows, thanks for the question. and i'm happy to be accessible whenever you need. so, the answer is i think we are still working on it. that is part of the agency of the history that i don't have a direct oversight over. my understanding is that you have had numerous conversations with the ceo of the marketplace kevin, and they are working on assembling those numbers. i think obviously come as you as you know, our focus is certainly getting the numbers out to you and the public and making sure that they are accurate when we do. >> okay. so what you're saying is you have not seen the numbers for the automatic. it's my understanding we have those numbers and we've been trying for 60 days to get that. any reason why it would take that long to verify numbers? >> i think it is just confirming the numbers are numbers we can stand behind making sure they are good numbers about to be

released. again, i believe the staff are in touch with your staff and obviously -- >> so we have been in touch and they have not really been in touch from a follow-up. it's amazing to me that we can have the response time for those that get recorded messages or wait times for spanish-speaking operators and we know that down to the second or actually attend a tenth of a second and yet we can't get automatic re- enrollment numbers from cms. when can we expect those? >> i don't have a particular timeline. >> let me go one further because i have a limited time. let's look at medicare. you are going from 14,000 lines of code to 68000 in terms of medicare reimbursement; is that correct? >> we are going to different codes. and so doctors and hospitals

putting in the wrong code will come out as an improper payment or fraud is that correct? >> not necessarily. >> or improper payment. >> obviously the importance -- >> why would he go from 14,000 codes to 68,000. how could that make it more efficient? >> first let me say the agency is adopting these codes that established outside of the agency process and with the input of the provider community. in fact it was the provider community searching for specificity and the ability to really define exactly what they were seeing -- >> but let me ask you why i went through and i looked at your codes. we have codes now that one in particular says that if you unexpectedly are missing your big toe and a get a code there are six different codes.

will they not make us more efficient? there is one for spending too much time in the freezer. it's incredibly ridiculous and let me tell you the physicians i i talk to and the hospitals i talked to are spending millions of dollars in compliance. >> there are numerous different kinds of codes and i don't hatchet in my own practice using that one or any of the others. >> is a mouse a rodent?

>> you make it so complicated that nobody can comply. >> the agent is a recipient just like others are. >> that you are in control of that are not? on implementing that, the program integrity? >> there are numerous parts of the agency. we are required to implement. i require that at some point we are required to implement icbm into the code design itself is to improve epidemiological understanding of the data to make sure the administrative data reflects what is going on in the real world clinically and that the providers have had extensive input into these codes. i don't necessarily disagree with your point, but we are as much a recipient as other agencies that are implemented across the board.

>> i will yield back. >> ranking member cummings. >> i want to thank you for appearing before the committee today. cms has undertaken a number of initiatives to reduce fraud and improper fans in the medicare program. how effective they are easy for the future i would like to ask about these today. the aca requires increased scrutiny of suppliers who pose a high risk of fraud or abuse. it is the heightened screening process applied to the providers and suppliers that are attempting to either enroll in a medicare program or revalidate their participation. can you describe the different risk-based screening level designations and various requirements that the providers

provide? >> the provider categories are essentially subdivided among the three risk categories limited medium and high. and as you go up the chain of risk more screening strategies and approaches are implemented to scream this type of providers whether they are newly and willing or validating. there are automated background checks to be performed for all provider types to ensure the accurate it license or felony record that would keep the provider out of the program. but in addition, the highest risk providers face the site visits and fingerprint-based background checks so the multitude of different screening approaches for the highest risk providers and that also includes the providers to enroll after having the program integrity action taken against them in the

past. the result of all this work and today we have revalidated over a million of the 1.5 million enrolled in medicare and the totality of the work on the newly and rolling validation is that we have removed the privileges over 450,000 enrollments in medicare to date. and i can tell you these requirements are also allowing us to deny more applications at the front end so they never make it into the program because they do not qualify. >> that's what i was about to ask you. so, as opposed to chasing money, you do some preventative things preventive things is that right? >> it solidly lands in the preventive category because it really is designed to keep folks out of the program that don't belong. if we conduct a site visits to determine that you are in operational provider, then you never really make it into the program or if we check the criminal background check or to

determine you are not licensed or have a relevant felony conviction that would keep you out of the program then indeed we divide the enrollment application. >> okay but we ask that the demonstration program on the cover ability devices. how does the agency's prior authorization demonstration from the power, mobility devices in the program integrity? >> one of the central challenges in the improper payment rate is that there is a disconnect between the medical record documentation that underwent a medical service or indicates what happened over the course of them in the medical interaction. and then the claim that comes in to build for that interaction. with the prior authorization does is ensure that medical necessity of requirements and documentation requirements are being met before the service is even offered to the beneficiary. the demonstration and the way that we have approached the

prior authorization is to take a risk based approach to the demonstration that was implemented around power mobility devices first. we are actually -- we put out a proposed rule that rule that would look to expand that on the supply and then there are elements in the presidents budget that look to expand it to things like oxygen and scheduled ambulance transportation. but all of it is the same principle the private sector uses every day evaluating the service before it is even provided and determining that it is okay and then the beneficiary gets the service and the provider gets paid. >> that is an important aspects of checking the front end before the service is provided that the documentation is appropriate and the medical appropriateness and necessity are there it prevents the beneficiary from potentially being on the hook for the denied claim.

so the service was never provided. that we neither the provider is on the hook for the service they provided and are not getting paid for and the beneficiary isn't on the hook for having received the service. >> the gentle man yields back. >> mr. chairman, the paper says in an article before signing on to the increase pentagon spending to the time level congress should identify and address wasteful spending by the pentagon and major federal agencies to pentagon is only there to submit little past a full audit. the jet fighter that is proven to be a massive drain on resources, 7.5 billion in fiscal year 2014 a loan with massive

cost overruns and an egregious acquisition failure over the years i have read so many articles about waste at the pentagon and i sometimes wonder if there are any fiscal conservatives at the pentagon. what do you say how much do you have any estimate as to how much we spent so far and are you concerned about this article that's in the hill today that talks about wasteful spending by the pentagon? >> we are concerned about any wasteful spending and we have a number of processes in place to address spending in general and the acquisition processes. i don't have the total number spent to date.

it costs have gone down below the estimates to actually produce a pretty good airplane and -- they are stuck on old news. >> you are the principal deputy for acquisition and do you have a rough guess? make it goes back to 2004. from east tennessee they told me that many hospitals in tennessee are either going to have to close or go under and in depth being sold to some out-of-state corporations because of the unfairness in the medicaid wage

index and they said it rewards hospitals and penalizes hospitals that have helped their cost down or that have continually lowered their costs. have you looked into this flaccid is the difference between what hospitals are being paid to say in the san francisco or compares them to tennessee or mississippi or places like that it is just almost unbelievable they are being paid twice as much for mostly the same type of work. what can you tell me about that? are they concerned about these discrepancies at all? >> we do have the process for others to engage us in terms of the wage discrepancies like that. i can tell you that we have a very proactive approach to those

that we know exist and reevaluating the codes and ensuring that the approach and reimbursement to the taxpayers expect we all want the program to provide so there is a process for doing that and we are happy to engage. >> i don't have much time left and years ago a hospital administrator in a small town in tennessee said if you don't have hospitals, you don't get doctors and if you don't get doctors you don't get people and there are many hospitals that are really struggling in this country because of the discrepancies between what they are getting in comparison to some of the other wasteful and inefficient city hospitals and i think that is something that we really need to take a look at because it is very unfair and i could give you all kind of statistics about

that but i won't bother you with it today. but it's getting to be a very serious problem in my state. >> thank you mr. chairman. >> the gentleman from south carolina. >> when i sat down this is my first hearing and when i sat down to do the research report we got sidetracked and i want to talk about some other things because one of the things i found doing the research in the report that came out today the agency is reporting that the tax refund fraud will be $21 billion this year. that is about 300% from a couple years ago and that number stunned me. just out of curiosity it's more than we spent on the department of agriculture. you can run the treasury committee judiciary, the fda and the irs with that money and

still have a couple billion dollars left over. mr. estevez on what we are going to lose this year in the tax refund fraud you can run the state and south carolina for three years on that money money into that isn't all of the fraud occurring it's just the tax refund fraud. that's what's the research i want to ask about which is the testimony last week before the senate we ask you some questions about the impact within the department and you go back and forth and we asked you about the people benefiting from the amnesty claiming the tax credit for up to three years. remember that testimony. >> i do. >> i don't know if we established without cost.

have you had a chance to figure out what the total cost of the program would be? >> i do not i don't know whether the 31 billion -- >> 21 billion. 16 billion for the fund and only 5 billion is the estimates that went through which is still a big number and we are worried about going out the door. with regards to the question you asked earlier by the eligibility for the earned income tax credit and the earned income tax credit to be able to apply for it you have to have a social security number so we have 700,000 out there by those that are paying taxes, but they are not eligible to apply because they do not have a social security number. >> that several million will get numbers under the new program. >> if you get a social security number and work you will be able to apply for the earned income tax credit.

you will get an amount depending on the situation. if you are an individual working in applying for the individual tax, the maximum amount you can get what depends on the range of five or $6 billion. >> there was a lack of clarity in the interpretation that you said and i want to clear this up. is the earned income tax credit only going to be available to the illegal immigrants to file taxes previously or is it going to be available to all of them who receive social security numbers under the new program? >> if you get a social security number you can file this year if you are working and if you earn income in the three years prior to that and file you will be eligible. if you didn't, you will have to file a return and have to file a demonstrator with the same information anybody else would you actually earned income and are therefore eligible.

so some assumption that you would get the end earned and come tax credit. >> so even if they didn't file the previous three years. you have no idea how much this is going to cost. it did not ask you to estimate that? >> i haven't talked to the white house about this at all. >> did anyone at the white house ever consult with your office before they issued the executive order that gave rise to the amnesty? >> they didn't consult with me or anyone else. i'm not aware of any consultation. >> are you aware that if we were to do with what the president did by legislation that he did by executive order that we would have to get an estimate of exactly what you and i are talking about here today? >> from the joint committee on taxation, yes. >> so if we did the same thing the president did we would have to know the answer to that question that the president

doesn't have to know the answer before he did. >> he would've come to us to get the answer he would come to us. >> about by the but by the same token did he ask for example about any increase in the risk of fraud clicks >> we had no conversations that i'm aware of and we haven't talked to the white house about any of this. >> the gentleman from ohio mr. jordan. >> i want to talk about the conservative groups and frankly the pattern of delay. and if you don't take my word for it, just yesterday in the hill the front page won't release the targeting documents so the respected mainstream journalists talking about the whole site a bit told the

committee staff there was no targeting going on. that turned out to be a lie. 2012 the then commissioner told the ways and means committee there is no targeting going on also a false statement. they went from a bar association here in dc with the plan in question again unprecedented, went before the inspector general, released a report and talked about the targeting by the conservative groups and a quote from remember, if you talk to the treasury and the white house about this then chief of staff had the treasury informed the white house about the plan to disclose the targeting so that the white house wouldn't be surprised come as a think about this. the planning question before the inspector general's report comes out, she discloses that and the white house and the treasury already knew that it was going on and then of course we have ms. lois lerner talking about

since it was a problem and that was false and the white house says that it is a scandal, no corruption, not even a little. february 14 of last year we subpoena you for all of what was learned's e-mails. applied number one. a few weeks later march 26 in this committee room the chairman of the committee asked you a question are you going to provide all of the e-mails and your response is yes we will do that. remember that conversation? >> i remember. you reminded me of it a couple of times. >> of the american people are frustrated about with the irs did to them regarding their first amendment free-speech rights. june 13 you said a letter saying we lost close for her's e-mails and we destroy the hard drives. remember that letter that you sent? ten days after you came back to the committee room and we asked you some questions.

i asked you specifically what date did you learn you couldn't get off the e-mail? remember that conversation? and your response was i learned in a pro. so my question is today will you admit that you misled the committee and more importantly the american people just like there's lois lerner was doing and will you admit that you misled the congress and the american people? >> absolutely not. >> you don't think you misled them? the >> no. >> sees that we will give all the e-mails and a few days later you learned in april, that was in march coming in you and you can't and you wait two months to tell us and you don't think that is misleading the american people? >> i didn't wait six weeks to tell you. we waited at the time to find as many of the e-mails we had been reported. >> did you send the chairman and

a letter saying that what you told him on march 26 i guess we will give to all of lois lerner's e-mails, did you send a letter saying what i told you on march 26 isn't true? like we had several hearings we said we would give you all of the e-mails. as i told you once before we could and makeup of the e-mails. we gave you all the e-mails that we had. >> and then you write a letter to the finance saying you lost them to read you destroy them. have you done anything to correct the record? ..

>> and we said in the backup tapes did not exist because they had been re-recorded over -- >> mr. chairman. >> so at that time -- >> i've got one more question mr. chairman, just in the last ten seconds, if i could. have you withdrawn the letter understanding that now tigta has told us that her e-mails are recover bl on the backup tapes, have you withdrawn the letter that you sent to senate finance where you confirmed that those tapes weren't there? and i bring this up, mr. chairman, because this committee has some experience with letters being withdrawn. in 2011 the justice department, after making inaccurate statements regarding fast and

furious, sent a letter to then-chairman issa and they said this: facts have come to light during the course of this investigation that indicate the february 4th letter contains inaccuracies. because of this, the department now formally withdraws the february 4th letter. so what i want to know mr. koskinen, is when are you going to be square with the american people and withdraw false and misleading statements you've sent this committee and, more importantly, the letter you sent to senate finance? are you going to withdraw that letter? >> absolutely not. we can have this argument for a long time. tigta has spent months and untold amounts of money trying to extract those -- >> you said you could confirm they didn't even exist. >> the gentleman -- >> the backup tapes if you go through my -- >> will you withdraw the letter that has falsehoods in it? >> there is no reason are to withdraw that letter. i stand by that letter. >> the gentleman's time has expired. now recognize the gentleman from michigan for five minutes. >> thank you, mr. chairman.

mr. koskinen monday -- tuesday of this week i did two live town halls back in my district and one tele-town hall, and at two of those events the issue that was brought up and the same story that came out in "the washington post" with the headlines "irs rehired hundreds of ex-employees with troubled records" came up. and it basically came up from my constituents saying, you you you know why can we not get away with the same things that are quoted there? in the article it indicated between 2010 january, and september 2013 the irs rehired 7,000 employees. a great jobs program and we're always delighted when people are employed. but the question comes from my people as to why over 800 of those 7,000 rehired irs

employees were rehired with prior substantial employment issues. including 11 individuals who engaged in unauthorized access to taxpayer information. and that really discourages and frustrates my citizens. that these people, 11 of them who engaged in unauthorized access to taxpayer information -- which is a crime, as we understand it -- were rehired. why? >> those are the bulk of those employees are temporaries are seasonals who are hired for four to six, eight months, a year depending on the time. they should not be rehired. >> even though they committed a crime -- why were they rehired? >> because the process at that time 2009 and 2011 and 2012 followed as the ig said the opm regulations. we consolidated in 2012 all of

those hiring issues into our personal security division, and i have made sure that if you have violated laws under a section called 1203b, if you have worked for the irs and violated section 1203b, you will not be rehired. >> well, according to tigta they said it still remains a concern because in 2012 and 2013 irs hired individuals with significant conduct and performance issues. what are you doing -- i mean, this was subsequent to that. >> yes, sir. and what the ig recommended again in that report said that was all pursuant, and we followed the opm rules what the ig said is we should make sure that we make sure before we hire someone we've actually reviewed all of this. and as i said, we now do that. we took the ig's recommendation, and i have talked with our personnel people since the irk g started raising this -- the ig started raising issue in december and to make sure that

in this consolidation with our security people if you have violated 1203b which is willful violations of taxes or taxpayer information, you won't be hired. >> let me proceed further then, and i hope this is a general trend. the audit identified 141 individuals that were rehired that had a prior tax issue. with five of them having been found by irs management to have willfully not filed their taxes. how many of these employees are still borking? >> they're -- working? >> they're all seasonal employees, so a lot of them don't come back the next year, so i don't know how many of those there were. i would note the 141, we take the requirement of irs employees to be tax compliant very seriously. our compliance rate is over 99 percents. we hold people accountable even if their mistakes are inadvertent, even if they make modest mistakes, we count that as not compliance. what we are concerned about is the five employees, as you mentioned, that have been found to willfully not pay their

taxes, and those people are subject to termination. >> could you get us information for this committee of people we're referring to here that are still employed? >> i will find the information. the 141 if you have had a minor attempt, minor mistake those you would get cited for but those aren't basis for termination. the five that had a willful violation, i will p find out the information and get it back to you. >> i appreciate that. what about, what about those -- not the tax issue, but had substantial prior employment issues attendance issues misrepresentation of what they were doing if they were on the job -- >> there's again, as i say the consolidation now we have a personal security department that reviews every offer before it is made to make sure that we've gone over all of that. some personal activities are you didn't show up for work by, you know, two days, others are you had a significant problem, and

