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                                                        Calendar No. 478
                                                      
                                                      
116th Congress  }                                             {   Report
                                 SENATE                          
2d Session      }                                             {   116-231
_______________________________________________________________________                                    

                                                       


                  BONUSES FOR COST-CUTTERS ACT OF 2019

                               __________

                              R E P O R T

                                 of the

                   COMMITTEE ON HOMELAND SECURITY AND

                          GOVERNMENTAL AFFAIRS

                          UNITED STATES SENATE

                              to accompany

                                S. 2618

                             together with

                             MINORITY VIEWS

  TO STRENGTHEN EMPLOYEE COST SAVINGS SUGGESTIONS PROGRAMS WITHIN THE 
                           FEDERAL GOVERNMENT
                           
                           
                           

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]




                  June 9, 2020.--Ordered to be printed
                  
                  
                  
                  
                           ______                      

             U.S. GOVERNMENT PUBLISHING OFFICE 
 99-007               WASHINGTON : 2020 
 
                   
                  
                  
        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                    RON JOHNSON, Wisconsin, Chairman
ROB PORTMAN, Ohio                    GARY C. PETERS, Michigan
RAND PAUL, Kentucky                  THOMAS R. CARPER, Delaware
JAMES LANKFORD, Oklahoma             MAGGIE HASSAN, New Hampshire
MITT ROMNEY, Utah                    KAMALA D. HARRIS, California
RICK SCOTT, Florida                  KYRSTEN SINEMA, Arizona
MICHAEL B. ENZI, Wyoming             JACKY ROSEN, Nevada
JOSH HAWLEY, Missouri

                Gabrielle D'Adamo Singer, Staff Director
                   Joseph C. Folio III, Chief Counsel
       Patrick J. Bailey, Chief Counsel for Governmental Affairs
               David M. Weinberg, Minority Staff Director
               Zachary I. Schram, Minority Chief Counsel
             Marie E. Talarico, Minority Research Assistant
                     Laura W. Kilbride, Chief Clerk
                     
                     
                     



                                                       Calendar No. 478
                                                       
                                                       
116th Congress  }                                              {   Report
                                 SENATE
 2d Session     }                                              {  116-231

======================================================================



 
                  BONUSES FOR COST-CUTTERS ACT OF 2019

                                _______
                                

                  June 9, 2020.--Ordered to be printed

                                _______
                                

 Mr. Johnson, from the Committee on Homeland Security and Governmental 
                    Affairs, submitted the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                         [To accompany S. 2618]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Homeland Security and Governmental 
Affairs, to which was referred the bill (S. 2618) to strengthen 
employee cost savings suggestions programs within the Federal 
Government, having considered the same, reports favorably 
thereon with amendments and recommends that the bill, as 
amended, do pass.

                                CONTENTS

                                                                   Page
  I. Purpose and Summary..............................................1
 II. Background and Need for the Legislation..........................2
III. Legislative History..............................................3
 IV. Section-by-Section Analysis......................................3
  V. Evaluation of Regulatory Impact..................................4
 VI. Congressional Budget Office Cost Estimate........................4
VII. Minority Views...................................................6
VIII.Changes in Existing Law Made by the Bill, as Reported............6


                         I. Purpose and Summary

    S. 2618, the Bonuses for Cost-Cutters Act of 2019, provides 
incentives for Federal employees to identify unnecessary 
spending that can be returned to the United States Treasury for 
deficit reduction. The agency may retain up to ten percent of 
the amount returned for the purpose of reprogramming, or to 
provide a monetary reward to the employee(s) who identified the 
unnecessary spending. Although the bill is primarily to combat 
``use it or lose it'' end-of-year spending, it is applicable to 
expenditures throughout the fiscal year.\1\
---------------------------------------------------------------------------
    \1\On May 25, 2016, the Committee approved S. 1378, the Bonuses for 
Cost-Cutters Act of 2015. That bill is substantially similar in purpose 
to S. 2618. Accordingly, this committee report is in large part a 
reproduction of Chairman Johnson's committee report for S. 1378, S. 
Rep. No. 114-406.
---------------------------------------------------------------------------

