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A Letter from the Editor-in-Chief

Dear Reader:

Welcome to the Fall/Winter 2002 edition of The Journal of Public Inquiry.For many years, the Journal has been a vehicle for the delivery of timelyand thoughtful information and opinion on the many issues that involveour Federal Inspector General community.

Over the past few years, former Treasury Inspector General for TaxAdministration IG Dave Williams, whose kind and generous words offarewell appear below, took the Journal from its infancy into an impressivematurity. Reviewing past issues, which are easily retrievable atwww.ignet.gov, reveals a breadth of subject matter expertise reflective offar more established publications. I join the rest of the IG community inthanking Dave Williams for his service to Journal readers, and wish himwell in his new position as Deputy Associate Under Secretary for AviationInspection at the Transportation Security Administration.

I also would like to thank those who served on the Journal’s staff and itsEditorial Board during the past years for providing the support and feed-back necessary to find, develop, and publish material of such consistenthigh quality. I hope that we can build on such a strong record andcontinue to expand the reach of the Journal for the benefit of the entireIG community, and ultimately for the benefit of the taxpayers whom we serve.

This edition of the Journal inaugurates a somewhat modified format.Most important, however, are what our collection of authors have tocommunicate. I hope you find this issue of interest, and as we continue toexplore new ways to make the Journal useful to your work, please shareyour ideas and thoughts with us. I can be reached at [email protected], and I look forward to hearing from you. R

Sincerely,

Daniel R. LevinsonEditor-in-Chief

Fall/Winter 2002 T H E J O U R N A L O F P U B L I C I N Q U I R Y 1

A Letter from the Former Editor-in-Chief

Dear Reader:

Dan Levinson, the Journal’s new Editor-in-Chief, was kind enough toallow me to say goodbye to the Journal’s loyal readers from these last 12 years. I was so pleased to have been your Editor-in-Chief, since theJournal began. I also appreciate the chance to congratulate Dan and thankhim for assuming the challenges of his new position.

I also want to thank the great staff at the Journal, under the Editor AgapiDoulaveris, and the Editorial Board. This group gave of their time andconsiderable talents, working voluntarily and in addition to their full-timeand demanding positions in IG offices. I know that you have appreciatedtheir work and the fact that they quietly operated above and beyond thecall of duty for many years to serve you.

The hundreds of authors for the Journal’s articles also deserve my thanks.Among their numbers were members of our community and distin-guished executives from numerous government departments, Senators,Congressmen, and other members of the Legislative Branch, and otherprestigious members of the private sector and academia also gave of theirtime to write articles.

The Journal has received high marks from Paul Light of the BrookingsInstitute and others for its place in continuously improving the IGcommunity. The Government Printing Office notified us that the Journalis requested by colleges and libraries across the country.

The Journal has been a place where professional ideas could be presentedand discussed. The Journal also attempted to chronicle our evolution asour professional disciplines developed and were refined. New innovationsand a strong connection with the future were also hallmarks of theJournal’s focus. The Journal was also there to chronicle changes as ourcommunity grew up from its tentative beginnings to a robust andpowerful force in government.

The Journal went online several years ago at www.ignet.gov with all of ourprevious editions available to serve as references. Many of the articlescontained in the archives have served as useful ready references.


A Letter from the Former Editor-in-Chief

4 T H E J O U R N A L O F P U B L I C I N Q U I R Y Fall/Winter 2002

Naturally I felt good about my participation in these endeavors as did theother members of the Editorial Staff and the Editorial Board. Most of all,though, I felt good about the ability to serve you. The men and women ofthe IG community have been my friends, since I joined you as one of yourinvestigators in 1979. The idea of linking us together and reminding eachother that we are part of a huge and valuable enterprise was one thatdeeply resonated inside me. It made the work enjoyable and rewarding forall of us. As you will recall from the article titles and the content of thearticles, we also viewed the work as great fun.

I was so pleased when the President’s Council on Integrity and Efficiencycontinued the Journal after my retirement a few weeks ago. I’ve continuedin government service at the newly created Transportation SecurityAdministration. The choice of Daniel Levinson as the new Editor-in-Chief was a very good one. I have enjoyed his friendship and have alwaysbeen very impressed with his intellect and great sense of humor. I lookforward to staying in touch with you all and to remaining a dedicatedreader of The Journal of Public Inquiry. R

Sincerely,

David WilliamsFormer Editor-in-Chief

M A R K W . E V E R S O NDeputy Director of Management, Office of Management and Budget

The President’s Management Agenda

An Update

After more than a year since launching the President’s ManagementAgenda, we have seen some success, a great deal of progress andplanning, and some, albeit little, deterioration. If we keep at this effort,

we will achieve the breakthrough improvements in government managementwe are seeking. Agency Inspectors General are a critical part of this effort.

The objective of the President’s Management Agenda is to improve themanagement and performance of the Federal Govern-ment. As President Bush said when we launched theagenda in 2001, the areas “we have targeted addressthe most apparent deficiencies where the opportunityto improve performance is the greatest.” The Agendaconsists of five governmentwide and nine agency-specific initiatives.

Since the agenda was launched in August 2001, wehave updated the Executive Branch ManagementScorecard—the device we use to measure agency statusand progress on the agenda—three times. It is thisdevice that gives the agenda momentum. The highlevel attention the agenda receives—it was covered at arecent cabinet meeting—and especially the scores

agencies are getting, tells me that we are getting traction in improving gov-ernment management.

At the time of last year’s budget, 85 percent of the major Departmentsand Agencies scored “red” in our baseline evaluation. During Fiscal Year


M A N A G E M E N T A G E N D A

Five Governmentwide Initiatives

� Strategic Management of HumanCapital

� Competitive Sourcing

� Improved Financial Performance

� Expanded Electronic Government

� Budget and PerformanceIntegration



(FY) 2002, eight Departments and Agenciesimproved their status in one or more of the initia-tives on the President’s Management Agenda. TheDepartments of Energy and Labor improved intwo categories, while Defense, the EnvironmentalProtection Agency, Veterans Affairs, the NationalAeronautics and Space Administration, theNational Science Foundation, and the Social Secu-rity Administration all improved in one category.

We assigned six agencies nine red progressscores in the quarter ending June 30. Five of thosescores improved in the last quarter. Most notably:

� The Department of Agriculture (USDA)had red progress scores in Human Capital,Competitive Sourcing, and Budget and Per-formance Integration. In the final quarter ofFY 2001, the USDA improved its progressscores to green in Human Capital and yel-low in Competitive Sourcing.

� Also in the third quarter of FY 2001, theDepartment of Transportation (DOT)scored just one green, in the financial per-formance initiative. In the final quarter ofFY 2001, the DOT received green progressscores in all the initiatives. The DOT hasmade good progress in developing effectiveperformance measures and goals to facili-tate budget and performance integration; itis one of three Cabinet agencies rated yellowin status for that initiative.

The Strategic Management of Human Capi-tal initiative is perhaps the most difficult, becauseof the challenges the Federal Government faces inthe personnel area. Looming retirements, skillimbalances, and cumbersome personnel policiescombine to present a particularly daunting handi-cap. Thanks largely to the leadership of Kay Jamesat the Office of Personnel Management, agenciesare beginning to take seriously the threat to theirsuccess that the Human Capital crisis brings. Thisinitiative is reducing layers between citizens anddecision-makers; better aligning skills with agencymissions; and, with Congress’ support, will allow

greater flexibility to acquire and develop talent andleadership.

Although progress in this initiative has beenslow to start, some agencies are taking concreteactions to address their human capital weaknesses.The Department of Energy (DOE), for example, isusing specific authorities, like buyouts and earlyretirement, to restructure and rebuild its workforcearound the skills it needs most to accomplish itsmission. The Department of Defense (DoD) hasmade substantial progress in headquarters civilianpersonnel reductions, planned reorganizations, andreductions in civilian supervisors and managers.And the USDA has identified gaps in the skills itneeds and is implementing a Senior Executive Ser-vice Development Program, a Mentoring Program,and a Career Intern Program to address these needs.

The Competitive Sourcing initiative has thedistinction of being the only initiative for which allagencies are red in status. That’s because too fewagencies have experience subjecting their commer-cial inventories to the pressures of public-privatecompetition. Studies show, however, that suchcompetitions reduce costs, generally producingsavings of 20 percent or more. More importantly,they actually improve business processes, helpingagencies improve their performance. With thisinitiative, the target of opportunity is enormous, asnearly half of Federal jobs perform tasks readilyavailable in the commercial marketplace.

The Competitive Sourcing initiative is mak-ing agencies take their commercial inventories,prepared pursuant to the Federal Activities Inven-tory Reform Act, and subject them to the forcesof competition. The initiative seeks simply to giveteeth to what has been the stated policy of the Fed-eral Government for more than 50 years. Since theEisenhower Administration, it has been the policyof the Federal Government to rely on the privatesector for commercial services. If the private sec-tor can perform these functions cheaper or better,then they ought to have the chance.

The DoD has the most experience conductingpublic-private competitions. And it has not shied



away from continuing its work in this area. TheDoD is currently conducting competitions on30,000 civilian positions that are doing jobs foundin the yellow pages. These include everything fromcafeteria to facilities maintenance, aircraft mainte-nance to supply functions. But other agencies areconducting more and more competitions. Specifi-cally in the information technology area, the DOEis moving ahead with the largest civilian agency-wide competition ever. It involves 1,000 positions ofeither current DOE employees or contractors andcompeting them with private firms to achieve thebest information technology value for the taxpayer.

In the past, few agencies have actively under-taken public-private competitions. The lack ofagency enthusiasm for public-private competitioncan be attributed, in large part, to the fact that the process we require them to go through inconducting competitions is complicated andcumbersome. That is why we have proposed tostreamline the competitive process. Our proposedrevisions to the process are contained in the revisedOMB Circular A-76. We are attempting to createan easy and well understood process with a levelplaying field for all bidders that eliminates exces-sive delays. The goals: savings and results.

Our expectation is that this new policy pro-vides a framework in which competitions can beconducted easily and quickly enough to bringabout the savings and efficiencies that public-private competitions can generate. It will meanmore of what agencies are currently doing toachieve the goals of the Competitive Sourcinginitiative.

The Improved Financial Performance initia-tive is designed to improve the ability of Federalagencies to collect and report accurate and timelyinformation needed to support decision-making.Too often today, the Federal Government hasneither. We have got to do better. That is why wehave accelerated the due dates for audited financialstatements from what the law requires, February28, to February 1 for FY 2002 and November 15for FY 2004.

For FY 2002, both the Department of theTreasury (Treasury) and the Social Security Admin-istration produced audited financial statements onNovember 15. Their effort is a testament to the factthat with sufficient effort and agency commitment,the accelerated deadline can be met. It was in largepart because of the cooperation of the InspectorsGeneral, especially in the case of the Treasury, thatthese agencies were able to produce their auditedfinancial statements by the accelerated deadline.Other agency Chief Financial Officers and Inspec-tors General are laying the groundwork for agencyefforts to accelerate their financial reporting.