we distinguish between those, and the opm rules are very clear about that. just because you had a performance issue in your file doesn't mean you can never work again for the irs. it depends on the nature and the duration of the affair. but it is important even though 80% as the tigta report said, 80% are temporaries and seasonals who don't necessarily even work for half the year, it is important for us to make sure -- >> very important. >> -- that we have the appropriate people working. so i'm a big supporter of igs because they continue to review these issues, and we take it seriously. we have implemented their recommendations, we have a personal security group now that insures before an offer goes out if you have violated 1203b which is the two most serious issueses, you don't get hired, and if there are other conduct issues, we're going to review those for appropriateness for work at the irs. and i think it's important for people to be comfortable that we do take it seriously and people working for the irs ought to be

tax pliability. if we're collecting your taxes, we ought to be paying ours. >> i appreciate that and i would like information that are still employed that came under the 824 -- >> the 824 covers a lot -- >> i thank the gentleman. >> thank you. >> gentleman's time has expired. we'll now recognize the gentleman from alabama mr. palmer, for five minutes. >> thank you, mr. chairman. i want to give mr. koskinen a break here for a minute and talk with mr. lightfoot if that's okay. >> i don't want you to think that's not appreciated. [laughter] >> well that doesn't mean i won't come back to you. mr. lightfoot, nasa's done a good job in making progress on getting off the high risk list but there's still some issues. i'm from alabama nasa's a major presence in our state. there have been some issues with rebaselining costs and

schedule -- rebase lining costs and management and technical issues. can you address that on some of your projects? >> yes sir. we have -- the process we we go through where we review these projects on a routine basis, while we have some that go very well, we continue to make progress on those last eight of the last night. once we go through confirmation of project which moves it from formulation to development that's when we make a commitment for a certain cost and schedule that we're going to try to live to. the process we have where we review those all monthly, occasionally we have one that pops up, and it gives us an issue. we've had two of those. the space ground sustainment system that we have and then the isat ii project which are two issues we have going where we were required to then go back and baseline. when you re-baseline, you go through a process of analysis alternatives, is there another way you can get that particular mission accomplished, can you

descope the existing mission? so that's the process we go through. each one of those has lessons, one of the things we've been really working on is the factoring those back in and continue to improve or process as we go forward with the rest of those projects. >> at a prior time in my life, i worked for a couple of major engineering companies, and one of the things that drives a client crazy -- particularly the one paying the bill -- is change orders. you've got some projects that i don't know if it's a result of design changes or poor design to gun with that are running -- to begin with that are running some substantial overruns on change orders. could you address that? >> yes, sir. i think the one you're talking about in particular is the ground systems project that we had. this was the first time that we've actually applied the same project management methodology that we had for the spacecraft that we've been flying to a ground system. and one of the things -- that's

an upgrade to our ground networks that actually communicate with all the satellites we have on orbit. that system is basically becoming obsolete. so what we did was we went out and we tried -- we knew we had a pretty large job in front of us and we tried those techniques we've been doing to spacecraft to a ground system. we've learned a few lessons in that process. the first one is that we have to be very clear on our requirements. much to which you're talking about. and understand -- and make sure we understand that the contractor that's doing that work understands those requirements as well. so we've gone back and forth with this in terms of trying to define better the expectations we have for the contractor and then managing that contractor. in this particular case, we've changed out the entire contract management team and the team that we have in terms of our managing it. and i said we've done that -- since we've done that, we have managed to stay from an earned value perspective we stayed at the levels we expected.

>> so this is -- would you say this is the result of a design that of a project that the schedule dictated the design, or is this something where you're entering a i concern -- a new area and you're designing as you go? >> i think this is a case where we underestimated the kind of work we needed to do to deal with the obsolescence projects that we had in front of us to put in place new i i didn't equipment. >> all right. i believe that's all i had. i'll yield the rest of my time. >> thank you chairman. and, mr. koskinen since you had a break i thought it only appropriate to come back to you and ask you a couple of questions that were on my mind in particular. based on previous testimony, you've made it clear that the ability of the irs to make progress in the areas that have been outlined by the gao have

been largely hindered due to reductions in funding. and i -- this is kind of a personal question to me because of my involvement with nonprofit organizations. the irs has spent millions of dollars to basically, rewrite the governing rules for 501c4s or what have you, different nonprofit organizations specifically potentially removing tax-exempt status if those organizations are involved in political act death. activity. my question is multiple. it's rather amazing personally that there would be an issue of trying to hinder speech of americans. my specific question really comes down to how much money can you tell me how much money the irs has spent on writing and

the attempt to rewrite that specific section of the 501c4 ruling? i know it was withdrawn but my understanding is that there is an attempt now to rewrite that. i'm curious how much money has been spent to that end. >> i don't know. the only money that's being spent the lawyers -- is the lawyers that have been working on the drafting of this, and they haven't been spending full time, so it is not a large amount but i could try to get an estimate of how many people worked on it. the work on the first version was done before i got there but we can try to figure out a rough estimate as to man hours. but the only time spent t was, as i say, a relatively small number of lawyer ors who were working on it. the goal here is not to hinder, as i noted when i kind of inherited all of this. the goal is, in fact, to try to make clear what the rules are in a way that's fair to everybody, all of the organizations, it's clear and easy to administer. right now the rule that's been there a long time is you judge both the determination as to

whether they're eligible to be a 501c4 and whether you're performing under the statute by facting and circumstances. so that means anybody be running an organization is running the risk of looking over their shoulder saying is somebody going to have a different view of the facts and circumstances. my view is we ought not to be changing the way people act but what we ought to have is a -- and the ig in his recommendation said the treasury department and the irs should color up what the standard is -- should clear up what the standard is for how much and what the definition is of the political activity you can engage in. and my sense is that it ought to be possible to have a rule that would be clearer easier for people in those organizations running them to understand and father to everybody and that would not be hinterring political speech. so it's not my intention anyway in looking at that to do that. my sense and concern is that the present system has over the last several years by the ig's analysis turned out to be

unworkable. and i think it would be in everybody's interest if, again, it could be clearer what the rules are without hindering people, and they would be able to run organizations confident that somebody isn't going to come in and we could guess them -- second guess them on the facts and circumstances they've been operating under. >> well, i would agree we certainly need clarification in that, but i would also strongly urge a very clear understanding of the freedoms of americans, that just because someone is a part of a nonprofit organization, they have not waived the first amendment rights. and that is a tremendous threat that the irs has, in my opinion no business interfering with. and that is a deep concern. >> i agree with you and, in fact, my sense is that the rules if they're fair and clear to everyone will, in fact, create less of a constraint on people's right to free speech than the present rules which are muddy and hard to interpret. >> okay. one other question and i will yield my time. again, going back to the issue

that the main problem has been lack of funding, the issues from the gao have come up with the irs for some 25 years or close to it. it's been a long time that we've had issues. and yet a few years ago in 2010 the irs had more funding than they've ever had, and these problems, these issues have still not been addressed -- >> that's not quite true because we did have more money in 2010 by a long shot and as i noted in my testimony in 2013 as a result of some of that spending on information technology, the information technology business system modernization problem for the irs was taken off the high risk list after having been there for 14 years. so it has been true and proven that certainly in the i.t. area that if we have the funding, we can make significant progress. >> and that's great for the i.t. area, but there's many other areas that need to be addressed -- >> there are. >> -- and 25 years is far too long. it's time to put some teeth to it. thank you. >> thank the gentleman. now recognize the gentleman from

florida, mr. desantos for five minutes. >> mr. koskinen, i know it was a year ago where the senior leadership learned that lois lerner's hard drive had crashed. there was an issue about getting her e-mails off backup tapes. you wrote a letter to senate finance in june of 2014 saying there were problems with lerner's e-mails, that the backup tapes had been destroyed. and then on june 20th you testified before the ways and means committee that the irs went to, quote great lengths and made quote, extraordinary efforts to recover lerner's e-mails. so let me ask you this, after the irs became aware that lerner's hard drives had crashed, what specific steps did the irs take to locate any backup tapes or disaster recovery tapes? >> the disaster recovery tapes at the irs are ordered over -- recorded over until they're no longer usable, so there is no technique or capacity in the irs to actually retrieve e-mails off of those tapes. what we did do was go to

everybody in the what so-called custodial list at that point about 80 different people ms. lerner would have been communicating with. was we were looking all e-mails -- because we were looking for all e-mails. so we looked all after of those 82 and took every e-mail that was to or from lois lerner, compared them against -- >> but that would not have been backup tapes. that was their hard drives. >> [inaudible] >> the backup tapes, you had made the judgment that they simply were not going to be recoverable, or did you actually have somebody investigate whether you could have backup tapes -- >> no -- >> or you could find some backup tapes? >> our expert said we we had no way, it's taking the ig the last six months working around the clock, and we still don't know how many there are. my position all along was if he could find more e-mails, that would be terrific.

and i actually mean that seriously because it would lend even more light than the 24,000 we already produced into what were in those e-mails in that time frame. >> yeah. but why would the ig be able to find it if you guys couldn't find snit you said you went through -- >> well, pause when we discovered this in the spring and then we reported it in june six weeks later within a couple weeks thereafter the eg started his investigation, so we had no more time. and i will tell you today if we started today it's taken the ig -- and i don't know how much money they're spending -- it's taken them over six months. we don't have that capacity. >> did the irs ever collect any tapes or send any backup tapes to any forensic lab in your investigation in the people you detailed to do this? was that -- any tapes recovered, any tapes ever sented to a lab by the irs? >> no. >> okay. now, who told you that the backup tapes would not yield any e-mails from lois lerner's

crashed hard drive? >> i was told that by our information technology department. >> and what was -- do you know the basis for that statement? did you inquire as to how they could be sure of that? >> basically what they described to me is they have these disaster recovery tapes, they're actual tapes, and then when the six months -- they keep them for six months, and when the six months is done, they simply reuse them and record over them and, you know, if you ever have tapes when you record over them then in the normal process the day underneath them is gone and, in fact i was told that we had no capacity and no way that you could actually recover those. and, in fact, they were not sure there was any way that you could recover them. >> has the irs communicated with lois lerner, her attorneys, about recovering the e-mails from in any of her crashed hard drives? >> no. i've had no communication with lois lerner about this at all. i've never met her. >> let me ask you this, in the course of the irs' response to this committee's investigation, has the irs withheld any

information or documents from congress on any other basis other than 6103? >> no. we've had some that we have asked staff to review in camera because they're personal matters that have nothing to do with the investigation, but we've exercised no privilege. we aren't trying to keep anything from you. in fact, we've continued to respond to requests and continue to provide any information we can find. >> and you would say that your responses to the request from this committee have been above and beyond what is required in this situation? >> no, i don't go above and beyond. when you want information and ask for it, we have an obligation to provide it. >> extraordinary efforts aren't above and beyond? >> extraordinary efforts were in fact, when we discovered the crash, then it was my decision and thought that we needed to do whatever we could to gill in that -- fill in that gap, and we did find 24,000 e-mails we provided. my understanding from newspaper reports is that the ig may be able to find another 9 or 10,000

lois lerner -- >> so you just, final question is, you made the effort. you were not cavalier about this, you made the effort to find what the committee wanted, is that your testimony? >> that's my testimony. >> thanks. i yield back. >> thank the gentleman. now recognize the distinguished gentleman from south carolina, mr. goudy, for five minutes. >> thank you, mr. chairman. the book of ecclesiastes teaches us there's a time and a season for everything and you convinced me earlier this evening that this is not the time to question mr. koskinen. he was here for gao-related testimony and not irs and i don't know whether he's prepared for the questions or not. we'll not find out because i believe that you have agreed at some point he's going to come back before the committee, and i was wondering if the chairman might engage in a colloquy with me to make sure that my cochronology is correct. i thought -- chronology is

correct. i thought the last time mr. koskinen was in front of us there was a robust discussion about the time period within which he was going to produce e-mails. and he had asked us to narrow the scope so that he could prioritize and yet us those e-mails -- get ez those e-mails we had asked for. and as the chairman will recall, we need those e-mails because the e-mails we do have from lois lerner contain such jewels as "lamenting gop wins," t "celebrating democrat wins," "forecasting doom and gloom if the gop god forbid, ever control the senate," saying that we needed a plan to overcome citizens united, those were just some of the e-mails that i recall, mr. chairman. and if my chronology holds after commissioner koskinen told us that he would prioritize the production of those e-mails, of course they magically

disappeared. and then the irs, of course, mr. chairman employed herculean efforts to recover those e-mails. they were not successful. but then talismanically after the election they did appear at some point, and now we are reading that 500 of those e-mails will not be made available due to the invocations of a privilege. -- invocations of a privilege. does the chairman know what privilege they are relying on? >> i do not. >> do you think -- do you know whether the president has had an opportunity to review those 500 documents? >> good question. >> do you think there's a chance that his conclusion that not a smidgen of corruption exists in this investigation might be altered if he did have an opportunity to review what's in those documents? >> certainly.

>> will you consider inviting mr. koskinen back to update us on this, on this chronology? >> yes, indeed. >> all right. well mr. koskinen commissioner, i'm not going to question you today because i think the hearing title was something else but i hope at some point we can go back to where we left off which was an asheerns from you that you were going to prioritize e-mail productions. and i e hope at some point, mr. chairman, we can evaluate the refusal to turn over certain documents to congress, the invocations of privilege and i used to add as the chairman remembers because of his service on judiciary and oversight, this administration has invoked executive privilege before only for us to then learn that that privilege was invoked to protect an e-mail that the attorney general sent to his wife.

under what theory of executive privilege is that e-mail protected? so i hope that i live long enough to see the production of those e-mails, and i certainly hope i live long enough to see the commissioner come back before us, and with that -- >> would the gentleman yield? >> could i i just make one clarification? during the course of all the document production, treasury department turned over all of its lerner e-mails, and the white house made a representation that they had no lois lerner e-mails. so in terms of that process and in fact, this committee issued a report in december on noting that, in fact, there was no evidence that anyone outside of the irs, whether at the white house or treasury, had any impact or innuance over the as the ig said, improper use of criteria for the determination process for c4. so i don't know what the documents over there are. there's been a litigation around the inspector general investigating communications but that's not a case between us and the irs is not a party to

that. and -- >> no, it's not, which is in part why i directed my questions to the chairman and not to you. but if you would like us to have this conversation, i will ask you, do you understand why congress wants those e-mails? can you understand as a trained attorney why we might want access to all the documents? >> i can understand that. few understanding -- my understanding was that the white house sometime ago certified there were no lois lerner e-mail, and treasury gave you all their -- >> well, what did they do? >> we'll have more occasions. i think this is my sixth appearance before the committee and i look forward to the seventh, and we'll talk about it, and i will be delighted to give you an update. and i will be delighted, if the inspector general can ever complete his work to produce those e-mails because all of us will learn what was in them. and i have been totally supportive of the ig, and my view really is if there are e-mails that can be done and the ig apparently in the public press it's been said has been able to find them i think that

will be a major step forward. and i look forward to discussing that with you. .. door agencies, these problems have come before congress 25 years in a row.

this is the all-star team of problems. that's the reality. you can try to put lipstick on this page but the reality is that it's ugly. to get on this list you have to be engaged in waste, fraud and abuse in excess of $1 billion a year. to get off the list come and granted it's not easy, but here's the criteria for getting off the list leadership capacity you have to have an action plan, you've got to be monitoring efforts and show progress. that seems light a reasonable set of criteria that you can accomplish. i have the scorecard according to the gal. 25 years in a row you fail to meet the criteria on those five and consequently, that's why we are highlighting this. i think you are all well intentioned and a very talented

individuals but the mass of bureaucracy within the organizations that you represent here today is failing to meet these modest goals. and that's what is so frustrating. things are going to pop up on the the challenges will rise to 25 years in a row is just not good enough. i heard we were making measurable progress. six sigma levels. good news to report. i am sorry. you don't have good news to report. the bad news is you're back again. we don't want to keep having these hearings. we want to show the progress, and i really do appreciate a good men and women that spend untold numbers of hours and literally years going through the details of what's happening within his departments and agencies. as a follow-up i don't expect you to do this off the top of your head at one of my concerns is who is held accountable?

like who actually is held accountable? we we asked at the beginning a good question. has anybody ever been fired? anybody dismissed or transferred we have thousands of good quality people who work for the federal government. these are employees that wake up, work hard i try to do their best but somehow, someway in these areas it is drawn down. we are not achieving the goals. the criteria that forward by the gal doesn't say that you have to solve this. it needs to say that you are on the trajectory to actually getting a soft. so, part of the follow-up that we would appreciate is who is held accountable and what happens if you do not meet these goals? because some of them are astronomically large. i mean we are talking hundreds of billions of dollars.

if you want to wipe out the federal deficit you just look at the uncollected taxes and the problems we have in the waste fraud and abuse going out the door through hhs. that's more than wipe out the deficit just right there. it's not very easily done. but the waste of fraud and abuse and if you look at the people that work hard and pay their taxes and they are doing everything they can and then they hear hundreds of billions of dollars going out going out of its either not collected or going out erroneously and the waste and fraud and abuse, they throw up their hands. they are $2500 means something in their lives and yet the numbers here are so big. i do not understand why the five there highlighted here, there are six departments to be good programs and the department of defense to my why you can't hit those five goals and according to the gal like the medicare

program, they've only met one of the five goals, for personally. on the dod programs, they met one of the five criteria. four of them are personally met. at the department of energy, one partially met wonderfully made, three not at all. so 25 years in a row. i don't want to come back and have the same hearing at the beginning of the congress. i want you to solve it. the committee would like to know and hear from you how are you going to do that? how are you going to do that. and again again, difficult for you to answer but i'm telling you you have all painted a pretty good picture and it is not so pretty. but we want to see what it is the action plan. that is the hope and the goal and that is my concern and with that i want to yield back.

