they went and got more funds? >> i'm aware that the corrupt national police officers who ended up being indicted by dea and convicted that what they were talking about is padding their operational requests that went dea to get additional money. >> yeah, in other words, fraudulent budgets. >> yes. on behalf of the colombian national police. >> you can't wipe -- you can't wash the hands of the office. look, this is a cooperating witness here who stated that the operational budgets were presented to the dea. so it doesn't seem to me you can wash your hands of that at the dea or they could have washed their hands of that. has someone looked back at how the funds were expended during this period so that you can now lay out exactly what happened

during this period? part of the problem here and the frustration, i think, of the committee is that it's taken so long because you had no policy to go up the chain of command. and so you can tell me, well this was 2003 and 2004, but i tell you if i was there, i'd want to know exactly what happened then so i'd make sure it wasn't happening now. >> one part of the investigation was to go through and audit and do just that. >> from that period? from that period? >> yeah. to look at the books from that period of time. >> we understand, again, from one of these cooperating witnesses, he could obtain, this is a quote, prostitutes for agents from the dea bogota office. this is what the cooperating witness said. he would pay the girls to come to the parties, then the agents would pay the girls directly for any sex they wanted. he recalled getting prostitutes for at least 15 to 20 parties.

weren't the dea agents in colombia there to crack down on the agents who were on the cartels who were given funds to pay for these parties? >> gentlewoman's time expired. >> that's what's so appalling about this. that although the agents didn't know the corrupt police were getting money from the traffickers. they were on their payroll and using that money for the prostitutes. >> thank you mr.horowitz in your office report, you noted that during the interviews some in your office staff were evidently told that some dea employees were under the impression, at least, that they were not to discuss information regarding open cases. do you know who provided that information?

>> we don't know who told them that information, but that is, in fact, what we were told. >> all right. so did you ever determine whether or not the dea staff, in fact, someone communicated that information? >> we didn't determine definitively whether it occurred. we believe it did occur given we were told that by several individuals. >> so you were told by several individuals that was not an isolated incident. so you did not investigate further? >> we did not. >> okay. did your office ever give information instructions to that effect? >> no my office didn't i saw the draft asking the office of professional responsibility and inspections about that. they said that there was a miscommunication. they were, they were under the belief that closed cases were

not a part of what mr. horowitz' audit would cover. >> all right. well, there was obvious confusion. did you yourself at any time give instruction to anyone to withhold information? >> absolutely not. >> did anyone in your staff? >> no, no one -- >> how do you know? >> because, we weren't involved in that part of the process. >> well, then you can't definitively say no one did it if you weren't involved in the process. obviously there were reports testimony given to mr. horowitz' team that your employees were instructed not to give information. >> the inspectors that were interviewed received instructions from opr and the office of inspections. . there's -- i have no information about what information was relaid to them other than it was relaid -- >> so you don't know?

>> confusion. >> is the bottom line? you don't know if that information was relaid or not. let me -- you are all over the board today. you say you can't fire anyone and that you didn't have all the facts, and yet, you send information that this behavior is not going to be tolerated. it's absolutely all over the board. you have junior officers who evidently can fire but you cannot fire. do you have any authority over them? can you fire those junior officers? >> if they're not doing their job, they can be replaced. and that is done by the -- >> did they do their job by not disciplining appropriately in this situation? >> i'm disappointed in the discipline. i think that it's not enough. >> why were those junior officers not replaced? >> again, i can't interfere with the disciplinary process. but i can make sure through our

career board that replacements or people that are coming up to take those positions are of utmost. >> do you or do you not have authority over the junior officers? >> i don't have the authority to intervene in the disciplinary process. >> all right. a moment ago, you said you would act differently if you had this to do all over again. why in the world would you say that? you said you made it clear that your hands are tied, that you can do nothing. i'm really having a difficult time understanding. it appears to me no one listens to you quite frankly. you write a letter saying this behavior's not going to be tolerated, and yet, you have no influence as to whether that behavior's going to be tolerated or not.

did anyone listen to you when you wrote that letter? >> yes, the entire workforce listened to me. and, in fact like me -- >> why would they listen -- if you have no influence whatsoever on the disciplinary process. i've got to tell you, you say you're in charge of discipline on one hand and then you come back and you say you have nothing to do with discipline. you're in charge of the entire agency. then you come back and say you have nothing to do with correcting problems. quite honestly, i have serious questions as to your competence, quite frankly, and it appears to me that we need to seriously consider a new leadership at the dea. i yield back the balance of my time. >> before the gentleman yields back, i'd like to give him an opportunity to respond to the questions that he was asking earlier. if you could address that. >> certainly. with regard to the production of information and answering questions. again, the frustration we had with both the fbi and dea during this process was we kept having

to go back and ask for more. once we learned what we didn't -- weren't told originally. that was the case with regard to documents. we got redacted information. i had to elevate it. in both instances, months after all this all started. with regard to the interviews we learned later in the process that certain individuals at dea that we had interviewed hadn't told us about an open case because of their understanding that they shouldn't talk about an open case. we found out that when we did get productions from both the fbi and the dea that they didn't give us everything. we only learned that because they went back and checked our own records to compare and see if we had everything that -- whether they provided us with everything that we already had. we thought they had even more than we had, which was why we went to them for the first instance for the information. but then we found out that the production was incomplete. we then had to go back and ask

for a further review. and then after we did the draft report, we found out that the dea hadn't run all the search terms we had done without telling us that they had made that decision on their own. so we had multiple instances where that occurred delayed our report, i can assure you it frustrated the good, hardworking folks in my office who spent months trying to get information. and i will go back to what i said earlier, the atf and u.s. marshal service, made the same request of them. we got the material and got it fast. and we never thought we didn't get from them what we were entitled to. that should've happened across the board. and it should be happening across the board in all instances. >> appreciate it. we'll now recognize the gentleman from virginia for five minutes. >> thank you, mr. chairman. thank you for holding this hearing. mr. horowitz, the i.g. report

we're discussing today would seem to suggest the dea's tolerance level for prostitution depends on the local cultural with which what we call offense occurs. for example, your report says the dea inspector told us that prostitution is considered a part of the local culture and tolerated in certain areas called tolerance zones. is that correct? >> that's correct. >> does the dea recognize that prostitution is embedded in certain local cultures and by implication, therefore tolerable, and the agency recognizes tolerance zones for prostitution? >> no what i believe the inspector was talking about was in colombia, there's certain tolerance zones for prostitution. it doesn't matter with the dea. the

it's not -- it doesn't matter if it's legal in a particular country. it doesn't matter if it's legal in a particular area of a city. it doesn't matter. they're not to take part in that type of behavior. >> so it's always wrong in terms of your policy no matter where, no matter when no matter what the circumstances? >> that's correct. >> and that's an explicit policy? >> it's -- you find it in our personnel manual. you find it there's a chapter called thou shalt not? >> can you confirm that? >> certainly that wasn't the case during the years we reviewed this. that's the problem we identified here. >> it was not the case? >> certainly not the culture and certainly not the understanding based on the interviews we

conducted. >> i'm going to get to that. but did you find an explicit policy in their manual human resource manual that barred such elicit activity? >> it did not at that time. it does now in light of both the administrator's memo. >> you said to me just now, that's a violation of our existing policy, you meant the new existing policy, is that correct? >> the new existing policy, but it existed in our personnel manual in a couple of different sections. one about, you cannot have a relationship with someone involved in illegal activity. you can't do anything -- >> wait a minute. you just said to me that the tolerant zones referred to colombia, not to dea designated tolerant zones, in which

prostitution, in fact, was legal. you just cited something that refers to illegal. but if you go to colombia it is not illegal in certain parts of the country. and did your policy therefore, in a sense open the door for what we would consider in most of the united states illegal activity that was not prohibited in the host country? >> what we found with the case was our policies didn't specifically say you cannot partake in prostitution. but we had different sections in our personnel manual. different sections in our standards of conduct that every agent in the agency signs once a year and acknowledges. things such as dea personnel are prohibited from engaging in any criminal, infamous dishonest, or notoriously disgraceful

conduct or other conduct prejudicial to dea to doj or the government of the united states. >> well, apparently some of your agents when they went thought prostitution was not included in that litany. >> no dea agent thought prostitution was okay. >> well, i don't think that's what the inspector general found found. >> according to the inspector, it is common for prostitutes to be present at business meetings between cartel members and foreign officers. the dea inspector stated that the acceptability of this type of behavior affects the way in which federal law enforcement employees conduct themselves in a particular country. what you read to us notwithstanding, the practice seems to be very much contingent

upon local acceptable practices. and we're influenced by that, your policy notwithstanding, would that be fair to say? >> i would say every dea agent knows to include going back to 2000 to 2004 in that period of time. knows that partaking in that kind of activity is against dea policy. when it happened and we reviewed all of our policies just to make sure we decided to strengthen them and put wording in about prostitution specifically. just so that -- just to put everybody on notice and make sure it was clear. our policies were not as clear. they did not specifically say prostitution. but there are three or four different places in our standards of conduct where you could point to that and say that's a violation of standards of conduct.