Other agencies are demonstrating markedimprovement in their financial performance. TheDepartment of Labor (DOL) and the Environ-mental Protection Agency (EPA) both improved instatus for the Financial Management initiative.The DOL received an unqualified and timelyaudit opinion on its annual financial statementsand met, for the first time, Federal financial man-agement system requirements. The EPA correctedall of its material weaknesses.

Tracking and reducing erroneous payments isanother component of the Financial Performanceinitiative and one in which Inspectors General areplaying an active role. Each year, the governmentsuffers billions of dollars in erroneous payments.We are making agencies estimate the level of erro-neous payments they make and set goals forreducing them. The President’s Council onIntegrity and Efficiency joined with the ChiefFinancial Officers Council in a concerted effortto help agencies meet these goals and reduce theirerroneous payments. And Congress recentlyhelped us in this effort by passing a law requiringevery agency and every program to estimate theextent of their erroneous payments.

The Expanded Electronic Governmentinitiative is designed to improve service to theAmerican people by providing easy-to-find singlepoints of access to government services. There istremendous interdependency in delivering servicesor achieving policy objectives, both across agencies



within the Federal Government and among Fed-eral, state, and local government organizations.By leveraging interagency cooperation, we canimprove our customer service, reduce the burdenwe place on businesses, reduce costs, and increaseaccess for persons with disabilities.

Although it is often difficult to get agencies tosee the value of contributing resources to inter-agency projects, often at the same time theagencies are giving up what they see as manage-ment sovereignty, we are making progress. We areprioritizing agency information technology in-vestments together around the President’s 24initiatives. For instance, the E-payroll project isconsolidating the Federal Government’s 22 exist-ing payroll providers to just two.

A part of this initiative is improving overallinformation technology management throughoutthe government. The community of InspectorsGeneral has provided critical leadership in identi-fying the issue of information technology securityas a governmentwide major management chal-lenge. We are insisting that agencies provide evengreater attention to providing security and pro-tecting privacy.

The goal of the Budget and PerformanceIntegration initiative is to provide greater focus on performance and accountability. It requiresagencies to depict the full cost of their programsand associated outcomes. Agencies have beenstruggling for more than 10 years, under the Gov-ernment Performance and Results Act, to measurethe results of their activities. And in almost 10 years,they have made little progress. With this informa-tion, we intend to reinforce high-performingprograms and reform or terminate nonperformingactivities.

When we launched this initiative, the firstthing we did was to require agencies to combine all

of their financial and performance reports into onedocument. This combined performance andaccountability report brings financial and perfor-mance information together in one place. Someagencies are integrating more performance infor-mation with their budgets than ever before. TheDepartment of Veterans Affairs (VA) has sub-mitted a completely restructured budget withaccounts aligned with its programs. It shows howeach account in the new structure contributes tothe VA’s strategic goals and objectives. The VA iscontinuing work to define program activities, mea-sure full cost, and improve presentation for FY2005. The DOL has also produced a “performancebudget,” structured according to its strategic goalsand outcome goals, providing performance mea-sures and targets for each, and discussing meansand strategies for achieving them.

With the FY 2003 budget, we gathered what-ever assessments we could find and gave a numberof Federal programs an initial rating. This year,we have refined that process by using what we callthe PART—the Performance Assessment RatingTool. The PART assesses the purpose, planning,and management of programs. Most importantly,it also assesses the accountability and results of aprogram. In the FY 2004 budget, we are going tobegin basing budget decisions more on programresults as determined by the PART. Programs thatare “ineffective” will need to be improved or closedout. And, we are going to challenge programs thatare performing well to do even better.

The initiatives that make up the President’sManagement Agenda are designed to address long-standing management challenges. The challengesare not new. But the discipline imposed by theExecutive Branch Management Scorecard makes usapply rigorous standards and regularly assess agen-cies’ progress against them. And it is working. R

R O B E R T J . S H E ACounselor to the Controller, Office of Management and Budget

Erroneous PaymentsEstimated Error Rates are Just the Beginning

When I was asked to join the Office of Management and Budget(OMB) to assist with the President’s effort to reduce erroneous pay-ments, agencies reported around $20 billion of erroneous payments

in their annual financial statements. I now joke that in the short time since Igot here, erroneous payments have doubled. Now, that is not completely true.They have only risen by 50 percent, to $30 billion. And that is a good thing.

A good thing, you ask incredulously? Yes. Erroneous payments are abad thing, of course. And $30 billion should shock you. But it is a goodthing that more agencies are estimating and reporting their erroneous pay-ments than ever before. Estimating and reporting erroneous payments arejust the first steps an agency has to take before it can understand the scopeand nature of its payment problems.

Take, for example, the case of Medicare Fee-for-Service payments. Whenthe Federal Government first began to estimate erroneous Medicare Fee-for-Service payments in 1996, the error rate was 14 percent. Medicare reported acontinued decrease in its erroneous payment rate from 6.8 percent in 2000 to6.3 percent in 2001. In 1996, Health and Human Services Inspector Generalcredits the Centers for Medicare and Medicaid Services (CMS) for their efforts.“CMS has worked with provider groups . . . to clarify reimbursement rulesand to impress upon health care providers the importance of fully document-ing services. . . . In addition, due to efforts by [the Centers for Medicare andMedicaid Services] and the provider community, the overwhelming majority ofhealth care providers follow Medicare reimbursement rules and bill correctly.”1


F I N A N C I A L M A N A G E M E N T

1“Improper Fiscal Year 2001 Medicare Fee-for-Service Payments,” Health and Human Ser-vices Inspector General, Report Number A-17-01-02002, February 15, 2002.

Erroneous Payments

1 0 T H E J O U R N A L O F P U B L I C I N Q U I R Y Fall/Winter 2002

The Food Stamps program is also one wherewe have a good historical baseline and a downwardtrend in erroneous payments. The national FoodStamps error rate fell from 8.91 percent in FY2000 to 8.66 percent in FY 2001, the lowest errorrate ever. The case for estimating erroneous pay-ments is clear.

Based on the success in these programs, andthe increasing attention paid to an increase inreported erroneous payments, in FY 2001, thePresident’s Budget asked agencies to estimate theextent of erroneous payments made in programsthey administer that make total annual paymentsin excess of $2 billion. This includes programs likethe Earned Income Tax Credit and housing subsi-dies, as well as loan programs like student financialassistance and the 7(a) small business loan pro-gram. The programs we have targeted representmore than $1.2 trillion in annual payments.

Coming up with error rates is easier said thandone. Most programs are not administered directlyby the Federal Government. Medicaid, for in-stance, is a program that is financed with andadministered by the states. Under broad Federalguidelines, each state establishes a Medicaid planthat outlines eligibility standards, provider meth-ods, and benefit packages tailored to the needs ofits citizens. Because Medicaid encompasses morethan $225 billion in payments each year, assessingthe risk of erroneous payments is critical to boththe Federal Government and the states.

Coming up with error rates is not the end—itis just the beginning. Agencies need to identify thereasons erroneous payments are made and imple-ment policies that stop them. Despite a reduction inthe national Food Stamps error rate, certain stateshad exorbitantly high error rates. For instance, Cal-ifornia had an error rate of 17.37 percent, andMichigan had an error rate of 13.90 percent. Agri-culture Under Secretary Eric Bost is working withthose states to ensure they put policies and prac-tices in place to prevent erroneous payments frombeing made in the first place. But he is also holdingall states with high error rates accountable, levying

cash sanctions authorized by law to recover Federaldollars erroneously paid.

The Department of the Treasury convened atask force to study the causes of erroneous paymentsin the Earned Income Tax Program. Based on stud-ies the task force commissioned, the reasons for themore than $9 billion in annual Earned Income TaxProgram overpayments are: (1) the applicant claimsto support a child who is not related to or does notreside with him or her; (2) the applicant erroneouslyclaims a filing status of “single” or “head of house-hold”; and (3) the applicant reports an incorrectamount of income. The Internal Revenue Service(IRS) will now make a greater effort to verify theinformation provided to it by applicants for thecredit. For instance, the IRS will make a more dili-gent effort to verify the custodian of the child byrequiring documentation and by using data avail-able to the Federal Government.

Often, unfortunately, program design or otherstatutory barriers prevent agencies from institutingsufficient internal controls to prevent erroneouspayments. A longstanding issue with respect to thePell Grant program has been its inability to verifythe income of applicants with the IRS, even if theapplicant assents to the check of the data. OMBDirector Mitch Daniels, the Treasury Secretary,and Education Secretary Rod Paige asked Con-gress to grant the Department of Education accessto tax data for the purposes of verifying the incomeof applicants for student financial assistance.Although the 107th Congress did not act on thelegislation, the Administration will continue topursue this common sense legislation. It will alsocontinue to pursue similar statutory authority fordata sharing for programs like UnemploymentInsurance and housing subsidies. We can allowreasonable access to available data while retainingstrong and appropriate privacy protections.

President Bush is leading the government to reduce waste, fraud, and abuse. Erroneouspayment is just one part of the President’s Man-agement Agenda. We will continue to insist thatagencies estimate erroneous payments and set

Erroneous Payments

Fall/Winter 2002 T H E J O U R N A L O F P U B L I C I N Q U I R Y 1 1

targets and institute policies to reduce them. Con-sistent with this policy, on November 26, 2002,the President signed the Improper Payments In-formation Act of 2002, a law that will requireagencies to report to Congress and the Presidentall programs that have erroneous payment rates in

excess of $10 million. That means reported annualerroneous payment rates are likely to exceed eventhe $30 billion already identified. And gettingthose estimates is just the first step in stemmingthe waste of billions and billions of tax dollarsevery year. R

D O N A L D V . H A M M O N DFiscal Assistant Secretary, Department of the Treasury

The Federal BudgetOn the Path to Effective Financial Reporting

Background

In late October, the Department of the Treasury (Treasury) and the Officeof Management Budget (OMB) released the annual budget results for thejust completed fiscal year. Less than a month after the close of FY 2002,

the public was provided a comprehensive report on the U.S. Government’sbudget activities. While very useful, this report does not provide a completepicture of the Federal Government’s financial results. The disclosure of resultsis not complete until individual agency and governmentwide accrual basedfinancial reports are issued. These reports contain significant additional infor-mation including liabilities, commitments, and asset portfolios. For example,for FY 2001, these reports revealed that the largest balance sheet liability of theU.S. Government was for post-employment benefits to military and civilianemployees. Unfortunately, last year these releases were not completed until 5and 6 months after the close of the fiscal year respectively.

Information provided this late loses its usefulness and does not consti-tute proper disclosure. As the Treasury Secretary stated, there is simply nopoint releasing financial information that is so out of date. In the corporateworld, no company could access capital markets with financial reportingunder these timeframes.

