the personal bonuses of the department heads who are responsible for execution of the game plan. Consequently, they have a vested interest in its success.

MEDICARE

Senator HARKIN. Another issue that has come up, I would like for you to be able to talk to me about. The Board has had the same Medicare carrier since 1966. This contract has never been competitively bid, allegedly, I understand. During fiscal year 1990, the cost paid to the carrier was $21 million. That cost rose to $23 million in 1991.

A recent health and human services inspector general study stated that the Government would save considerable funding and staff resources if HCFA were to take over the management of this contract. What are your views on that?

Mr. BOWER. Mr. Chairman, soon after I received the copy of the report from HHS's inspector general, I asked our own inspector general to review, and validate, and offer his own opinions on that report, and additional research as to what he thought the advisability of such an approach would be. And he has assured me that we will have his report in the very near future.

Senator HARKIN. So nothing has happened. You just asked him to do his own study.

Mr. BOWER. We asked him to review the study that was already done and to expand upon that.

Senator HARKIN. And based upon that, then you will decide what kind of action you need to take. Is that right?

Mr. BOWER. Yes.

Mr. REARDON. In addition, Senator, in our February meeting of the Board, we also instructed the Board staff to prepare an analysis of what would be required to put this out for competitive bidding.

Senator HARKIN. Is this going to be done?

Mr. REARDON. We instructed them to have it completed no later than June of this year.

Senator HARKIN. And you will communicate that to us?
Mr. BOWER. Certainly.

Senator HARKIN. Mr. Bower, we covered, for the record, a couple of major things I wanted to do. I want to make sure we get a copy of, not this one, but the backlog and cases reduction and we will keep it on hand here.

Mr. BOWER. I think I have already provided that to your staff, but we will be happy to give you another copy.

QUESTIONS SUBMITTED BY THE SUBCOMMITTEE

Senator HARKIN. That is all right, if we have got it here. And you will send that other stuff up on the Medicare bidding thing. We have some other questions I want to cover with you on mainframe acquisition and all that, but we can do that in writing. Thank you very much.

There will be some additional questions which will be submitted for your response in the record.

QUESTIONS SUBMITTED BY THE SUBCOMMITTEE

SPECIAL MANAGEMENT IMPROVEMENT FUND

Question. The fiscal year 1992 budget requests $13,910,000 for a Special Management Improvement Fund, $3,264,000 to be available in fiscal year 1992 and the remaining monies to be available through fiscal year 1996. Included in this request, is a request for an additional 77 full-time equivalent staff years (FTE's).

Why does the Board need the total $13.9 million in fiscal year 1992 if the Board is only planning to use $3.2 million in the coming fiscal year?

Answer. Office of Management and Budget (OMB) has recommended and the Board agrees that a 5-year funding commitment is the most prudent approach for the Special Management Improvement Program. The management reform plan is comprehensive and aimed at resolving systemic material weaknesses in the Board's internal controls and programs. These problems did not arise in any one fiscal year and will take multiple years to resolve.

The Board and OMB are committed to long-term progress. The plan developed to address these problems is the result of long hours and an in-depth analysis of the solutions. It would be very difficult to structure the reform plan without a multi-year approach. OMB advises that the 5-year plan is best suited for the types of issues we are addressing.

Question. What guarantees does this Committee have that these monies will be used for management improvements and not to supplement current staffing?

Answer. Our agreement with OMB outlines in detail how this funding will be used to achieve specific performance objectives. To ensure that funding is used exclusively for the purposes stated in that agreement, the Special Management Improvement Fund has been separated from our general administrative accounts in the budget process and will be continuously subject to the OMB apportionment process. This is a significant control in the process.

Additionally, and perhaps most significantly, the Inspector General has been requested by the Board and OMB to administer a compliance program in connection with our management improvement plan. The Inspector General will monitor compliance with the 5-year plan and expenditures and is required to issue formal reports every 6 months. We will be happy to make these reports available to the Committee.

