Senator PRYOR. Mr. Chairman, that is all the questions I have at this time.

Will Mr. Clinkscales possibly be available later in the day?

Mr. CLINKSCALES. Yes, sir.

Senator CHILES. Do you have any further questions?

Senator DANFORTH. No.

Senator CHILES. Thank you, Mr. Clinkscales.

Our next witness will be Howard Davia, Assistant Inspector General for Auditing.

[Whereupon, Howard R. Davia, having been first duly sworn, was called as a witness herein and was examined and testified as follows:]

TESTIMONY OF HOWARD R. DAVIA, ASSISTANT INSPECTOR GENERAL FOR AUDITING, GENERAL SERVICES ADMINISTRATION

Mr. DAVIA. Mr. Chairman and members of this committee. I regret the events and publicity which led to this hearing. But I welcome the opportunity to discuss a subject of great importance to me, members of my profession, this committee, and our Government.

Very frankly, I am not in the same situation as Mr. Clinkscales; at least not yet. I still head the GSA Office of Audits. If it were not for the current publicity, however, I am convinced that it would not have been long before I met a similar fate.

Before discussing why I sense a job peril, however, I think it is important for this committee to recognize that the fate Mr. Clinkscales experienced, and the peril that I sense, is not unique to the two of us. It is a situation that confronts our counterparts throughout the Federal Government. This is what should be of greatest concern to you.

In our Government, we have a system which naively expects the auditor, or criminal investigator, to function and prosper unprotected in the lonely role as adversary. A role which, when he or she is effective-as we have been in GSA-brings embarrassment and criticism upon his agency. I submit, gentlemen, that auditors throughout the Government who are concerned about their careers, who are interested in earning cash bonuses, who are concerned about keeping their jobs, quickly learn to avoid conflict, don't issue tough reports, and stay on friendly terms with their agencies.

As a young auditor with the U.S. Army about 20 years ago-I learned this very quickly. When I proposed several audit findings critical of the Department of the Army, my superiors made very clear to me that there would be no audit findings critical of the Department of the Army-no matter how constructive they were. Disillusioned, I left the Army and joined the General Accounting Office, where I worked productively for 16 years. The joy of working for the GAO, is that, as a legislative watchdog agency-auditing the executive branch of the Government-you needn't be concerned about offending the agency being audited.

With that background, about 32 years ago, I came to GSA under Jack Eckerd, and subsequently worked under Jay Solomon. Both men were and are outstanding Administrators. Under these men I

sensed no peril in doing the job I was hired to do. But, today I am concerned.

In my judgment, the level of fraud and waste in GSA is still very high. In the Office of Audits we are rapidly building the capability to control it, but it will be a few years yet. Several significant audit reports, now in their final stages, should tend to dispel any notions that all is well.

Thanks to you, Mr. Chairman, and this committee, and Congressman Burton, we have been able to double our audit staff in the last year. But, we are still at half-strength. A request for 160 new auditors for 1981 was turned down twice by the OMB. Only on a third appeal were 45 new auditors allowed. Also, thanks to assurances voiced by you and this committee, Senator Max Baucus, Senator Stafford, Senator Moynihan, and many others, we have had the courage and direction to do audit without fear in GSA. My problem, strangely, is that I feel peril when I issue audit reports which make significant disclosures of misconduct. Strangely, I am often regarded as the villain for making the disclosures. Those responsible for the mismanagement I disclose often seem to be defended-sometimes protected. It frequently is the auditors who are abused, as the bearers of bad news. For example, until recently, my field office in Seattle was relocated 28 miles away from GSA's Regional Office. In Kansas City, we are located 15 miles away from GSA. In New York, my auditors are located in a bad district, in a building housing a methadone clinic, where the stairs reek of urine. The auditors must travel a half-hour on perilous subways, to reach the GSA offices they must audit. Needless to say, the office site hurts our recruiting. Incidentally, in the New York GSA Regional Office in lower Manhattan, there are three floors vacant in a new Federal building annex, minutes away from GSA offices.

Senator CHILES. As I recall, your audit found a lot of empty space up there.

Mr. DAVIA. That was leased space, but we have a brand new federally owned building which has space which is unfinished and has been vacant for 3 years.