if there are any members that wish to ask a second round of questions, the gentleman from ohio. >> i appreciated the indulgence that we have put up the two slides again. >> it was noted and agreed by congress and the chair man and i will come back and we will have a full hearing about this. >> i expect that. >> but i'm happy to answer more questions. >> that's the way it works. the american people want to know why the internal revenue service violated the fundamental rights. so we appreciate your willingness to answer questions on behalf of the american people. that is awful big of you. >> we are going to have another hearing on this and i've had five already i'm happy to answer the question. >> and we haven't gotten the truth as evidenced yesterday. the mainstream press can't even get the documents. >> those are not documents they are requesting from us. >> that they are from your

unlawful activity. that's the point and that's something you have to understand as the the guided heads the agency with as much power as you do to have that kind of attitude that's what frustrates not just the members of the committee got all kinds of americans. about, mr. chair man is the problem. let's go back to this because i want to know something. is this what you told me when i asked what did you learn when you couldn't get all of her e-mails? you learned in april. then, you learned in april and then this is the letter you send to the senate finance telling them in june you sent this letter telling them, and you used the word confirm that no backup tapes, the backup tapes no longer exist. so i want to know between april, when you learned in the june when you told the congress and the american people what you did to confirm that those tapes

didn't exist, which we now know do exist so what did you do to confirm that the tapes didn't exist? >> i talked to our it people who told me that when the tapes were finished with their six months they were reused and then destroyed and about as far as they were concerned there was no way, we had no capacity even if we knew where they were two extra e-mails and it's taken in six months and they still haven't completed the process. >> that's all you did. >> )-right-paren is >> was a long conversation? >> i asked conversations about how the backup disaster recovery process worked. >> the word confirmed is based on one conversation that you had. is that what you're saying? >> they told me that there was no way that those tapes could be found or would be used. >> that's all you did?

really? an issue where repeated lies from lois lerner, false statements given by doug schuman, the unprecedented fact that you released it before the inspector general's report with the planted question that you've already tipped off the treasury and the white house about and all you do to confirm you lost the most important documents from the most important person in the center of the scandal all you do is ask a question of the it people? >> we spent six weeks looking at the hard drives and documents for 82 people -- to produce for you 24,000 more lois lerner e-mails. that's what we did -- >> who was this person this one conversation to confirm you lost valuable documents from the central figure in this entire scandal, who was this one person you asked the question too, can you give the name? >> that would have been steve manning the senior it guy and i asked him could we find the tapes available and then we decided what we could do is what we did do was we looked at all

of the e-mails to and from lois lerner from 80 people and produced 20,000 e-mails. >> focus on the word confirmed. confirmed was one conversation with one it guy that turned out not to be true. and here is the big picture. your chief counselor due in february you had problems with lois lerner's e-mails. you learned in april and you didn't tell us until june so from february to june you learned there was a big problem and the only thing you do to confirm that there are big problems is one question to your it guy. >> i knew in april -- >> a lot of time to get 24,000 e-mails which was at that time we thought the most we could do it the best we could do and we thought it was an extraordinary effort to go back through all of that to get you the additional 24,000 e-mails, which by the way apparently you don't have much interest in them -- >> one conversation, mr. chairman, but an it guy and

writes u.s. congress and told the american people we've lost what was her's e-mails. then one must question if i could. when did you learn that they actually found the tapes and could recover her e-mails? >> i haven't learned yet that they could recover them. we helped them find -- they went through the system and our people helped them find by the early part of july, late august and they thought they they thought they had found the tapes -- >> wait that's an important point, so utterly a month after -- in july and early august, a month after you said we confirmed that backup tapes no longer exist, they had the backup tapes? within a month they got the tapes that you confirmed it didn't exist next >> that's right. >> my goodness. >> thank you. recognize the ranking member. we consider listening to all of this -- i'm just trying to figure out how to we move

forward. you've been on the list for 25 years, that's a long time. the administration after administration and at some point we need to get off this merry-go-round. one of the things i've noticed after being here for 18 years now is that there is a tendency for mr. dowdy that said i think folks wait for another administration or another congress and then we just recycle the same problems. i guess my question is very simple to each of you. if you have had a magic wand and

you could get this done what would you do to get yourselves off the list? i'm i am serious. i mean what does it take and if you were us what would you do to get off the list or to have a kind of accountability that the chair man chairman talked about? because i have to agree with him we are better than this. and we're just going round and round and round and losing hundreds of billions of dollars. we are wasting a lot of time and it's very frustrating and i just believe -- is it that we are too big to have accountability? is it that we are too big to be able to say okay this is how it's supposed to be done and we are going to do it this way in an effective and efficient manner?

i mean you all may be old that but the questions are unfair and tough, so i'm going to turn the table. why don't you all tell us what you -- if you were us was what we have you do so that you would get off the list? so that we could hold you accountable? but start with you since you have such a wonderful smile. [laughter] >> thank you for your question. first the point i would make with respect to the department of energy and the chairman's comments is we have made progress but the gal is essentially focusing on half a dozen large capital projects where we have had repeated problems and we still do have problems and so there is no effort on our part to claim success on that and we welcome your oversight of the gal.

the success we have had is in projects below the 750. i won't dwell on those but i will point out that in the department and the nsa for example in the last three years we were seven present the low-budget low budget and had projects such as the national contract to make a project come in under budget. the problems we have which are systemic are in our large capital projects that tend to be the nuclear projects that are among the most complex projects in the world therefore what we are trying to focus on our structural changes so that they last passed to someone like me testify before you for a couple of years and that's why we've tried to create a much improved project risk management committee because that kennedy is meant to create enterprisewide dialogue and a challenge by all the project

members from across the state of the program so that we can avoid future problems like this and hopefully get to the bottom of the problems that we have. the last thing that i would mention sir is both of you talked about accountability. that has been a significant issue at the department of energy. when everybody is in charge of a project, nobody is in charge and so that's why as i mentioned earlier, we the secretary mandated that for every project we have to have a defined owner. to the chairman's question so that is the person that is accountable when things don't go correctly. >> i think we have a solution to this issue and -- >> the ranking member and i., mr. cummings and i have chatted and i think what we would like to do is to send each of you a letter we would request that he you would respond within a 30 day period of what is your plan.

show us your game plan and what you need to do to accomplish the plan. does anybody have an objection to that, is that fair? does anybody have an objection to that if we meet a 30 day timeline if we can send you a letter this week? >> fair enough. but this has been a long area and you've been patient taking your time here. but that's what we will do. we will send a bipartisan letter and ask you to respond in 30 days to show us your game plan and that way we can go from here. we do appreciate your agencies. again most of the people are good hard-working patriotic people, but we are failing them and if we do not address it and put a plan in place we will be back here again and we don't ever want to do that. with that the committee will stand adjourned. thank you. [applause]

[inaudible conversations] >> this afternoon here on c-span to the ceremonial swearing-in for the defense secretary ashton carter. supreme court justice administers the oath area we will hear from secretary carter followed by remarks from joint chiefs chairman general martin dempsey and former defense secretary william perry. that's live on why on c-span2 at 2 p.m. eastern. the u.s. economy added 295,000 jobs last month. the unemployment rate fell in february to 5.5% the lowest since may, 2008 for the financial crisis. with the higher than expected job creation numbers, house speaker john boehner issued a statement saying in part, violet is welcomed news that more americans found work last month middle-class families families continued to be left behind by the president's policies. by vetoing the keystone pipeline the president put his

political agenda ahead of the more than 42000 workers who would have a shot at a good paying job. it's time for the president to put down the veto pen. right now on c-span2 comments

from kathleen sebelius who was the secretary of health and human services on the federal health insurance exchange was set up. then we will hear from the lawyer who argued before the high court against the health-insurance subsidies. [inaudible conversations] i met with governors starting on day number one and we talked about it. i don't think there was ever a hint [inaudible] so you would argue that this is a matter of >> it is as established by the state seems to be the language but there's nothing else in the framework that would suggest that it's meant -- >> i thought that again the

solicitor general did a very good job every step of the way proving why this couldn't have been the intent and the notice provision. there was never a send. if you don't do this this will be the case. >> you've had conversations with governors -- >> no, no. i said we had conversations with governors starting on day number one. it was never mentioned through the congressional testimony -- i worked with the committee and no one ever suggested if the states establish an exchange -- >> you said at the intent is clear. >> i felt pretty confident about this, too. i just think that this congress

that passed the bill in 2010 intended for a national program nationally insurance companies have the purpose, nationally citizens are entitled and nationally there is an individual responsibility. it doesn't say only if you choose to set up your exchange. so, you would have consequences. the other pieces that stay in place -- i really have to go, i'm sorry. >> i'm on behalf of the plaintiffs in this case, very gratified that the court had a full and candid exchange of viewpoints and we believe our case is very compelling. so i am hopeful and confident that the court will recognize the merits of our statutory interpretation and not let the irs rewrite the plain language of the statute. >> [inaudible] >> the justice and i had a candid exchange of viewpoints

and i'm sure at the end of it i persuaded her but i would remind you that there is nine justices. >> [inaudible] when you talked about moving along as a whole [inaudible] >> as i said approximately four times by very much, a very much want them to read the statute as a whole because reading the statute as a whole dramatically reinforces the point principally the point that a clear purpose of the statute was to encourage the other states to establish their own exchanges which has dramatically undermined and frustrated by the irs ruled that provides the subsidies regardless of whether the states do that required task. >> how concerned were you about justice kennedy's question [inaudible] the federal government coercing the states into creating exchanges? >> but after the conversation i think it became clear in everyone's mind that this reading would be far less coercive than the version of the

medicaid statute they just upheld and in deed it would be a greater intrusion on state sovereignty to accept the government's positions because this would allow the federal government to unilaterally impose the employer mandate on state and local employers as well as other employers in the state. >> [inaudible] >> we were arguing the affordable care act shouldn't be the law of the land and here we are arguing it should be the law of the land and it shouldn't be drastically altered by a bureaucracy. >> do you see any contradiction in that? you think that it is consistent in both circumstances i have to accept the court's decisions because now the law of the land we needed to be neutrally and fairly interpreted and that's exactly why we are here to vindicate the rule of law.

>> [inaudible] >> not at all. as it was pointed out you've seen the press. it seems that the leaders in congress are well prepared to deal with any transition issues and the states don't have every incentive to go ahead and create the exchanges they would have created about for the contravention of the law. >> how do you cover millions of americans -- [inaudible] >> if you are arguing there's a compelling policy reason to help these people, i'm sure the elected officials at the state or federal level will listen to that and the court is not prepared or equipped to say that they make policy rather than the legislative branch. >> what about the issue -- they clearly didn't feel that they have this. >> they read the statute and the only reason they were confused about it is because the irs pulled a bait and switch on them. it said the statement federal. if they hadn't gotten in the way

and faithfully implemented the law all of the states would have known what the deal was in the statute. it takes a lot to come in and say since we changed the statute and since because two thirds of the state not to have stayed exchanges that an argument in favor of our regulation which is essentially what the government was saying today. >> [inaudible] >> i'm never surprised by vigorous questioning by the very well-informed and very articulate justice is because that is the norm. >> are you at all concerned about this causing the insurance system to collapse? >> if the theory is that insurance premiums will skyrocket for everybody, but simply confirms my political point. that would mean not only people receiving the subsidies but people in all incomes would demand either congress or the states do this. but the differences than it would be done through the legislative process rather than

the irs hijacking the buddhist native process. >> thank you very much. >> you can hear the supreme court argument from the case on health-insurance subsidies under the affordable care act tonight on c-span at 8 p.m. eastern. the city tour takes booktv in american history tv on the road traveling to u.s. cities to learn about their history and literary life. this weekend we partnered with comcast for a visit to galveston texas. >> the rising tide certainly drew them as they watched in amazement as both of these factors. ..

this hurricane was and still was the deadliest recorded natural event in the history of the united states. >> watch all of our events from galveston saturday at noon eastern on c-span2's booktv and sunday afternoon at two on american history tv on c-span3. >> you would see what the youth

ago when i was a kid on the jeff combination jeff combination, or stickball set. washington was a large man -- mutt and jeff. six-foot, very robust, terrific natural athlete. and madison is a skinny little guy. >> this sunday on q&a david post-award on founding father james madison and the partnerships he made that aided in the success of our fledgling nation. >> his gift that i write most about is his ability to form remarkable partnerships with really the great people of his era. but it also alludes to his gift to the country of his talents and what is able to do to help create the first self-sustaining constitutional republic. >> sunday night at eight eastern and pacific on c-span's q&a.

>> the political landscape has changed with a 114 congress. not only are there 43 to republicans and 15 by democrats in the house and 12 the republicans and one new democrat in the senate there's also 108 women including the first african-american republican in the house and the first woman veteran anderson. keep track using congressional chronicle on c-span.org. the congressional chronicle page is lots of useful information including voting results and statistics about each session. new congress, best access on c-span, c-span2, c-span radio and c-span that radio. >> former british defense secretary liam fox spoke this week about the nuclear negotiations with iran, the threat from isis, britain's upcoming election in may. from the center for strategic and international studies in washington, this is one hour.

>> well, good morning, everyone. welcome to the center for strategic and international studies. my name is heather conley. and senior vice president at csis that conducts a research for europe, eurasia and the arctic. we are absolutely delighted to welcome dr. liam fox a member of british parliament for 22 years looking after the constituents of north somerset. many of us know dr. foxx as being the former secretary of state for defense who was named by prime minister cameron from 2010-2011 and csis claims dr. fox has one of our own for coming last year for conversation we held in williamsburg, virginia, on the future of your. and i assure you that dr. fox it was a very lively and spirited debate about what the future of

europe will look like. and i am sure some of it will be reprised for us this morning. prior to former secretary of state, dr. fox served as many shadow secretaries out in opposition for health, for four secretary as well as four secretary of defense. a general practitioner, dr. fox can also give us some insights on health and health issues as they relate to the united kingdom. i am also delighted to welcome two guests with us. we have general brent scowcroft former u.s. national security advisor, and judge william webster, former fbi and cia director. we are delighted to have you both with us. dr. fox, i think they give you a sense of the importance that we subscribe to this conversation, and we look forward to your remarks by dr. fox will give his opening remarks and then we will transition into a discussion and welcome our audience today for a

lively q&a on the future of u.s.-uk special relationship. but i think we'll have a broader conversation about the variety of international challenges we face. so with that please join me in welcoming dr. liam fox. [applause] >> well, good morning ladies and gentlemen. it's a great pleasure to be back here at csis. it is not a quiet time in global events. in fact, i can never remember the more turbulent time in political events but what a time to talk about the relationship between the uk and the u.s. effect when winston churchill first used the term special relationship, he did during his speech in fulton, missouri which is better remembered for his use of the phrase iron council for the first time we talked, he did as a wartime leader. it was basically an intelligence relationship, a military

relationship. the somewhat disneyesque gooey eyed connotations of special relationship again in later years are not for me the concrete foundations it is said that this is relationship about our security in a dangerous world, and there are so many threats in this very interdependent world. one of the changes that churchill would've been astonished to see is the level of inner independence is that we now. we have so many warnings about just how interdependent we become in recent years whether it's a terrorist attack of 9/11, whether it's a natural event of czars but it's a 20000 a baking crisis but what is very clear is that a contingent one part of the global economy will very quickly spread to the rest. in fact, the whole concept of over their i think is a term that might become somewhat dated as we go ahead.