              II. Background and the Need for Legislation

    In 1980, the Committee issued a report titled ``Hurry-Up 
Spending,'' which concluded that the urgency to expend any 
funds remaining at the end of the fiscal year resulted in 
products being purchased at unnecessarily high prices, a lack 
of a competitive market, and generally poor compliance to 
contracting regulations.\2\
---------------------------------------------------------------------------
    \2\Subcomm. on Oversight of Gov't Mgmt. of the S. Comm. on 
Governmental Affairs, ``HurryUp'' Spending (1980), U.S. Gov't Printing 
Office, available at https://catalog.hathitrust.org/Record/002951199.
---------------------------------------------------------------------------
    Forty years later and the Committee is still concerned 
about Federal agencies continued practices of increasing the 
expenditure of funds at the end of the fiscal year. The 
transaction of funds in the final month of the fiscal year is 
not only a constant problem, but a growing one as well. An 
oversight company's report claims spending in the last month of 
a fiscal year has gone up each year since 2015.\3\ In the final 
week of fiscal year 2018, Federal agencies signed nearly 10 
percent of all fiscal year contracts resulting in $53.3 
billion--more than was spent during the entire month of August 
($47 billion).\4\
---------------------------------------------------------------------------
    \3\Adam Andrzejewski & Thomas W. Smith, American Transparency 
Openthebooks.com, The Federal Government's Use-It-Or-Lose-It Spending 
Spree, 2, Mar. 2019, available at https://www.openthebooks.com/assets/
1/7/UseItOrLoseIt_Final1.PDF.
    \4\Id. at 4.
---------------------------------------------------------------------------
    Federal agencies spent $96 billion in September 2018 
alone.\5\ The biggest culprit of wasteful spending in the final 
month of fiscal year 2018 was the Department of Defense, 
spending $61 billion in September 2018.\6\ It is reported that 
the Department of Defense spent over $4 million on crab and 
lobster in the closing weeks of the fiscal year.\7\ The 
increase in agency spending at the end of the year, due to 
``use it or lose it'' budget rules, is so prevalent that 
articles are published at the end of fiscal years to highlight 
ways contractors can take advantage of the influx of funds 
being spent.\8\
---------------------------------------------------------------------------
    \5\Id. at 2.
    \6\Id. at prologue.
    \7\Kyle Rempfer, Military Times, Use-it or lose-it: DoD dropped 
$4.6 million on crab and lobster, and $9,000 on a chair in last-minute 
spending spree, Mar. 12, 2019, available at https://
www.militarytimes.com/news/your-military/2019/03/12/use-it-or-lose-it-
dod-dropped-46-million-on-crab-and-lobster-and-9000-on-a-chair-in-last-
minute-spending-spree/?utm_
source=Sailthru&utm_medium=email&utm_campaign=New%20Campaign&utm_
term=Editorial%20-%20Marine%20Corps%20-%20Daily%20News%20Roundup.
    \8\Tom Temin, DLT--A Tech Data Company, How to Take Advantage of 
Federal Fiscal Year-End as a Solutions Provider, Aug. 15, 2018, 
available at https://www.dlt.com/blog/2018/08/15/
federal-fiscal-year-end-vendor.
---------------------------------------------------------------------------
    The Bonuses for Cost-Cutters Act of 2019 directly addresses 
this problem by expanding the existing awards program for 
Federal employees to disclose waste, fraud, or mismanagement 
that result in cost savings. Under the provisions of the bill, 
an employee can identify unnecessary surplus salary and 
expenses and refer them to the inspector general of the agency 
or other agency employees designated to undertake such reviews, 
as well as the Chief Financial Officer of the agency for 
review. If the Chief Financial Officer concurs that the funds 
are not necessary for their intended purpose, and the 
rescission of the funds would not be detrimental to the 
execution of that purpose, then the head of the agency shall 
transfer the surplus or unnecessary funds to the general fund 
of the Treasury Department. However, the head may retain up to 
ten percent of any funds for reprogramming, or also for the 
purpose of paying a cash award to the employee who identified 
the surplus. The remainder of the funds are to be used by the 
Treasury Department for the purpose of deficit reduction.

                        III. Legislative History

    S. 2618 was introduced on October 17, 2019, by Senators 
Rand Paul (R-KY), Michael Bennet (D-CO), John Cornyn (R-TX), 
Joni Ernst (R-IA), Mike Lee (R-UT), and Rob Portman (R-OH). 
Senators Michael Enzi (R-WY), Cory Gardner (R-CO), and Pat 
Toomey (R-PA) later joined as co-sponsors.
    The bill was referred to the Committee on Homeland Security 
and Governmental Affairs on October 17, 2019. The Committee 
considered S. 2618 at a business meeting on November 6, 2019. 
S. 2618 passed by voice vote en bloc with Senators Johnson, 
Portman, Paul, Lankford, Romney, Scott, Enzi, Hawley, Peters, 
Carper, Hassan, Sinema, and Rosen present. For the record only, 
Senators Peters, Carper, Hassan, and Rosen voted in the 
negative.

