Ensuring Disaster Relief Funds Are Spent Wisely

Testimony before the Subcommittee on Economic Development, Public Buildings and Emergency Preparedness

Chairman Shuster, Ranking Member Norton, and Members of the Subcommittee, thank you for the invitation to testify on the important topic of disaster relief in general and recovery efforts associated with Hurricane Katrina specifically.

As Chairman of the House Government Management, Finance and Accountability Subcommittee - the Subcommittee charged with oversight of the federal government's finances, as well as agency inspectors general - let me assure you that I share your commitment to ensuring that each and every dollar appropriated for hurricane disaster relief in the Gulf Coast region is spent wisely, efficiently, and effectively and that those dollars reach their intended recipients. 

In the wake of the terrible devastation caused by Hurricane Katrina, Congress has appropriated more than $60 billion for the immediate relief effort.  These funds must be spent in a way that ensures that the people in the affected areas of Louisiana, Mississippi, and Alabama are able to recover from this devastating event.  Any dollar lost to fraud or waste is a dollar that does not make it to someone who is in need.  This funding is too important to be misspent, and that is precisely why, in early September, I, along with Government Reform Committee Chairman Tom Davis, introduced legislation to establish a Special Inspectors General Council for Hurricane Katrina, H.R. 3810.   

In my experience as Chairman of the Government Management Subcommittee, I have seen firsthand the good work of agency inspectors general.  Their unique relationship with both the agencies they oversee and the Congress, to whom they report, provides an ideal check on the system.  Inspectors general have long stood as a bulwark against fraud and mismanagement. 

When Congress passed the Inspector General Act in 1978 in response to major management scandals within the federal government, we added an important balance to our system of separation of powers.  Congress envisioned Inspectors General as independent, non-partisan, and objective.  Since their creation, Inspectors General have been largely successful in carrying out their mission, reporting billions of dollars in savings and cost recoveries, as well as thousands of successful criminal prosecutions. 

We should not rush to condemn or abandon this existing accountability structure.  There is no reason to believe that our existing IGs will fail us in the wake of Hurricane Katrina, provided that we give them the resources and flexibility needed to succeed and a mechanism to coordinate their actions.

The Department of Homeland Security Inspector General has already taken proactive steps to ensure the appropriate expenditure of funds, not just after the fact, but in real time, as those funds are being spent.  Following Katrina, the DHS IG immediately assigned 12 personnel to monitor operations at FEMA's Emergency Operations Center to stay current on all activities and provide on-the-spot advice.  The IG has also deployed auditors and investigators to field offices in Baton Rouge, Louisiana, Jackson, Mississippi, and Montgomery, Alabama.  The DHS IG is coordinating the efforts of 13 Federal inspectors general offices, whose agencies are involved in the relief operations.  These offices combined have committed more than three hundred auditors and investigators to the effort. 

 The DHS IG is also monitoring - in real time - major contracts and purchase card transactions to ensure that federal acquisition regulations are being adhered to, and that expenditures are necessary and reasonable.  This is just the beginning.  We need to ensure that these IGs have the continued resources necessary to do their jobs and that the appropriate coordination occurs. 

In addition to coordination, the DHS IG needs the flexibility to adapt to circumstances.  In the weeks following Hurricane Katrina, the DHS IG adapted the structure of his existing office to create an Assistant IG specifically for Katrina Oversight, drawing on the expertise of the former FEMA CFO.  They did not wait for Congress to create a position, they were able to create it using their existing authority.  This type of flexibility is critical to success, and anything we do in Congress must enhance - not undermine - the authority of the existing IG structure.  Anyone who has heard the DHS IG in his many appearances before the Congress over the past two months would agree that he is doing yeoman's work.  He is taking a proactive approach with an eye toward preventing fraud and mismanagement - not just detecting it after the fact.  Within days after Katrina, the DHS IG was already in the process of implementing many of the recommendations we are discussing here today. 

Maintaining the IG structure while ensuring effective coordination is the ultimate goal of my legislation.  The funding related to this recovery and rebuilding effort will not flow through a single authority, but through each affected Federal entity.  In other words, housing funds will be managed by HUD, funds for repair of levees will go to the Army Corps of Engineers, disaster loan funds to the Small Business Administration, and so on.  Each of these Federal agencies has an existing oversight and accountability structure, led by its inspector general, whose responsibility it is to ensure that funds charged to them are spent as intended.  In the absence of an overall authority through which all Hurricane Katrina funding will flow, we do not need to add any additional layers of oversight, what we need is effective coordination.

In addition, almost all of the entities involved in the Hurricane Katrina recovery also have presidentially-appointed, Senate-confirmed Chief Financial Officers who operate under the CFO Act of 1990.  As you know, this act requires that all major federal agencies submit to a financial audit, and along with other laws and regulations helps to ensure the proper stewardship of taxpayer dollars and the development of effective financial management systems. 

Further, DHS faces the most stringent internal control requirements of any Federal agency under a bi-partisan law I sponsored along with Chairman Davis and others.  The DHS Financial Accountability Act, which was signed by the President on October 16, 2004, subjects DHS to requirements similar to those mandated for private companies under Sarbanes-Oxley.  The system of internal controls put in place in compliance with this law will provide the fundamental tools for effective management of these funds.

The proper way to ensure the most effective oversight is to leverage our existing resources and to let the accountability structure that Congress has put in place work as intended. This structure exists today, has no learning curve, and has already demonstrated leadership by ensuring that resources were deployed to the Gulf region in a timely manner.  With the proper resources, flexibility, and coordination, this existing structure is our best defense against waste, fraud and abuse.

Recognizing that the recovery effort will involve the full breadth of the Federal government, President Bush established by Executive Order a Coordinating Council to address recovery and reconstruction in the Gulf Coast earlier this week.  The President's Council is comprised of Cabinet Secretaries from the affected agencies.  My legislation would provide an important parallel to this group by establishing an accountability council comprised of IGs from those same agencies.  The President, again by Executive Order, also designated a point person to coordinate the effort from the Department of Homeland Security.  By designating the DHS IG as the Chair of the Special IG Council created under my bill, it would again parallel the structure put forth by the President.  As has been the case over the past quarter century, the IG community would serve as an effective counterweight to the executive branch using a parallel accountability structure.

We all share the same goal:  full accountability.  As we look to accomplish that goal, we need to be mindful not to impede the work that is going on right now with an unnecessary level of bureaucracy.  And we need to follow the model established by the Inspector General Act, where the accountability structure mirrors the structure of the program it oversees.  A Special Council of Inspectors General headed by the DHS IG will accomplish the goals we share in the most effective manner.

Thank you, Mr. Chairman.  I look forward to answering any questions.