>> would the chairman allow me one more question? i just have one more question if the chair would indulge. thank you, mr. chairman. mr. perkins, the report talks about fbi providing employees with extensive predeployment training regarding conduct abroad. and has done the most to prepare its employees to make day-to-day decisions, unlike, apparently, dea or the secret service. can you comment on that? does your training program in terms of deployment overseas explicitly deal with issues like prostitution and the sense of dishonor it brings on the united states if its employees engage in that kind of activity? >> yes, congressman. it actually covers a universe of issues from the personal security of the individuals going overseas to the standards of conduct we would expect them to exhibit while they're overseas.

as we began to expand the overseas presence with the wars in iraq and afghanistan we had a significant presence overseas at that time which required yet again additional training added to that as our overseas presence remains high. we see great benefit in maintaining that type of predeployment training for these individuals. >> and final point on training. leonhart, does dea have a program similar to the fbi? >> yes, we do it's called the foreign orientation program. and in may of 2012, we start eded handing out state department cable. even if it's legal in a country we also started adding extra

slides to a presentation that our opr gives to all of the employees and their spouses. that includes information about prostitution, information about security clearances. so they are in factformed before they go overseas. >> mr. chairman i would like to pursue with you at some point this whole issue of training because i think that has a great bearing on what was allowed to happen. >> now recognize mr. meadows for five minutes. >> thank you, mr. chairman. ms. leonhart. you've been with the dea for how many years? >> 35. >> and about 5 years in your current position? >> since 2010.

>> so you take this seriously being part of law enforcement? i enjoy a great relationship with law enforcement back home. and the standards that are violated by some within the ranks, painting a bad picture for the rest. do you agree with that? >> yes. these are you know, a few compared to the 4600 agents that work for dea. very proud of our agency and this hits us hard. >> it should hit you hard. you keep saying you're appalled and you can't believe this kind of behavior. my concern is in 1994 there was a gao report that outlined and you were there at that particular time that outlined sexual misconduct. and then there was an oig study that talked about this same kind

of inappropriate behavior. yet, here we are today with a new report that's over 100 pages in length but we're addressing the decade old cultural problem aren't we? this is not new to you. is that correct? >> this is new to me in this position. but in law enforcement, obviously every company every organization has some people that are not going to follow the rules. and to see what happened back in 2000 and 2003 in colombia. to see what happened in 2009 with the incident with the agent in bogota. and then to see it, this is our opportunity to make sure that

culture, if there was one that existed, that there's no doubt that employees know that this is unacceptable and see what will happen to them. that is why firing the three employees agents sets the tone for what happens from here on. >> well, it might. if it wasn't reinforced in other ways. let me tell you you keep coming back to cartejena because it may be the only time that people have been disciplined for improper conduct. wouldn't you agree with that? you were bragging about your directive that you sent out. didn't that go out in 2014? >> yes it went out. >> so why if you were concerned about the culture, wouldn't it

have gone out immediately after the event? or is it just that the press has started a report this as a problem and now it's a problem for you? >> no, actually, we had discussion, the executive staff on what things we should put in place. we started putting things in place in 2012 after the discovery -- >> so it your testimony that it took you two years to figure out what to put in a directive? is that your testimony here today? >> no. actually, we drafted that back after a working group got together to decide what steps should we immediately put in place. we drafted that, and on the heels of the cartagena case, being able to show here's what happens if you partake in this behavior. we had the case disciplinary case finalized, went out with a series of things. that memo we had already put

additional training every basic agent training every intel analyst training. >> okay. i'm running out of time. let me do this one follow-up. i have reason to believe that some of the people that you're saying today may should have been fired but you didn't give a directive. but i have reason to believe that some of them have actually gotten promotions gotten bonuses and have gotten new assignments. would you agree with that? >> i know that -- >> that some of them? >> i know that a number of them were promoted between the activity in 2000 and when it came to light in 2010. i can tell you that since the allegations were raised and investigated, there have been no promotions. >> how about bonuses? because i have reason to believe that there were bonuses that were given. i'm sure you just looked into all of this.

so were there bonuses given to some of those folks? >> of the -- i know there were bonuses given to the regional director. i don't know about -- i don't know about -- >> so some bonuses were given to people were directly involved in this particular thing about most americans find offensive. >> the regional -- >> yes or no? >> no. the regional director -- >> well, you said you didn't know, so how would you know? >> no the regional director that got bonuses was not directly involved in this. i don't know as to the other employees. >> is it possible they got bonuses? >> it's very possible. >> it's very possible. >> it's very possible. because our intel would say it is. so here's my -- i appreciate the patience of the chair. if you would give without names, because obviously that is critical, would you agree today to give the names and the number of people involved in this to

the oag so he can report back to this committee on how many of those people got bonuses? would you agree to do that? because i find that's real enforcing a bad behavior if they're getting bonuses. would you do that? would you agree to that? >> i will work with the department who is going to be giving you additional information here shortly. >> we can get bonus information to see if these people were involved in this got bonuses. and you can redact the names, i want to know the number of them. >> is that a no? >> no. >> you're the administrator, you can make the decision. are you going to give it to us, or not? >> if i'm able to give it to you, you'll get it. >> mr. chairman -- >> if the gentleman would yield? >> yes. >> we're asking you to provide the information to the inspector general. will you or will you not do

that? >> if it was up to me to give it to you -- >> you're the administrator. >> i would give it to you. >> you're the administrator, who do you have to ask? who do you report to? >> the documents that are going to your committee -- >> we're asking you to give them to the inspector general. >> if the inspector general wants that, we'll give him it. >> does the inspector general want that information? >> i'd be happy to take that information and look into the issue. >> will the inspector general report back to the committee? >> i will. >> and to suggest that the -- the more senior person wasn't directly involved, was involved. >> he was not involved in the activity -- >> did he properly report up the chain of command? >> he didn't report it to the right place. >> okay. so he was involved. may not have been naked having sex in his apartment like everybody else was, but he was involved, correct?

>> he failed to report to opr. >> that person should be included in the information you give regarding bonuses and promotions. can we also add into there promotions, title changes? bonuses, title changes, promotions. is that fair? i'm looking for a yes here. >> we'll work to get you that information. >> is that a yes or no? >> yes, we'll goat you that information. >> thank you. >> gentlemen? >> i thank the chair for the patience. i yield back. >> did you want to add something, mr. horowitz? but now, recognizing the gentleman from wisconsin.

recognized for five minutes. >> one of the things frustrated about this hearing. you've expressed concerns about some of the civil service protections. so people back home understand, they are very important because if we didn't have civil service protections, you could wind up in an agency like the irs or something firing anybody who wasn't on the right side politically. nevertheless, you have expressed frustration. i do believe some of the people are expressing the greatest anger at you today, or some of the people express anger at you, may be the first to fight any change in those civil service laws. could you give us suggestions that you may have to make it easier to remove and employee who who is a misbehavioring -- i can tell you one of the things that frustrate me. we have a situation which people

are behaving in outrageous conduct. if a late night talk show host made it up you wouldn't believe it, but it really happened apparently. it makes me wonder if we have employees not doing a good job the a their job. can you give suggestion for changing civil service laws? >> if you looked at giving us the same exemption as the fbi, i think that we then would be able to make sure the penalties were appropriate. >> and what would you think an appropriate penalty is for this behavior? >> i think this is outrageous behavior and that knowing the facts of the case as i do without having to be concerned with the appeal rights and being able to sustain it in a merit system protection board, i

believe that some of these, some of the behavior would raise to the level of removal. >> by removal, you mean they should be fired? >> just like cartagena, yes. >> could you describe to the public today why you feel this behavior was rongwrong? so i get a sense. why is this bad behavior? could you explain in your own mind? >> partaking -- well it's wrong on a number of levels. start with prostitution itself. you know it's human trafficking is like the second highest illegal market besides drug trafficking. look at all the efforts the government has been putting into, especially in recent years

years. that's number one. number two it is so far away from the type of conduct and ethical behavior that is required of someone to carry a badge as a federal agent. that those are the reasons. and the security clearance issues the security putting people and our information at risk are all reasons that i -- this is appalling. >> is it right that some of this stuff was brought to the attention or we were aware of by colombian authorities? they were aware of this? >> actually the colombian authorities, by the time this was discovered on the corruption of the two police officers, the colombian national police did a

great job in helping us convict them. and also, they removed a number of colombian national police officers who were involved in this same activity. >> okay. i'll ask the same question to mr. horowitz there. because he seems a little -- could you comment on how you feel we should change still keeping protections for people. but change things a little bit so we maybe have a little -- not just outrageous conduct, but even competent conduct out of the dea. >> well within the current structure, there needs to be prompt reporting, prompt investigating, prompt disciplinary action, and follow through. i mean, that's within the current structure, that can be done. he mentioned the colombian national example. those events that were learned about from the colombian

national officers who were corrupt and disclose the information related to the 2001 2004 events. all of those involved in the events said nothing about it. think about it. it was learned eight years, six, seven, eight years later when corrupt colombian national officers disclosed it. that's a problem. a serious problem. that no one thought that was reportable to headquarters, and that there needed to be follow through. whether it's the current system frankly, whether it's under an fbi regime, that was the fundamental flaw there. right? no one thought it was important enough or serious enough to raise to headquarters. >> well it's good that the colombian people had a little higher standards. >> well these were the corrupt officers. >> right. eventually they felt there was something going on.