when i was writing the book that her vote about global security threats, "rising tides," was put out to me that back in 1993 not exactly a very long time ago there were 130 websites in the world. at the end of last year there were over six and 54 million. which is a whole changed, quantum leap in information. but it's also a lot of terrorist haystacks in which to hide terrorist needles. is something want to come on to in a moment. i wanted to set out the range, generic range of risks that we face before i come to some of the specifics. but i said the most healing states, the rise of religious fundamentalism the spread of transnational terrorism, financial imbalances

competitions for commodities and that's before we even got to the state on states that we face. i begin by setting out what the risks were failing states and one that i identified was a christian. and i said pakistan not as maligned instance because of sheer instability. most of us politically will be you to do with opposite numbers but in a country like pakistan where frankly we were never really sure who's in charge with its the politicians, the military or the isi. went to develop a whole range of relationships. i thought from a british perspective i was interested as to why after two abusive history india after partition went on to become a relatively prosperous and increasingly middle-class economy was pakistan effectively rolled backwards from the very beginning perhaps to something we can discuss but i was interested that partition, nobody knew what to call

pakistan. it didn't correspond to any natural historical or geographical entity. so, in fact as an acronym pakistan was a made-up name, made up of the initials of the provinces. and i think that it is a fair bet that if the country's name is made up then it's probably not the most stable entity that you're likely to see. and i say that this is a worry because in washington with all the focus on iraq at the present time, people seem to have forgotten that pakistan is it something like 120 nuclear warheads and has really brought into play to new heavy war plans that will enable them to produce about 24 nuclear warheads a year. it is the nuclear problem that nobody seems to want to acknowledge and talk about in detail. and, of course we've got the rise of transnational terrorism but it's nothing new but it changes manifestations. and, of course, the word that we

have is that is nuclear proliferation in place like pakistan will find its way into the terrorist game coming people say if it's so easy to make a dirty bomb and so must the solid material why do we not see one? and yet no one seems know that in 1995 in moscow and the nuclear return was there but it just wasn't attached to a bomb. in chechnya with that fissile materials attached. so the threat is there and they will increase and we need to look at the whole issue of proliferation in light of the increased terrorist threat. we also need to understand some of the other risks coming from left field but one of the ones that i constantly talk about is the risk of competition for commodities. and in particular water. people talk about china but

they very often this one of the really important parts of the equation which is that 48% of all the people alive on the planet today get their drinking water from a river that arises on the tibetan plateau. so i do think china is so interest in tibet? isn't the dalai lama or is it the fact it's the world's greatest resource in terms of freshwater? a less we know the data we will not make sense of all interpretations of events and therefore, aren't likely to make policy mistakes. the rise of religious fundamentalism, particularly of islamic fundamentalism is there for all to see. we are facing this crisis now with isis, the latest manifestation but undoubtedly will be the last manifestation of the. we need to be very, very clear about the threat that islamic state post to is the first of all with humanitarian threat the immediate threat to the

population that lives under the control. we've seen what they're capable of, beheadings, crucifixion, setting people on fire for a video camera things that we thought had been violence, we thought had been left behind in the middle ages. the second threat of course the further destabilization of the region. they would love these a full-blown religious war. this is, in fact part of what they're trying to achieve, and then, of course, it would be the university of jihad if we allow them to do so. and they will export terror to western democracies, if they get the opportunity, we have seen cases in the united kingdom by people who have gone to fight for isis and then come home. personally i don't believe you can have a sabbatical civilization and then come home. no jihad gap that you can come back and say you are very sorry that you did it. so we have to again think about the domestic problems.

and then nuclear proliferation itself, iran's theory is a big issue. when rouhani became president, there were some in the western commentary who were describing it as a breakthrough, a new moment in a relationship. big disappointment there. the people of iran have not noticed much of a different. the repression, the executions continue in iran. and what people seem to fail to understand was that the shots are still called by the supreme leader. and if you read the article called reading how many -- how many -- his belief in the purity of the islamic revolution his hatred for the united states from his contempt for the existence of the state of israel all very, very consistent over a

long period. and i think it's absolutely unbelievable that people still will look at the evidence in front of them in terms of a iran is doing in terms of its nuclear program and say well, maybe they are not trying to achieve a nuclear weapons program. there is no possible excuse for the levels of nuclear that they're doing, enrichment of the present time all that kind get a nuclear weapons program in a clandestine way in which iran and iraq were to fill. testimony that this is not a country that is open about its intention. there is a problem there a generic problem in the west which is there are on communication in recent times of foreign policy we have allowed wishful thinking to take the place of critical analysis. because we want something to happen. we have used data to make it look as though that is what's happening, and it's not happen

in the case of iran. why should we worry about a nuclear iran? first of all it does provide an existential threat to israel with all the applications that pass for a wider policy. secondly i think it would mean the npt is not worth the paper that is written on. and if iran gets to nuclear weapons status, why should egypt, saudi arabia, and turkey not want to follow them? and that means a nuclear arms race in one of the most unstable regions of the world. and after all the work that was done, particularly in the united states at the end of the cold war, to stop proliferation and stop the former soviet states being able to have nuclear weapons, surely we want to leave something better for the next generation for a new nuclear arms race. this is a challenge for all of us. i worry about what is happening today in terms of the negotiations. sansei we need to get a deal.

i actually think no deal is better than a bad deal. what do i mean by a bad deal? i think any deal is a bad deal that allows iran to become a threshold nuclear state. because of the dangers that i've mentioned. i particularly worry about the potential of our bilateral agreement between the united states and iran. that doesn't come from the p5+1. we need to stand together in the face of international threat and not be divided. and i'm sure that something we will talk about in our wider conversation. and then on this happy list of the threats we face, we didn't really think that we would be facing a state on state threat to the extent that we are facing today from russia. and if ever there was an example of wishful thinking, displacing critical analysis, it is in putin's russia. because we have so wanted russia

to become a useful partner in the international family of nations that we have simply been turning a blind eye for too long. there are two basic principles followed by putin which make it extremely difficult if not impossible to normalize relations with russia. the first is that putin still clings to the idea the old soviet idea of a near abroad. in other words, that he should have a veto over the policies of its immediate geographic neighbors. and we've seen what that led to in recent times. and the second is this concept that he believes that the protection of ethnic russians lies not with the countries or the cause additions or the systems of law under which they live, but with an external power, i.e., russia itself. and these two views are the roots of many of the problems that we face. and we can see the manifestations of these debate

in ukraine. i do not believe that you can take putin's word on any agreement when it comes to his borders. i think that what is happening in the ukraine is truly shocking. the annexation by force of crimea. the destabilization of eastern borders of ukraine. the fact that while nato carries out normal military maneuvers and exercises, russia is actually testing weapons. these are real-time testings that russia's actually carry out and we are standing by and arguing about whether we should give the ukrainians in means or not to defend their homeland. just think about it. if we're actually saying we cannot give ukraine to secure

are the antitank capability or the you a fee that they need come because that might exacerbate the crisis, that is a bully's chart is predictably says we will never give anyone the means to defend themselves because that might make the aggressor even more angry. this is a ridiculous policy for us to hold. we need to recognize that the defense of the baltic states, for example, begins in ukraine. and we're only one miscalculation by putin away from potentially getting an article v involvement on continental europe, and we need to wake it up to me. we have been serial appeasers of putin, and it has not got us very far. when you have a cyber attack on estonia we did nothing. when he got off ukraine's gas we did nothing. when he invaded georgia, and he is still there and we did very little. we made some sanctions in

response to what's happening in ukraine and crimea, but i peace meant has a bad track record. it had a bad track record before, it's not a bad track record today. so why should we in the united kingdom still look so much to the united states in an era of all these potential problems. because you are the world's biggest economy. because you are the world's biggest military budget, bigger than the next 11 combined, which is very reassuring. when you are a close ally of the united states. but more than that we need to have a partnership of values. because in all these problems that we face in the world we need to understand that we are who we are not by accident. we are who we are i design and by decisions that were taken i those who went before us. and we are built on the concepts of both our nations of our ability to exercise a free

market, our economic liberty and free market. we understand the value in terms of prosperity and security, and free trade. we understand the need for a rule of law applied equally to the governing and the governed independently. and we understand the concept of rights across race, religion and gender. these are what makes us who we are. and we need to take ownership of these and we need to be expanding these in a very unstable world. and to my american political colleagues i would say this. there has never been a time when we are more able to shape the world, in the air of globalization we need to shape it in our image and by our own values. this is not the time for america to look inwards. it's not the time for america to become more isolationist. there has never been a time i believe for america was more needed on the pitch than it is today. and that's probably i think the

best place to begin our conversation. >> perfect, thank you. [applause] >> well, thank you. that was wonderful, a great tour de force. i think what we'll do i will spend a few minutes, we will have the conversation and then i will turn you over to our audience. i will warn you that csis audiences are very tough. to ask the tough questions. i am emir warm-up for what you are about to experience, but you gave us a broad sort of force. i think i'll focus more on europe in our session and let me start with russia because that's where you concluded. the murder of borders. you think that is a turning point? will we see a different environment within russia? i think one of the most poignant remarks literally days before

his murder was that he felt that the need to be a maidan in russia, an awakening in russia which in some ways i think is the most powerful threat to vladimir putin than to anything. did you see this come little images from moscow literally steps from the criminal? did you see that as potentially a turning point for russia? >> potentially, but again given the level of control and repression that exist there, we have had these before. being a vocal opponent the putin is not a safe position to be in. there's a growing list of enemies of the russian president who have been silenced. it would be nice to think that we would get a change. honestly i'm just not that optimistic about it.

>> you had some competition recently as yesterday on bbc1 radio talking about the level of defense spending. very concerned about british defense spending, the lack of the commitment to 2% of gross domestic product towards defense spending. i'd like to pull you out a bit on that and really offer some reflections. we have seen extraordinary military mobilization snap exercise. i thought that this is that since david cameron has been prime minister russia has gotten very close to air sovereignty of the uk 43 times. are we ready to confront this challenge military? >> you ended up militarily at the end. i think our biggest problem is having the will to confront. you can have as much military capable as you like to if you haven't got the political will to use it becomes largely redundant and i think that is of the to a list of nato it's

political personality and its military capability. that's what i would bet and this is where the 2% comes in because it's not just the ability that gives us in terms of military equipment. it's about our willingness to show our longer-term commitment. there are only four of the new allies using the 2% which remember is the floor. 2% as opposed to the floor of our not the ceiling of our spending. if you look at what happened for example, in the libyan crisis the european elements of nato would not have been able to even carry that out without the united states because we didn't have the reconnaissance capability. we certainly didn't have the air to air refueling capability. the big problem with a lot of european members of nato is that so many of them were very quick

after the cold war in particular to get into nato. and they all recognized what an opportunity was for everyone to get the insurance policy, but asking just a few of us to pay the premium. and we are in a position where there are to many countries taking a free ride on the united states in particular, which is why i think it's important that britain shows the moral leadership to make that 2% commitment. we have given our pledge that we will play our four part in the alliance and we must do so. last week i was in poland and the world from warsaw looks very different. there is a palpable fear about what is going on and the geographic proximity of who can is getting them to wake it up and they are of course going to

increase defense spending countries like estonia. but they're coming to the threat later in the day. so we do need to get our political act together incitement. as though i know this is -- i go back to it again. part of the problem with nato is european union. the european union trying to take on a defense and security role. that is not what the eu is for. that is what nato is for. and if we try to duplicate what nato is doing inside european union and the worst if it ends up having a diversion of funds investors find that we're giving nato into duplication in the european union that can be hurtful to our enemy. >> i'm going to turn to the eu because of what your thoughts on the euro zone and immigration issues but before they've russia in your opening remarks you

mentioned prime minister churchill but i to say i struggle with this. what would churchill say today? on the one hand he described the rise of nazism, wartime prime minister to great that defense. there's no choice between war and shame, you will have a sham and then war that will come later. he was also in yelton and agreed to a sphere of influence. we need a new strategic framework for this challenge that putin is presenting the west. how do you strike that balance between the values proposition but again the political will to meet putin with strength? >> first of all that divide ourselves with the capability but we also need to be willing to confront him where necessary. we have seen his modus operandi. we need to have a stronger presence in the baltic states in particular.

let's be very frank about what he is doing. he has been bolding some of the smaller baltic states, interfering politically. he has been encouraging republican -- and the baltics. the illegal referendum in crimea as a precedent. he has still got forces in georgia. is greater virtually a state in armenia. he has not annexed crimea. how many lessons do we need and what is happening? this is the ability now to cause instability that will in terms of the european security. we need to counter the. we need to have a larger presence in the boldly. we need to beef up the baltic air pixels but when you to look at countries like poland to see whether we need to have a greater nato presence there. we need to use the powers that we have to show that we're not

going to allow this concept this fear of influence today called. for example, we should be sending our naval power into the black sea just to show that we have every right to do that and that this is not the personal part of putin. so there are things we can do but we have to the will to do. we have to have the leadership to do it. >> let me turn to the european union. in some ways than a seventh general elections is in part not completely, about the future of great britain and the european union. obviously, you have any credit of the eu and britain's role in the. expand a little bit on what you been watching the last several years whether it's in the euro zone and have a 19 years 1907 dealing with the year in crisis.

is within an unprecedented conversation but more broadly how the eu is dealing with larger initiatives like maritime city, things like that? >> how long do we have? >> you have several minutes. >> first of all in terms of uk election, my party believes we should have the referendum because no one under about 57 hasn't been able to take part in the referendum about our membership. it's one of the early the political members the reverend from 1975 because my parents campaigned on opposite sides. my parents still have views that they hold them. but peter said in britain that come and i quote, europe is too important an issue to be left to the lottery of the electorate. which i think tell you all you need to know about the mindsets

of the bureaucracy in brussels. in an era where people cross western political systems seems be losing faith in the political system itself giving people a say on their own destiny i think is one of the ways in which you restore faith in that system, and she keeps faith with the people. so that's one side of it. the euro zone, well, a lot of our european partners are now becoming serial economic self harbors. -- harmer. the whole concept which we decide to stay out of i think has been a disaster. i remember at the night were voting in the house of commons john major saying to me who in their right minds would go into anything in life that doesn't have an exit? and we are now discovering with the greek situation exactly what happens when you don't have an exit. the euro was always i think

intellectually and economically flawed. they were two basic models that you could have taken. first of all to say it is so important for this concept that we will do everything to make it work, right up to and including full political economic monetary, but we didn't do that. or we could have said it's purely an economic project and only the countries that make the grade are allowed to join. we didn't do that either. in fact, the wrong countries were allowed to join countries that were never close to making the criteria. and then having been allowed to join with policies that made them diverge rather than convert, building and stability to an already flawed architecture. and we are living with the consequences of that today because what you are getting is monetary policy effectively applied across the whole continent. and i'm afraid that memories are

too short, or too long rather in history is too short for people to accept what we perceive as austerity been applied to them from their living. and the reason that i mentioned my parents position on the european referendum was that my father said we must join what was then the common market. he said to diminish the tensions that drove the europe to destruction twice in a century. i worry now but what we're getting in the euro is the re-creation of those tensions economically that will lead us to many of the same positions that we had before. how do you go about be risking the euro to me is the question. you can go back to the national currency and abandon the euro. that's not going to happen. you can throw out the outliers and southern europe in particular. that's great portugal, spain probably italy but that would undermine their drive towards

ever closer union so that's not going to happen. the third would be to throw the biggest outlier which is germany included that's not what happened because germany likes the year because it's a way undervalued currency for the size and strength of the germany economy. and germany has done very well out of the. and the fourth way is for the countries inside the euro zone to move to full political, economic and monetary union. i spoke to a senior member in brussels recently who said you're quite right, those are the for options and we will take none of them. and what we will do is continue to take the risk effectively and hoping that the bomb goes off on someone else's watch. and i regard the euro as being the single biggest threat to the global financial stability. because what is happening in greece will be replicated in the future because the basic problem is not being sorted out. the most important issue for european politicians i think is

transcendent of the year. 58% of young spaniards are unemployed. how long to you think you can tolerate those levels of unemployment being foisted upon the population for what is effectively a political project? this is not a sensible way to be running either the economics or the long-term social stability in europe and i wonder how many young europeans on the current trend will be sacrificed on the altar of the single currency before european leaders waking up to the truth of what's happening. >> setting aside the euro zone which in itself has got its own rhythm at the moment, are you undervaluing itself incredible benefit for being part of the single market? over the last five years trade between the united kingdom and eu has increased. i mean this conversation about uk's role within the european

union, are you not completely under emphasizing the great economic benefits that you enjoy as well as london as the financial center which is benefiting from being within the european union but not of the euro? >> we were told of course that if we didn't join the single currency that would be the end of london as the economic center. it didn't quite work out that way. i take a simplistic view of this, which is money goes where money can be made and money can be moved. money comes to lunge for both those reasons. money can be made because of our regulatory and taxation free market, special at the moment. and it can be moved because of our system of commercial law. so that will continue to make it attractive whether we're inside the european union or not. i haven't really noticed that norway or switzerland suffering hugely are not to be members of the european union. of course, there are gains nothing inside but what i would

like to happen is a debate that looks at the ledger in terms of its pluses and minuses but in a very realistic and hardheaded way. britain would have to look to see whether for britain to leave the european union what that means in terms of our trade what point the rest of our european partners export much more to us the one country than that we exported in from the other 27. so the balance is very much in one direction. i think we do need to have this debate, but i would really rather dislike some of those people who will say we couldn't stand on her own two feet. britain could not exist outside the european union, which is clearly nonsensical given the success of some of our neighbors geographically who are. what i would like to see is a renegotiated relationship with europe. i would like to go back to the concept of a common market. i want to be able to cooperate with our european partners and

it is our mutual interest to do so but want to keep separate believers that britain might need to use and britain's natural -- national interest which they do on a whole range of issues. >> one political party that has benefited from the sort of anti-european union, even at the immigrant stance has been the united kingdom independence party, you get there at like to turn to the domestic politics and put the crystal ball on the table from a seven. we have the common class srv been speculating that what we are about to witness on may 7 is going to be a real mess ma a hung parliament, very difficult coalition framework for the smaller parties, particularly a nationalist party perhaps ukip on the other side may be determining what a future british government looks like. the average american understands what's going to happen on may 7 and what are the implications

for us because i should also give you a lottery numbers this week. >> the bookies always have this right. i always follow the. >> i think ago with the bookies as the. i think people are more circumspect about what they put their money rather than where they put their opinions. what does look like it's happening at the moment is that the two main parties are gaining in strength again. for all the talk of breakthroughs in a country like britain is very, very difficult for parties to break into the. i think that, and you will see with some justification you would say this, as a former chairman of the party i believe that when you have an economy where we have created 1.85 million jobs a thousand jobs a day since we've been in office with historically low interest rates, low inflation rates, people really feeling the

growth in the economy now feeding through to their own pockets, i think that's very hard to see what the public would throw out a government that has provided them with it. i happen to think that the labour party leader is uniquely unqualified to lead the country in a way that i've never known in my 23 years in parliament. but i won't go into the private grief any further on that one. and i think that when it comes to the election people will look at the economic record of the government, look at the fact that in david kimmitt they have an experienced prime minister not looking great and i think that it will decide not to make the change. i think this will be the biggest party come close to an overall majority. and i remember the first election i was elected in 1992 the scenario was not that dissimilar to this one. when, in fact, we're not i had

any opinion polls john major won the highest number of votes in the primaries one in history. so the electorate when faced with actually putting the cross i think will think very hard. >> as a member of parliament usurped on the constitution committee and had a great deal of focus on constitutional affairs. for those of us who have been watching the scottish debate last fall reverend which was a bit of a heartstopper, were not quite sure how that would evolve, and now we see where the scottish national party is going to be, we think, doing very well on may 7, which may cause labour to not do as well. but what does this mean for the united kingdom? is it becoming more disunited and will this election begin to pull at the very fabric of the united kingdom? >> i always thought that tony blair's constitutional proposals towards devolution were

imbalanced and would have repercussions but we are good at the time it was my responsible at the time in the house of commons and argued that what was happening was a recipe for the rise of nationalism. i didn't think actually ever such a heartstopper, the referendum. they said a 7% chance of getting a no vote on the reference to effect a paid out the day before the referendum took place. some of the bookmakers were savvy of the outcome. the trouble is the pro-independence side lost the referendum think they one. and had been continuing to push more and more in that direction and that has been the problem. it has also now very apparent that labour party look like it would be very badly in scotland and i think that's a problem of their own making. again, and how they approached all of this. what will it mean if there is a

big snp grouping? that will depend on the wider outcome. a nightmare scenario is for me a labour snp coalition. and the recent that's a nightmare for me is not just yet more money will move for my constituents up north of the border of scotland and scottish voters already a far more spending per head than the voters in england to do. but the real worry is the snp is a regular part. they bleed and abandoning nuclear deterrent. they want a nuclear free country. and i wonder what price the labour leader with a to get the keys to downing street. that worries me more than anything else, and it should worry our american friends. >> absolutely. i'm on my last question and i'll bring our audience into the. i'm going to ask you to question i get asked frequently by journalist.

