Daily many 1979 cspan was created as a Public Service by americas Cable Television companies. And is brought to you today by your cable or satellite provider. At a Senate Hearing on government waste federal officials testified about ways to save money by preventing fraud and removing a necessary regulation. Senator john johnson shares Homeland Security and Government Affairs committee. This is an hour and 0 minutes. 40 minutes. All right. [silence] morning this hearing will come to order. I want to welcome my witnesses, appreciate your time, your testimony, and look forward to your oral testimony and answering pretty interesting questions. I frequently say from this podium that general and Inspector Generals are, you know, our goal two agencies in government. Doing so much to route out and identify and eliminate ways fraud abuse and prals which this hearing is about is reports by gao that started with a simple amendment offering and by senator colburn in increase in debt ceiling something we all hate to do. But if were going to do it it is kind of to get some measure of control and Pretty Simple concept asking the gao to start issuing reports due to inspection on different duplicated programs as resulted in 75 billion dollars worth of saves over seven years which is pretty remarkable based on the amount of Budget Authority that gao has 3. 8 billion over o the same time frame thats a 201 return investment that is pretty good and overall return investment is what mr. Troll scrn. Put the microphone on for this one. 1121. Inspector generals have a pretty good return as well so i do ask the the consent that my written Opening Statement get in the record. I want to start with a couple prepared here for the hearing just to put things in context, we got a recent Congressional Budget Office report on longterm debt and deficit an they always report these things as percent of gdp and we go through fair amount of effort to convert collars because i think it is a little bit more meaningful for last number of years because since couple of years since they objected. 30 year deficit is 103 trillion dollar, and moved forward in time and havent solved problem and now projected deficit over next 30 years is 129 trillion. Thats about almost 10 trillion over next decade. 37 trillion dollar in the second decade, 82 trillion dollars in the third decade. And put that in perspective the entire net private asset base of the United States all asset held by business and households is equal to 128 trillion. This by the way, would be tacked on top of our 20 trillion of debt for every man, woman, child in america. What is unfortunate is it seems like nobody is really paying attention to this. Were not addressing here in congress, obviously, from the change from 103 to 109 over next, i want to put that in context and one other chart here which also puts in context with 75 billion dollars and, you know, just in no way shape or form do i want this detracting from your efforts here which i think are but same seven year period g arntion o with great work 201 save 75 billion. We have spent 25,000 billion we borrowed 6. 6 trillion dollars of that about 26 . So 26 cents for every dollar we spent we borrowed just to show magnitude of the problem here. So again i want to thank all of the witnesses were going to have pretty good discussion with Inspector General about tax and refundable tax credit and improper payment trod and abuse of that program. Obviously one of our favorite institutions are universities and one dear to my heart all three of the kids went to university of wisconsin and professor blank talking about duplication of different regulations and a imposed on Research Universities in general overregulation difficult time that universities have dealing with federal regulations on their operations then we have mr. Keith from Va Health System to talk about problems dealing with duplicated regulations in constructing Health Care Facilities for finest among us so i think this is really good discussion again all laid before us because of a Pretty Simple amendment by senator tom colburn seven years and then excellent work of gene and good people working with that. Ill turn it over to my Ranking Member. I want to comment on mr. Chairman and continue to be frustrated along with colleague and former Ranking Member senator carper who has carped on improper payments for as long as one of my favorite verbs. To carp. I think gao is such an important ally to this community and i want to take this opportunity as i try every time here to tell all the people in that building that their work does matter everyone though it is too often ignored or set aside what you all do is really important. And your tremendous Public Service and i lover associates with auditor your annual duplication reports sets out important work that you have done investigating how the federal government spends tax dollars. You consistently identify concrete steps that we can take and executive branch can take to eliminate a lot of wasteful spending. You all have saved so much money for this country. But there is, obviously, a lot more work that we have to do. I want to welcome other witnesses to hearing also today i want to especially welcome keith who was here as the leader of the v. A. Facilities in st. Louis and i also think probably other members of the community can appreciate how nice it is to have that roll off my tongue since we struggled in st. Louis trying to fill this position for literally years on end, and i think people need realize management problems in v. A. Can be bared out by the fact that we would open the head of the v. A. Facility st. Louis job position and no one would apply. Now, that tells you something. That