        IV. Section-by-Section Analysis of the Bill, as Reported


Section 1. Short title

    This section establishes the short title of the bill as the 
``Bonuses for Cost-Cutters Act of 2019.''

Section 2. Cost savings enhancements

    Section 2 amends the sections in U.S. Code that establishes 
awards for cost savings disclosures by including surplus 
salaries, and expense funds that are determined to be 
unnecessary or wasteful.
    Subsection (a)(1) updates the definitions section by adding 
and defining ``surplus salaries and expenses funds.''
    Subsection (a)(2) creates the process in which an employee 
may identify surplus salaries and expenses that are 
unnecessary. The agency's inspector general and chief financial 
officer are then required to review the claim to decide if 
funds are essential to the operation. If the funds are not 
necessary, they are to be transferred to the Treasury for 
deficit reduction, with the agency having the option to retain 
up to ten percent of the non-essential funding to provide as an 
award to the employee(s) who identified the surplus capital. 
This subsection also requires each agency to submit a report to 
Treasury detailing the number and amount of cash awards given 
to employees, as well as a description of each submission for 
potential surplus funds reported. The report submitted by the 
agencies is also to be included in the agency's budget request 
to the Office of Management and Budget. Treasury is required to 
compile all the information provided by the agencies, and 
submit an annual report to Congress and the Government 
Accountability Office on the Federal cost savings and awards 
given through this legislation.
    Subsection (a)(3) updates the table of sections to reflect 
the changes made by this legislation.
    Subsection (a)(4) creates a six-year sunset on the 
authorities established by this bill.
    Subsection (b)(1) identifies the types of employees that 
are not allowed to collect a cash award through this 
legislation. The following employees are barred from receiving 
an award: the head of an agency; employees that serve at the 
level I of the Executive Schedule; or a commissioner, board 
member, or other voting member of an independent establishment.
    Subsection (b)(2) is a technical edit that strikes 
``Prohibition of cash award to Executive Schedule officers'' in 
Section 4509 and replaces it with ``Prohibition of cash award 
to certain officers'' to match the rest of the bill language.

                   V. Evaluation of Regulatory Impact

    Pursuant to the requirements of paragraph 11(b) of rule 
XXVI of the Standing Rules of the Senate, the Committee has 
considered the regulatory impact of this bill and determined 
that the bill will have no regulatory impact within the meaning 
of the rules. The Committee agrees with the Congressional 
Budget Office's statement that the bill contains no 
intergovernmental or private-sector mandates as defined in the 
Unfunded Mandates Reform Act (UMRA) and would impose no costs 
on state, local, or tribal governments.

             VI. Congressional Budget Office Cost Estimates

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, November 21, 2019.
Hon. Ron Johnson,
Chairman, Committee on Homeland Security and Governmental Affairs, U.S. 
        Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 2618, the Bonuses 
for Cost-Cutters Act of 2019.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Matthew 
Pickford.
            Sincerely,
                                         Phillip L. Swagel,
                                                          Director.
    Enclosure.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    

    Under current law, an inspector general (IG) of a federal 
agency can pay bonuses to employees who identify waste, fraud, 
or mismanagement of funds. S. 2618 would authorize agencies to 
pay bonuses to employees who identify unnecessary expenditures 
from amounts provided for agencies' salaries and expenses. 
Under the bill, if an agency's IG and Chief Financial Officer 
agree that funds appropriated to the agency are no longer 
required, then 90 percent of those surplus amounts would be 
transferred to the Treasury. The agency would retain 10 percent 
of the surplus funds and could use them to pay a bonus to 
employees who identified those surplus amounts, or for other 
authorized purposes.
    If appropriated amounts returned to the Treasury are from 
appropriations enacted before the enactment of S. 2618, the 
bill would reduce direct spending. If the process envisioned 
under S. 2618 results in fewer expenditures from funds 
appropriated in the future, implementing the bill would reduce 
spending subject to appropriation. However, CBO has no basis 
for estimating the size of any such reductions under the bill.
    The CBO staff contact for this estimate is Matthew 
Pickford. The estimate was reviewed by H. Samuel Papenfuss, 
Deputy Assistant Director for Budget Analysis.