does the united states still have this close, exclusive relationship with the united kingdom that it has in the past? does the united states still consider itself a european power? is a still engaged as a was in the trans-atlantic relationship, or hasn't decided we are going to maintain our lives but we are really focusing on the asia-pacific region, india these other great opportunities and we just don't see those opportunities in europe? how would you answer? >> i thought the whole concept of the pivot was a little bizarre. it's not as of the atlantic was going to disappear any day soon. clearly the united states does have to focus on pacific affairs but it is a pacific of the is also an atlantic power. global security for the very reasons we're discussing because of our interdependence is not something that you can decide which geographical area you're not going to worry about and which area you are going to disregard. it's not like that as events in ukraine are showing.

the u.s. is still the global superpower, economically and militarily, with outcomes responsibilities. and we need the u.s. to be in the game. so i wonder what signal mr. putin got that america was not going to be as focused on its transatlantic area but was going to focus on the pacific? i wonder what signaled he took from that and whether that's been advantageous to wider security? >> interesting. i've given you your warm-up. i'm ready to unleash the audience. if you could please raise your hand. we have a microphone. if you could identify yourself with your name and affiliation. we have about 50 minutes to ask for the calmest to be sure the questions to be very focused. with your permission i will bundle a few questions and you can find a way as to. we have one right there in the front and one right here. ..

>> i wonder if you have any thoughts on the third d development, and i how the relationship between usaid and the university and the department for international development in the u.k. has transformed, how you think it should transform in the future and if that's a significant aspect of what you're talking about. thanks. >> great. let's take one more. we have right there to the side

and the ore corner next. thank you. >> dr. fox, thank you for joining us today. major scott simpson, united states central command. real quick question. it seems like one of the emerging narratives about the debate between the future and nato e is there are some member states are increasingly oriented to the east whereas others can be concerned about instability in libya. how do we, the united states and the united kingdom help change that narrative from an or to an and? >> great. question of development, which the united kingdom has played a great role in leadership in the world. can nato do both? do they have to choose? can the alliance be united in addressing both conflicts? >> well, the very first question, think, goes to the heart -- i think goes to the heart of this entire discussion. i think increasingly you have to understand the implications of globalization and that we can't simply disregard other parts of

the world simply because they're not close to it geographically. and i think of the 20th century as being the century of the block which was defined by our geography. and so we cooperated with countries that were close to us in terms of physical geography rather than countries that were like us in terms of our values or our political systems. increasingly, the world is shrinking because of the effects of globalization. and as i said at the beginning, we can't afford to disregard risks that are rising in asia any more than we can do risks that are rising in europe, because they will both affect us very quickly. i think politicians have a problem with this. if i'm allowed to say that. i think that politicians on the right resent the loss of sovereignty that inevitably comes with globalization. and, therefore, tend to not want it to happen. politicians on the left dislike

the other voluble importation of strategic risk that comes with globalization that has to be paid for. and our systems of government also with the very neat way in which we have little silos that say that's economic policy that's trade policy, that's foreign policy, that's security policy failed to grasp how globalization is developing and the interdependence and the unavoidable risk that comes with that. so we do have to look at it more widely at risk and emerging risk and recognize that, you know whether we like it or not it's going to happen. the question is how well we prepare for it. so i think if talk about fukuyama book had been about the end of history, he'd been a lot closer in terms of the world we're imagining. in terms of -- you cannot choose the conflicts. this is the problem with security and saying, well, we're going to reduce our spending

because we think the world is becoming a safer place. you know, conflicts choose you more than you yet to choose the conflicts -- you get to choose the conflicts. and that's one of the lessons of history, and we have to be ready for the unexpected. and libya showed some real shortcomings. it also showed the dislocation i think, of our military action and our plans for longer term political stability. in fact really since the marshall plan i can't think of an example where we've got both the military action and reconstruction/stabilization right. so we have a lot of thinking to do there. where does aid come into all of this? well it's very useful in terms of being able to help out, i think in the short term, that's its main value. my own view is that if you want to alleviate global poverty you do that through free trade. i think capitalism has actually given a much greater step up to

the world's poor than any amount of aid program can do. but i do think that specifically well targeted aid is very useful. and i don't just mean in terms of physical or monetary poverty. i think that we should be using our aid budgets to get a change in behavior and values. in particular i think that our taxpayers who provide this money live by certain ethical values. and i think that we should be using our aid budget more to get a change in behavior. for example, i think that countries that exhibit religious intolerance, that do not give women equal rights, that don't send girls to school we should be trying to use our aid as a lever in those cases. we should be trying to apply the values that our people live by to those countries that we give aid to, and i think that's in the aid debate. it's been understandably focused

on public health which i regard as hugely important and the alleviation of poverty. but i think there are other things that our aid budget should be involved in, and that's the promotion of our values. if you go back to what i was saying at the very beginning if you believe as i do, i think you've got a moral respondent to insure people are able to benefit from those values too which is what i see our aid program as being a very important part of. i just don't, however, buy this idea that you can diminish your need for hard power by having more soft power. that really is an and, not an or. >> one quick question, then i want to turn to the audience again. i've been meaning to ask you this question, we followed very closely the house of commons' vote on syria. and, clearly u.s. syrian policy has been a great conversation

topic here lack of -- thereof or that we do have a coherent policy. was that a real turning point in how at least democratically the united kingdom looked at foreign policy challenges or was that in some ways trying to litigate the past and past decisions about tony blair's decision on iraq? >> it was an aberration. >> an aberration. >> it was a mistake. i wouldn't take it as reading too much into -- >> okay. >> -- how britain sees its role. this was a house of commons that was recalled from their summer holiday three days before they had to. people who are on their family holidays don't take kindly to that. there wasn't a great deal of preparation done this terms of briefing them as a parliament about the actual issue. a lot of it was about domestic politics, and i wouldn't read too much into it.

however, the damage that produced the outcome of that vote has been very substantial because i think there are two things you shouldn't do in politics as in life. first of all, don't make promises you know you can't keep and, secondly, don't make threats you're not willing to carry out. and if you draw red lines and say they will not be crossed and then they are crossed and you don't do anything about them the one thing you can be sure of is that your next red line will be tested. and i think it wasn't only about the specific issue, it was about how many of our allies as well as our enemies perceive our willingness to enforce the policies that we set out for ourselves. that's a very dangerous world to get into. >> absolutely. i think we have time for maybe two more questions. we've got one there and right will. there. >> good morning. my name's paul -- [inaudible] i'm an exchange officer british exchange officer working at pentagon. i'd just like to ask about information operations regarding russia in particular and i'd like your opinion on just how

costly it was to cut the russian-speaking bbc world service in 2011 as, as far as i can tell, the only reasonable means of countering rt, russia today, as a state-sponsored information control network? and if you agree with me that it was with hindsight certainly extremely costly, whether it can be reversed. >> thank you. and -- [inaudible] you can just grab the microphone. thank you. >> liam michelle. among the defense issues u.k. will face in 2016 will be the mandate decision on replacing the current -- [inaudible] how strong is support within the conservative party for a like-for-like replacement? and very quickly, since you were defense minister at the time that you signed the defense treaties with france in 2010 are you satisfied with the level of british/french defense

cooperation? >> i'll add one more to that. any predictions on the strategic defense review csr for this year? >> all right. >> all right. that's how you're going to end on strong note. last five minutes. >> the question of information as well as forgetting about the concept of deterrence in general, we also seem to have forgotten the value of propaganda. you would think that we had entirely lost our institutional memory from the cold war. both of these are really important things. russia is now becoming extremely adept -- as isis are, for example -- in conducting an information war. and despite having all the technology and all the tools at our disposal, we seem to fail to understand the importance or the potential as it gives us. so i'm entirely with you on that, and we need to really raise our game right across the whole information piece. in terms of --

[inaudible] yes, a very strong -- [inaudible] for replacement. the biggest arguments in britain against it are that well, why would you spend so much money on a system that never, that you'll never use which utterly fails to understand the concept of deterrence which is that we're using every day it's a deterrent. and then when they say you can't really afford 20 billion in terms of capital costs for the new, for the new program i point out that we were very happy to to 9 billion for three weeks of the olympics, but we're reticent about spending 20 billion for 35 years of nuclear blackmail? it does seem we need to think hard about our priorities on that one. clearly, the next defense -- [inaudible] will have to take into account that heavy initial cost in the capital program for the nuclear deterrent. that, i think, is factored in,

but it's a big cost. and i would say that the defense budget is driven by four things, there are four drivers and constraints. the first is the international security environment which is deteriorating which suggests you need an uplift in the budget. secondly it's driven by the commitments already entered into, our 2% nato commitment, our commitment to upgrade our nuclear deterrent and it's also the gaps that we decided to take in 2010 but which we will not be able to take again at maritime surveillance capable, for example. that's probably going to be another billion on the budget just for the one item. then you've got the fiscal position which is improving dramatically in the united kingdom because of the long-term plan that we've put forward and then the fourth one, i think is international obligations and your willingness to have --

[inaudible] global affairs. and i think that we have given our word as a country as a member of the alliance. we need to keep that word. and i think if we want to be able to pop a gate the values -- propagate the values and systems that i've been talking about, we have to be willing to provide the means if necessary to protect them. so i can see no option relief than a rise in the budge. i fail to see how you can actually produce what we did in future force 2020 set out in the 2010 defense -- [inaudible] increasing the budget, never mind filling in the gaps that we will have to because of the deteriorating security picture. i hi it's inevitable the budget will go up. i think smart politicians would turn a necessity into a virtue. >> well dr. fox, it is always a great opportunity to have a great discussion with you. you've given us a lot to think about. we're going to focus in on the outcome of may 7th and see what the future holds for british

politics but although the u.s./u.k. relationship may be complicated and evolving, it's clearly vitally important and we're delighted that you could spend some time with us, and please join me in thanking dr. fox for a great discussion. [applause] >> we take you live to the pentagon for a ceremonial swearing in today of defense secretary ashton carter. supreme court justice elena kagan will deliver the oath of office, and we'll hear also from the chairman of the joint chiefs general martin dempsey, former defense secretary william perry and also comments obviously, from the new defense secretary, ashton carter. he was officially sworn in a couple of weeks ago by vice president biden. >> performed today by master sergeant caleb green.

>> ladies and gentlemen associate justice elena kagan the honorable ash carter, his wife stephanie former secretary of defense dr. william perry and general martin dempsey. [applause]

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>> forward, halt! present colors. ♪ o say can you see by the dawn's early light -- ♪ what so proudly we hailed at the twilight's last gleaming. ♪ whose broad stripes and bright stars through the perilous fight -- ♪ or the ramparts we watched were so gallantly streaming. ♪ and the rockets' red glare, the bombs busting in air -- ♪ gave proof new the night --

through the night that our flag was still there. ♪ o say does that star-spangled banner yet wave -- ♪ o'er the land of the free and the home of the brave ♪ >> -- right shoulder, march. [background sounds]

>> please be seated. ladies and gentlemen the 18th chairman of the joint chiefs of staff, general martin e. dempsey. >> well good afternoon, everyone. distinguished guests, ladies and gentlemen, thanks for being here this afternoon as we formally welcome secretary carter back to the pentagon as our 25th secretary of defense. i'd mentioned to him in the green room i feel like i just did this actually -- [laughter] about 12 months ago. but we are thrilled to have him back. before we, i say a few words about the carters, i'd like to ask you to join me in a round of applause for both the color guard and for the man who performed the national anthem. he will retire either at the end of this month or the next after

a distinguished career of service. but they're representative of the men and women i represent and we're very proud of them and very proud of them being here today as part of this ceremony to welcome our new secretary of defense. please join me in a round of applause. [applause] i'd especially -- i'd like to begin, actually, by recognizing secretary carter's wife, stephanie, and his two children ava and will who we are also welcoming back to the pentagon. thanks for being here today and thanks for -- your life of service to our country and to the men and women who serve. we want to thank stephanie, ava and will for allowing -- or sharing, really, secretary carter with us. we recognize the sacrifices we all make in our family lives to take the kind of jobs that the

secretary has agreed to take. so thank you for that. standing up here and hearing the national anthem always fills me with pride for the 2.2 million men and women serving in uniform around the world today. and with deep appreciation for their families who support them. i'm honored to speak on their behalf and in particular on behalf of the joint chiefs who are here in the audience as well. i know those same sentiments stir in secretary carter's heart and that we share the same affection for our servicemen and women and their families. but the truth is his appointment very nearly broke my oldest granddaughter's heart. i had to explain to her that my new boss would be ashton carter not ashton kutcher. [laughter] you know, some jokes never get old, do they? [laughter] as even i've been known to confuse the two. [laughter] but i assured her that we definitely got the better end of the deal. [laughter] as we know from secretary carter's long experience in the

department, he is the right person to lead the department of defense at this point in our history. not just for what he's done, but in particular for how he's done it. secretary carter's known for bringing judgment and candor to decisions and for explaining those decisions in clear and honest language. this is something those of us in the armed forces very much appreciate. our men and women and their families are willing to bear great hardships and do anything. they just ask for clarity and honesty in return. in that area secretary carter's credentials are absolutely unquestioned. and they also happen to be the traits that congress and the american people appreciate as well. mr. secretary, it is a genuine pleasure to work beside you again, and i say "beside you," even if that quite literally means sitting next to you in countless congressional hearings. [laughter] we have two under our belt this week with many more such opportunities to come. on behalf of the joint chiefs

thank you, mr. secretary for your willingness yet again to serve our nation. and with that, i now have the pleasure of introducing a leader who we all admire and who has as well served his country for nearly 70 years ever since he first enlisted as a soldier in 1946. ladies and gentlemen, the 19th secretary of defense the honorable william j. perry. [applause] >> thank you. thank you. since 1947 there have been 24 people sworn in as secretary of defense. none of them, none of them better qualified for this job than ash carter. qualified by intellect, by

temperament and by experience. the media has reported that ash carter is a super-smart mega-genius. [laughter] well some would argue with that description, but none will argue the value of the vast experience that he brings to the job. he was the assistant secretary for policy in charge of the former soviet union and all nuclear things. he's been the undersecretary of defense responsible for acquisition, technology and logistics. and he's been the deputy secretary who basically ran the pentagon for three different secretaries of defense. that's what i would call experience. and he didn't just occupy those jobs he achieved remarkable results. indeed, i believe in each of those positions his tenure will be the standard by which all other occupants of the position

will be measured. early in the '90s he and i took on some -- we were both at universities at that time -- we took on some track ii diplomacy which ultimately led to the nun--- nunn-lugar program. then he became responsible for exercising that job. under his tenure he was responsible for dismantling 4,000 nuclear weapons in ukraine and kazahkstan and belarus. when he retired as assistant secretary, i spoke at his retirement ceremony and i said then there will never come an end to the good that he has done. when he became undersecretary, he galvanized the pentagon into real action real action. he supplied the troops in

afghanistan with the protective equipment and the surveillance equipment that they desperately needed, and he did it on accelerated schedules. his actions in my judgment saved countless lives of our soldiers. when the casualties did come in back to the hospitals here, he and stephanie countless times went out to the hospital to visit a -- our wounded warriors for which i thank both ash and stephanie. their tireless dedicationing in these visits was an example for all of us. he will be a secretary who cares for his troops. so his proven actions i believe, uniquely qualify him for this job. but it is going to be severely tested. because the dangerous security problems we are facing today. during the '90s ash and i and others worked very hard to bring

russia into the western security circle. we had a chance to do that. we tried hard our successor tried hard. obviously, we failed. russians at that time signed an agreement which ash and i had a big hand in negotiating by which they agreed to respect the territorial integrity of the ukraine. they have violated that agreement. they have threatened their neighbors with nuclear weapons, and they have threatened the united states, official, top official russian media have announced that russia is the only country that can turn the united states into radioactive ash, a wonderful statement coming from an official. and to back up this kind of threat, they're investing billions and billions in rebuilding their nuclear arsenal. ash was also -- and i worked

together very hard in trying to de-nuclearize north korea. i don't have to tell you that we did not succeed in that objective, but he became very close to it. so today they are building a nuclear arsenal and making blatant threats about its use. so these are just some of the dangerous security problems he faces, not to mention iran and isis and afghanistan. when the president called on ash to take this job, he was fully aware of these problems and believed that ash was the best qualified person to meet that -- face these problems. at the time, however ash was back in stanford, california pursuing a new career. an academic career at stanford and a business career in silicon valley. and so he was reluctant to leave. but he answered the call and here he is today.

