During fiscal year 1991, the Board will pay benefits to approximately 890,000 retirement and survivor annuitants. I would like to report on several significant activities which have taken place in the last 12 months. These activities have given rise to a new set of priorities at the Board, priorities which I hope you will support.

MANAGEMENT REVIEW OF THE RAILROAD RETIREMENT BOARD [RRB] Based upon various GAO reports, RRB Inspector General reports and Board internal control reports and other sources, OMB launched a thorough management review of our agency. It included a 2-week onsite visit by a 20-person review team.

The review team drafted a set of recommendations which led to numerous extensive discussions with OMB and the Board to evaluate, analyze, and propose solutions to problems facing the Board. A set of initiatives was given and has been incorporated into an agreement between OMB and the Board.

The agreement has now been finalized. We are confident that the long hours and many discussions with OMB officials will indeed produce significant changes at the Board.

The agreement calls for the creation this year of a special management improvement fund to be used over the next 5 years. This year's budget request's most significant enhancement is the funding of these improvements. We recognize, however, that without the support of the Congress the OMB-RRB contract cannot be carried out. I will discuss this proposal in a moment.

PROGRAM INTEGRITY ACTIVITIES

In the area of program integrity activities, during fiscal year 1990 we continued to make improvements in our program integrity operations. Fiscal year 1990 program integrity activities included investigation of uncashed checks, monitoring earnings, matching payroll records with railroads and States, and performing other types of monitoring and matching functions related to disability, age, and death. Some results of our fiscal year 1990 program integrity activities are detailed in the statement which I have submitted to you.

As I am certain you know, Mr. Chairman, the Inspector General of the Railroad Retirement Board, William J. Doyle, and his staff continue to play an integral role in the program integrity activities. We have referred numerous cases for investigation to the inspector general, and in the fiscal year 1990 we referred 272 such cases to his office. It is our hope that the continued crack-down on fraud upon our programs will be a strong deterrent.

MAINFRAME COMPUTER

Funds of $2.89 million were provided in fiscal year 1991 to install and fund the first year of a 5-year lease-to-purchase procurement of a mainframe computer. The General Services Administration has approved delegation of procurement authority. On a parallel path, we are attempting to acquire a computer declared excess by another Federal agency. Such an acquisition would result in substan

tial savings. The new computer will enable us to implement several priorities of our agency and improve service to our beneficiaries.

FISCAL YEAR 1992 APPROPRIATION REQUEST

I would like to summarize and highlight for you the new and important funding areas. As mentioned earlier, the requested increase for administrative funds over 1991 is primarily due to $13.9 million request for a special management improvement fund that we negotiated with the Office of Management and Budget.

The requests for our other administrative accounts also increases because of the January 1991 pay increase reflected for the entire 1992 fiscal year and an anticipated pay raise of 4.2 percent in January 1992, building rental costs, the postal rate increases and an anticipated increase in communication systems usage.

More funds are also requested in 1992 over 1991 for contractual services and equipment. Additional equipment funds would be used primarily to acquire additional personal computers, computer terminals, and auxiliary equipment.

Therefore, for fiscal year 1992, $105,210,000 and 1,711 FTE's are requested in the administration's budget for our agency. This would provide $94,564,000 for fiscal year 1992 administrative expenses. The balance of the appropriation-$10,646,000-would be obligated in fiscal years 1993 through 1996.

The inspector general has prepared a separate justification for audit and investigative activities. This is separate from our own funds, and we are requesting that you support this budget as we think it will be dollars well spent.

SPECIAL MANAGEMENT IMPROVEMENT FUND

As noted earlier, a management improvement plan has been prepared in connection with the OMB review. I would like to briefly discuss the highlights with you.

BACKLOG CASES

As you can see from the chart, a major backlog of adjustments to retirement and survivor cases still exist. A concerted effort by a sizable number of skilled and experienced claims examiners is needed to eliminate the backlogs in the next few years.

The dark bars on the chart indicate the number of expected backlog cases at current FTE levels and the shaded bars indicate the number of expected backlog cases at the enhanced FTE levels. Performance objectives for the number, accuracy, and timeliness of processing these cases have been agreed upon by the Office of Management and Budget.