                          VII. Minority Views

    Ranking Member Peters, Senator Carper, and Senator Rosen 
oppose S. 2618, the Bonuses for Cost-Cutters Act of 2019. While 
the intention of encouraging federal employees to identify 
savings opportunities in the federal government is worthwhile, 
there are several aspects of this bill that are problematic.
    First, this legislation raises potential constitutional 
concerns by empowering the executive branch to rescind 
congressional action. This bill would authorize Inspectors 
General (IGs) and Chief Financial Officers (CFOs) to determine 
whether funds already appropriated by Congress to government 
programs are necessary, and to rescind or redirect funds 
without approval by or consultation with Congress. 
Congressional oversight of these decisions is further limited 
since not all IGs and CFOs are Senate-confirmed positions.\1\ 
Recent vacancies among IGs further raise the question of 
whether an Acting IG should have this authority.
---------------------------------------------------------------------------
    \1\5a U.S.C. Sec. 8G; 31 U.S.C. Sec. 901.
---------------------------------------------------------------------------
    Moreover, S. 2618 requires IGs to participate in the 
management and operations of the agencies they oversee, which 
would undermine IG independence. The Council of Inspectors 
General on Integrity and Efficiency's (CIGIE) current standards 
of conduct require IGs to ``avoid assuming management 
responsibilities, such as setting policies, designing, 
implementing, or maintaining internal controls.''\2\ These 
guidelines were developed to allow IGs and their offices to 
conduct audits and investigations impartially. By requiring 
that IGs be involved in decisions on agency operations and 
funding, this legislation would place them at odds with these 
standards and could create conflicts of interest.
---------------------------------------------------------------------------
    \2\Council of the Inspectors General on Integrity and Efficiency, 
Quality Standards for Federal Offices of Inspector General (August 
2012) (www.ignet.gov/sites/default/files/files/
Silver%20Book%20Revision%20-%208-20-12r.pdf#page=19)
---------------------------------------------------------------------------
    Finally, although this legislation purports to offer a 
solution to wasteful end-of-year government spending, the 
mechanisms in this bill are not specifically targeted to the 
problem. The mechanisms are instead broadly applicable to 
address spending throughout the year. While there are 
legitimate examples of wasteful end-of-year spending, end-of-
year spending is not inherently wasteful. This bill would not 
address a key cause of many of those decisions, which is 
Congress' failure to adhere to the regular budget and 
appropriations process. To effectively tackle the issue of 
unnecessary end-of-year spending, this legislation should be 
more tailored to address the particular problem.
    Therefore, for all of the above reasons, we oppose this 
measure.

      VIII. Changes in Existing Law Made by the Bill, as Reported

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
the bill, as reported, are shown as follows: (existing law 
proposed to be omitted is enclosed in brackets, new matter is 
printed in italic, and existing law in which no change is 
proposed is shown in roman):

UNITED STATES CODE

           *       *       *       *       *       *       *


TITLE 5--GOVERNMENT ORGANIZATION AND EMPLOYEES

           *       *       *       *       *       *       *


PART III--EMPLOYEES

           *       *       *       *       *       *       *



Subpart C--Employee Performance

           *       *       *       *       *       *       *



                      CHAPTER 45--INCENTIVE AWARDS


            Subchapter I--Awards for Superior Accomplishments

Sec.
4501. Definitions.
     * * * * * * *

           Subchapter II--Awards for Cost Savings Disclosures

[4511. Definition and general provisions.]
4511. Definitions and general provisions.
     * * * * * * *

Subchapter II--Awards for Cost Savings Disclosures

           *       *       *       *       *       *       *



SEC. 4511. [DEFINITION] DEFINITIONS AND GENERAL PROVISIONS.

    (a) For purposes of [this subchapter, the term]this 
subchapter--
          (1) the term ``agency'' means any Executive agency[.] 
        ;and
          (2) the term `surplus salaries and expenses funds' 
        means amount made available for the salaries and 
        expenses account, or equivalent account, of an agency--
          (A) that are identified by an employee of the agency 
        under section 4512(a) as unnecessary;
          (B) that the Inspector General of the agency or other 
        agency employee designated under section 4512(b) 
        determines are not required for the purpose for which 
        the amounts were made available;
          (C) that the Chief Financial Officer of the agency 
        determines are not required for the purpose for which 
        the amounts were made available; and
          (D) the rescission of which would not be detrimental 
        to the full execution of the purposes for which the 
        amounts were made available.