Acceleration CommitteeAccelerating the issuance of the agency and governmentwide reports is animportant component of the “Improved Financial Performance” elementof the President’s Management Agenda. While a few agencies issue theirfinancial reports shortly after fiscal year end, the information will only be


F I N A N C I A L R E P O R T I N G

The Federal Budget


truly useful when all the agencies and the govern-ment as a whole release the information promptly.OMB has established new issuance dates for the2004 statements (November 15 for agencies andDecember 15 for the governmentwide), and hasrequired the preparation of quarterly financial state-ments. Recognizing the importance of and thechallenge imbedded in this task, the Chief FinancialOfficers (CFO) Council established a committeedevoted to supporting the acceleration process.

The Council’s acceleration committee has takensteps to help agencies with this transition but hasnoted that there are no “silver bullets” to meetingthe new dates. In fact, the single biggest barrier isinternal—agencies must change their businessprocesses for processing financial data. It is impor-tant to note that the acceleration is primarily notan audit issue. Audit schedules will need to changebut only after management demonstrates thatmeaningful information and statement preparationprocesses will be available to the auditors.

The committee identified two agencies thathave consistently released their statements early—the Social Security Administration and the U.S.Postal Service. Each of these entities held an openhouse for the CFO community and providedinsight into how they accomplish the task. Ad-ditionally, a preliminary list of impediments tomeeting the deadlines was prepared and provided tothe council members. Many of these impedimentsinvolve the practices of the central agencies, OMB,and Treasury. These issues are being referred to therespective entities to initiate ways to resolve them.

The committee also extracted the earliest datesfor scheduled completion of key preparation stepsfrom agency submitted financial statement prep-aration timelines and created a summary of theearliest dates. Finally, the Private Sector Council hasaccepted an invitation to assist in the analysis of issuesregarding the estimation of actuarial liabilities par-ticularly for interim statements. This effort will allowus to learn how corporations with significant actuar-ial liabilities produce timely and auditable estimates.These and other key committee documents are avail-able at the CFO Council Web site www.cfoc.gov.

Accelerating Month-end ReportingA critical acceleration dependency for agencies isthe ability to receive complete information imme-diately after the reporting period in order toperform reconciliations and begin the process withfinal data. The current monthly process does notpermit an agency to analyze the final data for up to45 days after month end. Since the agency’s finaldata includes information provided by other Fed-eral agencies, this lag is particularly problematic.Treasury’s Financial Management Service, with theconcurrence of OMB, has developed a newtimetable to mitigate this problem.

Starting in January 2003, agencies will berequired to submit their month-end reporting muchsooner. The schedule calls for a phased-in imple-mentation [see timeline chart] that will concludewith all reporting accelerated by the beginning ofFY 2004. In order to be successful, it is essential thatall agencies meet these dates. This is because of theinterdependency of individual agencies on data sub-mitted by other agencies. Additionally, the release ofthe governmentwide monthly budget report, theMonthly Treasury Statement, will be able to beaccelerated once all agencies are in compliance.Treasury will be monitoring agency compliancelevels throughout the implementation and report-ing to the agencies and OMB on the progress.

With this change, we will be able to acceleratethe release of year-end budget results to mid-October. But will acceleration of reporting beenough to cause our financial reporting to beeffective?

Ensuring Data Credibility

It goes without saying that not only must reportingbe timely to be meaningful but it must also be cred-ible. A measure of the credibility of financial resultsis the audit report that accompanies it. The auditassurance or opinion provides third-party validationthat the financial report is prepared using informa-tion that is reliable and that the report is presentedin conformance with generally accepted account-

The Federal Budget


ing principles (GAAP). Two areas of weakness notedin the governmentwide audit opinion for thegovernment’s reporting are the reporting of intra-governmental transactions and the process used toprepare the governmentwide financial report. It isessential that these two basic areas of weakness beresolved in order to have truly effective reporting.

As noted above a daunting problem for the gov-ernment’s financial reporting is the appropriatetreatment and reporting of intra-governmentaltransactions. These financial transactions are theresult of the business activities that the governmentconducts among its various components. Thesetransactions include activity such as rent and utilitypayments to General Services Administration,employment-related benefit transactions with OPM,and agency trust fund investments with Treasury.

Accurately reflecting and in most cases elimi-nating these transactions for financial reporting isessential for meaningful and useful information. Justas with large private sector corporations, the financialconsolidation of component entities (i.e. the agen-cies) requires the elimination of transactions withinthe “parent” in order to prevent double counting.Unfortunately, to date, the nature of this agency datavaries greatly and the lack of detailed meaningfuldata makes agency reconciliations almost impossible.Little progress can be made on resolving this long-standing problem without effective standardizedprocesses. The financial community identified thisneed and the result has been that OMB has issuedformal business rules for the conduct of financialtransactions between Federal entities. These rulestake effect in January 2003 and will bring a disci-plined and uniform approach to these importantcomponents of the Federal financial picture.

A second piece of the puzzle to accuratelycapture intra-governmental transactions is the de-velopment of an automated system to be used byagencies to conduct the commercial or “buy/sell”types of transactions. The system will capture thedata necessary to comply with the business rules,greatly ease the reconciliation process, match thetrading party data, and interface with the Inter-governmental Payment and Collections (IPAC)

settlement system when the transaction iscompleted. This system is currently under devel-opment and is scheduled to be implemented in thesummer of 2003. Combined with the applicationof the business rules, the longstanding issue of theproper treatment of intra-governmental activityshould be reaching a successful conclusion.

Consistency and Accuracy

The preparation of the governmentwide financialreport presents its own unique challenges. Notonly must it be prepared in a very compressedperiod—issued 30 days after the agency reports—but it must also be consistent with the agencyfinancial reports. This consistency is critical fortwo reasons. First and most obvious, it is essentialthat the government report the same results foridentical activities regardless of who is doing thereporting. Second and more problematic, the auditassurance that is provided to the agency financialreports must flow through to the governmentwidereport. The flow-through audit assurance is neces-sitated by the short time period in which theagency financial data is currently available to theauditors and simply is more efficient in avoidingthe need to have the same information auditedtwice. The process that has been used to preparethe governmentwide financial report does notallow for the effective flow-through of the agencyaudit opinions and makes Treasury responsible toensure that the agency data submitted is consistentwith the respective financial report.

A working group was assembled to evaluatenew approaches to collecting data from the agen-cies for the preparation of the governmentwidereport. The result was that a concept was recom-mended that would collect data at the agency leveldirectly from the agencies’ audited financial state-ments. This approach has been selected byTreasury and OMB because it meets the two cri-teria. It provides for the provision of financial datathat is consistent with the agency statements sincethat is the source of the data and it provides for

The Federal Budget


the flow-through of audit assurance since it is thesame information that has been audited. Theapproach has an additional benefit. It clearlyaligns responsibility for an agency’s financialinformation with the agency CFO not variousagency reporting components. Our experienceindicates that the quality and reliability of thefinancial data should be enhanced by this centralpoint of responsibility.

The detailed development of this approach isunderway. While the implementation timeframesare aggressive, they have also been designed to allowtime for meaningful agency and auditor input intothe reporting requirements. A draft set of require-ments was released for agency review in October.Five agencies will “pilot test” the new approachusing financial data of their choice. Once agencycomments are received and incorporated the seconddraft of requirements will be shared with the audit

community in the spring. These comments willthen be incorporated into the requirements, andthey will be finalized in June 2003. The require-ments will be effective for FY 2004 reporting(November 2004), meaning that agencies will havemore than a year to be able to comply with the newreporting submission. Since the reporting require-ments have their origins in the standard generalledger, all agencies will have a common frame of ref-erence with which to collect the information.

Conclusion

The Federal Government has an obligation to thecitizens of the United States to publish complete,reliable, and timely financial information on thegovernment’s activities. The initiatives currentlyunderway should put the Federal Government in abetter position to fulfill this obligation.

Central Accounting and Reporting Operations of Governmentwide AccountingThe Accelerated Monthly Process

Summary

The basic principle of the President’s ManagementAgenda calls for improving financial performance byproviding timely, reliable, and useful information. Inaccordance with this, the Office of Management andBudget (OMB) has significantly accelerated financialreporting due dates and requires additional disclo-sures to facilitate the preparation and audit of theFinancial Report of the U.S. Government.

The accelerated financial reporting due datesinclude year-end and quarterly reporting for CFOAct agencies and the Federal Government. Theadditional disclosure requirements in agency finan-cial statements will serve as building blocks for the Department of the Treasury (Treasury) as theymove closer to using agency audited financial state-ments to prepare the Financial Report of the U.S.Government.

Beginning with the quarter ending March 31,2004, agencies will be required to prepare and sub-mit to OMB their quarterly unaudited financial

statements 21 days after the end of each quarter. Inaddition, beginning with the fiscal year ending Sep-tember 30, 2004, performance and accountabilityreports will be due to the President, OMB, and theCongress by November 15, 2004. Treasury will berequired to issue the Financial Report of the U.S.Government to the President and Congress byDecember 15.

In consideration of the accelerated financialreporting due dates, Governmentwide Accountinghas prepared an abstract of the Central Accountingand Reporting Operations for the acceleratedmonthly process.

Following is a timeline of the current monthlyprocess, an interim accelerated schedule for FY2003, and the maximum accelerated monthlyprocess effective FY 2004. Also included are imple-mentation steps for the accelerated monthly processand the associated timeframes. This new timelineallows minimal time for agency reporting and theFinancial Management Service’s (FMS) review ofdata prior to release of information to users. R

The Federal Budget


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THE ACCELERATED MONTHLY PROCESSIMPLEMENTATION STEPS

Timeframe

August 12–15, 2002

August 30, 2002

September 4, 2002

December 2002

January/February 2003

February–April 2003(Jan.–Mar. accting month)

February–August 2003(Jan.–July accting month)

May 2003 and beyond(Apr. accting month)

July 2003(Jun. accting month)

July 2003

August 2003

September 2003(Aug. accting month)

October 2003(Sept. accting month)

October 2003

November 2003(Oct. accting month)

Tasks

Discuss the new reporting requirements at the Year-end and FMS Annual Conferences.

Issue a Treasury Financial Manual (TFM) announcement alerting agencies of newreporting requirements and due dates for transaction reports.

Brief the CFO Council.

Modify the internal processing cycle of the Bank transcript data to shorten the-number of workdays at the beginning of the month for prior month reporting.

Put a message on GOALS to remind agencies of the new reporting dates.

Accelerate the FMS 224 reporting to the 3rd workday and the FMS 1219/1220 and SF1218/1221 reports to the 5th workday. Supplementals for both types of reporting will beaccepted until the 6th workday. No changes will be made in the MTS cycle and thereforeagencies will still receive their undisbursed ledgers on the 13th workday. Agencies canuse alternative means for verifying their undisbursed ledger balances before the 13thworkday; for example, access to STAR, CASHLINK, and RFC Agency Link.