>> right. they felt it was wrong. and once they, of course, got arrested, they were more than happy to come in and report out on whether it occurred. >> thank you. >> i think the gentleman will recognize the gentleman from alabama, mr. palmer, for five minutes. >> thank you, mr. chairman. ms. leonhart. is there any policy against turning over dea weapons or communication devices to foreign agents or any nondea or nonu.s. official? >> if i hear you right, you're asking about prohibition on turning over a device? >> not having immediate supervision of the weapons and devices that belong to an agent. >> well, number one securing your weapon. that's required. >> i'm not asking you about

that. i'm asking you is there any policy at the dea that would result in any kind of reprimand or punishment for not having immediate supervision of your weapons and communication devices. that's a yes or no. >> it could fall under, depending on the circumstances. >> yes or no, you either have a penalty for not securing your weapon and your communications devices. >> yes. >> because there are things on those communication devices that could be used against other agents against this country. >> it could fall under poor judgment. there's a number of areas there's policies on -- >> poor judgment has already been -- >> securing information. >> it's already been pointed out, it's not one of those official criteria. and what happened here you talked about these corrupt police officers. is it true that the same officers who helped facilitate

these parties may have helped pay for the prostitutes? supervised, had control of the agents' weapons and communication devices? possibly the security and badges? is that also the case? >> part of the report is that while some of the agents were involved in that activity -- >> it's a yes or no. >> yes. >> okay. as egregious as the activity that the agents were involved in which is in many respects a crime against humanity. but because of the ages of these girls, could you not find a reason to reprimand or fire agents for turning over their weapons and their communication devices to foreign nationals? i mean for crying out loud, china is investing in south america, latin america. they're going to spend another $250 billion over the next ten

years down there. did it not occur to anyone that this might be a national security breach or problem along that line? >> someone doing a security adjudication could look at that and find those are reasons why a security clearance should be suspended and revoked. >> were they? for any of these people? >> for the bogota case, their clearances were never looked at. >> who is your immediate supervisor? who do you report to? who has the authority to hold you accountable? >> the deputy attorney general. >> okay. have you discussed this with the deputy attorney general? and how to proceed with this? >> i briefed the deputy attorney general on these cases recently. >> did he make any

recommendations on how to proceed? >> yes the security clearances are being reviewed by. >> i want to ask you something more specific. did he express any -- was there any discussion about how to respond to the request from the inspector general's office, office of the inspector general? >> i've had multiple conversations with the office turning over documents to the oig. and they've given us good guidance on that. >> so they gave you good guidance, that means they approved of attorneying over the documents that the inspector general requested? >> no, actually, we didn't know we were worried about the victim's names and how to handle that. >> mr. horowitz you have said that there have been numerous

instances where the fbi, you mentioned it about the dea. you spoke of agencies, particularly the fbi and others. did this rise to obstruction? you said it had a significant impact on reviews but failed to go as far as calling it destruction. i want to ask you that again. are you willing to call it obstruction now? >> what occurred back in 2013 when we were given redacted documents impeded and obstructed our ability to move forward in this investigation in a timely manner. and it took months and required me to elevate it to the leadership of both agencies. and it was when i elevated it that we got the reaction. but i didn't have to do that with atf and the marshal

service. >> right. >> and i shouldn't have to do that. >> it appears to me you've been obstructed. >> i think in this instance we were obstructed. >> is there still information you'd like to get from the dea? >> i think at this point we made a decision to issue the report. this was so important to put forward. and frankly at this point, we've got the reports to do and to get to that we still have the same issues on. >> is there additional information you'd like to have? >> on this issue, no. on others? yes. >> thank the gentleman. now recognize the gentleman from massachusetts, mr. lynch. >> thank you, mr. chairman. mr. chairman, i'm not sure if the memo from attorney general holder has been admitted into evidence. but in case it hasn't, would

you -- >> to order. >> okay. great. >> in the attorney general's memo for all department personnel dated april 10th 2015, subject, prohibition on solicitation of prostitution, it says that the solicitation of prostitutes creates a greater demand for human trafficking victims and a consequent increase in the number of pie mors trafficked into commercial sex slavery, do you agree with that assessment? >> i think it raises the risks. >> agree with that? >> i certainly do. >> okay. and also, under the statutes we have what we're talking about here solicitation of prostitutes

for 15 to 20 parties is clearly the definition of human trafficking and yet the dea is actually charged. i know that we were down in central america recently and that's a big part of the dea's mission is really to combat human trafficking. and we actually give grants to the department of -- to the dea and to the fbi and to state department as part of the trafficking victim's act and the violence to women act. we give grants to your agency to prevent human trafficking, prevent prostitution. and yet, the very people the departments getting this money in this case are engaging in human trafficking.

it brings me back to the unbelievability of what has happened here. it is unbelievable. under the discipline factors, one of the factors is the seriousness of the offense. and whether the offense is in violation of the policy. and the notoriety of the offense. and whether that prevents that individual from doing their job. at this point we have agents on the job that are receiving federal assistance to stop trafficking who have engaged and admitted to trafficking.

and i don't see the end of this, i don't see the end of this if we leave this situation the way it is. i wouldn't believe this would be necessary, but we may need to amend title five. we may have to put in a provision that says that holds you accountable. because right now, you could pass it off to somebody below you. you don't have to accept responsibility. and you haven't. and that's, you know, that's clear. but if we adopted an amendment to uh title 5 that said outrageous and criminal conduct in direct violation of an agency's mission would give you an ability to fire somebody. that would solve this i think, in part. and also, the failure to report. that's where this is starting. where the managers at the lower levels did not report. did not kick this up the chain

of command. and so we need to hold them accountable, too. and there should be a provision that says refusal or failure to report an offense like this will give the agency and the government the ability to claw back pensions. it's a shake we have to get to this. i actually think that may be where we're at right now. i'll yield back the balance of my time. >> thank the gentleman i'm going to recognize myself. i have a series of questions as we wrap up here. administrator leonhart, you became the -- you've tried to paint a picture of this as a decade ago. i heard you say multiple times ten years ago. when did you become the deputy add mrter? administrator? >> i was confirmed in march of 2004.

>> how many are there? deputy administrators are there? >> there's one. >> so you were the sole administrator and then the acting administrateor, when was that? >> 2007. >> and then you were confirmed in 20 -- >> 10. >> it's safe to say you've had your finger on the pulse of this department or this agency for more than a decade? correct? >> 35 years? >> either as the deputy or the acting administrator yes. since 2004. >> one of the things you said was troubling and brought up by mr. lynch is the idea that, and it was in response to some of the gentlemen who asked the question about those directly involved. i've got to i want you to seriously consider. in my mind, they are directly

involved if they fail to report. you may not have been the person directly fully engaged in the inappropriate behavior, but once you know about it, you have a responsibility to deal with it under the department of policies, correct? >> that's correct. that offers me great concern. do you understand that? >> i do understand that. i was just making the point that he wasn't involved in the behavior, he failed to report. and that's what his shortcomings were. >> part of the abhorrent behavior is covering it up. that's the concern. and that's essentially what it is. it's covering it up by not reporting it up the chain. because as mr. horowitz pointed out, the only, the only

alternative based on the law enforcement component offense tables in appendix 3 of sexual misconduct and sexual harassment is -- removal. it's the only one. there's no if ands, or buts no ambiguity. removal is the only option. so let me ask you administrator, do you believe that soliciting prostitution is sexual harassment? >> no i believe that prostitution is sexual misconduct. >> explain the difference between sexual misconduct and sexual harassment. >> sexual harassment is a workplace behavior. it's what that affects the employees in the workplace or an

employee. sexual misconduct is outside of the workforce -- outside of the worse place workplace like prostitution. there's a difference. does it affect the employee getting a raise? getting a transfer getting a particular job? is it a hostile work environment? those are sexual harassment, sexual misconduct is a different, you could have sexual misconduct that's also sexual harassment. but there is a difference. prostitution would be sexual misconduct. >> so, explain to me then, exactly what you believe sexual harassment is. what would be some examples of

sexual harassment? >> unwelcome remarks. touching an employee, a supervisor touching an employee. a supervisor making threats about you're not going to get that promotion unless you do a, b, c and d, those kinds of activities. >> mr. horowitz, do you want to weigh in here, the difference between sexual harassment and sexual misconduct? >> i think it's based on what you have before you, which is what's written down as the definitions. and looking at the actions. some of these, for example, one of the incidents that we cite talks about the assistant regional director making inappropriate sexual comments, forcing others to watch pornographic movies. yelling at employees. other kinds of actions.

