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HEAD START

Senator HARKIN. The last question. I said I was going to return to the Chief Financial Officers Act, and I made a note on that.

No; I had one other thing I wanted to ask you. I had written this down earlier. When Assistant Secretary Gall was here, she said that the Inspector General's Office is doing a study of Head Start. I just jotted that down.

Is it done, or when will it be available? Will we be able to get a copy?

Mr. KUSSEROW. If you have a follow-up hearing on that subject, as you said, it will be ready then.

We basically have four national studies going on right now. We were asked by the Assistant Secretary for Management and Budget, as well as by Mary Gall of Human Development Services, to try to see if we could examine the readiness of the Head Start Program to handle its proposed expansion. What good is it to give money to a program if it is all going to fall off the table because they are not ready to handle it? So we want to know how ready they are.

Senator HARKIN. That is what I want to know, too. Mr. KUSSEROW. We also are doing work to try to understand the whole Head Start management information system and how reliable it is in terms of being able to look at performance and to monitor programs. We are very much interested in trying to have a lot of information relating to performance evaluation, and also to see if we can identify high risk grantees who are not doing the job or who could do it better.

One of the other areas we have reported on in the past is the results of looking at grantees to see how many vacant slots they have in their programs. There is not really a straight, linear relationship between the amount of dollars and the number of children you can have in the program. If you have a program that is operating at only 50 percent of capacity, the question is how can you bring it up to full capacity? You can do that with only marginal increases to the cost of the program. So we want to look at the attendance and how well the program is working, and how much capacity that existing program is going to have for expansion. Senator HARKIN. You made a good point, and you are correct

. So my linear assumptions earlier are not quite correct. Obviously you are right. The incremental cost for each additional one is lower than the first.

Mr. KUSSEROW. Yes; what we really need to know is the exact relationship, to have some idea as to what the excess capacity is right now. Once you know the excess capacity, you can determine under an ideal, frictionless environment how many more children you can pump into that excess capacity, and what the add-on costs would be versus what it would be to establish new facilities and new capacity.

We have that ready. If you have a follow-up hearing on this, to get to your question, we will be ready for that hearing.

Senator HARKIN. We will. I just do not know when exactly

Mr. KUSSEROW. I will be pleased to come back to you and give you the full results of all the work that we are doing in this area. As I say, Human Development Services has been very anxious to have this kind of information. The ASMB has also been very anxious, and we have been very anxious. I think that from the dialog I heard earlier with Mary Gall, you are quite interested. So I think this is good information.

RESOURCES FOR AUDITED FINANCIAL STATEMENTS

Senator HARKIN. The Chief Financial Officers Act, which you were lauding and saying is an important piece of legislation that was passed, requires you to audit financial statements for all the trust funds, revolving funds, accounts, et cetera.

Again, you said that you needed 95 additional FTE's and how much more money?

Mr. KUSSEROW. About $9.5 million.

Senator HARKIN. What does it basically mean for your office? It means more people and more money, but what do you have to do?

Mr. KUSSEROW. The money would be dedicated to people. We would have to have a meter running to make sure that we could account for it, because the way it is set up in the President's budget, they want that money dedicated for this purpose and this purpose only.

Senator HARKIN. Those FTE's will be just for this purpose only?

Mr. KUSSEROW. And no other purpose at all. If we do not use that money for that purpose, or if we do not use those people for that purpose, then we cannot have them.

Now what would they do? Let us go back to NIH, for example, since we talked about it earlier. What we would do is provide a financial audit report on NIH's operations. The OMB, as well as the congressional staff and committee members that caused the passage of this legislation, said that they wanted information that goes beyond just a statement as to whether a financial statement can be relied upon. They consider that critical, but a very technical thing. They said that they want two things that I have heard over and over again. I have been to more meetings on this than you can shake a stick at. They said that they want usable information, and information that deals with performance indicators. They want to know how well the programs are doing.

So what you would be getting, quite frankly, in your capacity as chairman of this subcommittee, is information about operating components of our Department. The financial information would include the financial statement—which if you are lucky somebody on the staff might be able to make heads or tails of and is really technical-but would also go beyond that; that is, a statement of the kind of problems there might be in internal controls, whether they are complying with rules and regulations and program guidance, and how well they are performing against their stated objectives.

Many of those objectives, quite frankly, are worked out between the program people and the Congress. I just heard a discussion like that when you were talking to Mary Gall about wanting to know the number of children enrolled in Head Start today, the potential number, and how far along the line we are incrementally with increased funding.

So No. 1, as a performance indicator you might have results in terms of output; that is, are we getting those children enrolled and at what rate. You would have that kind of information.

The other side, which is much more difficult and from our standpoint almost scary, would be if the new chief financial officer that has been created for the U.S. Government were to say that they want to know information about output. If we apply output to the Head Start model, the question might not be the number of children being enrolled, but how well have they been equipped to compete with a disadvantaged background once they enter a school with children who do not come from that background. Boy, that is a lot more difficult to measure.

It would be an opportunity to get information about how well agencies are doing against what they have been given. I cannot imagine anybody who would be a better recipient for that kind of information, who would use it to better advantage, than the Appropriations Committees of the Congress. It certainly would be of enormous value to oversight committees.

If you look at the legislative record on this, and if you talk to the prime movers behind it-Mr. Darman at OMB, Mr. Brady at Treasury, and Mr. Bowsher at GA0—it is also a major objective of this legislation to reduce the vulnerabilities for the kinds of things that we saw and witnessed in the HUD scandals.

So there are a multiplicity of things that might come out of this. There is a great opportunity here. Whether that opportunity will be realized over time is another question.