Evaluate data integrity and prepare monthly feedback reports on late reporting ornon-complying agencies. Meet with agencies that consistently report late.

Accelerate the FMS 1219/1220 and the SF 1218/1221 reporting another 2 days to the3rd workday. Maintain requirement for FMS 224 reporting by the 3rd workday. Supple-mentals will be further accelerated to the 4th workday for both FMS 224 and FMS1219/1220 and SF 1218/1221 reporters. Agencies can use alternative means for veri-fying their undisbursed ledger balances before the 13th workday; for example, accessto STAR, CASHLINK, and RFC Agency Link.

Change the internal FMS threshold for resolving payment and collection differences,if necessary, after assessing agency performance.

Discuss the accelerated reporting at the AGA Conference.

Evaluate agency performance (timeliness and accuracy) to determine if we couldaccelerate the year-end undisbursed ledgers and the MTS. Users will be notified thatthe September MTS will be released early if appropriate.

Generate the accounting month of August on a test basis to determine if we canaccelerate the undisbursed ledgers and the MTS.

Release the undisbursed ledgers and the MTS on a schedule consistent with theperformance of the agencies and our evaluation of the steps above.

Agency account statements will be available for agencies to view their undisburseddata online daily. This would make the undisbursed data available to the agenciesthe day AFTER their reporting is complete and accurate. As a result, the undisbursedledgers may not be as critical.

Remove the supplemental period for submissions of the FMS 224 and FMS 1219/1220and SF 1218/1221 reports and continue to reevaluate agency performance and accel-erate the release of the undisbursed ledgers and the MTS with the goal of attainingthe maximum acceleration by September 2004.

G A S T O N L . G I A N N I , J R .Inspector General, Federal Deposit and Insurance Corporation; Vice Chair, President’s Council on Integrity and Efficiency

Celebrating 25 YearsReflections on the Silver Anniversary of the IG Act

October 12, 2003 will mark the 25th anniversary of the enactment ofthe Inspector General (IG) Act. On that date in 1978, PresidentJimmy Carter created independent audit and investigative offices in

12 Federal agencies. The IG concept put into place on that day was derivedin part from the military custom of having an IG provide an independentreview of the combat readiness of the Continental Army’s troops. The needfor that independent review over 225 years ago remains the solid foundationthat guides the IG community today.

Moving from the IG concept into law was neither quick nor withoutopposition. Work in the early 1960s by a subcommittee of the Govern-ment Operations Committee, U.S. House of Representatives, began tohighlight the need for independent statutory IGs. Further work by this samesubcommittee in 1974 revealed a situation in the former Department ofHealth, Education, and Welfare (HEW) where processes for investigatingprogram fraud and abuse were essentially non-existent. In response, legisla-tion establishing a statutory IG at HEW was enacted 2 years later. Duringcongressional hearings debating the Act itself, several witnesses soundedwarnings of serious adverse consequences that would result if the Actbecame law, and other witnesses questioned the constitutionality of someof the Act’s provisions. However, these concerns were tempered by the tes-timony of the HEW Secretary and IG, and the Act passed both houses ofthe Congress with strong bipartisan support.

Now, 25 years later, it is clear that adverse consequences have not mate-rialized, and the basic tenets of the Act’s intended mission have remainedconstant and strong. Although amended several times over the years to addnew IGs and clarify reporting requirements, the Act has given IGs the


I G A C T O F 1 9 7 8

Celebrating 25 Years


authority and responsibility to be independentvoices for economy, efficiency, and effectivenesswithin the Federal Government. Today, with therecent amendment to the Act establishing an IG atthe Export-Import Bank, 58 IGs protect theintegrity of government; improve program effi-ciency and effectiveness; and prevent and detectfraud, waste, and abuse in 60 Federal agencies.

Since their early beginnings, IGs have focusedattention on good government. As charged by theAct, individual IGs direct their work toward exam-ining agency programs and operations with thegoal of promoting program efficiency and effec-tiveness and protecting government integrity. TheIGs independently identify government vulnera-bilities, facilitate solutions, and leverage theirresources to promote government integrity,accountability, transparency, and excellence. Sim-ply put, IGs appropriately view themselves as“agents of positive change.”

The IG concept has proven to be of significantbenefit to our government as well as governmentsabroad. Each year, billions of dollars are returned tothe Federal Government or better spent based onthe recommendations from IG reports. IG investi-gations contribute to the prosecution of thousandsof wrongdoers and recovery of billions of dollarsannually. In FY 2001 alone, the IGs accounted formore that $28 billion in saved and recovered Fed-eral funds. The IG concept of good governance andaccountability encourages foreign governments toseek advice with the goal of replicating the basic IGprinciples in their governments.

Over the last several years, IGs have been oper-ating in a changing environment. In addition tothe traditional roles of promoting economy andefficiency and fighting fraud, waste, and abuse,new responsibilities and challenges have emerged.The IGs are now playing a pivotal role within their

agencies by conducting financial audits, reportingon Results Act compliance and accountability,assessing information security efforts, identifyingtheir agencies’ most significant challenges, andensuring the effective implementation of the Pres-ident’s Management Agenda.

The President’s Council on Integrity and Effi-ciency (PCIE) and the Executive Council onIntegrity and Efficiency (ECIE) are continuingtheir long tradition of coordinating the profes-sional activities of the IG community. Establishedby Executive Order in 1981 and 1992, respec-tively, the PCIE and ECIE were charged withaddressing integrity and efficiency issues thattranscend individual government agencies andincreasing the professionalism and effectiveness ofOIG personnel throughout government. Throughtheir committees and working groups, both Coun-cils have addressed relevant issues related to audit,investigation, and inspection efforts; developedprofessional standards, guidelines, and manuals;issued reports on governmentwide initiatives andconcerns; and trained OIG staff to remain currentin their respective professions.

In celebrating the many accomplishments ofour community, we will use this next year as anopportunity to reflect, both individually and as acommunity, on the successes of our past and howwe can continue to build on our accomplishments.Over the next 12 months, we are looking toengage the administration and the Congress in adialogue on ways to improve upon the Act. Wehope to host forums and other events as well asproduce publications, such as The Journal of Pub-lic Inquiry and our individual agency semiannualreports, to share our past and articulate our visionfor the future.

We look forward to an exciting and productiveyear. R

J O S E P H E . S C H M I T Z

Inspector General, Department of Defense

The Enduring Legacy ofInspector General von Steuben

According to one 20th Century Army historian, “the military servicesof two men, and of two men alone, can be regarded as indispensableto the achievement of American Independence. These two men were

Washington and Steuben. . . . Washington was the indispensable comman-der. Steuben was his indispensable staff officer.”1

When Benjamin Franklin recruited Baron von Steuben in 1777 fromthe latter’s post-Prussian Army position as “Hofmarschall” (Lord Cham-berlain) of a small Hohenzollern principality in what is now SouthernGermany, how could anyone have envisioned the enduring legacy of thisfirst effective American Inspector General: “integrity, knowledge, and loy-alty to conscience”?2 The Steuben family motto, Sub Tutela Altissimi Semper3

(translated, Under the Protection of the Almighty Always), might have fore-shadowed the legacy of this German-American patriot whose monumentgraces the park across from the White House, along with Generals Lafayette,Rochambeau, and Kosciuszko: all four of whom “testify to the gratitude ofthe American people to those from France, from Poland, and from Prussia


I G H I S T O R Y

1 John Palmer, General von Steuben 1 (Yale University Press, 1937).2 Joseph Whitehorne, “Von Steuben’s Legacy,” The Inspectors General of the United States

Army, 1903-1939, at 4 (Office of the Inspector General & Center of Military History, UnitedStates Army, 1998).

3 Henning-Hubertus Baron von Steuben, Chronik der Familie von Steuben 4 (1998).

The Enduring Legacy of Inspector General von Steuben


who aided them in their struggle for national inde-pendence and existence.”4

Ever since the Revolutionary War, the militaryInspector General in America has served as anindependent extension of the eyes, ears, andconscience of the Commander.5 Still today, allInspectors General in the Department of Defense,including the military departments, are trained toserve in this role; as such, the military Inspec-tor General is always a paradigm of militaryleadership—the only issue is whether he or she isa good paradigm.

While today’s Army Inspector General is themodern day personification of the enduring legacyof General von Steuben, it is also clear that Gen-eral von Steuben is much more than the foundingfather of the Army Inspector General system. Heis, of course, that. Not only is the first lesson planof the Army Inspector General School devoted toGeneral von Steuben, the entire 3-week course ispermeated with the “Von Steuben Model.” He isthe enduring prime role model for every one of the239 principal Army Inspectors General, a veritable“IG-Network” of senior officers serving full timein assistance, inspection, non-criminal investiga-tion, and “teach & train” functions at every majorcommand around the world.

Modern day military Inspectors General servein a variety of uniforms: the 239 principal ArmyIGs mentioned above; 150 senior Air Force IGsand an additional 2,000 counterintelligence and criminal investigative professionals report tothe Air Force Inspector General; the Navy andMarine Corps together deploy more than 70 IGs insimilar functions. All three service Inspectors Gen-eral are three-star flag and general officers; the

Marine Corps IG has two-stars. By statute, how-ever, “No member of the Armed Forces, active or reserve, shall be appointed Inspector General ofthe Department of Defense”6—a Senate-confirmedcivilian officer responsible for approximately 1,250 professional auditors, inspectors, and inves-tigators, including 30 uniformed military officers.

Inspector General von Steuben is also a rolemodel for the 30 Presidentially-appointed civilianInspectors General who comprise the President’sCouncil on Integrity and Efficiency (PCIE) andanother 27 agency head-appointed civilian Inspec-tors General who comprise the Executive Council onIntegrity and Efficiency (ECIE). (See http://www.ignet.gov.) According to the PCIE/ ECIE ProgressReport to the President for FY 2001, this “commu-nity of nearly 10,000 employees has accounted forover $28 billion in saved and recovered funds andwas instrumental in over 7,600 successful prose-cutions, suspensions or debarments of nearly 8,800individuals or businesses, and more than 2,000 civilor personnel actions.”7 In addition to the FederalPCIE/ECIE community, a robust “Association ofInspectors General” caters to a multitude of “Inspec-tors General at all levels of government [who] areentrusted with fostering and promoting accountabil-ity and integrity in government.”8

How is it that this historical paradigm ofmilitary leadership has become the modern pro-fessional role model for civilians? As explainedbelow, the answer is not just in the title. Althoughhe is most known for military training, discipline,and accountability, General von Steuben is alsoknown for his integrity and aversion to fraud andwaste: “Prolonged study of his official correspon-dence and other military papers shows them tobe models of veracity and scientific precision.”9

4 William Howard Taft, “Address of the President of theUnited States,” reprinted in Proceedings Upon the Unveiling ofthe Statue of Baron von Steuben, Major General InspectorGeneral in the Continental Army During the RevolutionaryWar 49 (Joint Committee on Printing, 1912).

