Servicerelated debts that they received in good faith. On another note, since this is his last hearing with us, i want to thank doctor heck for his leadership and his dedication to serving our troops, our families, and retirees over the past two years as chairman of the subcommittee. It has been a great privilege to work with him and he will be missed. Thank you, miss davis. Thank you. Thank you. I now ask unanimous consent that non subcommittee members be allowed to participate in todays hearing after all subcommittee members have had an opportunity to ask questions. Without objection, so ordered. We are joined today by two panels. The first, from the National Guard, the second will be from the office of the secretary of defense and ph the army. Well give each witness the opportunity to make opening comments, and each subcommittee member an opportunity to question the witnesses. I respectfully ask the witnesses to summarize, to the greatest extent possible, the high points of your written testimony in no more than five minutes. Your complete written statements will be entered into the hearing record. We are joined on panel one by Lieutenant General timothy kadavy, director Army National guard, National Guard bureau. And Major GeneralDavid Baldwin, adjutant general of the california National Guard. General kadavy, you are recognized for five minutes. Thank you. Chairman heck, Ranking Member davis, distinguished members of the subcommittee, thank you for the opportunity to discuss the readiness of Army National guard personnel matters. On behalf of the Army National guard, i would like to thank you for your support and commitment to our soldiers, their families, to our veterans, wounded warriors, and those who have made the ultimate sacrifice. For your Army National guard is today mobilized with more than 11,000 soldiers, both abroad and here, at home. Our soldiers are our nations and our armys greatest assets, and should be treated that way. The subcommittees interest in recruiting and retention Incentives Programs is understandable. In 2008, the california National Guard discovered inaccuracies in the number of incentive contracts awarded, and launched an investigation in 2010. The investigation revealed that the california guards Incentive Program had been grossly mismanaged, and there were instances of fraud which were discovered. As a result, california took measures to ensure these individuals engaged in the perpetration of fraud were punished. In 2011, the california Incentive Task force identified more than 17,000 california Army National guard cases that were potentially linked to the unethical management of the Incentives Program between 2004 and 2011. In 2011, the california National Guard was with assistance from the National Guard bureau, established a soldier incentive Assistance Center to assist any california National Guard member affected by the mismanagement of the Incentives Program. Every california National Guard soldier impacted received a formal written letter to inform them of this option. This center will continue to provide assistance to each affected soldier. As a result of the issues with the california Incentives Program, the Army National guard took numerous steps to improve oversight within our incentives process. In 2010, the chief of the National Guard bureau, then general Craig Mckinley ordered a review of all Army National guard recruiting and retention Incentives Programs across all states, territories and the district of columbia, which found no systemic fraud. In 2012, the Army National guard completed the fielding of the guard incentive management systems, known as gims, to all states, territories and again the district of columbia, which now provides a centralized Oversight Program for bonus and incentive payments. In 2016, an external review of the army by the Army Audit Agency of gims validated its effectiveness and found the system substantially improved the controls throughout eligibility, monitoring and payment phases of the incentive process. State adjutant and generals have provided annual statements of insurance since 2012, documenting internal controls processes to help prevent similar situations from occurring. Additionally, based upon reviews and assessments of the entire Army National guard fraud in the Incentives Program is not a nationwide problem. In november 2016, the United States property and fiscal officers provided additional assurances while reviewing their state Incentive Programs that there are no issues outside of what we know to be normal. Currently, Mister Peter Levine performing duties is the undersecretary of defense for personnel and readiness, is chairing a across functional team with the National Guard bureau, the United States army, the office of secretary of defense general counsel and the defense finance and accounting service, dfas. This team is leading the effort to expeditiously resolve the cases involving the affected california Army National guard members. I understand you will hear from secretary levine a little bit later this afternoon. Secretary of defense carters guidance is to adjudicate all cases by july 1, 2017. The National Guard continues to support the cross functional teams process to ensure it soldiers case is fairly and equitably reviewed, with due process afforded to each and every soldier. In closing, i assure you that the National Guard has worked hard to implement appropriate effective internal controls across the 50 states, the three