The one thing I would say is that when this request was submitted, it was submitted as a joint effort by both ASMB and the inspector general. ASMB has a very major role to play in this process, as they will be the ones who will generate the chief financial officer. It is a clear case of a real partnership for better management in Government. We are probably better equipped in our Department to deal with this than any of the others that we have seen. But again, the burden is going to fall much heavier on us.

We are estimating that for the 60 departmental accounts and the add-ons to those accounts, there are going to be up to $100 billion in outlays that will fall under the new requirement for financial statement audits. That does not count the Social Security Administration, which we already have under financial statement audits, though that will be much more broad in the future.

That means that here within a finite period of time 80 percent of the outlays of the entire Department are going to be under financial statements that will be audited and reported.

ADEQUACY OF RESOURCES FOR AUDITS

Senator HARKIN. Is the budget request enough to do that? You have what, $9.5 million?

Mr. KUSSEROW. Well, as a startup. I may come back next year and be panic stricken, but right now I think that for the startup it is right. I would hope that by next year, if we did get this funding, we could come back and answer some of the questions that you have and have you look at what has been produced by this process, to make a determination of whether this is a good investment of

resources or not.

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There are a lot of question marks in this, and I will tell you that we are all challenged by it. I put challenged in a positive sense. We are scared to death at the same time, because of the enormous burden that is following it.

Mr. WILLIAMS. In addition to the $9.5 million which Mr. Kusserow is requesting to audit the statements in the budgets for the various operating divisions in the Department, we have also included $2.5 million to prepare those statements. So except for SSA, which already does a financial statement, the $2.5 million is for the other operating divisions to begin preparing them so that Mr. Kusserow can audit them.

Senator HARKIN. I did not know that. A total of $2.5 million for all of them?

Mr. WILLIAMS. For all the other agencies, right.

Mr. KUSSEROW. We have found from our experience that one way in which we have an advantage over other agencies is that we saw this coming. ASMB and the management side of our Department and the inspector general went ahead and did Social Security to begin to see if we could figure out what it would cost and how we would go about doing it and everything else. So we are forearmed on this.

I just thought it was terribly inappropriate that Mr. Williams would put in a commercial announcement for somebody else's appropriation while it is my time in the box. I would register a protest on that. [Laughter.]

Mr. WILLIAMS. It is money well spent, Mr. Chairman.
Senator HARKIN. That is what we call a side shot in this busi-

ness.

I had a whole bunch of questions about this CFO, but in your remarks you have covered them all but one. Are you in favor of the Department's request to waive the CFO Act's audit requirements for some parts of HHS?

Do you want me to repeat that?
Mr. KUSSEROW. Yes; repeat it. [Laughter.]

What that question leads to, Mr. Chairman, is the fact that we have 3 years to fully implement this legislation before Congress comes back and reevaluates it. The question is, at how fast a pace should we do this in that 36-month period, starting in 1992 and carrying forward to 1995.

I know that you will find my next statement pretty hard to accept, but just take it on faith. I tend to be more aggressive and reckless than perhaps other people in the Department, so my feeling is that I would want to go as fast as we can on this, because think that the more we learn up front the better off we are.

The real question, and one of the underlying reasons why this legislation came about from the Congress, is that we do know the financial systems are not in place yet to produce the statements that are required. When we go out to audit NIH, for example, I think there are roughly 38 different program accounts. If you look at the financial systems that support them, you find that they are not coordinated, and they are going to have a tough time meshing them.

So I think that the management side of our Department wants to use the time to repair the system, to standardize it, and to move it forward. My feeling is that I will personally move very aggressively on this, whether or not an agency has its financial statements prepared. I will do the 220's, and I will do other work on the financial audit report. I intend to look at all 60 accounts in the first year, if I get the funding.

I did not mean to waffle too much on that.

CLOSING REMARKS
Senator HARKIN. Thank you. I will have to read that.

That is all I have. Again, I appreciate your being here for such a long time. While we started this process a couple of years ago when I first took chairmanship of this subcommittee, my time was somewhat taken with some diversionary interests last year. I can assure you that for the next 6 years that I am privileged to serve as chairman of this subcommittee that I intend to delve into this whole area of accountability for all the Federal dollars that are spent in our bill.

It probably does not come as much of a surprise to you or anyone else in this room that I am a supporter of programs like Head Start, community health centers, and eradicating infant mortality. I look at the billions of dollars going through here, and I have discussed it with Senators Specter, Hatfield, and Bumpers. How do we get a handle on this and really make sure that we are not wasting a lot of money? Any time you have $100 billion out there, there has to be someplace you can tighten down on it and not affect the program itself or the recipients and the people you want to serve out there.

So we are going to look forward to working further with you, as we will other inspectors general in the other departments, to try to accomplish those twin goals of really making those programs work and then saving or cutting back as much as we can. That is why I am so interested in this indirect cost program. I am not certain where it is going to lead me, but I want to look at it very hard.

Mr. KUSSEROW. Mr. Chairman, let me just restate that we will be happy to work with your staff and provide as much information as necessary. I think I can speak also for ASMB by saying that we will be happy to keep you apprised of the development of the CFO legislation, once we start rolling on this thing.

Again, since you are going to be a prime user of whatever comes out of this process, we think you should be kept well informed as to what we are doing and how we are going about it, and have some input as well.

Senator HARKIN. I appreciate that. I was just informed, I did not know there is a vote on. There is 9 minutes left.

Thank you again very much.
Mr. KUSSEROW. Thank you, Mr. Chairman.

QUESTIONS SUBMITTED BY THE SUBCOMMITTEE Senator HARKIN. There will be some additional questions from various Senators which we will submit to

you
for

your response. [The following questions were not asked at the hearing, but were submitted to the office for response subsequent to the hearing:)

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