obviously clearly within the definition of -- >> so with those -- within the report do you believe that those are sexual harassment? >> that is sexual harassment. >> so if you're a d.e.a. agent in this case and you're having sex -- commercial sex paid for, you don't believe that that's sexual harassment? >> no. that's sexual misconduct. >> is procuring a prostitute sexual harassment? >> it would be sexual misconduct. it didn't happen -- >> no harassment? >> it's not the workplace. >> it happened in government housing. >> it's not behavior against a fellow -- another employee. >> so in your mind in your world, which is a different

planet than i live it's not sexual harassment if you do something to somebody who's not a federal employee? what if they were here washington, d.c. -- or you were in charge of los angeles field office. is it sexual harrisassment if they go up to someone in los angeles and start saying some ridiculous comments and trying to solicit somebody? that's just harassment? or isn't? it's not in your world? >> as it's defined for government, as it's defined by the eeo in eeo terms, it's all workplace related. >> so in the course of the workforce, somebody there investigating, if they accept the federal employee accepts

commercial sex, is that sexual harassment? >> that's sexual misconduct. >> we'll have to further explore this because i think this is -- we're getting to the heart of one of the biggest problems here, which is in your world which i don't think is the real world, the charge here for the person in bogota was improper association. does that sound like the appropriate charge? >> for which person in bogota? >> the d.e.a. agent in bogota in july of 2009 when they engaged -- this is the case with the prostitute. they had a payment dispute. he throws a glass at a woman. a security guard sees this happening. there's no doubt about the facts according to your previous testimony. so that was not sexual harassment. >> sexual misconduct. >> wow. and under sexual misconduct do

you think that improper association is one of the proper charges? do you think this person was properly -- i guess the word is charged. based on that case and everything you that know, this person was suspended for 14 days without pay for conduct unbecoming and improper association. do you believe that that was the proper charge for that person? >> i believe those are two proper charges. the deciding official had a number of other charges they could have looked at as well. >> i'm asking what you personally believe. what do you believe they should have been charged with? or do you believe that that was the proper conclusion? >> i think it would be conduct unbecoming. it is improper association. i would have concerns about

false statements. i have a number of concerns with those cases. >> any other -- in your professional opinion, your experience. you worked for the opr. you've been at the agency for 30-plus years. you've been either the acting or the deputy or administrator for more than a decade. do you believe that this person in bogota was properly charged, or do you believe that they fell short? if they did fall short, what else do you think they should have been charged with? >> i do believe it fell short. >> so what else should they have been charged with? >> as i said, it's not so much the charge. it's the penalty. the other charges that would have been not -- >> the charge determines the penalty. and when you say that this person engaging with a prostitute throwing a glass at her, i mean how many things could we list out that are wrong with that at every step? and improper association is the

one that they go with? >> the penalty for improper association and conduct unbecoming can be removal. >> and it was only 14 days. we even had an eyewitness. a security guard that worked for the federal government. do you think any of these cases we've brought before you there should be -- there should be additional charges? >> again not knowing all the facts that the -- >> you said you knew all the facts. you just issued a memo on march 26th saying that you had fully investigated this. >> if i can -- >> it says "these allegations were fully investigated by d.e.a. office of professional responsibility." you sent this out at 5:33 p.m. on march 26th, 2015. >> not knowing all the circumstances that the deciding officials, who are the only ones that can decide punishment in d.e.a., not knowing everything they took into consideration

they could have, by charging conduct unbecoming and improper association, the penalties are up to removal. >> mr. horowitz do you have a comment on this? >> i think the concern we found as we cite in our report is that they were charged with offenses such as conduct unbecoming, poor judgment, which by the way isn't a category. and others that were inconsistent. and the concern is, and we deal with this in our own agency when we have to look at individuals who might have engaged in misconduct, you want to charge what the number of charges should be in part because there's precedent. you look to what prior individuals got for similarly situated conduct under similar charges. and so that's one of the concerns we have as we late out

here as to the importance of consistent chashlging and charging the appropriate offense. >> to the administrator. is the d.e.a. part of the intelligence community? >> a sliver of d.e.a. >> sorry. i -- >> a sliver of d.e.a. is a part of the intelligence community. >> is it governed by the intelligence community directive number 704? >> that sliver of the agency is, yes. >> define that sliver, please. >> under 60 positions in d.e.a. within the intelligence division. >> those that are serving overseas, would they be subject to this? >> it depends on the position. there are in some countries some intelligence analysts that would be under that. the special agents would not. >> again, we're getting close to wrapping up. i promise.

we're not at halftime. we're well past that. so walk me through security clearances. who makes the determination who gets the security clearance, and who makes the decision as to whether or not it's revoked and when? >> the same office that determines that a new employee gets a security clearance, that same office makes a -- >> what office is that? >> office of security programs. they do all adjudicating of security clearances for new employees, for contract employees, for anybody that's going to be in the workforce within d.e.a. this same office also handles periodic reinvestigations and handles reviews of people who already have security clearances. so for instance, in the cartagena case opr referred --

referred the case over to security programs when they had completed their investigation and security programs did a complete review of their security clearances, adjudicated it made a decision that there was enough to move to suspend the clearance, and then the agency moved for -- because the person no longer has a security clearance, removal from service because they can't be a d.e.a. employee without having a security clearance. >> so what are the standards by which you can have and not have a security clearance? where is that standard? >> there's a number of things they look at. the main thing is securing information. national security interest information. does this person with -- >> contact with a foreign

national. allowed or not allowed? unreported, i should say. >> not allowed if it's unreported. and there's rules for reporting. >> is there a document that determines -- that governs what you will and will not give for security clearances? >> there's a document that every employee is to fill out. an sf-86. >> but it's just a couple of dudes down in the bowels of the d.e.a. that just make a random decision or how is the decision made? >> no. they're trained on adjudication. they review if there's anything that is a red flag for them, like past -- >> sexual misconduct a red flag? >> sexual misconduct, if a person was disciplined received any discipline they on their

form check it. office of security programs does a review of that. >> has the office of security have they ever revoked somebody's security clearance for people engaging in prostitution? >> i don't know about prostitution. i know that they have revoked security clearances. so other than the three from cartagena i'm not sure. >> you're just the administrator. mr. horowitz, have you looked into the security clearance possibilities? >> we didn't look into what could have happened had they been referred to the office of security programs, primarily because the concern we saw was that they weren't being referred to the office of security programs. so we weren't in a position to review what actions they took

with regard to these matters because we learned that opr, when they did finally get these allegations never turned around and sent them to the osp. >> what do you say about that, ms. leonhart? >> that's one of the changes we've put in place. >> when? >> november. november of last year. we've never had in the history of d.e.a., we've never had a formal mechanism for those security clearances to be reviewed upon an opr investigation. >> you were the administrator of the deputy administrator or the acting administrator for almost ten years at that point and you never had that policy in place? it seems like a well duh. >> we never had a formal policy. it would be up to the office of professional responsibility to flag an internal investigation that had security issues and

then to refer that over to security programs. so we set up a mechanism for that to happen automatically. >> so were those recommendations made before or after a draft report from the inspector general? >> the recommendation that security programs -- that office of professional responsibility flag security violations and give them the security programs was happening long before that. what we did is in cartagena made sure that the security clearances were reviewed and then more recently in november set up a mechanism so that security programs and opr have a mechanism to pass on a regular

basis security clearances over. >> it's just unbelievable to me. it just -- you know there are some things you just think -- you just think this has to be happening. on the one hand you've got this problem. we've listed out the host. this is not one incidence. i mean we're going to have some people do something stupid somewhere. people are going to make mistakes. people are going to get themselves into trouble. i get this. but it was happening with such frequency. to not have that moved up the chain for you to earlier not say, well, they weren't directly involved. you've got to hold everybody accountable. to get that thing all the way to the finish line. i just don't understand why you personally don't take a hand in that. mr. horowitz has referenced these made-up categories of offenses. why did you make those up? >> that's how employees for the last 40 years have been charged at d.e.a. >> so never mind the guidelines.

we just keep doing it like we did 40 years ago? >> part of charging by the board of conduct and by the deciding officials is to look at agency precedent and government precedent. and so the -- >> the problem though and again, we've exhausted this, we're getting to the end, is that this is a problem. you say -- you get called before this committee and say oh, it's terrible, it's awful. but you, you personally have been responsible for this for more than a decade and you didn't do anything about it. you may cry in the mirror but i'm telling you, you are in a position to do it and you didn't. and after cartagena is that should have been a wake-up call. it took you two years to get out a memo. two years, as mr. meadows brought up.