territories and the district of columbia, and to prevent similar systemic fraud from occurring in the future. Thank you and i look forward to your questions. Thank you general. General baldwin, youre recognized for five minutes. Thank you, mister chair and Ranking Member davis, and the members of the committee. I do appreciate very much you taking up the this important issue to be able to help our soldiers. As general kadavy mentioned in 2010, a whistleblower and a very astute auditor, uncovered signs of potential fraud within our Incentives Program in the california National Guard. That resulted in a fairly broad investigation by the federal department of justice that went through the course of of the three years. The governor relieved my predecessor in march 2011 and recalled me from afghanistan in april of that year in order to take charge of this organization and with the mandate of cleaning up this and some of the challenges. I immediately ordered full investigation on our side into this matter to do a couple things. One is, i wanted to see if there is any other cases of fraud were out there, that the federal government had not begun to investigate picked up on. The second was to hold leaders accountable to find out why did this happen and what what what were the problems. We found that there is a complete lack of internal controls, so instituted an internal control system in order to prevent these problems from happening again, and then we held the leaders accountable that that failed to provide the proper oversight or create a command climate. In that we we punished with the california National Guard 61 people, including firing four general officers and full colonials. The feds prosecuted 44 soldiers some of those prosecutions continue to go on and and several people were put in jail for the fraud that they had committed. But as general kadavy mentioned, we also recognize that there were a lot of soldiers that got caught up in this, that through no fault of their own had taken money from the federal government that they were not necessarily due or couldnt document why they did deserve that money. So, we established the soldier System Task Force in 2011 in order to address those problems. Because of the fact that we had found a 91 error rate in the in the initial audits that wed done, we were compelled to review every record. There were 17,000 soldiers and about 30,000 records; we are able to get through about 12,000 of the records. Of the 12,000, we found 4000 soldiers that that we were able to help keep their money to the tune of about 39 million because they had minor errors or problems and or contracts and were very proud of the work that our task force did in order to help those soldiers keep the money that they in fact deserved. Of the remaining soldiers there were 1,400, only 1,400 that we actually sent to recoupment. Those were soldiers that did not contact our task force for assistance, but also we determined had problems were probably insurmountable and we couldnt support an appeal. We submitted another 1200 soldiers that did contact us for appeal because we felt that they even though there were problems in their contracts or maybe they may not have met the letter of their contract. We felt that they have served honorably and should be able keep their money. Of those, 400 cases were adjudicated by either the National Guard bureau or the army board for the correction of military records. So 400 soldiers were able to win their appeals and they were able to keep about 4 million between those 400 soldiers. Another 400 soldiers even with our endorsement to help them keep their money, unfortunately lost their appeal and and have not gotten their money back. They lost about 3. 3 million amongst them. And then finally there is 400 cases that are remaining. Were very encouraged today by the actions of the congress and the legislation that has gone into the ndaa, that we think goes a very long way to help redress some of the problems that we face the frustrations that we face in trying to help our soldiers get through this. Were also very encouraged by the actions that secretary carter and his team at osd have taken in order to increase the bandwidth to be able to adjudicate cases quickly, fairly and with standards that err on the side of honoring soldiers and their service and helping them keep their money. And, again thank you very much for the opportunity to discuss this today. Thank you general baldwin. So first, my first question is that for general kadavy. Concerning the key recommendations in the us army audit agencies followup review that was issued in may of this year, they noted that while the ngb had made progress in implementing many of the control procedures outlined in their prior audit that not all of the internal controls had been put into place. Can you please give us an update as to where ngb is in and implementing the final recommended controls is put forward by the aaa . Yes, chairman. Thanks for the question. Can i just ask you to pull that microphone directly, kind of like a rock star . Right here . Ok. So there were there were 15 initial recommendations, of which the 2016 Army Auditing Agency followup reported that all 15 initial recommendations were being implemented and then they recommended four new additional recommendations, of which one will be fully implemented by the end of this calendar year by the end of the month december. And the other three will be implemented by the end of this fiscal