[The information follows:]

In the areas of debt collection, the Board would establish a strong executive position to manage the Board's debt collection program; expand and use debt collection agencies and the income tax offset program, eliminate the backlog of unemployment insurance cases requiring that accounts receivable be established, work toward debt offset programs where possible, and explore and use other collection tools. These debt collection enhancement programs would be more than offset by increased revenues to our funds.

FRAUD CONTROL

In the area of fraud control, Mr. Chairman, as you can see from the chart, in the last 6 months we have made significant progress in contracting with States to perform automated wage matches. As of October 1, 1990, we had contracts with 10 States that provided automatic wage matches covering about 48 percent of all railroad employees.

As of March 1, 1991, the number of States under contract had increased to 23 States and will cover about 70 percent of all railroad employees. It is our goal to enter into agreements with each of the 50 States and the District of Columbia if cost effective and as soon as practical.

[The information follows:]

Note.--Actual number of States added will depend on the results of cost-benefit analyses
and on the receipt of additional resources.

TAX ACCOUNTING

In the tax accounting area, internal quality assurance reports documented significant problems with the accuracy, quality, and timeliness of tax statements. The 17 FTE's being requested in fiscal year 1992 for this activity would be used to reduce the backlog of individual record and tax statement corrections, and maintain balances in other workload categories at normal levels, and to implement improved control systems.

PREPARED STATEMENT

To help ensure that the correct amounts of taxes are credited to the RRB's accounts, the Board performs a number of verification checks. We have also requested additional information from the Internal Revenue Service to be able to further reconcile our accounts. The two FTE's being requested for this activity in fiscal year 1992 would be used to complete the compensation reconciliations sooner and to perform further reconciliation activities with information to be obtained from the Internal Revenue Service.

That concludes my remarks and I would be happy to answer any questions.

Senator HARKIN. Thank you very much, Mr. Bower. [The statements follow:]

STATEMENT OF GLEN L. BOWER

Good morning Mr. Chairman and Members of the Committee. My name is Glen L. Bower. I am the Chairman of the Railroad Retirement Board. The Board's membership also includes Mr. Charles J. Chamberlain, the Labor Member of the Board, and Mr. Andrew F. Reardon, the Management Member of the Board.

I am pleased to be here today to present the Administration's budget

proposals for fiscal year 1992 for the Railroad Retirement Board. I would like to begin my statement with a brief description of the agency functions and operations. Background on the Railroad Retirement Board

The Railroad Retirement Board is an independent agency in the executive branch of the Federal Government, administered by three members appointed by the President. Our primary function is to administer retirement-survivor and unemployment-sickness insurance benefit programs for the nation's railroad workers and their families, under the Railroad Retirement and Railroad Unemployment Insurance Acts. We also have administrative responsibilities for certain social security benefit payments and railroad workers' Medicare coverage.

To accomplish our mission, the RRB maintains extensive electronic data processing equipment in our headquarters and a network of field offices. The RRB employs data processing technicians, field representatives to take claims, and examiners to adjudicate the claims. In addition, the RRB employs actuaries to predict the future income and outlays of the Railroad Retirement Account, statisticians and economists to provide statistics and other vital data necessary for financial and claims operations, and attorneys to draft and interpret legislation and to represent the RRB in litigation. Internal administration requires a procurement staff, a budget and accounting staff, and personnel specialists. The Board's Inspector General employs auditors and investigators to protect the integrity of the system. His budget is submitted separately.

During fiscal year 1990, the RRB paid $7.2 billion in retirement and survivor benefits to about 950,000 annuitants and $95 million in unemployment and sickness insurance benefits to about 55,000 beneficiaries. During fiscal year 1991, the

RRB will pay approximately 890,000 retirement and survivor annuitants.

Financial Status of the Trust Funds

During fiscal year 1990, revenues to the railroad retirement accounts exceeded expenditures by about $806 million and the equity balance of the retirement trust funds increased to $9.9 billion.