>> we have a lot more that we need to go through. mr. horowitz, are there any other outstanding issues that you need help with from the department -- the drug enforcement agency? >> with the drug enforcement agency, no. >> with the fbi? >> we have -- not as to this review but as to at least four other ongoing reviews we still do not have all the records that we need because of the fbi's continuing process of reviewing records, determining what it has allowed under its legal judgment to provide to us go through that process, go to the attorney general or the deputy attorney general, get their approval, and then get it to us. so as to several ongoing reviews we still do not have all the materials that are responsive to our requests. >> so mr. perkins, why does the fbi think you're so special and don't have to adhere to the law and don't do what the other agencies are doing within the

department of justice? >> mr. chairman we are adhering to the law. i take exception with the inspector general's comments along those lines. let me tell you, sir there are -- in his latest letter they did it yesterday, 218 letters we refer to them, there were five investigations noted. the records they wished to receive, that are being delayed, involve e-mail. we have turned over 35,000 e-mails to them. there are 200 e-mails in question out of 35,000 that we are working with them to go through. we believe in the rule of law. we have a legal disagreement with the inspector general. >> mr. horowitz? >> can i be clear? they're not working with us to get us the 200 e-mails. they haven't given us the 200 e-mails. our understanding is it's because they believe they have a legal review to conduct. that's why what our understanding is as to why we're not getting them. for several of these matters

these are multimonths we've been waiting for them. there is no reason why we should not be getting the materials immediately. none whatsoever. i understand they have a legal position that is different. frankly the easiest way to resolve this, and on this we're in complete agreement-s if the office of legal counsel would simply issue its opinion i think we would both say we're very satisfied. >> how long has this been pending at the olc? >> may will be the one-year anniversary. >> i concur with the inspector general. we will follow the olc opinion to the letter. >> why are you different than the other departments and agencies within the department of justice? >> i can't speak for the other agencies mr. chairman. what i can speak for is matters involving rule 6-e, matters involving the financial privacy act and other matters that we believe -- we strongly believe

we have a legal responsibility to review and provide then to the inspector general. >> what are you not willing to share with the inspector general? >> any number of series of items, as i mentioned. for instance, rule 6-e material. there are certain aspects -- >> pln that -- >> i'm sorry. the secrecy rules involving grand jury information. >> but you'd given that to them previously. >> once matters have been reviewed, once matters -- >> it had been a long-standing practice of the fbi to provide the inspector general this material, correct? >> i can't speak to that, sir. zplu can't speak to the history of fbi document production? that's why you're here. >> we provide the information once there has been a legal review that we determine legally

that we are on solid ground to provide -- >> but that's a change, correct? what was it before, mr. horowitz horowitz? >> pre-2010 there was no such objection from the fbi. as to wiretap information, fair credit reporting act information, grand jury information, we got that material. in fact, in a 1998 and 1999 proceedings in district court in oklahoma the department itself took the position that we were entitled to grand jury material and two federal judges agreed. this has all changed since 2010, with no change in the law. the only thing frankly that o'skurd was several hard-hitting oig reviews about how the fbi was handling some of its national security authorities. other than that nothing changed in 2010. >> and mr. perkins that's the concern from this committee. we have hundreds of people working for the inspector

general's office there in the department of justice intending to be the fair arbiters who can get in and look under the hood and see -- and ferret out these problems. and quite frankly, the reason that the d.e.a. and the fbi are here today is they're the problem children. we've cited several times that atf and marshals and -- this is not a problem it's not an issue. they've got problems within their agencies. don't get me wrong. they've got things they've got to clean up and we're going to work with them on that. but the reason that you're sitting here today in the hearing, and i know we were very focuses on the d.e.a. but the two agencies the fbi as well as the d.e.a., are impeding the ability to understand and unearth what the problems are. >> mr. chairman, let me clarify. there's an apples and oranges issue here. with regard to this particular prort that we're here today for, there are process issues within

the fbi that the deputy director has made changes, the inspector general's aware of, and those xhaz in our business process will eliminate these types of holdups -- >> all of them? >> for these types of records. not having to do with the other issues he brings up in 218. we are waiting as the inspector general said, if olc will render their opinion we will march forward and abide by it 100%. >> and i would just add on that i think we would both take any opinion at this point, good or bad, because this is ongoing. we completely disagree on the legal issue. and certainly we've questioned why all of a sudden in 2010 -- >> we're wrapping up. i've got hours of questions on this. but we are going to wrap up here pretty quick. this act the inspector general act, authorizes "to have access

to all records, reports audits reviews, documents papers recommendations or other material available to the applicable establishment which relate to the programs and operations with respect to which that inspector general has responsibilities under this act. doesn't sound ambiguous. and there was no change in the law. it's just in 2010 after the inspector general was unearthing a lot of difficult things for the agency they just decide we're going to change the rules. we're going to change the rules. i'm not suggesting mr. perkins you personally did that. but the consequence is we have hundreds of people at the inspector general's office who can't do their job. and you, the fbi, are standing in their way. and the d.e.a. standing in their way. we're going to keep yanking you up here time after time after time if we have to. i'm fortunate enough to become

the chairman of this committee. the very first hearing we had is on this. and i can promise you we will continue to yank you up here as long as this continues to be a problem. the act is clear. the inspector general is to have unfettered access to all records, not just the ones you want to choose from. this idea that an olc opinion is just pending and it's going on for close to a year is just intolerable. and there's not a prevailing attitude within the fbi or the d.e.a. that believes that the inspector general work is of value to those departments and agencies. otherwise, they would want them to come in and help clear their good name or ferret out problems and work to fix it. see, in this nation we're different. we are self-critical. i can't have this type of hearing in another nation. i probably couldn't go to colombia and do this type of hearing. but you can in the united states. but it requires good people to

allow somebody to come in and check and look under the hood, which is what the inspector general's supposed to do. we've had a long hearing. i appreciate your patience. we need your help and cooperation moving forward. again, to the thousands of men and women who serve in these departments and agencies i cannot thank them enough for putting their lives on the line. my grandfather was a career fbi agent. i care about the agency. >> thank you, sir. >> i care about law enforcement in this nation. but we're going to do it the right way. we're going to do it the right way. and allowing sexual harassment or misconduct to get a little slap on the wrist with 2 to 14 days' paid leave is not acceptable. it wasn't then. it isn't now. and it shouldn't be moving forward. we're going to look toward other things we can do within law to give future administrators and directors more latitude. and to the inspector general i thank you for this report. we wouldn't have known about it

without your good work and the good people within your agency. so we thank you and this hearing stands adjourned. the new hampshire republican party's first in the nation leadership summit is live on c-span today. and it continues tomorrow with speeches from declared and potential republican presidential candidates. tomorrow morning remarks from senators rand paul, ted cruz, and lindsey graham and also speeches from wisconsin governor scott walker ohio governor john kasich, and former arkansas governor mike huckabee. it begins tomorrow morning at 10:00 eastern live on c-span. and then sunday on c-span, democratic national committee chair debbie wasserman schultz.

she'll be talking about the 2016 race for president, the republican candidates in new hampshire, and hillary clinton's presidential campaign. "newsmakers" is sunday on c-span at 10:00 a.m. and 6:00 p.m. eastern. this weekend the c-span cities tour has partnered with dm cast to learn about the history and literary life of st. augustine, florida. >> ponce de leon may or may not have been searching for the fountain of eternal youth. a lot of people have said he was out for additional property for the king of spain and colonization attempts and gold, which is very decidedly true. we do know that juan ponce de leon came ashore after searching for good harbor, took on water and wood. this area presents one of the few freshwater springs in the area around 30 degrees 8 minutes and is also the location of the