Senator CHILES. How long?

Mr. DAVIA. Well, about 2 years.

Why do I feel threatened? Recently, we decided that a contracting officer, responsible for major construction projects in GSA's region 10, could no longer be allowed to represent the Government's interest. In one instance, he allowed a contractor over $120,000, even though we advised him it was a false claim. In our audit report, which tallied up over $1 million in questionable allowances to contractors, we recommended that his contracting officer's authority be withdrawn. Very frankly, we decided that the taxpayers could no longer afford his bad judgments.

GSA's Regional Administrator in region 10 disagreed with our recommendations and defended the man. I was summoned by Mr. Muellenberg who told me that Mr. Freeman was very unhappy with our recommendation. A few days later, I received a memorandum of the Administrator's staff meeting, which was widely distributed in GSA. In it, he stated, "I don't agree that an auditor is in a position to recommend removal of a contracting officer." He stated

that such disclosures should not appear in audit reports or the public record. I agree with his statement to the extent that auditors should never have had to recommend the man's removal. But, in the absence of management action, there seemed to be no other alternative.

Why do we auditors feel threatened? About 6 months ago we conducted an audit test in Kansas City which has come to be called "the Sting." The auditor who conducted the test, Mrs. Carolyn Emery, is in this audience today, in the first row behind me. Briefly, an audit probe established that internal controls in Kansas City were not working. Mrs. Emery and her audit team successfully tested the audit premise and fooled the local finance office into sending her a check for $95,000.

The successful test caused a fury at GSA. Local officials reacted by restricting the auditors access to records, until they were advised I would ask for a contempt citation. We were contemptuously described as "the gang that couldn't shoot straight," by the Director of the Office of Finance.

Shortly after our test, one afternoon I was summoned by Mr. Muellenberg. He told me he had just talked to Mr. Freeman who was in Kansas City at the time. He told me that Mr. Freeman was very disturbed at our test and said that the auditors involved in the test should be fired.

Just 2 weeks ago, I am told that the Regional Administrator in Kansas City stated he had recently met with the Inspector General. He said that he learned that Kurt Muellenberg is going to clean out the Inspector General's office, and expected that after that, the Gestapo tactics used by investigators and auditors will come to a screeching halt. I understand this is a near quote.

I surmise that the Gestapo tactics he refers to was our attempt to determine how our security on the "Sting" audit was breeched. At my request, Mr. Clinkscales had one of his agents ask principal GSA officials in Kansas City how they came to know about the "Sting" before we were ready to tell them. Nothing was learned from that round of questioning. Later, Mr. Clinkscales had his agent go back and repeat the questions, with the subjects sworn to tell the truth. This time, a GSA official who had lied the first time revealed that an investigator was an informer. Mr. Clinkscales asked for and received the man's resignation. Although it was recommended, the official who lied was not admonished.

Then, of course, there are the little things that alone are dismissed, but together are unsettling. About 6 months ago, Mr. Muellenberg told my Deputy that he could fire me or Mr. Clinkscales any time he wanted. And, I am told that an Assistant Administrator advised a subordinate of my expected upcoming job vacancy. Very frankly, gentlemen, I am not overly concerned about my personal welfare. I am a Wisconsin CPA, and confident of my ability. I am near the end of my Federal career. I have advanced to as high as I can go as a career employee. I receive maximum pay and I have reasonable salary protection. I enjoy the job pressures and I have no further career goals other than to leave a better Government behind me, which, if given the opportunity, I can do. I am very concerned, however, for the livelihood and careers of my senior subordinates, people who trust me, and risk retribution

every day. If my job is vulnerable, they are vulnerable. Without their courage, their trust in me, and the durability of my job, GSA audits will be ineffective. Fraud and abuse will prosper in GSA Very frankly, I fear that Mr. Clinkscales' removal may have already damaged that relationship. I assure you that everyone is watching what happens to him. Several of my most effective audit field directors are nervous as a result of their tough audit products already issued, and yet to come. Each time they issue a tough report, they make enemies. Gentlemen, I feel a personal responsibility for their welfare.