5 Army Regulation 20-1, Inspector General Activities andProcedures 5 (Department of the Army, 2002).

6 Inspector General Act of 1978, as amended, Section 8.7 PCIE/ECIE Press Release, December 10, 2002.8 Association of Inspectors General, Principles and Stan-

dards for Officers of Inspector General 3 (May 2001) (http://www.inspectorsgeneral.org).

9 Palmer, General von Steuben, supra, at 5.



According to the official history of the ArmyInspectors General, “Steuben, beginning work asan advisor to [General] Washington, proclaimedthe money department ‘a mere farce,’ and saidthat paying quartermaster agents a commissionaccording to what they spent was a prescriptionfor waste.”10

Integrity & Efficiency. “Although Maj. Gen.Friedrich W. A. von Steuben was preceded briefly by three Inspectors General, he is credited withestablishing the high standards desired byWashington—integrity, knowledge, and loyalty toconscience—that have been the measure of theinspection system ever since.”11

According to the recently published chronicle ofthe Steuben family, the 13 years Baron von Steubenserved Prince Joseph Wilhelm von Hohenzollern-Hechingen “were the most difficult times of hislife.”12 The modern day Baron von Steuben con-cludes that his namesake’s service as Hofmarschall“strongly shaped his attitudes”: “Because the Princewas a spendthrift, Steuben tried everything finan-cially to save the principality. . . . This experienceshaped his understanding of honesty, probity, effi-ciency and truthfulness. These principles he laterbrought to the American Army, above all to histraining of its military commanders.”13

In his own writing, approved by Congress inMarch 29, 1779, as “invariable rules for the orderand discipline of the troops,”14 General vonSteuben admonished that “the commanding

officer of a regiment must preserve the strictestdiscipline and order in his corps, obliging everyofficer to a strict performance of his duty, withoutrelaxing in the smallest point; punishing impar-tially the faults that are committed, withoutdistinction of rank or service.”15

Training. General von Steuben’s most wellknown legacy, “Military Instruction,” is enshrinedon his monument in Lafayette Park. Upon arrivalat Valley Forge in 1778, he confronted an Amer-ican Army, simply stated, in disarray. His first taskwas to train General Washington’s own guard.Having proved his value as a military trainer tohis Commander-in-Chief, Steuben’s acumen fortraining soon spread to the entire army. Accord-ing to the U.S. Army’s official history of theInspectors General, “Steuben shocked Americanofficers by personally teaching men the manual ofarms and drill, but his success helped to convincethem. . . . With Washington’s support, Steubenset out to involve officers in training, making thesubordinate inspectors—a body of officers drilledby Steuben—his agents.”16

According to President William Howard Taft,“The effect of STEUBEN’S instruction in the Amer-ican Army teaches us a lesson that is well for us allto keep in mind, and that is that no people, how-ever warlike in spirit and ambition, in naturalcourage and self-confidence, can be made at once,by uniforms and guns, a military force. Until theylearn drill and discipline, they are a mob, and thetheory that they can be made an army overnighthas cost this Nation billions of dollars and thou-sands of lives.”17

Discipline. According to the 1902 Proceed-ings in Congress, “[General von Steuben] made

10 David Clary and Joseph Whitehorne, The InspectorsGeneral of the United States Army, 1777-1903, 37 (U.S. Gov-ernment Printing Office, 1987).

11 Whitehorne, “Von Steuben’s Legacy,” The InspectorsGeneral, 1903-1939, supra, at 4.

12 Henning-Hubertus Baron von Steuben, Chronik derFamilie von Steuben, supra, at 73.

13 Henning von Steuben, Translated E-mail to Joseph E.Schmitz, December 1, 2002.

14 “In Congress, 29th March, 1779,” reprinted in Baronvon Steuben’s Revolutionary War Drill Manual: A FacsimileReprint of the 1794 Edition A2 (New York, Dover Publica-tions, 1985).

15 Frederick William Baron von Steuben, RevolutionaryWar Drill Manual: A Facsimile Reprint of the 1794 Edition,supra, at 128.

16 Clary and Whitehorne, The Inspectors General, 1777-1903, supra, at 40.

17 Proceedings Upon the Unveiling of the Statue of Baronvon Steuben, supra, at 50.



the patriotic army a disciplined and effectiveforce—the drilled corps that ultimately won thewar for freedom. He worked incessantly to do thisunder the greatest difficulties and the credit for itis all his own.”18 When the Pentagon commis-sioned its “Soldier-Signers of the ConstitutionCorridor” in 1986, the following signage accom-panied the central oil painting of Washington atValley Forge, surrounded by his mounted staff andtattered soldiers: “During the coming months theywould suffer from shortages of food and clothing,and from the cold, but under the tutelage of Wash-ington and Major General Frederick Steuben [sic]would gain the professional training necessary tobecome the equal of the British and Hessians inopen battle.”

Accountability. Parallel with his emphasis ontraining and drilling the troops, General vonSteuben maintained that his inspectors “mustdepart from purely military inspection and mustalso examine financial accounts.”19 Inspector Gen-eral von Steuben himself described what heencountered on arrival at Valley Forge in 1778,and how he established a system to eliminatewasteful losses of muskets, bayonets, and otherRevolutionary War “accouterments”:

General Knox assured me that, previous tothe establishment of my department, therenever was a campaign in which the militarymagazines did not furnish from five thou-sand to eight thousand muskets to replacethose which were lost . . . . The loss of bay-onets was still greater. The American soldier,never having used this arm, had no faith init, and never used it but to roast his beef-steak, and indeed often left it at home. This

is not astonishing when it is considered thatthe majority of the States engaged their sol-diers for from six to nine months. Each manwho went away took his musket with him,and his successor received another from thepublic store. No captain kept a book.Accounts were never furnished nor re-quired. As our army is, thank God, littlesubject to desertion, I venture to say thatduring an entire campaign there have notbeen twenty muskets lost since my systemcame into force. It was the same with thepouches and other accouterments, and I donot believe that I exaggerate when I statethat my arrangements have saved theUnited States at least eight hundred thou-sand French livres a year.20

The original state of affairs upon his arrival atValley Forge, according to a Congressional publi-cation, indicated “[t]here were 5,000 musketsmore on paper than were required, yet many sol-diers were without them. Steuben’s first task was,therefore, to inaugurate a system of control overthe needs and supply of arms, and, in course oftime, he succeeded in carrying this control to suchperfection that, on his last inspection before he leftthe Army, there were but three muskets missing,and even those were accounted for.”21

The Constitution ratified by Congress after thesuccessful conclusion of the Revolutionary War stillrequires that “a regular Statement and Account ofthe Receipts and Expenditure of all public Moneyshall be published from time to time.”22 Moreover,

18 United States Congress, “Proceedings in Congress Relat-ing to Baron Steuben,” July 1, 1902, reprinted in ProceedingsUpon the Unveiling of the Statue of Baron von Steuben, supra,at 154.

19 Clary and Whitehorne, The Inspectors General, 1777-1903, supra, at 37.

20 Friedrich Kapp, The Life of Frederick William vonSteuben, Major General in the Revolutionary Army 117 (NewYork, Mason Brothers, 1859) (quoting “Steuben, MS. Papers, vol. xi.”).

21 “Address of Hon. Richard Bartholdt” (“Author of theSteuben Statue Legislation”), reprinted in Proceedings Uponthe Unveiling of the Statue of Baron von Steuben, supra, at 22-23.

22 U.S. Constitution, Article I, Section 9.



as explained in the 1789 Preamble to the Bill ofRights, the first ten Amendments were designed “toprevent misconstructions or abuse of its power,”23

i.e., to prevent abuses of “powers . . . delegated tothe United States by the Constitution.”24

Congress subsequently codified these sameconstitutional principles—200 years afterconfirming Baron von Steuben as George Wash-ington’s Inspector General—in the InspectorGeneral Act of 1978, which created “independentand objective units” in most major Federal agen-cies “to provide leadership and coordination andrecommend policies for activities designed (A) topromote economy, efficiency, and effectiveness in

the administration of; and (B) to prevent anddetect fraud and abuse.”25

So, the next time an Inspector General knockson someone else’s figurative door, only to encountera panic or curse (or both), the Inspector General(or the IG’s representative) might remind his or her“customer” that the Inspector General, whethercivilian or military, serves as an extension of theCommander’s Conscience, guarding a RevolutionaryWar legacy of: integrity; training and discipline;preventing and detecting fraud, waste, abuse, andmismanagement; and ensuring constitutionalaccountability ultimately to “the People of theUnited States”26—sub tutela Altissimi semper. R

23 Bill of Rights, Preamble.24 U.S. Constitution, Amendment X.

25 Inspector General Act of 1978, as amended, Section 2. 26 U.S. Constitution, Preamble.

D A N N Y L . A T H A N A S A W , D . P. A .Director, Inspectors General Auditor Training Institute

Recent DevelopmentsThe Inspectors General Auditor Training Institute

As we enter a new year, I would like to offer some reflections on impor-tant new developments at the Inspectors General Auditor TrainingInstitute (IGATI). Thanks in large part to a dedicated corps of

instructors and of staff, this past year was highly successful by almost everymeasure. In a rapidly changing environment, we have persevered to improvethe training experiences of a growing number of students in the InspectorGeneral (IG) community while strengthening the Institute’s courseportfolio.

I know that every individual at the Institute has been challenged thispast year, and to enumerate these accomplishments serves to underscore ourcollective commitment to excellence. The Institute is achieving greaterinstructional recognition, remaining competitive, and continuously im-proving.

Building on Past Success

During the past 10 years, the Institute has earned a reputation of providingexcellent quality training for the IG community and other audit organiza-tions. This past year our reputation continued to spread throughout theIG community. Notwithstanding disruptions caused by the September 11,2001 terrorist attacks, the Institute successfully completed 60 trainingclasses and conducted 17 agency-specific training exercises, involving about1,400 students. Remarkably, this was accomplished with a small staff of twofull-time instructors, two administrative staff, contract instructors, andvolunteers. The quality of the instructors and staff, reflected in their dili-gence to meet the needs of our customers, is first class.


A U D I T T R A I N I N G

Recent Developments


The Institute could not expand course offer-ings without additional instructors, so we hiredtwo outstanding new full-time instructors at theend of FY 2002. The Institute now has four full-time instructors comprising a faculty that willallow us to improve and increase our course offer-ings. Numerous curricular improvements andteaching innovations supported by the Instituteare underway.