1565 first settlement of st. augustine. 42 years before the settlement of jamestown was founded and 55 years before the pilgrims landed on plymouth rock. >> the hotel ponce de leon was built by henry morrison flagler. now, flagler is a man who is very little known outside of the state of florida. but he was one of the wealthiest men in america. he essentially had been a co-founder of standard oil company with john d. rockefeller. he was a man who always wanted to undertake some great enterprise. and as it turned out, florida was it. he realized that he needed to own the railroad between jacksonville and st. augustine to ensure that guests could get to his hotel conveniently. so clearly the dream was

beginning to grow on flagler. he was a man who had big dreams. he was a visionary. >> watch all of our events from st. augustine saturday at noon eastern on c-span 2's book tv and sunday afternoon at 2:00 on american history tv on c-span 3. here are a few of the book festivals we'll be covering this spling on c-span 2's book tv. this weekend we're live from the university of southern california for the los angeles times festival of books with discussions on science, biographies, american history, and crime. we'll also have conversations with authors and be taking your calls throughout the weekend. and on the last weekend of the month we'll be in maryland's state capital for the annapolis book festival. hearing from authors such as former attorney general roberto gonzalez and "new york times" reporter james risen. in the middle of may we'll revisit maryland for live gofrnlg of the gaithersburg book festival with former congressman tom davis and narnt frost as

well as former senior adviser to president obama david axelrod. and then we'll close out may at book expo america in new york city where the publishing industry showcases their upcoming books. then on the first week in june we're live for the "chicago tribune" printer's row litfest including our three-hour in depth program with pulitzer prize-winning author liz wright. that's this spring on c-span 2's book tv. irs commissioner john koskinen says budget cuts to his agency mean worse customer service for taxpayers and longer waits for people calling the irs with questions about their taxes. he spoke in the brookings institute in the tax policy center earlier this month. followed by a panel discussion.

good afternoon, everybody. nice to see some reunions taking place in the front row. thank you, everybody, for coming today. my name is ted gehr. i'm the vice president and director of economic studies here at brookings. and i'm delighted to welcome irs commissioner john koskinen, who is here to discuss how the irs deals with an increasing workload in a time of budget cuts. it's actually a nicely timed event. i like to put one-week reminders ahead of deadlines. so you've all got your one-week reminder of a deadline next week. we're delighted to have you here again today. some of you may know i have a textbook co-authored with my friend harvey rosen.

so i pulled it off my shelf. much half of the textbook is devoted to taxes. and we have a quote in there. this kind of bonus question. in anybody can name the case. 1899 supreme court decision. and in it there's a nice little quote that we pulled. it says "the power to tax is the one great power upon which the whole national fabric is based. it is as necessary to the existence and prosperity of a nation as is the air he breathes to a natural man. it is not only the power to destroy but also the power to keep alive." i thought it was a very appropriate quotation to kick off today's event. clearly the irs continues to be an essential part of our system of governance. responsible for collecting tax revenue that amounts to about 18% of our economy. commissioner koskinen is the irs's 48th commissioner. he manages approximately 90,000 employees. with a budget of approximately $11 billion. and that's a budget as i'm sure

he'll allude to today that his been shrinking over the last five years or so. maybe more than five years. previous to coming to the irs he served as the non-executive chairman of freddie mac from 2008 to 2012 and its acting chief executive officer in 2009. prior to that he was the president of the u.s. soccer foundation. got a lot to talk about with you on that one. he has also served as deputy mayor and city administrator of washington, d.c. assistant to the chair and president's chair council the year 2000 version. and deputy director of management at the office for management and budget. he's also had 21 years of private sector experience in various leadership experience with the palmieri company, helping to turn around large troubled organizations. i'm detecting a pattern. the idea is for the commissioner to give a keynote speech, and then we're going to follow one a

panel discussion moderated by howard gluckman. on that panel we'll hear from rosemary marcus and nina olson, both of the irs, eric toter of the tax policy center, and david williams of intuit. all of their bios are in the paekts you should have received when you came in this afternoon. so with that i'll ask you to please join me in welcoming the commissioner to the podium. thank you. [ applause ] >> i have to be careful not to do something with the computer that's here. i'm delighted to be here. i've got over the course of years a number of good friends, both at the urban institute and at brookings. so it's fun to be here. and have a chance to talk with you. it's particularly good because rarely do i get a group that actually commemorates tax day every year. where else could you find that except probably in washington.

it's normally the point where i would deliver my standard public service announcement. by reminding everyone to file their taxes by april 15th. but ted's already taken care of that for me. but we still have a lot of leading minds on taxes and budget here. so it should be superfluous to make that reminder. because nobody here would file their taxes at the last minute. i'm sure. right? including me with a little luck. before we begin i'd like to say a special thank you to rosemary marcus, the head of our research division, who helped put together today's event and will be on the next panel. rosemary is retiring soon after more than three decades of wonderful public service at the irs, the bureau of economic analysis, and the congressional budget office. and she will be missed by all of us at the irs, and she's done just a terrific job there. i also want to recognize someone else who will be on the next panel as ted noted. nina olson, the taxpayer

advocate. over nearly 16 months as the irs commissioner i've found nina's advice and recommendations for improvement a great help to me in shining a path forward for the agency. turning now while we're here, i need to thank the tax policy center for selecting my favorite subject for this day's tax day event. the question of how the irs budget cuts affect taxpayers and the tax system is certainly something that keeps me up late at night. and it's something that i think all policy makers in washington should be losing sleep over and i'm grateful to the tax policy center for fostering a discussion that needs to continue until we achieve the right result. my view is simple. i believe the underfunding of the agency is the most critical challenge facing the irs today. and the serious ramifications of five years of budget cuts are becoming increasingly visible and will worsen if action isn't taken soon. this is not just about the

agency. it's about the entire tax system. we're coming to the point where the significant reduction's already taken place in the irs budget are degrading the agency's ability to continue to deliver on its mission both during the filing season and beyond. i'm sure most of the people in this room know how critical our situation is. but in case you're just back from a few months in antarctica or missed this morning's "washington post" or the release this afternoon of the story from bloomberg, i'll recap it for you. the irs budget level as ted noted for fiscal year 2015 of $10.9 billion is $1.2 billion less than it was five years ago. the irs is now at its lowest level of funding since 2008. if you adjust for inflation our budget is now comparable to where we were in 1998. while our budget has been shrinking, however, the taxpayer growth -- taxpayer base has grown by millions. we've also taken on many new

responsibilities such as implementation of the foreign account tax compliance act and the tax-related provisions of the affordable care act. since 75% of the irs budget more or less is personnel the agency has been absorbing the budget reductions mainly by shrinking our workforce. as a result we ended fiscal 2014 with more than 14,000 fewer permanent full-time employees compared with 2010. we expect to lose another 3,000 more or less through attrition by the end of this year. you might think that shrinking an agency might force it to do more with less. that may have been true in the early going. we have heard the comments on the hill and elsewhere that our funding is deliberately lowered to make sure we think twice about spending. the irs does need to be as efficient as possible and be careful stewards of funding that we receive from taxpayers. we now save over $200 million a year as a result of non-labor cost savings put in place over

the last several years. after five years of budget cuts and a hiring freeze that has lasted for four years, people need to understand that the irs is going to have to do less with less. it means that both enforcement and taxpayer service will suffer. the problem is that our levels of staffing are insufficient to deliver on our mission. consider that the 13,000 employees we've lost since 2010 include 5,000 key enforcement personnel. these are the people who audit returns, conduct collection activities and criminal agents who investigate refund fraud and other cases. we estimate the drop in audit and collection case measures this year will translate into a loss for the government of at least $2 billion in revenue that otherwise would have been collected. essentially, the government is foregoing billions of dollars to achieve budget savings of a few hundred million dollars. since we estimate that every one

dollar invested in the irs budget produces at least $4 in additional revenue. the cumulative effect of the irs -- of the cuts in the irs budget enforcement personnel alone since fiscal 2010 results in an estimated 7 to 8 billion dollars every year in lost revenue for the government. as some have called it this amounts to a tax cut for tax cheats. on the services side this year we were forced to substantially reduce hiring of extra seasonal help we usually have during the filing season. as a result our phone level of service at the start of the filing season was just 54%. sxaz we've gotten closer to the end of the filing season it dipped below 40%. that means more than six out of ten people who called could not reach a live assister. that's simply unacceptable. especially when you consider our goal for the phone level of service in a given year is 80%. it impacts our business side as

well. it may sound like good news to some corporation that's we're conducting fewer audits. but the ones we do are likely to be more burdensome because we have fewer examiners are specialized training who understand complex business issues. as for tax law guidance needed by businesses we are having to target our resources more to retail issues involving individuals and their 1040 filing forms. that means guidance sought for more highly specialized issues in a corporate area will likely suffer as a result. the risk to our tax system posed by underfunding goes deeper than uncollected revenues, unanswered phones, or unpublished guidance. service and enforcement need to be viewed as two sides of the same compliance coin because our system is built on the notion of voluntary compliance. if people think they're not going to get caught if they cheat or they're just fed up because they can't get the help they need from us to file their taxes, the system will be put at

