Mr. CARR. One of the task forces established by the Advisory Commission on Intergovernmental Relations deals with applying benefit-cost analysis to investment decisions. That task force reported the following:

All estimates and costs of proposed investments are forecasts, and therefore inherently uncertain.

There has been relatively little development of methods for coping with this type of uncertainty.

Risk analysis is seldom used in conjunction with benefit-cost analysis.

Better methods are needed for estimating, expressing, and communicating the estimated uncertainties and risk factors incorporated into benefit-cost inputs, assumptions, and results so that decision makers may understand the range and likelihood of possible outcomes.

Do you agree with this assessment?

[The information follows:]

The administration believes that our nation will achieve the greatest benefits from its infrastructure investments if it invests wisely, and continually improves the quality and performance of its infrastructure programs. As a result, on January 26, 1994, the President signed Executive Order 12893, "Principles for Federal Infrastructure Investments," requiring a systematic analysis of expected benefits and costs from its infrastructure investments. The Executive Order also requires that each executive department and agency improve its practices for managing infrastructure it funds. Agency plans to implement the Executive Order are due to the Office of Management and Budget by March 15, 1994.

Mr. CARR. What is the Department of Transportation doing to address the issues of risk and uncertainty in investment decision making? Specifically, is the Department doing anything to encourage the use of risk factors in benefit-cost analyses?

[The information follows:]

The President's Executive order specifically requires that executive departments and agencies with infrastructure investments recognize uncertainty in costs and benefits and address this uncertainty in their analysis of infrastructure investments. As agencies develop their plans, they must specify actions that they will take to address the requirements of the Executive Order. In addition to the Executive Order, the Department of Transportation is currently exploring ways to build risk factors and uncertainty into its biennial assessments of highway and transit needs.

Mr. CARR. What institutionalized actions does the Department take using benefit-cost analysis or risk factors before awarding funds for highway, transit and airport projects? Could-and should-the department be doing more in this area?

[The information follows:]

The Department of Transportation uses a number of techniques to assess the benefits, costs, and risks inherent in its infrastructure programs. In our discretionary grant programs, we look specifically at the costs and benefits of projects in helping us decide appropriate funding priorities. For example, transit new starts projects undergo a detailed alternatives analysis process that specifically addresses the costs and benefits of various build options, and contributes to development of a cost-effectiveness index to help rank priorities. Other discretionary programs use different processes, but all are designed to improve the decision making process.

For the Department's major formula infrastructure programs we focus on helping the states, localities, and grantees make the best use of the resources provided. For example, ISTEA requires the states, along with local metropolitan planning organizations, to develop a number of management systems, including: highway pavement, bridges, highway safety, traffic congestion, public transportation facilities and equipment, and intermodal transportation facilities and systems, to enhance the overall

PROPOSED AIR TRAFFIC CONTROL CORPORATION

Mr. CARR. Finally, I want to say, I am probably alone among people on Capitol Hill, at least so far as I have been able to gather, who commend you for your effort on the ATC Corporation. I am going to reserve judgment until I see exactly what your proposal is. But it seems to me that it is not really fair for Members of Congress to prejudge the situation as some seem to be doing.

It is a complicated issue. But it seems to me it is one of those things about whether the glass is half full or half empty. I think in this matter that Members of Congress really should be taking the glass-as-half-full attitude and waiting to see what you come up with. I am sure that there will be some thoughtful comments from the Congress about how it is done, how it is phased in, where you draw the line and so many other things.

But I want you to know that in this effort, somewhere on Capitol Hill as it pertains to transportation, you have a friend. And it is. conceivable that it would affect the jurisdiction of this Committee. But I don't think that it might diminish the jurisdiction of this Committee. I don't think that really ought to be our worry.

I think we really ought to be focusing on what is good for the American public and what is good for aviation and air commerce in this country, and we should not be terribly concerned about whether it enhances or diminishes our jurisdiction. That is what the American voters have been saying is wrong with this place and how we operate in government for too long.

So I just want to tell you that I congratulate you for your effort and I look forward to working with you in a positive way about it. I think maybe somewhere along the line if we could chat or be briefed by your able staff about what is likely to come out before it actually does come out, I might be, in fact, able to help anticipate some problems that you might have up on the Hill so that we might minimize some of those things and see that the proposal gets as fair a launch as possible.

I think we owe that to you. And again, I am sorry that some on Capitol Hill are trying to nibble you to death on this issue already. And I would just urge them to and I will be urging them to keep an open mind, just as I will.

CLOSING REMARKS

With that, I don't believe that we have any other business before the Committee today. I want to thank you for your time and attention.