Looking Toward the Future

This year the Institute plans to deliver over 95 scheduled classes, representing 26 differentcourses. These 26 courses fall within one of five categories—Performance Auditing, FinancialAuditing, Information Technology Auditing,Communications, and Management Analysis andTechniques. Among the proposed course offeringswill be the following:

� Ethics for Auditors and Evaluators. Thecollapse of several major corporations hasraised awareness about ethics. Along withseveral IG counsels, we are developing acourse focusing on how ethics, as it relates tocompliance and integrity, impacts the per-formance of audits and evaluations andwhat auditors and evaluators need to beaware of when doing these reviews.

� Electronic Reports Distribution. Withinthe IG community there is an interest inelectronic distribution of reports. As a result,the Institute, collaborating with the stafffrom the Office of Inspector General (OIG),Department of Interior (DOI), is develop-ing a course that will instruct students howto use Adobe Acrobat in preparing auditreports for distribution using a CD or theiragency Web site. Additionally, we are look-ing to include training for students to learnbasic HTML coding techniques to alertrecipients of new reports on agency Websites. We are very excited to be partnering

with the OIG DOI in this most importantendeavor. Students have already showninterest for this course.

� TeamMate. Several OIGs have inquiredabout the Institute conducting training onPriceWaterhouse’s TeamMate software. Toprovide needed training for the community,we are looking into the possibility of devel-oping a course on using TeamMate toprepare and route electronic work papers. As more and more OIGs move towardelectronic work papers, this course andothers like it will be invaluable to thecommunity.

� Information Technology Concepts forFinancial and Program Auditors. There isa need in the community for a basic coursefor auditors in information technology. TheInstitute is developing an introductoryinformation technology course that willprovide a foundation for auditors to per-form basic application and general controltests to determine the reliability of computerprocessed data that they may encounter dur-ing an audit.

� MS Access and Excel. The use of Accessand Excel in our work is becoming evermore important. While a large number ofthe community’s newly hired auditors canuse these programs, there is a growing needto use them in a productive manner in ouraudits. This course is geared towards pro-viding the auditor and evaluator a betterunderstanding of the advantages for usingthese two programs in their audit work andreport.

� Decision-Making Processes for Managers.When doing audits and evaluations, man-agers are faced with choices between two ormore options. This course will evaluate themany quantitative methods and analyticalaudit procedures available to managers inmaking and interpreting information.

Recent Developments


A New Campus

For the past 10 years, the Institute was located atFt. Belvoir, Virginia. We located to Ft. Belvoirbecause it provided cost-effective spacing. Thelocation provided a pleasant campus-like setting,inexpensive student accommodations, free park-ing, and many other facilities and services.However, Ft. Belvoir is located outside the Capi-tal Beltway, more than 20 miles from downtownWashington with no metro rail or other publictransportation in close proximity. This made it dif-ficult for many students to attend the Institute.Recognizing the need for training devoted primar-ily to a central city Federal OIG community, theInstitute, with the support and approval of theAudit Committee of the President’s Council onIntegrity and Efficiency, decided in FY 2002 torelocate closer to Washington D.C.

In October 2002, the Institute opened its newstate-of-the-art training center at the RosslynMetro Center Building, Rosslyn, Virginia. Thenew training center is multi-use and includesoffices for instructors and administrative staff,three classrooms, one large computer lab, threebreakout rooms, a library with Internet access, anda kitchenette. It also provides two areas for stu-dents to make telephone calls and have Internetaccess.

All of our classrooms are equipped withprojector/screen, television, VCR, telephone, aninstructor computer, and printer. Each classroomcan seat up to 18 students with sufficient spaceand windows for a truly enjoyable learning en-vironment. Our new breakout rooms, which canseat six, are also equipped with television, VCR,and telephones. The Institute also has a computer

lab consisting of 16 student workstations, an NTserver, and Internet access. Our lab can providestudents with hands-on training in data retrievaland analysis, Internet research, network/IT se-curity, and automated work papers. By havingindividual workstations, students are able to gainhands-on experience using programs such asIDEA, Adobe Acrobat, password crackers, andMicrosoft Office products. In addition, we have asecond classroom that is wired so we can meet anyincrease in demand for information technologyrelated training.

Staying Ahead

In a new approach to providing training to thecommunity, the Institute is planning a series ofsymposiums this year. These symposiums aregeared to focus on emerging issues confronting the IG community. For instance, the Institute is developing a one-day symposium on the im-plementation of electronic work papers. Thesymposium will include a roundtable discussionon implementation and business process re-engineering issues the IGs should consider whendeciding to implement electronic work papers. Wealso plan to include a discussion of lessons learnedand best practices based on experiences of otheroffices already using electronic work papers.

Conclusion

The Institute’s primary focus is to provide themost current and relevant training opportunities. Ilook forward to 2003 as we continue in our en-deavors to serve the IG community. R

Recent Developments


Entryway Dr. Danny Athanasaw

Staff Inspector General Everett Mosley

Classroom Breakout Rooms

Computer Lab

P E G G Y L . F I S C H E R , P H . D .Associate Inspector General for Investigations, National Science Foundation

J A M E S T . K R O L L , P H . D .Section Head, Administrative Investigations, National Science Foundation

M O N T G O M E R Y K . F I S H E R , P H . D . , J . D .Senior Counsel, Office of Inspector General, National Science Foundation

Research Misconduct and its Relationship to Fraud

Research Misconduct (RM) and government investigations intoallegations of RM have been the focus of several congressionally-appointed review committees. This interest culminated in a 3-year,

multi-agency effort spearheaded by the Office of Science and TechnologyPolicy (OSTP) to publish a uniform government process for handling RMallegations.1 The process requires all Federal agencies that support intra-mural or extramural research to develop a process for investigating theseallegations. These agency processes will either vest the responsibility forthese investigations with the Office of Inspector General (OIG), or resultin an OIG review of agency investigative efforts, to ensure both the referralof fraud cases and the quality of the agency investigative process. In thisarticle we describe the OSTP effort to implement RM policies within agen-cies and the companion OIG effort to ensure that OIGs can adequatelyinvestigate those RM cases involving fraud. We describe how our office hashandled RM allegations to highlight the advantages of parallel processing toensure adequate administrative, civil, or criminal resolution.

The National Science Foundation (NSF) first published its regulation inthe Federal Register in 1987.2 It vested the responsibility for investigating


R E S E A R C H M I S C O N D U C T

1 65 Fed. Reg. 76,260 (2000).2 52 Fed. Reg. 24,466 (1987) (codified at 45 C.F.R. pt. 689).



allegations with its Division of Audit and Oversight(DAO). It transferred that responsibility to theNSF OIG after our Inspector General’s office wasestablished at NSF in 1989. The NSF subsequentlymodified its regulation to formally place theresponsibility for these investigations in the OIG.3

Placing the investigative functions in an office inde-pendent of agency management, while retainingthe adjudicative function in the NSF, created a fire-wall between the two functions that is analogous tothe United States system for investigating and adju-dicating civil and criminal matters.4

According to NSF’s regulation, all allegations ofRM5 are referred to the NSF OIG for investigation.We view investigating these allegations as consis-tent with and part of our charge under the IG Actto “conduct . . . investigations relating to the pro-grams and operations of the establishment” and to“prevent and detect fraud and abuse . . . .”6 OurRM investigations follow the same guidelines asour investigations into civil or criminal wrong-doing.7 In fact, our Privacy Act system of recordsnotice makes no distinction between our civil/criminal files and the administrative files in whichwe store evidence of our RM investigations.8

Over the past 12 years, our office has investi-gated approximately 800 research misconductallegations in 600 cases. Approximately 10 percentof these cases have resulted in findings by NSF

management of RM. These findings were accom-panied by actions ranging from a written repri-mand to debarment. Some of these investigationshave also resulted in the recovery of NSF funds.

In our experience, many RM cases contain ele-ments of fraud that must be investigated by theOIG. Whether the agencies or the OIGs investi-gate RM allegations, OIGs should carefully reviewallegations and the evidence to ensure that thepotential civil and criminal issues are adequatelyaddressed.

The OSTP Governmentwide ResearchMisconduct Policy and the OIG Misconductin Research Working Group

The OSTP policy took effect in December 2000and required all Federal agencies that supportresearch (internally or externally)9 to develop apolicy for handling research misconduct allega-tions by December 2001. As described in theOSTP policy, each agency’s policy must adopt:

� The OSTP definition of research misconduct;� Procedural separation of inquiry, investiga-

tion, adjudication, and appeal;� Organizational separation of inquiry and

investigation from adjudication and appeal;� Referral of most investigations to home

institutions; and� Certain procedural elements.

Since the publication of the OSTP policy, theOSTP has convened meetings of an InteragencyImplementation Working Group attended by

3 56 Fed. Reg. 22,286 (1991).4 See K.G. Herman, P.L. Sunshine, M.K. Fisher, J.J.

Zwolenik & C.H. Herz, “Investigating Misconduct in Science:The National Science Foundation Model,” 65 J. Higher Ed.384 (1994).

5 NSF referred to these cases as “misconduct in science”prior to modifying its regulation in 2002, and as “researchmisconduct” after 2002 pursuant to the OSTP policy. Forsimplicity, we will refer to all these matters as “researchmisconduct.”

6 5 U.S.C. App. § 2(1) and § 2(2)(B).7 For example we apply the same quality standards,

as described in the PCIE/ECIE Quality Standards for Investiga-tions as well as the same rules for preservation of evidence,interviews, affidavits, warnings, file security, and confidentiality.

8 64 Fed. Reg. 29,703 (1999).

9 The policy defines research as: “all basic, applied, anddemonstration research in all fields of science, engineering, andmathematics. This includes, but is not limited to, research ineconomics, education, linguistics, medicine, psychology, socialsciences, statistics, and research involving human subjects andanimals.” 65 Fed. Reg. 76,260 at 76,262 n.3 (2000). In itsrevised regulation, NSF explained that this definition wouldcover NSF-funded activities in science, engineering, and edu-cation. 45 C.F.R. § 689.1(a)(4).



agency representatives in order to track theprogress of policy development and to serve as afocal point for resolving common concerns. TheIG community recognized the need for a similareffort, and formed the PCIE/ECIE Misconductin Research Working Group (MIRWG).

Representatives from over 20 different OIGoffices have attended the MIRWG meetings.10 TheMIRWG functions as the OIG counterpart to theOSTP Interagency Implementation WorkingGroup, and an MIRWG liaison attends the Inter-agency Group meetings. The MIRWG has servedas the focal point for discussions about the role ofthe OIGs in RM investigations.

Some OIGs were interested in conducting theinvestigations themselves and others viewed theseinvestigations as an agency programmatic functionrather than an IG responsibility. The OIG repre-sentatives concluded that if the agency carries outRM investigations, the OIG should be notified ofallegations on their receipt by the agency andwhen agency RM investigations raise substantiveadministrative, civil, or criminal issues. Represen-tatives also wanted agencies to provide OIGs withcopies of the final Reports of Investigation. TheOIG reviews of an agency’s processes and inves-tigative reports will ensure that the OIG is learningof allegations involving civil or criminal wrong-doing. The OIG can also ensure that the agency’sprocesses meet the standards for quality investiga-tions. The MIRWG linked the OIG and agencyrepresentatives so that these issues, and the role ofthe OIGs in RM investigations, should be resolvedbefore agency policies are issued.