risk. risk. consider that a 1% decline in the compliance rate translates into $30 billion in lost revenue for the government over a year. as everett turkson would have said, you're into real money. in describing the situation we find ourselves in it's important not only to point out what the irs can't do but also what we can do and are still doing. while the agency is still cutting in discretionary areas over which we have control we continue to deliver on core functions. a great example is the current tax filing season. which has gone smoothly in terms of tax return processing and the technical issues around it. and the operations of our i.t. systems. through april 3rd the irs has received more than 99 million individual tax returns on the way to an expected 150 million. we've issued more than 77 million refunds for more than $217 billion. one thing i've been trying to

get people to understand is delivering the filing season doesn't happen automatically and it doesn't happen by accident. it happens because of the talent, expertise, and dedication of our workforce. to get ready for this filing season irs employees built into the systems that we use the back end of the affordable care act the front end of fatka and the tax extenders legislation passed in late december, all without missing a beat. i told employees a year ago during my visits to irs offices around the country that if we could pull this off it would be an amazing testimonial. to the skill and dedication of irs employees. and that's exactly what it is. in the public sector, as many of you here know, when things go well they often pass unnoticed. so i view part of my job to make sure the public, the press, and the congress understand the magnitude of this achievement and see it for the great accomplishment that it is. let me give you an illustration of the disconnect between our funding levels and our

responsibilities. last december just three days after cutting our budget by nearly $350 million congress passed legislation requiring the irs to design and implement two new programs by july 1st of this year. and the punchline is those programs, the able act and the certification requirement for employer organization -- professional employer organizations, didn't come with any additional funding. but we're a can-do agency and we'll play the hand we're dealt, and we'll do the best we can. that's because we have no choice but we do statutory mandates even if because those mandates are often underfunded implementation comes at the expense of taxpayer service and enforcement. it's a strange position for us to be in. the irs is such a capable energy that congress keeps giving us new responsibilities. we deliver on those responsibilities and we deliver smooth filing season year after year, and then they tell us, well, we'll give you less money

and see how you do next year. up until now we've been able to manage. but i'm extremely concerned that the cracks are beginning to show. i've said it before but i think it bears repeating. i never found an organization in my 20 years in my private sector experience that said i think i'll take my revenue-producing arm, set it off to the side starve it for funds, and just see how it does. but that's what's happening now to the irs. and so my view is what i want people to understand is that this is a real threat. that the capacity of the agency over time to meet its mission, people need to know what's at stake. the problem goes beyond not having enough employees to adequately run current operations. the continuing underfunding of the irs threatens our ability to properly develop our workforce so that we have a viable operation five to ten down the road. as i mentioned part of the problem is simply having fewer people. the high water mark of the agency's workforce in terms of size was in 1992 and since then we've lost more than 30,000

full-time employees and are at our lowest level since the '80s. the current composition of the irs workforce also presents a challenge. the problem is simple. our workforce is maturing at a rapid rate. in fact, a portion of our workforce over 50 years of age has been growing steadily during the last several years. today more than half of our employees are in that age group, and we estimate that by next year more than 25% of the irs workforce will be eligible to retire. by 2019 that number will be over 40%. meantime the number of irs employees under 30 has been steadily declining and now is less than 3% of our workforce. 1900 people out of 300,000. a baby bust. the risk to our future workforce is generally overlooked in our funding discussion and yet this issue is critical to the future of the agency and will only grow in importance in the months and years ahead. as i've noted alongs the way my

term will end before the full magnitude of this problem is visible to the outsiders. but it would be irresponsible to just slide along without beginning to address the situation. in talking about issues posed by the underfunding of the agency one of my biggest concerns involves our inability to fully improve and modernize our information technology systems. because of inadequate resources the irs is operating with antiquated systems that are increasingly at risk as we continue to follow behind in upgrading both hardware infrastructure and software. despite more than a decade of upgrades to the agency's core business systems, we still have very old technology running alongside our more modern systems. as i've sidaid it's a model t but has i a great gps system, a wonderful sound system and rebuilt engines. but it's still a model t. we have many application that's were running when john f. kennedy was president. at a cybersecurity meeting last

week the code they use has been out of dpatfof date for so long it has the unintended effect of creating problems for hackers who may be hacking in and trying to figure out how the system works. that's our case for adequate funding of the irs but i think we need to broaden the discussion. i am increasingly convinced the irs needs to do more and take a different approach and one that doesn't just rely on resources. our goal isn't merely to get enough funding to hire back 13,000 people and go backwards in time and perform the way we used to. we are not going to build the irs back to the year 2010. we need to be looking forward to a new and improved way of doing business. this involves looking at the future in a more comprehensive way and considering how we can take advantage of the latest technology to move the taxpayer experience to a new level. and do it in a way that's cost effective for the government. in particular, we're focused on how best to use our limited information technology

resources. our goal is for taxpayers to have a more complete online experience for all their transactions with the irs. the online experience should give everyone confidence in knowing that they can take care of their tax obligations in a fast, secure, and consistent manner. the goal is not unrealistic. we're not trying to go to the moon or mars. we're simply saying that people should xb the same level of service when dealing with the irs in the future as they have now from their financial institutions whether it's a bank, morning company or brokerage company. the idea is taxpayers would have an account at the which is they or their preparers can log in securely, get all their information about their account and interact with the irs as needed. most things the taxpayers need to do to fulfill their obligations could be done virtually and there would be much less need for in-person help either by waiting in line at an irs assistance center or calling in by phone. improving service to taxpayers

in this way can also help us on the compliance front. we need to be faster and smarter in that area. with a more modern system the irs could identify problems in tax returns when a return is filed rather than coming back to taxpayers years after the fact while the meter is running on potential penalties and interest. we want to interact with taxpayers as soon as fobl so that those issues can be corrected without costly follow-up, contact, or labor-intensive audits. and it's not as if all of this would be new. to the extent we've been able to even with our budget constraints we've made sichblt improvements to our ability to serve taxpayers. for example, one of our most popular features on irs.gov is the where's my refund electronic tracking tool. taxpayers have already used it more than 187 million times this filing season's did and is very close to you are spags the total for all of last year. i always try to note it doesn't mean there are 187 million taxpayers. there are some people who just can't resist punching the button

to see where their refund is. another example is get transcript which was launched last year. it's a security online system that allows taxpayers to view and print a record of their irs account in a matter of seconds. so far this year taxpayers have used this application to obtain more than 15 million copies of previously filed tax information. in both cases without the online applications all of those people would have been remitted to either calling us on the phone trying to call us on the phone, or walking into one of thundershower assistant centers. without them we've been able to provide better service than we would -- even though it's hard to imagine how it could get worse but it's better than it would be if all of those people were on the phone or standing in line. so while we already have a few of the building blocks in place we still need to engage in a full-court press. i went to duke. so i'm using terms like full-court press today just because it seemed right. in an organized way to build toward a better online filing experience. in moving toward this future

state i should mention that the irs will continue the extreme le valued partnerships we have with the private sector. these partners run the gamut from the tax industry, from tax professional return preparers to developers of software and other projects. they're critical to our ability to run a system that helps millions of people each year fulfill their tax obligations. and we'll look to our partners for assistance as we continue down this road. i would also point out that as we improve the online filing experience we recognize the responsibility we have to serve the needs of all taxpayers, whatever their age income, or station in life. improving service to taxpayers must include special consideration for those who aren't comfortable in the digital environment or cannot afford to or don't have access to online transactions. in the end our ability to improve both online and traditional challenges of taxpayer service will depend as we said on future levels of the agency funding. but even with our budget constraints we are going to

continue to find some funds to support these efforts to build toward the future even at the expense of other areas of activities. otherwise, if we just wage a guerrilla style fight every year through the continuing funding challenges focusing only on the presence, we'll wake up in five years and be no further down the road than we are today and in fact we'll be five years farther behind. so that's our story. the changz facellenges face the irs today leave policy makers with a clear choice. a decision to adequately fund the irs will give us the tools we need to fulfill our mission and build for the future. a decision to keep underfunding the agency will punish taxpayers, reduce the revenue needed to fund the government, and inject risk into our system of voluntary tax compliance. i will continue urging the congress to make the right decision. i took this job nearly 16 months ago because i understand the critical role the irs plays in the lives of taxpayers and in the operation and funding of the

government. i know i speak for the thousands of professional dedicated employees of the irs when i say that we're committed to continuing to do all we can to build for the future in the interest of serving the american taxpayer. thank you, and i'd be happy to answer any questions you have. [ applause ] >> thank you. thanks. >> mr. koskinen thank you very much for that very interesting talk. the plan here is the commissioner and i will chat for