Thank you, Louise, for being here as well, and we look forward to seeing you again. The Committee is adjourned until 10 a.m. to

morrow.

THURSDAY, FEBRUARY 24, 1994.

OFFICE OF THE INSPECTOR GENERAL

WITNESSES

A. MARY SCHIAVO, INSPECTOR GENERAL

RAYMOND J. DECARLI, ASSISTANT INSPECTOR GENERAL FOR AUDITING

WILBUR L. DANIELS, SR. ASSISTANT INSPECTOR GENERAL FOR INSPECTIONS AND EVALUATIONS

ROGER P. WILLIAMS, ASSISTANT INSPECTOR GENERAL FOR INVESTIGATIONS

JOSEPH T. O'NEILL, SPECIAL ASSISTANT TO THE INSPECTOR GENERAL

OPENING REMARKS

Mr. CARR. We will open this hearing. We are glad to have the Inspector General with us today. Nice to see you again. We have your request for the fiscal year 1995 budget, and that request is for $38.3 million, which is 2 percent less than the amount that you have this year.

The Office of the Inspector General and the Saint Lawrence Seaway Development Corporation are the only DOT agencies that are budgeted to receive less than they were provided last year in absolute dollars, while having to absorb locality pay and a 1.6 percent pay raise. Salaries and expenses, it appears, for the Office of the Secretary, for example, would go up 6.4 percent and Coast Guard and NHTSA operating expenses would rise about 2.4 percent.

Transit administrative expenses are up 9 percent. It is apparent that the administration's budget request for the Office of the Inspector General is very austere, even more so than is the case for other elements of the Department. Your request represents a loss of 35 FTEs, and that is about 7.3 percent of the work force. We will explore today some of the implications of that reduction and say that we are very concerned.

I think yesterday Mr. Wolf interrogated, you might say, the Secretary pretty vigorously on this point. I might say that we generally think that you do a great job and an important job and so we are happy to have you here today. If you would like to introduce your supporting staff and in the interests of time perhaps make some summary remarks of your testimony, we will put your entire statement into the record. I think you will find this Committee is a very friendly Committee when it comes to the Inspector General. We work together on a whole host of issues that I think are important for the checks and balances of the Department. I happen to be a fan of some of the things you are doing. So I don't know whether it is a little too early to say that you won't have to suffer those proposed cuts, but it seems to me that cutting the IG, par

(115)

ticularly when it is not a large amount of money, that it is a bit of an insurance policy that we need to have things run right. So with that, I would be glad to take your testimony and we might have a couple of questions. I don't think there will be many.

INSPECTOR GENERAL'S OPENING REMARKS

Ms. SCHIAVO. Let me introduce the gentlemen who are accompanying me here today. To my left is, Raymond DeCarli, with whom you are quite familiar, the Assistant Inspector General for Audits. He has accompanied me here every year. Next to him on my far left is Wilbur Daniels, who is the Assistant Inspector General for Inspections and Evaluation, and this is his first time here before the Committee.

Mr. CARR. We will be rougher on him then, a little hazing here. Ms. SCHIAVO. We made up some stories for him about what it would be like.

On the far right is Roger Williams, the Assistant Inspector General for Investigations and this is also his first time here. So you can save some of that for him. And then to my immediate right is Joseph O'Neill, who is a Special Assistant to the Inspector General. The Deputy Inspector General, unfortunately, is unable to be with us today and did send his regrets. He had a long-standing commitment for a series of tests at the Mayo Clinic and we would not let him postpone. We said, "Come back when you are healthy," so he does send his regrets.

I already submitted my statement, and in it I covered our budget request information, goals, accomplishments, how we are going to deal with our downsizing plan, what we did with NPR and our work on the DOT strategic plan. So I will not repeat any of that and I will just submit my statement for the record.

You did correctly summarize our budget request. It is an austere one. We realize that cuts are being taken, of course, all through the Government. It is kind of funny, though, when cuts are taken in Washington, it seems like the rest of the country cheers, so I do not want to be complaining too badly. I know that the rest of the country has also already taken cuts and hits. But I will say that in the last three years that we have come up here, we have issued 6,293 audit reports totaling findings of $2,624,000,000, and of that amount, the Department sustained $1,265,000,000 of our findings of funds to be put to better use. We hope we have earned our keep. On the investigative side in the last year alone, we pulled in almost $26.5 million in fines, restitutions and other criminal penalties, and have pulled in over the last three years 341 years of prison sentences.

That is what we do with the money when we get it. We hope we spend it wisely. We certainly endeavor to do that. Therefore, we will proceed with the questioning on our budget request and just stand on the opening statement.