year. It is about writing software and updating systems to to get after ph . Particularly, its related to officer bonuses and army medical recruitment of experts to make sure we are tracking their contracts as we do with all others. And i would ask that you keep the subcommittee apprised of the progress in implementing those final for controls. We will, chairman. And while you noted in your testimony that there was no systemic fraud across the National Guard, has there been a review to look at whether or not there is widespread administrative errors. And general baldwin mentioned 91 percent error rate in what they reviewed in california. So while there may not be criminal fraud taking place, what about the administrative errors that might be more common across the National Guard enterprise . So chairman, the chief National Guard bureau at the time, general Craig Mckinley asked us o do a survey of the other 53, states, territories and district of columbia, which began late 2010 completed 2011. And we did the agenda identified some some systemic problems, particularly related to the lack of oversight, no separations and duties, inadequate training, outdated regulations, lack amount manpower and overall tracking, but it said no idespread fraud. So we were already working on the gems ph system. They believe gems accounted for most of that as as done, as shown through the army auditing agencies follow on recommendations and where were t. And i can just give you a quick update. So, on average, we do about 16,000 incentive contracts between 2011 and 2015, the latest year 2016. We do about 1,200 recruitments on average for normal processes which is about 7 percent, and you listen to some of the errors that were previously in and we have cut that down significantly. And the majority most of those recruitments are for of contractual issues when a soldier leaves before the end of their enlistment. . Show less text joe heck all right, thanks. General baldwin, you listed some of the other numbers of individuals that were either disciplined or charged. Certainly we have only heard in the in the open media about the one nco that seemed to bear the brunt. But you again just list for the record, the numbers of individuals other than that one nco who was incarcerated, whether it is administrative, reprimand or other discipline procedures . Yes, mr. Chairman. Ill start with the the cases that were prosecuted by either the feds or in some cases, some district attorneys took up the fraud cases. That was 44 soldiers in total, of those of 26 were prosecuted and found guilty and convicted. There is another 15 or so that are that are pending, prosecution is still ongoing and then the remainder of the cases were either dismissed, which is just a handful, i think its only four that were dismissed or were acquitted. Then on our side, within the military, we have two options. We can do you do ucmj action which can include up up to including Courts Martial or administer action. We initiated Courts Martials on seven personnel. It was six officers and one on enlisted soldier. Those cases were dismissed by the military judge either for lack of jurisdiction or for lack of evidence. But we did go after 61 people on both on the Receiving Side, so people that we had evidence that had committed fraud but didnt rise to the threshold that one of civilian prosecutors would take would apply the resources to take the case, so we took the case. And then on there also many, many cases of people that were in the chain of command that we couldnt prove that they committed fraud but as i mentioned before, were lax in their oversight or established support inaudible command climate that we took action against. The most common action we took against the Senior Leaders was to give a formal reprimand and fire them. And that again included four general officers and two two colonels. And of all the cases that you found scattered across the california guard, did it seem like these were cases, whether it was up to one individual in a particular unit or did there seem to be collusion was this a ring of individuals of all the folks that you mentioned that were actually doing this on purpose or just happen units apart from some type of organized activity . David baldwin so it was it was statewide. It was across on nearly every unit, and where there were cases of actual fraud, it was a bilateral arrangement between the Master Sergeant that ended up going to prison and the soldier that was receiving the money. And in those cases either we or the federal government were able to prove and show evidence that there had been collusion were the the incentive was offered, and one or both parties admitted that they shouldnt be doing it, it violates rules, regulations, and they did it anyway. Joe heck and then just real quick, you mentioned or 1,400 cases that had insurmountable problems. Could you give an example of what those some of problems might have been that prevented them from Going Forward on appeal . David baldwin sure. Most common would be people that that the failed to serve the term of their contract egregiously, not just falling short just by a few days or months, but by years. People that enlisted never showed up to basic training, people that that we had to throw out for methamphetamine use, incarcerations, and those types of problems that are that are not compatible with military service. Joe heck and problems that would happen regardless of component, regardless the california Nati