I am very disturbed to tell you that parts of GSA appear to tolerate fraud, waste, and abuse. I know that you and many of this Congress are disturbed. Many millions of citiziens, including myself, are furious during this tax season as they pay their hard earned dollars for taxes, which will be used to pay the thieves and those who would waste those tax dollars.

Gentlemen, I urge that you participate with Senators like Harry F. Byrd, Jr., of Virginia, to consider legislation which would protect the Government's Inspectors General, auditors, and investigators. And, I hope that you are able to restore Mr. Clinckscales to his position, and allow us, with your clear support, to work together to get the job done.

Thank you.

Senator CHILES. Mr. Davia, we thank you for your statement. The exact purpose of the inspector general bill is an attempt to create the kind of independence within the agency so that audit reports could be issued, letting the chips fall exactly where they may, so that investigation work can be done on the basis of the merits of that particular work. That is why we have attempted in this bill, to insulate the Inspector General from the Director himself of the agency.

I find it very disturbing to see that that situation doesn't appear to be working; that you raise the allegation that it is not working that way in GSA.

I can't think of anything worse than having the auditors feel like they can't discover bad situations or can't bring in bad audits and discover bad facts without finding that they will be criticized for it. I think it is human nature that an administrator, following his line of responsibility, is going to be upset because he is going to hear from his regional people, wherein a "Sting" operation or some kind of internal investigation like that is done. We expect there would be some of that.

That was exactly the reason to try to create the Office of Auditor and Inspector General, because we recognized that the audit function was just as important as trying to discover the fraud after that, and I can't tell you how disturbed I am to find out that you were criticized for operating a sting operation that successfully demonstrated how easy it was to have payments made that were improper payments and that should not have been made, and I would think, rather than forgetting about the task of correcting that and seeing that controls were put in that that would be time worth spending.

But knowing human nature, I think you could expect that there would be problems, but I think that you should be completely insulated from those problems.

Senator PRYOR. Can you tell us what the bill provides? As a prelude to the questioning I would like to know generally what it provides.

Mr. DAVIA. Frankly, Senator, approximately 1 month ago, Senator Harry Byrd was quoted in a newspaper article wherein he expressed some concern that the HEW Inspector General had several months ago made the comment that there were $7 or $8 billion worth of Federal waste in HEW. Senator Byrd remarked at the time that he wondered how long Mr. Morris would be around. The Inspector General was Tom Morris.

Two or three months later Mr. Morris was no longer HEW Inspector General. Senator Byrd expressed a concern that perhaps he should look into the matter of assuring the objectivity of inspector generals, possibly through legislation or something of that sort. So there wasn't legislation yet, but I presume he intends an investigation which could very well result in such legislation.

Senator CHILES. I would like to ask you, if I can, about the audit report in which you brought out that you thought the contracting officer should be relieved of his responsibility. You said that you agreed with the comments from the memorandum of the Administrator's staff meeting that an auditor should not be in a position to recommend removal of a contracting officer, but in the absence of management action on your report, there seemed to be no alternative. What are you talking about there? Are you talking about that you had not received any management response from your previous critical audits of this contracting officer?

Mr. DAVIA. Yes. With regard to the construction projects that this individual was involved in we issued two or three audit reports for the last several years, perhaps even more. One had to do with the Anchorage Federal Office Building. That is where we spent $2.5 million on an architectural design which had to be discarded. Senator CHILES. This is the same fellow responsible?

Mr. DAVIA. Yes. I am not saying he was responsible for the rejected architectural design, but on that construction contract we had a question with regard to his justification for making a number of contract change orders which did not justify, in our judgment, allowing something like $1 million in costs.

Senator CHILES. So you had issued at least two or three critical reports?

Mr. DAVIA. Yes. We had issued several of what we call contract audit reports wherein we evaluate the substance and/or support behind contractor's claims.

Senator CHILES. But you never saw any results from those, and that is why you felt that you had to go ahead and recommend in the report that he should be terminated?

Mr. DAVIA. That's correct. I think that the need for our judgment in this case is borne out by the fact that after we issued the report in question, that we still did not get concurrence from the local regional administrator. As a matter of fact, they defended this man's actions as not having had sufficient training. Part of the defense was the fact that documents were missing from the files, in

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