Finally, although we do not expect to fall short of our commitment, the Congress always retains the appropriation authority to rescind its previous funding commitment. While we agree that a multi-year approach to funding is not the common approach, it is appropriate in certain circumstances, such as proposed here.

Question. Although the Board requests an increase of 77 FTE's under the Special Management Improvement Fund, there is a decrease of 8 FTE's in its other accounts. Will some of the FTE's in the management improvement fund be used to fill those vacancies? If

not, how will the activities of the 77 FTE's under the management improvement fund differ from the responsibilities of current employees?

Ansver. We will not use any of the FTE's under the Special Management Improvement Fund to fill vacancies in other areas. The FTE's requested for the Special Management Improvement Program have been designated to work in six functional areas: claims processing, debt collection, fraud control, tax accounting, trust fund integrity, and information systems.

In some of these areas, such as trust fund integrity, our agreement with OMB calls for us to begin new initiatives for which we do not now have sufficient staffing. In other areas, such as claims processing, the agreement calls for us to accelerate operations which are already underway.

In either case, our agreement with OMB includes specific performance objectives which we plan to achieve with the additional resources in each area. These objectives would not be attainable in the near term without the additional staff, and our progress toward meeting them will be carefully monitored.

Question. The Board's justification indicates that in fiscal year 1992, 16.8 FTE's out of the 77 are being requested for tax accounting. The number of FTE's for future years in tax accounting will be determined later. Does this mean that you are expecting to request more than 16.8 FTE's and will request additional funding for the management improvement fund?

Answer. We expect that we will need 16.8 FTE's for tax accounting in fiscal year 1992, and that we will continue to need FTE's from the Special Management Improvement Fund for this work during fiscal years 1993 through 1996. However, we have already planned for funding these additional FTE's from the $13.9 million requested for the Special Management Improvement Fund over this 5-year period. We may seek a higher FTE ceiling for the tax accounting area, but we will not seek additional money.

Our agreement with the Office of Management and Budget calls for total spending of $4,707,000 from the Special Management Improvement Fund for tax accounting initiatives through fiscal year 1996. We plan to use $965,000 of this amount for shorter range initiatives in fiscal year 1992 and the remaining $3,742,000 for long-range initiatives in the following years.

5-YEAR WORKPLAN

Question. The Special Management Improvement Initiative agreed to between the Board and OMB sets forth a 5-year plan for the implementation of the 77 FTE's and the appropriation of $13 million to be used for operational improvements. Has the Board prepared a second level or more detailed workplan that would supplement the master plan and identify specific target dates, milestones and expenditures for these operational improvements?

Answer. The Board submitted fairly detailed information to OMB in the process of reaching agreement on the purposes and scope

of the Special Management Improvement Initiative. This information described the nature of the problems, resource commitments, and specific goals for evaluating performance, including milestones and production and improvement objectives.

We are now in the process of developing more detailed workplans which will build on the information submitted to OMB and show how we will accomplish each program improvement identified in the

agreement.

Question. Should the $13 million and 77 FTE's for the Special Management Improvement Initiative not be approved by the Congress, what contingency plans has the Board prepared to make operational improvements?

Answer. Before the Special Management Improvement Initiative began to take shape in mid-1990, the RRB was in the process of addressing many operational improvement issues. If the funding for the Special Management Improvement Fund is not approved, we will still continue to work toward achieving the needed improvements with the more limited resources available. However, without the additional resources being proposed by the Administration, it would take much longer to make improvements. For example, the following table illustrates the impact the additional resources would have on reducing cases backlogged in our railroad retirement program.

Question. The Board has had the same Medicare carrier since 1966. This contract has never been competitively bid. During fiscal year 1990, the cost paid to the carrier was $21 million; that cost rose to $23 million in fiscal year 1991. A recent HHS-OIG study stated that the government would save considerable funding and staff resources were HCFA to take over the management of this contract. What action is the Board taking as a result of that recommendation?

Answer. The Board's Office of Inspector General has undertaken a detailed review of the HHS study and will be reporting its findings to the Board Members in the very near future. The Board Members have also instructed agency staff to analyze the process of