ash, speaking for myself -- and i hope speaking for a grateful nation -- we thank you for your willingness to take on this demanding task at this very difficult time for the country. in a few minutes, associate justice elena kagan is going to swear in dr. carter for the position as the 25th secretary of defense. justice kagan p doesn't know this, but she is my favorite member of the supreme court. [laughter] both because of her court decisions and because of her amazing, really amazing academic record. degrees from oxford, degrees from harvard, a law clerk for thurgood marshall professor at university of chicago and university of harvard law school. eventually becoming the dean of the harvard law school. in 2009 president obama asked her to become the solicitor general, and a year later

associate justice of the supreme court. so that's a brief summary of a truly spectacular career. so i'm very proud to introduce to you today justice elena kagan, a woman for all seasons. [applause] >> thank you so much, secretary perry, and i promise not to tell any of my colleagues that you said that. [laughter] and thank you, general dempsey. most of all thank you, secretary carter for asking me to be here. it's a wonderful honor for me to be here to express my deep admiration and yacht tuesday to you for -- gratitude to you for your service and to all the men and women who make this department work and most of all to all the men and women in uniform who sacrifice for us on

a daily basis. so thank you for giving me the opportunity to be part of this day. if you walk around this town and talk to people what everybody says is exactly what the general and the former secretary said about ash carter which is he is the perfect man for this job, consummate public servant the person who by virtue of his experience and his judgment and his good sense and his brilliance will be able to deal with the challenges that this important office has. and so i feel very privileged to be able to swear you in today. but beyond all of that, i know that secretary carter cares so deeply about the men and women in his charge, the men and women in uniform. and maybe above everything else that kind of commitment, that kind of concern that kind of

caring, that kind of deep devotion will make him a great secretary of defense. so thank you for asking me to swear you in, secretary carter, and why don't we do that. >> the carters will now join justice cay began for the oath of -- kagan for the oath of office. >> i ashton b. carter -- >> i, ashton b. carter -- >> do solemnly swear -- >> do columnly swear -- >> that i will support and defend the constitution of the united states -- >> that i will support and defend the constitution of the united states -- >> against all enemy, foreign and domestic. >> against all enemies foreign and deaths mix. >> that i will bear true faith and allegiance to the same -- >> that i will bear true faith and allegiance to the same -- >> that i take this obligation

freely. >> that i take this obligation freely. >> without any mental reservation or purpose of evasion. >> without any mental reservation or purpose of evasion. >> and that i will well and faithfully discharge the duties -- >> and that i will well and faithfully discharge the duties -- >> of the office on which i am about to enter. >> of the office on which i am about to enter. >> so help me god. >> so help me god. >> congratulations. [applause] >> thank you, justice kagan and mrs. carter. ladies and gentlemen the 25th secretary of defense ash carter. >> thank you. chairman dempsey secretary perry, justice kagan, thank you

for your kind words. and distinguished guests, so many distinguished guests members of the administration family and friends, thank you thank you all for being here today. the past two and a half weeks have been an opportunity to reconnect with the many fine publicker is or haven'ts -- publicker servants at the pentagon and here in washington, and there are few fine or than chairman dempsey. i sleep better at night with him on the job. i'm sure we all do. marty, our men and women in uniform are fortunate for your leadership, and our country is stronger and safer for it. thank you. justice kagan, after two days of congressional testimony it's nice to spend some quality time with a different branch of government. [laughter] you've made remarkable

contributions in academia, policy and on the bench. and i also know as the dean of harvard law you were a fierce advocate for the school's veterans community. thank you for that leadership and for doing me the honor of being here today. there are three mentors whom i want to recognize today, two of whom are here and one who, sadly, isn't. bill perry you helped the united states write a more peaceful and prosperous post-cold war history, and in the process you established the model of a modern secretary of defense. bill, you stood up for me early in my career. you stood in for my father at my wedding, and here you are again today. our nation and the world are

safer because of your leadership and intellect and also because of your civility. thank you always for standing by me and thank you for your example. we do not have enough time to talk about all the history in which brent scowcroft figures. with a cool head brent helped steer the shep of state for over -- the ship of state for over fife decades and through some tumultuous waters. and with a warm heart he helped countless men and women -- including me -- strengthen their faith in public life. brent reminds us all to look ated today's dangers -- at today's dangers with a longer perspective, to see opportunities when so many see crises, to remember our strength when so many focus on our challenges. brent, thank you.

and jim schlesinger who i'm sorry did not live to see this day, was a mentor and model for bringing a fierce analytic intellect to the thorniest problems. jim always surrounded himself with the best people wherever they came from. he relished strenuous but always-constructive debate and he followed the evidence wherever it took him. i was a beneficiary of his openness to new people and new thinking, and from him i learned to do the same. my fantastic family is here as well. my daughter ava, and my son, will are -- and don't make any mistake about this, guys -- the pride of my life. and my perfect wife stephanie -- [laughter] is my partner in life and in service to this great institution and especially to

our military families whom we love so much. ladies and gentlemen, to serve as america's 25th secretary of defense is the highest honor x i'm grateful to president obama for his trust and confidence and to the u.s. senate for my confirmation and to all of you for your friendship and support without which i know i wouldn't be here. being back, i'm reminded how easy it is in and in this building to focus solely on our challenges, and it is, indeed, a turbulent, rough world out there. but as a nation and as a department, this is also a moment to continue to shine the beacon of american leadership and to seize the many bright opportunities in front of us. the men and women of this d. -- of this department will not on

the continue to protect our country, but also insure we leave a more peaceful,s prosperous and promising world to our children to live their lives, raise their families, dream their dreams. we are standing for our shared values in europe against those who would turn back the clock. we're standing with our friends and allies against savagery in the middle east. in the asia-pacific where new powers rise and old techs still simmer -- tensions still similarrer and where half of humanity resides, we are standing up for a continuation of the decades-long miracle of development and progress underwritten by the united states. and in cyberspace we're standing with those who create and innovate against those who with seek to steal destroy and exploit. and as technology and

globalization revolutionize how the world works and also as pentagon's budget tightens, we have the opportunity to open ourselves up to new ways of operating, recruiting buying, innovating and much more. america is home to the world's most dynamic businesses and universities. we have to think outside this five-sided box and be open to their best practices, ideas and technologies. and as the 9/11 generation begins to leave our ranks, we also have the opportunity to attract gifted and idealistic future service minutes and civil servants even as we honor the sacrifices of those who came before them. i have learned from my kids and from my students that every generation is different.

this new one has no memory of the cold war and dim memories even of 9/11. but they still are devoted to living lives of service and purpose. we must attract the finest among them. in realizing all these opportunities, previous generations and my recent predecessors -- some of the most honorable public servants i have ever worked for; bob gates leon panetta, chuck hagel, and i see bill cohen here as well mr. secretary -- all of them have blessed us with a remarkable inheritance a more secure country a stronger institution and the world's greatest military. and we owe the same to those who come after us. i will remember that on each of the 686 days between now and the

end of president obama's term in office. just as i wake up every day committed to putting in a day of service worthy of our extraordinary men and women in uniform. we have some of our amazing soldiers sailors, airmen marines and coast guardsmen here today. you, you represent the finest fighting force or the world has ever known and a deep line of warriors who have fought in lexington and concord in gettysburg and midway in fallujah and helmand. in the years ahead your country will call on you to continue that tradition. perhaps sending you into harm's way. my greatest obligation will be to help the commander in chief make those decisions with wisdom

and care to get you what you need to fight and win and to insure the welfare and dignity of you and your families. thank you for all that you do, thank you for the trust that you place in me. i will do my best to live up to it, and may god bless you, all of you, and the united states of america. thank you. [applause] ..

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♪ ♪ >> ladies and gentlemen please remain standing for the departure of the initial party and remain in place until your row was invited to depart.

>> this is a well in and tension teacher who is teaching her students about thanksgiving because thanksgiving is required content in almost every state in the union your teachers are expected to teach about things being in some way. this is what they've been teaching for women. this is innocent play. they are pretending this is why kids do and it seems innocent enough. a couple of things, first of all it's rather unlikely they would pretend to be people of any other race that what they are. that is almost immediately as

inappropriate or not when it comes to indians. the other thing is that this that innocent play turns into this a group of sorority girls dressing like indians or frat boys dressing up as indians. or little hipsters dressing up as indians. these guys i don't know what that's all about. what is this thing with dressing up as indians? and it turns into this then becomes commercialized victoria's secret every year and of course this. so what starts out as innocent play eventually becomes ignorant and racist.

>> people go -- is certainly true time. they watch in amazement as both of these battered the structures. at that time we had wooden bathhouses over the gulf of mexico and we also have peers then we even had a huge prevailing. as the story of increased, the structures literally were turned into matchsticks. the storm struck galveston

saturday, september 8th 1900 before noon and increasing dramatic and finally tapered off that evening. this whole thing was and still is the deadliest report in the history of the united states. >> treasury secretary jack lew and irs commissioner john costin and testified earlier this week. they answered questions about tax fraud identity theft in the department's 2016 budget request. arkansas senator john boozman

chairs the hearing. it is almost two hours. [inaudible conversations] >> the subcommittee on financial services and general subcommittee will come to order. good afternoon. the subcommittee as the subcommittee has a federal come to order. today marks the first hearing of the financial services and general government subcommittee with 114th congress. this is also my first hearing the subcommittee chairman and i am pleased to say below inside the new ranking member in good friend. i would also like to acknowledge the other members of our subcommittee, senator moran, senator lankford. although her subcommittee small come of the number of agencies we find this large and the economy is significant. i'm confident the members directed the task force.

as we begin the important hearing for the department of treasury and the internal revenue service we welcome our witnesses. senator jack lew senator john koskinen -- at best i'm not the first one that struggled without a little bit. boozman -- boozman. very good. and the treasury i.t. for tax administration russell george. thank you for being here. we look forward to your testimony. we have a tremendous responsibility to ensure the hard-earnhard-earn ed tax dollars for millions of americans are spent appropriately. unfortunately the president has put for the budget out of touch at the needs and concerns of hard-working tax payers in the budget for fiscal year 2016 poses to create 2.1 trillion in new taxes and increase running a 65% and $8.5 trillion to the debt over the next 10 years. while hard-working arkansans are forced to cut spending

significantly in the last three years, the president willing to do the same in washington. our countries in need of budgeting. all too often in washington is a of the fact every dollar the government spends comes out of the pocket of the taxpayer and can spend to provide for their family, grow their business or help their neighbors. as members of this committee, we have a responsibility to ensure the decisions about federal funding are made with those taxpayers in mind. nowhere is the need for oversight or parent in the agent these today. when the irs takes actions that breach the trust of the american people, it undermines the faith and impartiality of the agency with the self-inflicted damage that harms the compliance system to function. americans have lost faith in the institution and you have a responsibility to regain trust.

we've all heard too often the investigations into these issues are distracting and everyone should move on. unfortunately to taxpayers these responses appear to continue lack of accountability and lack of leadership. to repair the damage there has to be a fundamental change and not changes all transparency and accepted the responsibility. various continued evidence and undermines the public trust in the tax administration. additionally weakens the public confidence in the irs ability to safeguard taxpayer right of privacy. making bonuses a priority does not help the irs to regain the trust of taxpayers to raise confidence that the agency will enforce tax laws impartially without regard to an individual exercise of the constitutional rights. this was the case in fiscal year

2015 the appropriations bill was to pay $67 million in awards to employees. the most important customers enter and employees. are the american people. the irs budget is unrealistic and is almost $12.9 million increase. under the budget control act of discretionary spending caps for fiscal year 2016 limit nondefense spending to $493 billion. this represents an increase of $1.1 billion in the fiscal year 2015 level for nondefense departments and agencies. get fiscal year 2016 the irs has increased as requested -- yet

for fiscal year 2016 the irs has requested a base increase that is higher than the total increase available for all the nondefense discretionary spending. also troubles the request for the $667 million above the limit on the current law. treasury and the irs are fully aware that such cap adjustment were not included in the budget control act of 2011. no cap adjustment for the irs has been authorized since then. given fact what the unrealistic request simply sets unreasonable expectations. this is even more troubling than finding critical work to protect taxpayers in the future from the trauma of identity theft is left to be funded through an adjustment. the american people want a government that works with them, not against them. they want us to curb wasteful spending on this effective and

accountable and pursue policies that create economic house is for everyone. these are priorities of the american people reflected in the critical oversight. we cannot as we consider fiscal year 2016 budget request for all the agencies have been her jurisdictions and without i yield back and turned to senator coons. >> thank you, mr. chairman. thank you for bringing us together today. i look forward to working with you and with new blood new energy and an approach with my buddy strong partnership on the subcommittee. and like to welcome eyewitnesses secretary lew ranking general koskinen. you have difficult jobs and i just want to thank you for your service on the outside. a responsible stewardship of hard-earned money is one of the most obligations in public service. it is important to work diligently and together to uphold the trust and i recognize there is very disagree.

it is my consider health will approach this with the seriousness it deserves. the government stability in nation's fiscal health by welcome the chance to examine the treasury's budget request for level be a frank discussion about requiring to the full responsibility. i'm eager to learn how treasury has adapted to budget constraints and how we'll deal with with research competition and competing demands. much of treasury's budget goes to the irs but there's a number of important functions i look forward to hearing about. three in particular strengthening community development financial institutions fund and the cdf i bond program in the small business credit initiative i believe programs like these can provide access for small businesses around the country and help them grow jobs and support affordable housing and i look forward to talking about those. i'd concerns about the department's proposal to cut funding for the office of

terrorism and financial intelligence given pressing issues to run in russia. i look forward to hearing your thoughts on that topic. no government agencies were visible to the american people than the internal revenue service and for 95% of the government and each year more than 80,000 public servants at the irs make hundreds of millions of contact to tax payers as the face of government to more americans than any other agency. it is my hope that the taxpayer advocate has suggested the irs could best be described as the accounts receivable department of our government and not positive monikers. the presidents budget requested 18% increase for the irs. on this point i think it is valuable we reflect on the fact that while there is a broad bipartisan we shouldn't cut off our nose to spite our face. the more we cut irs funding the harder it becomes for the agency

to investigate abuse. i hear from theories when the calls go unanswered or it takes a long time to contact and get response answers to questions. many senate officers had the same experience. every dollar for the irs budget resulted in seven fewer dollars revenue collected by one estimation by former irs commissioner douglas with the 2011 estimate. we have a lot to discuss today ways we can improve the functioning and operation of responsiveness and engagement, ways we can improve treasury department and the fiscal 2016 forecast is not encouraging a significant budgetary constraints remain in place and look forward to hearing secretary lew and commissioner koskinen. i look forward to working with you chairman boozman having enough exchange of ideas or hearings progress. thank you.