The MIRWG developed a Supplement to the PCIE/ECIE Quality Standards for Investiga-tions11 that discusses the unique issues arising ininvestigating RM allegations. The MIRWG also

developed Guidelines for the OIG oversight ofagency RM investigations12 and a position paperon processing fraud allegations arising in RMinvestigations.13

How Research Misconduct Cases AreProcessed at NSF

Receipt of AllegationsThe NSF’s Personnel Manual requires NSF staff toreport to the OIG all “allegations of misconduct,fraud, waste, abuse or corruption,”14 and we reg-ularly hear of allegations of research misconductfrom NSF staff, as well as reviewers of NSF pro-posals and others in the NSF-funded community.Institutional policies stipulate that research mis-conduct allegations must be reported to specifiedinstitution officials, and NSF’s regulation requiresinstitutions to inform the OIG of allegations thatthe institutions investigate.15

Unfortunately, we have anecdotal evidencesuggesting institutions sometimes resolve sub-stantive RM allegations without initiating in-vestigations, thereby bypassing the reportingrequirement. Our office receives approximately50 RM allegations each year. When comparedwith the aggregate number of proposals and ongo-ing awards the NSF manages annually, this resultsin a reporting rate of 0.14 percent. This figure isapproximately 100-fold less than published esti-mates of the amount of research misconduct.16

10 MIRWG minutes and work products are found athttp://www.ignet.gov/pcieecie/misconduct.htm.

11 Available at http://www.ignet.gov/pcieecie/mir/supplement.pdf.

12 Available at http://www.ignet.gov/pcieecie/mir/rmpol-icy.pdf.

13Available at http://www.ignet.gov/pcieecie/mir/statutes.pdf.

14 NSF Manual 14, June 19, 1996, I-100-2 § 143.15 See below for the distinction between investigation and

inquiry.16 Swazey, J.P. Anderson, M.S. and K. Seashore Lewis; Eth-

ical Problems in Academic Research; American Scientist, Vol.81; 1993; pp. 542-553. Steneck, N.H. Assessing the Integrityof Publicly Funded Research. A Background Report for theNovember ORI Research Conference on Research Integrity;2000. If these estimates are correct, RM may be a large categoryof fraud left unaddressed by Inspectors General.



The Inquiry Phase

The NSF regulation specifies the OIG will con-duct an inquiry, typically lasting no more than 90 days, to determine if an RM allegation has sub-stance. Our first step is to contact the complainantto obtain a full understanding of the allegation andto obtain any evidence the complainant has to sub-stantiate the allegation. Our second step is toascertain if the NSF OIG has jurisdiction over thematter and whether that jurisdiction is shared withother Federal agencies. If the jurisdiction is sharedwith another Federal agency, we will coordinatewith that agency and its OIG to determine whichoffice will lead the inquiry effort.

Once jurisdiction is established, we customar-ily contact the subject to obtain his/her perspectiveon the allegations unless we believe there is a riskthe subject could destroy evidence or intimidatewitnesses. We do this because the Privacy Actrequires us to gather information about the alle-gation first from the subject if it is “practicable” todo so.17 In general, we have determined that it ispracticable to contact the subject first concerningplagiarism allegations, but not when the alle-gations concern fabrication or falsification.However, when the RM allegation implicates pos-sible fraud, we handle it as a potential criminalcase, and the requirement for collecting informa-tion from the subject does not apply.18

If we need expert advice or assessment of evi-dence, we typically seek that information from theNSF program staff. If our inquiry determinesthere is substance to the allegation, we proceedimmediately to the investigation phase. If wedetermine the allegation is unsubstantiated, wenotify the subject and complainant and close thecase. This method allows us to handle unsubstan-

tiated allegations without involving the granteeinstitution.

The Investigation Phase

Unlike other administrative or civil/criminal inves-tigations, the NSF’s RM regulation—consistentwith the OSTP policy—specifies that RM inves-tigations are principally the responsibility of thesubject’s employing institution. Therefore, we referthe matter to the institution for investigation anddefer conducting our own investigation until theinstitution has completed its efforts. Institutionstypically have detailed policies in place thatdescribe their investigative process. The institu-tion’s policy identifies an institutional official whois responsible for managing the process. That indi-vidual usually convenes a committee of peerexperts to gather and evaluate evidence, and inter-view witnesses and the subject, to determine if thesubject or other individuals committed RM.19

As specified in the NSF’s regulation,20 we typi-cally allow institutions about 180 days to completetheir investigation, although the complexity of someinvestigations may require more time. Our officemaintains regular contact with institutional officialsto answer questions about process and to assist ingathering information. At the conclusion of itsinvestigation, the institution provides our officewith an investigation report that summarizes thecommittee’s conclusion and contains the evidencegathered during the investigation. It also containsthe determination of the institution’s adjudicator.

Once our office receives the institution’s inves-tigation report, we initiate our investigation. Ouroffice reviews the report to assess whether it is accu-rate and complete and that the institution followedreasonable procedures. If the report is insufficient,we may ask the institution for additional informa-

17 5 U.S.C. § 552a(e)(2).18 Our criminal investigative files are exempt from

5 U.S.C. § 552a(e)(2) because, as authorized by 5 U.S.C.§ 552a(j)(2), we (like virtually all OIGs) have published a ruleexempting them, 45 C.F.R. § 613.5(b).

19 Nothing in the OSTP policy or NSF’s regulationrequires institutions to use committees to conduct their inves-tigations rather than individuals, but the vast majority of insti-tutions do use committees.

20 45 C.F.R. § 689.4(b)(4).



tion or we may seek additional evidence inde-pendently. If the evidence proves an act of RMoccurred, we will write a Report of Investigation(ROI) for adjudication by NSF management. Forthe NSF to make a finding of RM, a preponder-ance of the evidence must establish that:

� The act meets the definition of RM;21

� The identified individual committed theact;

� The act was a substantial departure fromaccepted practices; and

� The act was committed with at least grossnegligence (acts committed carelessly ornegligently are not considered to be RM).

As a part of our ROI, our office provides anassessment of whether the actions taken by the insti-tution are sufficient to protect the Federal interest,or whether we believe that NSF should take addi-tional actions to do so. We provide a draft ROI tothe subject and request any comments, corrections,or additional evidence. The subject’s comments areincluded in the final report and may cause us toalter the conclusions our office makes in the finalreport. Our office then provides the final ROI to theNSF’s adjudicator, the Deputy Director.

Adjudication and Appeal

The Deputy Director, with the assistance of NSF’sOffice of General Counsel, independently assesseswhether the evidence supports the recommendedfindings in our ROI and, if so, determines whatactions, if any, the agency will take. The subject isnotified of the Deputy Director’s decision and hasthe right to appeal that decision to the NSF Director.Upon appeal, the NSF Director’s decision is final.

In making a decision on what action to take,the agency considers:

� How serious the RM is;� The degree to which the RM was knowing,

intentional, or reckless;

� Whether it was an isolated event or part ofa pattern; and

� Other relevant circumstances.22

Our investigation officially closes when theagency’s decision is final.

Fraud in Research Misconduct Cases

We are progressively moving from handling casesas either “administrative” or “civil/criminal” toparallel processing of allegations of wrongdoing.That is, we consider an investigation successful if itresults in adequate administrative, civil, or crimi-nal actions. Actions in one area do not precludeactions in another. For example, in several casesresulting in civil settlements, the subjects also stip-ulated that their actions violated NSF’s RMregulation and agreed to administrative voluntaryexclusion. We recently closed a case that began as amisconduct investigation and was resolved crim-inally under 18 U.S.C. § 1001, with significantmonetary recovery, a suspended sentence, and anadministrative voluntary exclusion.

Research Misconduct is defined in the NSF’sregulation,23 consistent with the OSTP policy, as:

fabrication,24 falsification,25 or plagiarism26

in proposing or performing research27

funded by NSF, reviewing research proposals

21 The definition is set out below.

22 45 C.F.R. § 689.3(b).23 45 C.F.R. § 689.1(a).24 Id., -(a)(1): “Fabrication means making up data or

results and recording or reporting them.”25 Id., -(a)(2): “Falsification means manipulating research

materials, equipment, or processes, or changing or omittingdata or results such that the research is not accurately repre-sented in the research record.”

26 Id., -(a)(3): “Plagiarism means the appropriation ofanother person’s ideas, processes, results or words without giv-ing appropriate credit.”

27 Id., -(a)(4): “Research, for the purposes of [this defini-tion], includes proposals submitted to NSF in all fields ofscience, engineering, mathematics, and education and resultsfrom such proposals.”



submitted to NSF, or in reporting researchresults funded by NSF. . . . Research mis-conduct does not include honest error ordifferences of opinion.28

By comparison, according to Black’s law dic-tionary, the definition of fraud is:

A knowing misrepresentation of the truthor concealment of a material fact to induceanother to act to his or her detriment.29

Fabrication, falsification, and plagiarism are allmisrepresentations. It is therefore apparent an RMcase that involves knowing and material fabrica-tion, falsification, or plagiarism, with detrimentalreliance, constitutes fraud.

The case studies below highlight the possibili-ties for the more effective resolution when theresearch misconduct regulation is used in conjunc-tion with other statutes and regulations includingthe False Claims Act and the Program Fraud CivilRemedies Act.

� Fraudulent data and time-card falsifica-tion. An undergraduate student, employedas a technician on a Federal research grant,fabricated data and time sheets. The studentrationalized her conduct by claiming shewas underpaid. The student was arrestedand charged with fraud, and she entered aplea of guilty to a lesser-included misde-meanor offense. The student was ordered topay approximately $9,000 in restitution andfines. The student was also expelled fromthe university and no longer pursued acareer in science. The NSF also made anadministrative finding of research miscon-duct and concluded it did not need to debarthe student from receiving Federal funds

because of the criminal and administrativeactions already taken.

� Data Fabrication. The principal investiga-tors (PIs) on numerous Small BusinessInnovation Research (SBIR) grants falselyclaimed data as generated during perfor-mance of their SBIR awards. In actuality thedata had been gathered by a graduate stu-dent in connection with his thesis prior tothe funding of the SBIR awards. The casewas initially processed as an administrativeinvestigation focusing on research mis-conduct, but when the extent of themisrepresentations and amount of moneyinvolved became clear, the case became acriminal case. Ultimately the PIs repaidapproximately $300,000 to the FederalGovernment and pled guilty to violating 18 U.S.C. § 1001. In separate negotiationswith NSF, the PIs agreed to a voluntaryexclusion receiving Federal funds for 3 years.