about ten minutes and then you all will have about ten minutes to ask some questions. i'm going to ask you to please make them questions and not speeches since there's a limited amount of time. in respect of your fellow audience members, just keep them as questions. >> you can send me the speeches afterwards. >> absolutely. and then the panel will come up and they'll have an opportunity to discuss this. commissioner, i want to start by saying i didn't think you could make yourself less popular but then you had to talk about going to duke. i couldn't help but notice that in the last few days two candidates have announced for president. one of them said this -- the irs is too big, too powerful, and we should absolutely scrap the code. another place he said we should axwolbolish the irs and preserve our liberty. and the other said i think we ought to aboshl the irs. to try to put this in corporate terms, and i know it's not an exact analogy, but it is as if people want to run for chairman of the board who really would like to eliminate the

enterprise. how does an organization respond to that? >> well as i've said in the past i understand that there are different ways of framing issues as you go. i think in both cases what people are basically saying, and i think resonates with most people and the public is the tax code's too complicated. so some people talking about abolishing the irs have said everybody ought to be able to file on a simple small card. but the only way you can do that is if you had a very simple tax code. and i've made it clear from the start that while tax policy's the domain and province of the treasury department, the white house and the congress we're just the tax administration, once i've said that i've also told members of the congress that anything they want to do to simplify the tax code we'll do our best to try to help them be supportive. because it is beyond the pale of understanding. i don't know how anybody

understands the full sweep and impact of the code. chairman camp of the ways and means committee before he retired introduced a very comprehensive proposal for tax reform and had a way of framing it that the tax code was longer than the bible without any of the good news. i told him my rule of life is i will give him credit for that statement for a year and then i'm just stealing it for my own as we go forward. but i do think as i've said, unless you think you can run the government with no money, if people are going to file a short form or even a longer form, somebody has to be there to collect the money. somebody has to make sure that the numbers are right. that somebody is reporting the amount -- right amount of income against which they're applying a simple formula, which i assume would be simple. i view it as a concern, cry against the complexity of the tax code and desire to make it simpler, and arefrom my standpoint if we could do that it would be a great step forward and i think the irs employees would agree

with me. >> that said it's been a long time since congress only asked the irs to collect money. you now run a large welfare organization through the earned income credit and the child tax credit. you're responsible for managing a huge health insurance program. is it realistic for congress to continue to expect a tax collecting agency to do all of these things that really have nothing to do with collecting taxes? >> it's a good reminder that what i should have said as well is if you're going to have a simple little card that you fill out your adjusted gross income you then have to figure out what you're going to do with all these programs. the tax credit programs that we run. you either have to abolish them or you have to have a more complicated form for the people eligible for the education tax credit, the child tax credit, the earned income tax credit as you said. it is, again, ironic as shown in december that at the same time people attack the irs they keep giving us more things to do. and to some extent particularly

in the social welfare area that's because they ultimately understand, even though they may not say it, that we are very efficient and that in fact we will get the job done. and in fact, one of the points that -- if i had a little more time about the issue they're updating, tax efficiency from around the world and the irs spends half the amount to collect a dollar of revenue than the tax administrations of germany, france, england, canada and australia. that will give you some indication how efficient we are. so you're right. now now, i met with tax administrators from around the world an a number of them have tax credit programs and i think again because people have discovered it's a simple way to reach out to the con stiff wents. you have 160 million individual tax returns, so they cover the

gamut of people across income strata except for those who don't make enough to file. it is true that the tax income -- on the one hand, we have on obligation to make sure everybody that's eligible knows about the program and applies. when you reach about 80% of the program, partly because of 80% of the beneficiaries turn over every year. people get a better job or quit working and are no longer eligible and the other hand we have to try to make sure that only the right people get thing right amount. it's one of the major challenges we have because and i was looking at the educational tax credit draft report from the inspector general, congress has a way of giving us requirements to pay tax credits we do

educational tax credits we don't get the information, we're not required to get the information from colleges, university, until the end of march, but people are expecting their credits in january, february and into march. it is more camp complicated than you'd expect. most people thinking about the irs and paying their taxes have no idea about the amount of money and time and effort intend running programs in fact, a social welfare agency. i'd be happy to give some of these programs over to somebody else, hhs or the labor department and our life would be a lot simpler. >> you have obviously been pushing very hard for the coolidge to give you more money. fz not sure whether you think it's likely you're going to get much more money. let many ask you to get out your crystal ball and ask if you don't get additional funding, not ooempb talking about more cuts, but if you don't get additional funding, what will

the irs look like in five years? >> that's our concern. when i got there, deputy commissioner and i have been talking about what the vision of the future ought to be. what should the irs look like and that's what i've talked about what the future ought to be for an individual taxpayer. the concern i have and that's where we've begun, got the chart that showed we had 650 people out of 25, it became clear to me that we have a significant problem in the workforce so if we, my point about fighting your way through the budget each year, you're going to wake up one day as somebody said recent riley riley, if we don't do something about this and we look at the age ageing, we're going to go out of business. we're going to have this significant. so with flat flat as has been the case for the last five

years, we're successful and just got held flat for 20 16 it means that the good news things won't get a lot worse, but the bad news is they won't get significantly bert. so, part of our challenge in trying to build toward that future is trying to find ways to make modest ways in information technology to try to move more and more people on to the web where we can and give them better services quickly and try to move them out of the channels of calling us and walking into our taxpayer system center so the people who need to get a hold of us, whether they need to get access to the web can get through on the phone or walk in service. i think if we go flat the next five years, inflationary forces and no additional responsibility, it's been a while since we had in, the irs is going to become dysfunctional

and my concern is efforts of 50, $60 billion is that some point, and as i said, that's not an on off switch. you can't say wow, i didn't know that was going to happen. part of the reason i am so serious about this is that people need to understand the five-year implications and ramifications of where we're headed and as i've said in other contexts, i don't want anybody to say we didn't warn you. you should treat this as your warning that this is a real problem, it's a serious problem and we're beyond the sim police it have thety of saying we'll cut your budget or make sure you know what you're doing. cut our budget again and i know what we're going to do. we're going to have fewer people. technology that doesn't respond effectively. we'll do fewer audits and if that makes somebody comfortable that we're now paying more

attention to what we're doing, that will be the result but it seems to be a fairly strange way to run an organization where we are the producers of 92% of the revenues that were on the government. >> one last question. have you seen any evidence of compliance? >> no. we don't in compliance is a difficult thing to measure. the economy has been good, so tax revenues go up. not so good revenues go down. that should tell you enough about compliance. rose mary's good. a research and statistic organization does tax staff analysis. we audit 13,000 returns a year for three years. to give us 40,000 returns in which we can and with go through those in detail, not to catch people who haven't paid their taxes, but to see what is going on with compliance. that's how we know what our improper payment is more or less with the earned income tax credit.

so, we expect to issue the next updated tax stat report. which will give us some indications where we are with compliance. the problem with compliance is that we're not measuring 1% of the throw, so my concern is when ever it gets to be visible and noticeable, it's going to be more than 11% and a lot harder to fix. >> thank you. a few questions from the audience. >> yes, sir. please wait for the mike and introduce yourself. >> the opportunity given the compensation structure of the federal government, it's important to hire more paid younger people to replace the older people as they retire to help solve some of the budget problem. >> it would. if we weren't in a position where as the only way we can deal with the budget cut to to

say we wouldn't hire anybody. the only way we've gotten down by 13000 people is attrition. but you're right. the other side of the coin the people who are retiring have wonderful years of experience and great knowledge and insight so part of the challenge is how do we engage in a management program. we just started over the last year, which is how do we capture as much of that experience and those insights and the way we do -- at some point, my concern is when you simply say we're not hiring, then where ever the turnover is greatest, you have the bigs need, so as often happen, i saw it in the private sector a lot. we don't have enough support because we haven't hired anybody, so we haven't enough secretaries or administrators. some places, we don't have enough people to run the i.t. help desk. then you're right over time, an organization to bring young

bright people in. they'll start early in their career, but less experienced, which is why even in the worst of days this career and next year we're going to continue to train people because i don't think we can afford to send people out to deal with the public who don't know what they're talking about. but it goes back to the baby bust problem. not only do we need younger, experienced, energetic people coming into the workforce, in five to ten years when we look at need for a front line managers and supervirzs, if we keep going the way we're going we're going to look at a group and there's not going to be anybody there, so it has all of these factors to it. but you're right. as we balanced out the workforce over time, that would actually -- i think if we could get enough money to move forward with our information technology work the call volume would go down and as i try to get the appropriations, we're not talking about hiring more13,000 more

people. we ought to be able because we have such an antiquated system, but as terry says, we shouldn't be at the cutting edge. just fast followers. my way of putting it i'd love to be in the 20th sempkry are i.t. rather than the 20th. it's all part of that kind of single package. >> good questions. yes, ma'am. >> hi karen with brookings. you mentioned you lost enforcement. i was wondering in making those cuts to the enforcement divisions, to what degree does return on enforcement activities inform those cuts. >> actually, what we have is we have to do statutory mandates. the second highest prior thety is to run the filing season and collect the $3 trillion, so we