>> thank you senator coons. altered to secretary lew and look forward to the testimony. >> thank you, mr. chairman. numbers of the committee come it's a pleasure to discuss the treasury's budget. as we meet today our economy and country have made considerable progress we can all take pride in. every metric from job creation come economic growth, deficit reduction to manufacturing americans come a long way. in 2014 with other best year of job growth over the past five years they have created nearly 12 million new jobs. our economy continues to expand with growth in 2014 and forecast project teams the growth of this year. we continue to outperform our trading partners, many of which are still struggling to recover from the global economic crisis. we set another rack of last year

for goods and services overseas and the record was largely driven by small business. fallen by almost three quarters has declined even further in the next fiscal year. achievements -underscore americans enduring economic strength and we can keep the progress going with the right policies and bipartisan cooperation. the president's budget is a blueprint for washington to work together and not only they set a path to find common ground and puts forward sensible solutions to make sure every american who works hard at the chance to get ahead. this budget knocks down barriers for working families. things like child care, mortgage payments are more affordable. the modernizes arcs to stem and repairs i rose bridges and ports for more companies will invest locate and hire the united states. reforms are tax system to eliminate special-interest loopholes of the strength of the middle-class amount of the plainfield. a bipartisan budget act of 2013 reverse a portion of

sequestration and a lot higher investments in 2014 and 2016 that it did nothing to alleviate sequestration 2016. sequestration imposed arbitrary spending cuts bad for our economy and security. across-the-board cuts were never intended to go into effect. they were purposely unpalatable to create pressure for balance production. congress should act to provide acceptable funding to meet domestic and national security requirements. as part of the president's approach, treasury's budget will allow the department to carry out responsibilities efficiently and effectively. treasuries instrumental in helping shape and implement economic policies in today's request will allow the department to promote economic prosperity, fiscal responsibility and resilient even as it addresses the national security objective duster stability home and abroad. treasury department touches the

life of virtually every american tour work to bondage the government finances, streamlined and reformed taxes sent to small businesses and through economic development advanced a cagey country is what makes social security payments and producer nations currency. since president obama took office, the treasury department has had to marshal its resources and global challenges and we consistently made our obligations efficiently and the lowest cost to taxpayers. this budget request continues to achieve saving and fund vital programs along strategies that will make the department were affected. the primary area we request additional resources is in the internal revenue service. funding for the irs has cut dramatically with the past five years he these amount to a total of $1.2 billion or 10% of the agency budget. as a result, taxpayers face longer an unacceptable wait times on the phone and takes the irs longer to respond to

correspondence. a sustained deterioration in taxpayer service mind with the person at the present serious long-term risk to the u.s. tax system which is based on voluntary compliance. the treasury budget request storage funding to the irs though it can provide an acceptable level of customer service as well as continued modernization to meet legislative mandates set by congress. funds will help the irs update antiquated computer systems and protect taxpayer information. in addition we seek an adjustment of the program cat to allow the irs to invest in enforcement initiatives and investments that will generate a sizable return. it will yield $60 billion in additional revenue at a cost in $19 billion, meaning it would reduce $41 billion under the digital accountability act and

government spending. on top of that we are requesting reauthorization of programs with proven results with an extension of the community development financial institution guarantee program which unlike long-term financing for financial institutions in underserved communities and proposes a new investment in the small business credit initiative which leverages private money to strengthen small businesses nationwide. in closing i want to thank for talented team of public servants at the treasury department. you dedicated to the work of the department committed to the american people. i'm proud to represent them here today cannot be half of the hard-working men and women i want to say how much we appreciate the support of the committee. thank you and i look forward to answering the questions you have. >> thank you very much mr. secretary. who will proceed where each question senator last additional rounds of questions will try to

accommodate. i read your testimony and appreciate it. and there you mentioned the need for finding common ground. i think you mentioned infrastructure, things like that, which i would agree on totally and very much support infrastructure. we have different viewpoints on how to get that done. the other thing and let me do this in the form of the question. it concerns our community bankers. i feel like the backbone of america is small business paperback of a small business is community banks. a number of community bankers have expressed concerns about the cost of complying with a fear like her onerous regulatory burdens and again the backbone which are also the backbone of our communities.

the community banks in the night of state and help for the regulatory coordination and design regulations with community banks. this is particular concern in states like arkansas for their 96 towns with one physical banking location and two thirds of these communities have less than 1000 residents. what do you propose -- what is the administration doing to ease the burden and compliance costs facing banks? >> mr. chairman, we very much share with you the view that community banks play in our communities, and the fabric of our national economy. if you look at the design of many laws of the rules you will see there are standards that reflect differences between smaller and larger financial

institutions. exemptions in many cases for smaller institution and cars easier to clear for smaller institution or don't present the same level of financial risks. as they look at the discretion is looking for whether there is flexibility and whether or not there is a risk they need to be concerned about and they've consistently made judgments to have the burden on smaller financial institutions reflect in general a lower level of risk. i think we have to be careful to remember form. it was to make sure we never again face the economic crisis we had in 2008 in the standards we use has to be mined for of the fact the architecture put in place was designed to prevent the taking of risks that could add up to a risk to the country.

the relatively clear standards for smaller is to to shins and is more appropriate than in 2008 where we had a lapse deniability something financial reforms and the rules have been quite effect is in making our financial system safer and founder and we tried to do it in a way that's mindful of the burdens on smaller banks and communities. >> i guess my concern when you get out you visit and go to institutions like this. if he voted 9096 towns small towns and other towns have a few banks. again it is universal. they feel like things have changed dramatically and i would argue that these types of

community banks just didn't have anything at all with the meltdown we experience several years ago. so i really wish he would look at that as something with a one-size-fits-all. i think the idea of these days were somehow responsible for that i simply don't agree with. recent cybersecurity reports reveal a cybercriminal and russia, china, ukraine and other parts of europe has sold $1 billion from 100 things in countries around the world including the united states since 2013. cybersecurity is a huge thing we are concerned about. in your opinion, is america's personal and financial information safe from cyberattacks? >> senator, cybersecurity is an enormously important and difficult issue of and one that i know i worry about everyday.

i sat to ceos that financial institutions, retail and businesses worry about it every day. i think we are doing an awful lot that is the right kind of defense against cyberattacks him with a cybercriminals are always haunted their attacks and we can't think we can get ahead of them. our challenge is going to be to keep up with them, to make sure we can put practices in place and we have the ability to respond when there are attacks and to share information so the best practices can be available throughout the system. we have legislation pending proposed that would go a long way towards sharing information which rebate would make the system safer. i think the financial sector is probably in a better position now than other sectors are.

.. >> i am encouraged by recent steps to reform the us cuba relationship. my home state of arkansas exported nearly $40 million in goods to cuba before payment restrictions were tightened in 2005.

earlier this year researchers estimated expanded trade and travel would bring economic gains. what is being done to ease payment restrictions restrictions, and how we will this impact us agricultural exports? >> the actions that the president announced just a few months ago regarding easing of some of our sanctions against cuba we think, will help us businesses but mostly it will help advance the kind of positive change in cuba which could be positive in terms of making a difference where the old policies were not. we have tried to make it easier for the kind of transactions that have been frustrating for american agriculture to go forward consistent with the legal restrictions that remain in place. i think that there are opportunities for americans in agriculture and other

sectors to do business in cuba but i but i think the bigger story in terms of us cuba relations is, it is a chance for cuba to be more exposed to us values and ways of doing business and freedoms in a way that will be more effective at pushing back on the practice in cuba that still needs to change, the old change, the old policies that were both not productive in terms of not changing cuba and hurting us interest. >> thank you chairman, secretary. on the theme that the chairman started with about access to capitol in small towns and how community banks can make a significant difference described briefly how development of financial institutions fund is used to help rebuild neighborhoods and small businesses and the bond guarantee program if it were to ramp up 2 billion might be able to do and how they

might play a constructive role in providing access to capitol for small communities. second, the senator asked about the regulatory burden on smaller banks. i have heard from a number of folks from the financial community who believe that once banks obtain more than 50 billion in assets they suddenly become subject to the regulatory oversight of the megabanks. megabanks. while i am a supporter of dodd frank, i wonder if that is quite accurate or whether there is a step series where you steadily ratcheted up regulations in accordance with growing size and would welcome your insights. >> thank you, senator. see dfi has been an enormously effective program because of what it does directly and the institution building role it plays in the communities it serves. just looking at the raw numbers, in 2014 hundred $46

$46 million in awards were made producing 50,000 new jobs almost 10,000 businesses financed. in the communities in the communities where they are present there is a financial institution that local businesses can go to. in places where community banks or not able to have a foothold it has created access to the benefits of what community banks offer. the cdfi bond guarantee program addresses one of the fundamental challenges and revitalizing communities. in many low and underserved -- low income and underserved communities access to long-term fixed-rate financing is hard to find or impossible to find. the guarantee program to date has guaranteed $525 billion in bonds through the program to help cdfi provide financing needs for the committee.

i think it is well leveraged and successful which is why we have proposed the reauthorization. with regard to the threshold question you asked about i think you are totally correct. it is not a hard line where everything happens to an institution when they pass the threshold. there are requirements from which institutions remain exempt and there are other cases in which standards are modified to reflect the lower level of risk. with that said we remain very much focused on what we can do to make that burden less without creating risk to the kind of general architecture of financial security. it is an area regulators are focused on. >> i share that concern that we find ways to provide better access to capitol more lending at the community banking level without increasing risk to

the financial system as a whole and macy missing -- making basic changes to what i think are important financial incentives. i made reference in my opening statement in a hearing in the last congress senator mikulski was central in advocating for a significant increase to make sure we have the resources given the ongoing issues with russia and the ukraine syria and particular. why does it proposed to cut funds for the office? do you believe it is over resourced? given the potential that we may return to enforcing sanctions against iran, do we have the resources needed? >> i think the work that our office terrorism financing

does is enormously important. the sanctions program we administer have added to this president and future presidents tools that are effective and powerful. it is a bit of a bit of a surprise how much of my time goes to this because of the world we live in. we requested the resource level. we propose putting it in the departmental offices so we have a little bit more flexibility. there were one-time expenditures that may or may not recur. as far as iran sanctions go, go, we have not listened activity. we are fully funded. russia's sanctions were a new start this year. i do not think we missed a a beat in terms of the other sanctions programs and came

up to speed quickly when there was a need for russia's sanctions and are proud of our team for having mastered the intricacies of russia's financial institutions, has interconnection to the global financial system and how we can use targeted and surgical sanctions to put the maximum pressure on the target of the sanctions with minimal spillover to europe and the rest of the world. we have funded it at the right level but it is a floor not assume. we appreciate the support that this committee has given for this important function. >> speaking for myself, this is an area i intend to follow closely and want to be continually reassured you have more than adequate resources. your it investments are significant relative to the total increase requested. i share the chairman's concerns about cyber security. this strikes this strikes me

as ways you can modernize and strengthen your it system and the transparency of your budget. >> i think i think the investment in the data act is extremely important. we worked with congress on the development of that legislation and are eager to implement it well. we cannot implemented as well as we should without the resources to do it properly. i think it helps to safeguard our systems to invest in cyber security by having better systems to begin with. >> i was struck that the budget proposals eliminating master partnerships as a structure. i a structure. i have long been an advocate on a bipartisan basis opening them to renewable energy. i think it is a technology neutral politically feasible way to provide long-term financial support. >> it is an area i would be happy to follow up with you on.

our proposal -- obviously we have many proposals to promote renewable energy. with regard to with regard to master limited partnerships we have had concerns over the years. >> thank you. >> the senator from kansas is recognized. >> thank you very much. since i last saw the sen. from maryland she has announced her intention not to seek reelection and and i want to thank her for her service. i have enjoyed your tenure as chairman and appreciate the tenacity with which you have tackled are spending and the continual attempt to get us in the appropriations process back to regular order. mr. secretary, three relatively quick questions.

i was i was told the chairman was questioning about community banking regulations. i would add my voice to that issue. my understanding is your response was something along the lines that community banks or better regulated today than previously. i don't think that is the case. they have been caught up in a broader regulatory scheme than they deserve. the consequences are significant to the economy. in states like mine the relationship thinking is important. it has become so annoying and devastating that many community banks and made the decision no longer to make home mortgage loans to individuals who want to buy a home in their hometown with the bank is located because of the significant regulatory environment they

now operate in. i doubt the intended consequence was to reduce the availability of mortgage credit, but that has been the end result. the reason it is necessary for me to bring this kind of issue to you is so many of the regulators are not subject to appropriations. an opportunity to express concern about things happening within the treasury department the broader in the bank regulatory environment that those banks face. >> i understand the concern. i agree. they are an important part of the fabric. i do think what happens at the cutoff.is not quite as dramatic as is sometimes

described. with specific regard to the housing issue, saw the regulators are reviewing some of the rules that have been of concern to community banks. i don't think i don't think the intention was to stop the lending you described. what -- it was intended to no clients better and offer different kind of products not to shut down lending. looking at put back risk regulators have been trying to take some of that unknown out of the system by being clear what would it would not be considered an actionable error i think the regulators are attuned to it. most of this is not directly in the jurisdiction of treasury, but i am concerned about the health of our banking and financial system and look forward to working with you.

we we must be careful not to undo the architecture that has made our system safer. >> is there anyone that answers to you at the treasury department that would be a good person to talk to? >> office of domestic finance and people who work on banking issues command i i am happy to have them be in contact with your staff. >> thank you. part of the review under way in which banking regulations are being considered and i would welcome our report back as to how that process is going and whether we are headed in a direction that would eliminate or modify the existing rules and regulations. >> i am very much focused on that. we did a look back of rules across the federal government. we did not have the ability to reach into the independent regulatory agencies. i am pleased to see this process underway.

i no from the conversations i have had that the heads of these agencies are focused and participating in regional hearings. it we will be interesting to see what they come back with. >> i am pleased with your smile and your interest in this topic. i was not sure you would no about this process, but i guess you would no as treasury secretary and certainly as director of omb. let me ask a question. this congress passed last session the travel general welfare exclusion act. what was going on was irs activity on native american lands involving activities. that legislation requires that a tribal advisory committee be established to advise you on matters related taxation of indians

and establishment of training and education systems were irs field agents. it seems to me the treasury department is going out of its way to not have native americans on the advisory committee. would you dispel me of that belief? >> i am not sure where that notion comes from. we found the charter for the treasury tribal advisory committee and have issued a call for nominations for three members to be appointed by the treasury secretary. we have expressly contacted tribal leaders for nominations. the deadline is april 28. we are still very much in the process of reviewing candidates. >> do you have any belief tribal leaders should be involved? >> i don't start out with a preconceived notion. we review the applicants that come in.

>> that is a good answer and i suggest tribal leaders at least in part would be a significant an important component in providing advice. >> i did i did have a meeting with tribal leaders several months ago and it command it was a good exchange. the feedback i got was that they welcome interaction with the treasury department we we will continue we will continue to stay working with them. >> thank you. >> the senator from maryland. >> thank you you, mr. chairman and my colleagues for your kind words. i thank you for your service. we have been together a long time. >> a long time. >> back when we were discussing earmarks. so thank you for your words and your service.

i want to reiterate questions about community banks that i see as a common theme. it we will require maybe a meeting, maybe not a hearing, but a conversation. i am concerned the shrinking number of community banks. also concerned about the shrinking number of minority owned community banks that have demonstrated solvency and stability. i no since last year we have gone from 47 to a number a number in the 20s. these are issues we need to be looking at. we could talk about the merits of the community bank as compared to a regional or franchise banking. but to my question the

rules of government are interfering with banks being able to get back on there feet. a specific question i have is that there is a community bank in maryland that needs the approval from the federal reserve bank of richmond in order to buy back what they had gotten in the tarp program. they are told they cannot buy it back. ripe for a hedge fund to come along and by the bank. a have the money to buy it back. i don't want to get into individual cases, but the very rules of government seem to be either torpedoing or -- to move out of the recession. we are absolutely committed.

do you have any thoughts about what treasury is telling people about buying back preferred stock and regulators view on actions on this? >> we have been working our way through the assets trying to resolve them so that we can recover taxpayer investment fully wherever possible. we have worked with community institutions and have no objection when community institutions are able to do that. i am not sure what the regulatory issue is you are describing, but i am happy to look into it. we have no authority over the fed decision. >> the fed really does have to coordinate with treasury. if i could get you a formal letter -- >> i would be happy to look into it.

>> two other points that are very specific to the maryland dc area just to bring to your attention and ask you to look into them. then i have a pretty big question. the retired dc firefighters have called my office along with owner hans norton that there is an old accounting error that was discovered and several retirees are getting notifications that their benefits might be reduced. these are pensions we are responsible for. i would like to give you a letter on that and a letter from owner hans norton. i am not asking for a response there. the other is the other is the treasury is emerging financial management service with the bureau of public debt. the financial management services in hyattsville i i was able to negotiate a five-year delay with

treasury but we hear that there are employees of treasury so grouchy about what i did to protect those people so that we can sort this out that they are being demoted intimidated, and pushed out. would you take a look at that? >> i we will i we will take a look at it. it obviously would be unacceptable if that were true. the merger has been ineffective, but there should be no kind of treatment like you describe. >> they were looking for a dollar in our accountants and west virginia. i don't think there is any accountant for $8 an hour. i can assure you i want to have as many legacies as i can. one is a larger question for my colleagues. you you and i have withdrew to appropriations together when i was the chair could could you tell me the

impact of crisis driven appropriations with last-minute agreements through an omnibus? nothing but excellent words to say about my colleagues but it was a hell of a time. i wonder our domestic economy and global economy, what is the impact of crisis driven appropriations? getting back to regular order. >> i think that is an extra narrowly important externality important question and i commend you for the work you did to put together an omnibus appropriation bill with funding levels designed to meet current needs which is so important in terms of having our system maintain its responsiveness. continuing resolutions don't have that ability.

when you look at the deadline driven, crisis driven funding decisions that have been made it has caused substantial anxiety, not just in the united states but around the world. when one looks at the business investment environment it is psychology confidence. the sense of government behaving in the way that a reasonable set of institutions should behave adds to confidence. the since we are hurtling off the cliff destroys that confidence. the since we are hurtling off the cliff destroys that sense of confidence i detect. i detected considerable improvement in the united states and internationally in confidence in the us and its economy since we have seen a return to something that approaches regular order. maintaining regular order is extraordinarily important to keep the recovery we have going and having the investment decisions that

depend on people thinking things will be going in the right direction in the years to come. i applaud the i applaud the efforts you went through to put an omnibus together. if congress can meet the requirements to fund the government to make sure that our debt does not become an issue of anxiety again that will be very important. >> i have way i have weight breaking news. the senate version of the homeland security bill cleared the house 257 2157. that means we now have passed 12 bills and have completed today our fiscal 15 work. >> congratulations.