� Data Falsification and Fabrication. A PIand associated researchers falsified and fab-ricated data to support proposals submittedto, and two awards made by, a Federalagency. The investigation resulted in a civil settlement. Under the terms of theagreement, the institution employing theresearchers paid the Federal Government $2.6 million, instituted a 3-year institutionalintegrity agreement to ensure compliancewith all Federal laws and regulations pertain-ing to Federal grants, arranged for thepublication of corrections in scientific jour-nals, and implemented corrective actions inthe institution’s administrative and grantsmanagement systems and practices.

� Data Falsification and Fabrication. Aninvestigation into allegations of research mis-conduct concluded that a scientist publishedboth fabricated and falsified data in a publi-cation. His research had been supported byFederal grants totaling $3.3 million. Thescientist agreed to a voluntary exclusion

28 45 C.F.R. § 689.1(a) & -(b).29 Black’s Law Dictionary, Seventh Edition, 2000.



from the receipt of Federal funds for 3 years,but neither admitted nor denied any wrong-doing. The Department of Justice (DOJ)subsequently initiated efforts to recover atleast part of these funds from the institu-tion employing the scientist.

� Plagiarism and False Statements. Aninvestigation in three separate administra-tive cases focusing on research misconductallegations determined that PIs submittedmultiple SBIR proposals that containedplagiarized material and misrepresented sci-entific credentials. The PIs received SBIRawards from several Federal agencies forprojects that were duplicative of each other.The PIs agreed to a governmentwidevoluntary exclusion for 3 years and paidapproximately $500,000 to the FederalGovernment under the False Claims Act. In

the settlement agreement the researchersstipulated that their conduct violated NSF’sresearch misconduct regulation.

Conclusion

We encourage the OIGs to either investigate RMcases under their broad charge to address fraud,waste, and abuse or to closely monitor researchmisconduct cases handled by their agencies. TheOIGs that adopt the technique of parallel process-ing RM allegations can ensure recovery of agencyfunds, restitution, debarments of individuals orinstitutions, suspension or termination of awards,and, in rare instances, incarceration or probation.Alternatively, careful monitoring will ensureadequate resolutions, and ensure that DOJ isinformed of those cases containing the elements of criminal or civil violations. R

R E N N C . F O W L E R , E S Q .Executive Director of the Federal Training Foundation

Harold J. Ashner, Winning at the Merit Systems ProtectionBoard (Dewey Publications, Inc., 2002), 900 pages, $125.00.Reviewed by Renn C. Fowler.

In 1998, I reviewed in this Journal, Representing the Agency Before the MeritSystems Protection Board: A Handbook on MSPB Practice and Procedure, byHarold Ashner, Esq. That book was an ambitious revision and extensive

update of much earlier efforts by Ashner to make simple the complexities ofthe Civil Service Reform Act and the nuances of Merit Systems ProtectionBoard (MSPB) practice. I heralded that update and revision as invaluable forall practitioners and as a much-needed tool for anyone called upon to conductan administrative investigation into employee misconduct.

Now, Ashner is back with an impressive update and revision, titled Win-ning at the Merit Systems Protection Board. “Winning” is not a repackaging of“Representing,” but it is quite simply Ashner’s most significant and ambi-tious undertaking yet.

“Winning,” as its name implies, is a step-by-step guide on how to putone’s best foot forward in contested personnel disputes. What is immediatelyappealing is that “Winning” divides into three useful sections: Introductionto MSPB, Building a Winning Case, and Winning on Appeal. While itspredecessor had one chapter on MSPB jurisdiction, etc., “Winning” has six“jurisdictional” chapters, including the latest on collective-bargaining agree-ments, Uniformed Services Employment and Reemployment Rights Act(USERRA), Veterans Employment Opportunities Act (VEOP), Office ofSpecial Counsel prosecutions, etc. In addition, “Winning” adds another fiveinformation-filled chapters on discrete components of an adverse action (e.g.,penalty, affirmative defenses, etc.). And “Winning” distills the MSPB appealprocess into its incremental steps (e.g., responding to the appeal, pre-hearingpractice, etc.).

“Winning” will become a must-have desktop reference for those respon-sible for fact gathering for administrative investigation into employeemisconduct. Ashner has made an obvious effort to make “Winning” friendly


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Book Review


to lay readers and, in so doing, he has succeeded inbridging the chasms between investigators, man-agers, personnelists, and practitioners.

Of particular value is the new and expandedchapter on administrative investigations, i.e.,building the case or “Getting the Facts.” As Ashnerpoints out, thorough front-end fact gathering isthe key to it all, and Ashner’s treatment brings it alltogether in one place, starting with witness rapportand interviewing techniques.

To be sure, managers, personnelists, and prac-titioners often look to investigators not only tofind the facts but also to prepare the case, i.e., tosubmit a report of investigation suitable for filingat the MSPB. Left to their own devices, too manypersonnelists and practitioners simply charge firstand investigate later. In other words, agencies oftenfind the charge and then, generally on discoveryat MSPB, go in search of facts to fit the charge.

Ashner then provides an extensive treatment ofthe law of investigation, commenting on the dutyof a Federal employee to cooperate as well as theapplicable rights, union, and otherwise. He alsomakes easily understandable the law of warnings,e.g., Garrity, Kalkines, Weston, etc., and the fineline between an employee’s various entitlements.

Ashner includes an extensive treatment of theUnited States Court of Appeals for the FederalCircuit’s recent decision in Modrowski v. Depart-ment of Veterans Affairs, 252 F.3d 1344 (Fed. Cir.2001), wherein the court overturned an agencycharge of failure to cooperate in an agency inves-tigation. In Modrowski, the agency investigated arealty specialist for possible misconduct relat-ing to the sale of Department of Veterans Affairs(VA)-owned properties and the authorization ofbrokerage fees for those sales. The employee, ac-companied by his union representative, refused toanswer questions based on his right against self-incrimination under the Fifth Amendment to theU. S. Constitution.

Agency investigators thereupon informed himthat the U.S. Attorney had declined prosecution.The agency gave the employee a letter, stating that

the U.S. Attorney had declined prosecution andordering the employee to respond to the investi-gator’s questions. After more wrangling, theagency removed the employee for, among otherthings, failure to cooperate.

The court found that the employee’s “legalrights in this case were far from clear cut.” Theletter given the employee was written on VA let-terhead and only referenced the U.S. Attorney’sdeclination; the letter did not actually set out agrant of immunity. The court found it entirelyunderstandable that the employee would questionthe scope and grant of immunity. Thus, the courtfound that the agency erred by not allowing theemployee to consult an attorney. In reaching itsdecision, the court gave particular weight to thefollowing factors: (1) the agency was admittedlyinvestigating for criminal violations; (2) the pur-ported grant of immunity was ambiguous as toscope; (3) statements elicited under the supposedgrant of immunity could possibly be used againstthe employee in a criminal prosecution; (4) theabsence of a formal assurance that criminal inves-tigations had, in fact, terminated; (5) the employeewas faced with the penalty of removal for failure tocooperate; (6) the employee had arranged to meetwith counsel; and (7) there was no allegation thatthe employee’s request to meet with counsel wasunreasonable. Had the agency come up with acharge other than failure to cooperate, its actionsmight have been vindicated, at least partially.

A significant contribution of “Winning” is thatit highlights and underscores the complexity ofcharging at MSPB. As Ashner points out, due toa certain amount of confusion and over-reading,the rule of thumb has been for years that there are no lesser-included offenses at MSPB. In other words, if an agency charges insubordinationand fails to prove intent, an essential element, the entire charge falls. The agency cannot impose a penalty on the employee’s failure to followinstructions.

For further example, assume the followingscenario. Late one evening, X removes, without

Book Review


authorization, from the agency’s office, a computerand takes it to his residence. X’s supervisor noticesthe missing equipment. The building logs and thebuilding guard identify X. The Federal ProtectiveOfficers go to X’s residence, and he turns over thecomputer. The agency removes X on the chargeof stealing the computer.

At trial, X testifies that he was only borrowingthe computer, and points to official work in thecomputer when he had previously removed it, asconfirmed by the building logs. The result is that Xwins, the agency being unable to prove the essen-tial element of intent to permanently deprive. Ofcourse the record shows misconduct, e.g., misuse,unauthorized removal, failure to get a propertypass, conversion, and much more.

“Winning” addresses such problems by point-ing out that the Board and the Federal Circuithave affirmed the validity of narrative charges andalternative pleading. Narrative charging is simplythe practice of writing in a succinct and focusedway a factual statement of what the employee did.In narrative charging, there is usually no char-acterization of the misconduct. In fact, the CivilService Reform Act never mentions charges butspeaks instead of reasons, and the only reasonreally given in statute is that the employee engagedin conduct that damaged service efficiency.

Had the agency in our hypothetical above justset out the facts without characterization, withouta label of “stealing,” the employee who took thecomputer home would be facing discipline. Theproblem with narrative charging is that too oftenthe “narrative charge” lacks focus and is unclear asto how service efficiency was damaged.

Similarly, the Federal Circuit, in Lachance,OPM v. MSPB, 147 F.3d 1367 (Fed. Cir. 1998),authorized alternative pleading or lesser-includedoffenses, when clearly noticed. The agency hadcharged a guard at the Old Mint in San Franciscowith “unacceptable and inappropriate behavior by

a supervisor,” a meaningless charge. That chargewas supported by a detailed description of theemployee’s misconduct, which the agency char-acterized as obstructing an investigation.

The court noted that the specific charge wasmeaningless and interpreted the descriptive narra-tive. It found that the narrative could be read ascharacterized by the agency. But the court also saidthat the narrative could easily and fairly be readin a more expansive way to include lesser miscon-duct, for example, poor judgment, etc. Given thecourt’s reading, the guard could not escape disci-pline. Thus, said the court, the descriptionincluded several potential charges. In so holding,the court put to rest an old civil service law shib-boleth that the charge must be a function of thepenalty, that is, the charge reviewed must be thecharge upon which the penalty was predicated.The way to handle that, according to the court, isto adjust the penalty.

Ashner also provides some insight into whathas seemingly developed as a newfound agencypractice of “charging up and proving down.”“Winning” notes that the MSPB has relaxed itspenalty approach so that an agency can success-fully charge a lesser offense of more seriousmisconduct, such as failure to follow instructions,instead of insubordination. The former is “proof-friendly but penalty-friendly too,” that is, unlikelyto support a stiff sanction. On the other hand,insubordination is hard to prove but delivers amore powerful penalty, if proven. In recent years,the Board has allowed agencies to bring such non-intent charges as “failure to follow” and still proveintent in the penalty phrase so as to obtain themore stringent penalty. This allows a good inves-tigator to build a solid case on a more easilyprovable charge, giving the agency a softer path toa tougher, but more appropriate penalty.

“Winning” has all of this and more. Hats off toAshner. R

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