tells you that there is a real problem in either the support these managers are get organize what were paying them but when you have a job with that responsible and nobody wants it, it means that we still have a lot more work to do in figuring out if so thank you for filling this position has been badly needed this stability there has been badly needed an thrilled to have you here today. One of the things pointed out in this years report is the problem is v. A. Has managing construction. And it is clearly we put a lot of capital in v. A. Ive been somebody banging table to get that done. I want to mac sure our facilities are first and adequate and isnt lack of facilities that is causing any undue delay or problems with our veterans getting health care. But clearly this report points out that this had is not always being managed well in terms of how these projects are being undertaken and how theyre being executed and we want to spend a little bit time on the management of those Construction Projects. I also want to echo about the tax credits. It is particularly im glad youre here. Doctor blank to talk about grants and the the problems in terms of administrative burdens on grant superintendents also administrative burdens on reporting Crime Statistics that are difficult for our universities right now. But im also glad youre here because i think we need to talk about the growth improperrer payments and new form of tax credit refundable tax credit that is the amount of easily determined overpayments in the american opportunities tax credit. It may not be as large as the other refundable tax credits doesnt mean it wont be. If we dont get a handle on this and the notion that its just as simple as double checking with universities and seeing how many hours someone is actually beginning to college is pretty jaw dropping that we are allowing a billion dollars to go out the door every year without just the rudimentary check and balances whether or not those tax credits have actually been earned by students attending higher education. So thank you all for being here. Thank you chairman for having this hearing and ill look forward to question and comments as we move forward. Thanks senator mccaskill to swear in witnesses so rise and raise your right hand. Do you swear the testimony youll give before this committee will be the truth, nothing but the truth so help you god . I do. Our first witness is mr. Eugene darrell. Comptroller general of the Accountability Office since 2010 and 40 Years Experience at the agency. Including his acting, comptroller general, chief operating officer, and head of the accounting Management Division just, darrell. Rng thank you very much mr. Chairman. Good morning to you senator mccaskill and senator peters, it is a pleasure to be here. I appreciate very much the the word that you said complementing jill and i will pass it along to those in the agency. We have a dedicated talented work force an they deserve it hear such compliments. I want to also assure this committee before i get into talking about this years duplication report that i am worried about the Overall Fiscal Health of the federal government. Issued a special report this past january, basically saying that the truest on a longterm unsustainable fiscal path and call for an action plan by the congress to deal with fiscal policy changes that are needed to be made. While there needs to be changes both on spending an revenue side with entitlement programs there are some things that can be done, and addressing overlap and duplication improper payment and tax gap are among those areas. This year in our seventh report on overlap duplication of fragmentation, we report on whats happened over the last six years with the 45 recommendations that weve made to date in the first six years. 51 of those have been implemented by congress and executive branch. 31 have been partially addressed. And 18 have not been addressed at all. As you pointed out mr. Chairman 75 billion is already accrued in savings but theres another 61 billion in the pipeline that will be accrued because of actions that have been taken so that toalings amount of savings is 136 billion so far. Now this years report adds 29 different areas that range across the federal government from the Defense Department could save tens of millions of dollars by better managing their Virtual Training programs and integrating them and simple things like advertising for recruitment purpose where theres seven dirchts advertising programs competing in same market to hundred of millions of dollars that could be saved in implementing our recommendations on medicare and medicaid. Dealing with such things as providing not adequate compensation for uncompensated care that hospitals give we think formula is outdated and doesnt really reflect the true amount of uncompensated care particularly sips it is going down with expansion of medicaid for example. Other area where they could reduce improper payments in medicare, medicaid we have a number of recommendations in that regard. Most of the improper payments of the 144 billion dollars in the federal government come from medicare, medicaid, and earn income tax credits so im glad were addressing that today and im glad russell is here to talk about that issue as well so with new areas were adding 395 open areas yet recommended suggestions. Now i recently met with omb director, and i mention to him that were going to be sepgding letters to each of the department and agency outlying our open redges recommendation and giving head of the agency these to pay personal attention to over coming months as ive done in the last two yearses. And i think this will be particularly helpful as they go through their exercise