>> thank you for being here. we appreciate you coming in testifying. we got valuable information. we we will follow-up with additional questions for the record that our members may have in the future. in order to move through the witnesses -- >> thank you very much like thank you for being here. [inaudible conversations] [inaudible conversations]

>> commi@[inaudible conversations] >> commissioner i now invite you to present your testimony on behalf of the internal revenue service. >> chairman ranking member members of the subcommittee thank you for the opportunity to discuss the irs budget and current operations. i remain deeply concerned there is an undermining in the ability to continue its mission. funding has been reduced by $1.2 billion dropping to 10.9 billion for fiscal 15. at the same time the number of taxpayers has increased in the irs has been given significant additional responsibilities including implementation of the foreign account tax compliance act and the affordable care act. the disconnect between our funding levels and responsibilities is

illustrated in some way by the fact that just three days after cutting our budget by $350 million congress passed legislation requiring the irs to design and implement two new programs by july 1. it is occurring in the middle of our most complicated filing season. discussing our need for adequate funding, i understand we have an obligation to be careful stewards of taxpayer dollars and must be as efficient as possible. the irs has the irs has made considerable efforts to find efficiencies in operation in regard to personnel and nonlabor spending. your cuts and office space, contracts, printings and mailings we're saving over 200 million-a-year. we have made significant progress in moving millions of taxpayer inquiries from

call centers and walk-in sites to our significantly updated and improved website there there have been more than 150 million visits to our website and more than 2.7 million visits to the section devoted to the affordable care act. over 125 million hits on our where is my refund site. also, more than 11 million copies of previously filed tax information have been obtained online. in the past all of these inquiries would have inundated over phone lines resulting in long lines at walk-in sites. we have taken seriously issues raised about inappropriate actions and activities in the past by making necessary changes and improvements in policies and procedures to ensure these situations do not recur. we have established review

boards insured that those who willfully failed to meet tax obligations are not eligible for performance awards reviewing our hiring process to ensure former employees with serious conduct issues are not rehired require all contractors have the same high standards and have implemented the recommendations of the inspector general with regard to the serious management failures surrounding the review of applications for social welfare status. there is a limit to what we can do. we reached the.of having to make performance trade-offs. there was no way without taking difficult steps which have had negative impacts on service enforcement, and information technology.

funding cuts have limited our ability to give taxpayers a more complete online filing experience. taxpayers ought to have the same level of service that they have from their financial institutions whether a bank, mortgage company can warm oak ridge bridge firm. the president's fiscal 2016 budget request for the irs would help the agency move ahead in these critical areas. we would we would be able to bring our farm level of service up from the current 43 percent to 80 percent and significantly increase enforcement and collection activities generating over $2 billion more in increased revenues every year and would be able to take steps toward building a more modern interface between the agency and taxpayers. i understand and appreciate the concerns raised about activities in the agency. i i took this job because i

understand the critical role the irs plays in the lives of taxpayers and in the collection of revenues that fund the government. i speak for the thousands of professional experienced and dedicated employees of the agency when i say we are committed to working with you and the other members of congress to lead the agency effectively and appropriately into the future but we need your help and support if we are to be successful. this concludes my statement command i would be happy to take your questions. >> i would like to go to you. >> you go ahead. >> thank you very much. thank thank you for being here today, and i appreciate your testimony. the problem is lack of confidence. we can go all through these but irs targeting people

rehiring people that had left with bad records for some having marked on their file not higher tax refunds for prisoners 25 percent earned income tax credit fraud. not enough safeguards on sensitive information. one employee taking over a million records. the list goes on and on. cyber security, licensors wasting billions of dollars bonuses for people with poor performance records, taking a bank accounts for people -- from people with little evidence of wrongdoing still having tax entities waiting for tax deductions for literally years. and still no execution plan on how to implement.

again, the problem is accountability and getting confidence back. in your budget request your asking for almost 12.9 billion. even without the request for 607 billion above current spending limits you are still asking for a $1.3 billion increase. for comparison total non- defense discretionary spending for the entire government will increase by only $1.1 billion. given current budget constraints is it clear -- it is clear that this request favors hope over reality. the question is, the question is, are you developing contingency plans on how to carry out your mission based on a more realistic budget expectations? >> first i i would note the difference between the irs and other agencies is if you give us money we give you

money back. in terms of deficit reduction in many ways it is counterproductive that the more revenues and support for the irs to the greater difficulty we have been collecting revenues. but we are continuing to assume one of the options going into the future is that we will stay at the flat level. that was our assumption going into 2015 when we ended up with a budget cut of $315 million. when you look at it we are the only major agency and the government that was not restored to the pre- sequester level. we had the impact and to sequester's while everyone else is waiting to see what happens with the next sequester. to that extent we already have had to deal with a difficult reality.

>> very good. >> last year i said to him if we did not get the increase in funding requested the customer service level will drop below 50 percent and it has done that to the extent we don't get additional revenues for enforcement, the enforcement revenues available to the government will decrease by six to eight times more than the cut in budget. we we will play the hand you deal. whatever decisions you make, we will abide with them. there are great threats to taxpayer service tax enforcement and information technology. cyber security is a critical issue for us. we get attacked 145 million times per year. we are dealing with less and

less support for our it system then we think is appropriate. we're significantly underfunded already. >> how much money did you waste and licensure? >> where? >> licensure. >> and licensure? >> yes. >> i i did not know we wasted any money in licensure. it licensure? there is an it report i i am in disagreement with in terms of licenses for software as to whether we lost money by not using them and it is an issue of how you measure it. we have taken actions to make sure because i am a big supporter that when an issue like that is raised we deal with it. >> during a hearing last month you were asked about the tax consequences of the president's unilateral action on immigration and

whether it would allow individuals to claim millions of dollars in tax benefits for unauthorized work. your follow-up letter that individuals may claim up to three years of income on refunds even if they were working off the books are never pay taxes is truly startling. why are you allowing individuals who cheated by not paying any taxes to claim a refund financed by hard-working americans? >> you are eligible for the earned income tax credit only if you have earnings that meet the requirements to statute. we have 700,000 undocumented residents who pay taxes every year. they are paying even though they are undocumented. anyone who is provided a social security number would be eligible for filing an amended return but they have to demonstrate that they had earnings and paid

taxes or at least file the return and only then are eligible. the single employee at the low end of the scale without a a family is eligible to less than $600 per year. you have to have worked provide evidence and documentation pay taxes on what you learned to be eligible for any kind of income tax credit payment. >> the statement that individuals may claim up to three years of refunds on income even if they were working off the books were never pay taxes is not true? >> they basically have to if they want to file an amended return have to file for the income they earn. so to qualify the earned income tax credit you have

to have worked and provide us documentation that shows you had earnings, zero taxes and it will be factored into what if any earned income tax credit you are entitled to. >> the senator from maryland >> thank you, mr. chairman. thank you. 1st of all, i appreciate someone of your caliber has decided to continue a life the life of public service at the irs. the irs has taken a beating in the budget by members of congress. we have demonized the men and women who work there and then we underfunded and give them an impossible job. when they cannot do the impossible we punish them by giving them less money so that the impossible goes to the catastrophic. i appreciate you showing up

and trying to run this ship. i really do think the president's budget if we do not find at least the full close to 13 billion we are talking about the need to add more money in taxpayer service beefing up enforcement strengthening operations, and looking at knew technologies. let let me get to my question which goes to service. i am concerned that by giving you less money we end up with more fraud and abuse tell me how many people -- what is the staff level reduction since 2010? >> we have lost 13,000 employees since 2010 an estimate another 3,000 at the end of fiscal 2015 down down a total of an estimated 16,000 employees. >> 16,000 employees in four years. >> five years.

>> and having what at that i understand from the taxpayer advocate that for every dollar spent on tax enforcement we get $6 back. i am i am concerned about the fraud issues, as i no you are. guys in prison who come up with dummy accounts this recent thing with turbotax. we could go through one fraudulent thing after another. what what is the impact of a shrinking amount of money in the area of enforcement and the investigation staff to back. >> cuts across the board because we have no choice but to cut across the board. we have tried to support and maintain the number of people helping taxpayers who

have been victims of fraud, but the underfunding of information technology means we have made less progress in our systems capable of dealing with the influx of those returns. 5,000 fewer revenue agents officers, and criminal investigators. an increasing percentage of criminal investigation work is focused on tracking down identity thieves there is a limit to what our revenue agents can do and what are criminal investigators can do. there is a reference to the end income tax credit which i am concerned about. we need help from congress. they are again we have a limited number of people auditor that area, as well. >> with this double sequester and reductions that congress is forced upon you are you having a hard time recruiting people? >> we have some difficulty. we have said that except for emergencies we are not

hiring anyone. >> you have a freeze? >> a total freeze. 10 percent of what we would save for a total freeze for emergencies because it makes no sense not to replace senior managers. but as a general matter we are not replacing anyone when they leave. >> when you have a freeze a freeze and people leaving the enforcement and investigation area, do you replace them? >> no. >> it is not only a a freeze but a freeze on replacement. >> the way we are going to lose 3,000 people this year is simply not replacing those. 1000. 1,000 people right now have applications and to retire. they we will not be replaced. that is a significant amount of experience going out the door that will not be replaced. my concern is we will have an employee base that has a baby bust in the middle

because we are replacing one in every five. as you look into the future there will be a time at which we have a gap in our experience level. that we will start to be a a serious problem for the agency no matter what we do now. >> let me go to the impact. i want to raise an issue related to helping victims of the payroll provider fraud problem. i have many constituents who were victims of a crime related to a company called accu pay. the small business hires someone. that that is the way they talk about it then this then this company took their money that they gave them to pay taxes did not pay the irs and then disappeared.

i got into it and i've been trying to get it straight. what i find is that approximately five to 600 businesses were scammed in my state. the irs has only offered 54 offers in compromise to these businesses. they they paid the company who did not pay the irs. irs comes back and goes after the home improvement the beauty shop. when we say small business it is really main street strip mall type business. and i put in legislation that requires irs to do more but they have not. they just have not followed my laws. it has even become an issue with the national taxpayer advocate and for msp number 21.

the irs does not comply with law regarding victims of payroll service provider failure. could you help me out with this? >> the requirement is a thoughtful and sensitive one every time a tax preparer and payroll provider makes it a change in their residence we should notify the constituents that they are payroll provider has moved. we also are trying across the board whenever anyone mrs. an estimated tax payment, rather than waiting until the end of the year we will try to more affirmatively reach out and identify when payments are not made on a quarterly basis so that we can catch these problems earlier. with accu pay no one knew there was a problem until well after the end of the year. now we will try to do is to

the extent we can identify where we are not getting quarterly payments of employee taxes we should be getting and both notify the payers as well as the intermediaries. >> that is a solution but can i ask you to really look into what the taxpayer advocate advocate says that they are not complying with the law? your agency is not implement in the law. >> i we will be delighted to look into that. we are in the process of notifying people when they're are address changes to make sure -- >> i got that. >> i we will be happy to talk to the taxpayer advocate. i meet with her regularly and have asked her last year and this year as well to take the 23 most significant challenges and to give me the list of those we could implement without having to spend more money. last year she gave me that list, list command we implemented most of them. i made i made the same offer this year. if you will give me the

things that we can do without expenditure of money which we obviously don't have, we will make a serious effort to do that and this will be one of those. >> thank you. you want to take this over? >> thank you, sen. you you, senator. you brought up an excellent issue. the senator from kansas. >> thank you very much. commissioner, a couple of topics. first of all dealing with veterans. my understanding is that the american legion the national american legion has been required by the irs to provide tax identification numbers from every post across the country when they file their return. and they are incapable of doing -- there charter

indicates they are not a parent apparent organization for various american legion post across the country and they have been trying to sort this out with the irs without success. a number a number of letters and requests have been made to the irs. if you could bring me up-to-date on this topic. i would also say i met with your predecessor back in 2013 in which the topic was american legion posts across the country being required to provide the dd 214 the service-connected discharge document for every veteran that was a member of the post. it was it was my understanding that practice was coming to a conclusion, the irs concluded that was not a beneficial use of the limited resources. just before i walked in this hearing i came to meeting with vfw members of indicate that circumstance is occurring across the country

vfw posts are being required to provide the dd 214 for every post member which is something difficult, if not impossible to accomplish. that is the issue that arose in 2013 that i was assured it come to an end. more recently the american legion is being told they must provide tax-exempt status documentation from every post across the country which they are incapable of doing and have been unable to receive a response from their inquiry to the irs. >> i am happy to assume responsibility for everything the irs does. before i got they're. i thought we had resolved the issue on the dd 214 with the va. we would be delighted to make sure -- obviously our

challenge is the limited resources and the limited resources of the tax-exempt organizations to try to make sure to the extent we can and they can that they are operating within the realm of their charters and exemption. that involves veterans organizations basically dealing with veterans and not expanding operations to include nonveterans. this has to be done in a reasonable way. we cannot be layering impossible burdens upon people. i we will be happy to look into it and get back to you promptly. >> the 2nd and larger aspect of american legion the national post, national american legion the required to provide information from every post across the country to the irs, which is irs, which is a different issue than the one you and i just described. >> i had not heard that problem. to the extent they are not

in control and don't charter and establish post across the country and don't have records, that would not make much sense either. again, i am happy to look at both those issues and let you know the status and get back to you quickly. >> based upon your town and words your response, my assumption is this appears to be something that ought to be able to be resolved quickly and satisfactorily toward veterans service organizations. >> yes. again, i am not an expert on where we are with that and the details of it. but our goal is to make it easy for people to establish they are operating within their charters and serving those they are meant to. >> i was surprised. in 2013 i think your predecessor a short assured me this practice was coming to a conclusion.

i had not heard about it at the local level until this meeting right before. i have to question the irs commissioner and immediately they had a request. three vfw post in new york state. >> i am happy to look into it. it should have come to an end of the acting commissioner said it would. i am delighted to look into it. >> in regard to a similar question i asked secretary lou on this legislation that congress passed the travel general welfare exclusion act the lost if you wait all to benefits under the general welfare exclusion should be suspended until travel advisory committees are established and the irs field agents are properly trained and educated in federal law relating to sovereign indian tribes. with this issue is -- and maybe you are familiar with

it. >> i am. i met with the leaders late last fall. washington. >> thank you for doing that. the concern that. the concern that exists is that the irs audits continue even though the tribes believe that the issue being audited are related to the general welfare exclusion. my question to you is can you provide me with the standards being used to determine whether or not it relates to the general welfare exclusion and confirmation deference is being provided based upon that exclusion? >> i we will be delighted to get you that information. my understanding is that have been made clear. again i am delighted to go back and check on that and get back to you quickly. if your staff to let us no the details where they are hearing that from. i cannot talk about an individual case but clearly

that was our understanding, we understanding, we would try to have a better working relationship, understand the significance of their sovereignty and make sure our people were properly trained and respectful of the sovereignty. >> do you have an idea how many audits had been suspended as a result of this requirement of the exclusion act? >> i do not. >> i guess i would ask another question. would you provide me information in addition to how many audits have been put on hold or suspended as a result of awaiting training and appointment of advisory committees i would ask if there is a tribe that believes that the audit is improper how do they appeal the decision that they are being audited? they seem to have no recourse in the conversations with me. if you could respond. >> i would be delighted. every taxpayer taxpayer has a right to our appellate

process which is totally independent of our compliance process. i we will be delighted to get on a road map as to what they should be doing to make sure they have an appropriate way to raise concerns. >> thank you for responding. >> delighted. >> senator. >> thank you, chairman. we appreciate follow-up. i joined the appropriations committee in no small part because of the fervor passion command commitment that the chair and vice chair demonstrated toward returning us to regular order and her effective leadership will be sorely missed. you identified service and enforcement and it has three core themes where you think of funding shortfalls have caused challenges for the irs and taxpayers.

the the treasury of inspector general for tax administration identified security for taxpayer data as its number one priority challenge. i assume that is not unrelated to your it investment. let let me talk about identity theft and combating refund fraud your estimate was you paid out 5.8 billion in identity theft refunds in tax year 2013. tell tell me about your strategy for dealing with refund fraud and identity theft. is it comprehensive enough and aggressive enough to keep pace with rosters keep finding more and more sophisticated ways to hack in and access were take advantage of different schemes? what measures would help the irs better detect and whole fraud schemes before they get out of hand? >> it has been historically a growing problem.