of looking at reorganizing streamlining and gaining some more efficiencies in federal government and most are open to executive brnch. But i have senate appendix to this year he asked what can congress do . Give us a list so we have 61 open matters for the congress to consider. Most of the saving has taken from Congress Taking action and most of our savings ten of billions of dollars that are still on the table that can be implemented and successfully achieved but through implementing our rengs so looking for the to continue to work with congress and executive branch which im committed to do in a process of trying to meet all new cabinet officials. And talk about our working relationship and recommendations at gao has to make their operations more effective and efficient. So thank you again for the opportunity to be here today and i look forward to answering questions at the appropriate time. Thank you very much. Our next witness i have a couple of charts, lets put up the first improper payment chart. Everybody has had in front lay the ground work in terms of improper payments on refundable tax credits in first three programs, earn incomes tax credit in 2015, correct . 69. 8 billion dollars additional child tax credits 28. 5 billion, and American Opportunity tax credit is 4. 4 billion l. Those are pee refundable tax credits and about 24 and next chart shows how this has been a problem and duplication project going on for 20 years. And despite, inspite of all the of the good efforts and public sizing this year after year after year, it doesnt look like were making a lot of progress as you can see how much money is spent on tax accident pendture on tax credits an how improper payment rates is still above 20 . Just stubbornly stuck there so again thats kind of the the back drop for next witness mr. Jay russell george, mr. George since becoming nominated by president or since nominated by president george w. Bush in 2005 mr. George served as treasury Inspector General for Tax Administration he served as Inspector General for corporation of national an Community Service in addition to work as thpt tore general he served as member of the Integrity Committee of the Inspector General for integrity inefficiency. Mr. George. Thank you chairman Johnson Mccaskill and members of the committee, i appreciate the opportunity to testify on tax related and proper payment. Since conducted number of reviewing that evaluate irs erroneous and improper refundable tax credit payments. My comment today will highlight our ongoing work. Refundable credits are designed to help low income individuals reduce their tax burden or to provide incentives for other afnghts. Because these tax credits are refundable they have vulnerable to unscrupulous veiling who file frawngt claims. To date earned income tax credit remains only refundable credit the irs has designated as high risk for improper payments. However they report with additional tax credit and American Opportunity tax credit also known as the education credit substantially understate rick of improper payments for these credits. These credits collectively are counted for more than 100 billion claimed during tax year 2015. For pes call year 2016 irs issued an estimated 25 billion dollars potentially e erroneous payments this represents significant loss to the federal government. Assessment to improper payments continues to present challenges for the irs. This contract created by the Affordable Care act insist individuals of families for theying for their insurance. Irs is not solely responsible for administering the premium tax credit. As a result the irs cannot effectively athe risk of improper payments on its own. Irs and department of health and Human Services continue to work on a methodology to effectively measure improper payments relating to this credit. To reduce certain fraudulent and improper Payments Congress enacted the protecting americans from are tax hikes act. Among other provision act moves up the deadlines reformed w2 wage and tax statements, and other o income information related document its and a provides irs additional time to verify earn this can tags and additional tax credits that have based on income individuals report on their tax returns. According to the house way of Mean Committee these integrity provisions are projected to save roughly 7 billion over ten years by reducing fraughted abuse and improper payments in refundable credit programs. To date our work related to this legislation has found that the irs has properly withheld refund for returns with earned income and additional tax credit claims and released those returns that were not identified for ticial review. Claims are verified against data to identify claims that have supported income. Irs management indicatedded that for the 2017 Filing Season, they do not plan to use other income reporting documents to systemically reform an tax reform with refundable credit claim. Irs sited number of technical challenges and timing issues that need to be address thed in order to use the information to verify income at the time tax returns are processed. In addition, the irs was unable to implement process to identify erroneous claim for the 2016 Filing Season for taxpayers filing tax returns for prior years to claim certain refundable credits. Referred to as retroactive claims. Our tax, review of tax year 2014 tax returns filed and processed org did the 2016 Filing Season identified 35 Million Dollars in refundable credits that were erroneously paid to taxpayers following retroactive claims. Finally the irs still does not have the authority to correct tax returns during processing in which the information provided by the taxpayer does not match Informatio