           *       *       *       *       *       *       *


SEC. 4512. AGENCY AWARDS FOR COST SAVINGS DISCLOSURES

    (a) The Inspector General of an agency, or any other agency 
employee designated under subsection (b), may pay a cash award 
to any employee of such agency whose disclosure of fraud, 
waste, or mismanagement or identification of surplus salaries 
and expenses funds to the Inspector General of the agency, or 
to such other designated agency employee, has resulted in cost 
savings for the agency. The amount of an award under this 
section may not exceed the lesser of--
          (1) $10,000; or
          (2) an amount equal to 1 percent of the agency's cost 
        savings which the Inspector General, or other employee 
        designated under subsection (b), determines to be the 
        total savings attributable to the employee's disclosure 
        or identification.
          For purposes of paragraph (2), the Inspector General 
        or other designated employee may take into account 
        agency cost savings projected for subsequent fiscal 
        years which will be attributable to such disclosure or 
        identification.
    (b) * * *
    (c)(1) The Inspector General of an agency or other agency 
employee designated under subsection (b) shall refer to the 
Chief Financial Officer of the agency any potential surplus 
salaries and expenses funds identified by an employee that the 
Inspector General or other agency employee determines meets the 
requirements under subparagraphs (B) and (D) of section 
4511(a)(2), along with any recommendations of the Inspector 
General or other agency employee.
    (2)(A) If the Chief Financial Officer of the agency 
determines that potential surplus salaries and expenses funds 
referred under paragraph (1) meet the requirements under 
section 4511(a)(2), except as provided in subsection (d), the 
head of the agency shall transfer the amount of surplus 
salaries and expenses funds from the applicable appropriations 
account to the general fund of the Treasury.
    (B) Any amounts referred under subparagraph (A) shall be 
deposited in the Treasury and used for deficit reduction, 
except that in the case of a fiscal year for which there is no 
Federal debt (in such a manger as the Secretary of the Treasury 
considers appropriate).
    (3) The Inspector General or other agency employee 
designated under subsection (b) for each agency and the Chief 
Financial Officer for each agency shall issue standards and 
definitions for purposes of making determinations relating to 
potential surplus salaries and expenses funds identified by an 
employee under this subsection.
    (d)(1) The head of an agency may retain not more than 10 
percent of amounts to be transferred to the general fund of the 
Treasury under subsection (c)(2).
    (2) Amounts retained by the head of an agency under 
paragraph (1) maybe--
          (A) used for the purpose of paying a cash award under 
        subsection (a) to one or more employees who identified 
        the surplus salaries and expenses funds; and
          (B) to the extent amounts remain after paying cash 
        awards under subsection (a), transferred or 
        reprogrammed for use by the agency, in accordance with 
        any limitation on such a transfer or reprogramming 
        under any other provision of law.
    (e)(1) Not later than October 1 of each fiscal year, the 
head of each agency shall submit to the Secretary of the 
Treasury a report identifying the total savings achieved during 
the previous fiscal year through disclosures of possible fraud, 
waste, or mismanagement and identifications of surplus salaries 
and expenses funds by an employee.
    (2) Not later than September 30 of each fiscal year, the 
head of each agency shall submit to the Secretary of the 
Treasury a report that, for the previous fiscal year--
          (A) describes each disclosure of possible fraud, 
        waste, or mismanagement or identification of 
        potentially surplus salaries and expenses funds by an 
        employee of the agency determined by the agency to have 
        merit; and
          (B) provides the number and amount of cash awards by 
        the agency under section (a).
    (3) The head of each agency shall include the information 
described in paragraphs (1) and (2) in each budget request of 
the agency submitted to the Office of Management and Budget as 
part of the preparation of the budget of the President 
submitted to Congress under section 1105(a) of title 31.
    (4) The Secretary of the Treasury shall submit to the 
Committee on Appropriations of the Senate, the Committee on 
Appropriations of the House of Representatives, and the 
Government Accountability Office an annual report on Federal 
cost saving and awards based on the reports submitted under 
paragraphs (1) and (2).
    (f) The Director of the Office of Personnel Management 
shall--
          (1) ensure that the cash award program of each agency 
        complies with this section; and
          (2) submit to Congress an annual certification 
        indicating whether the cash award program of each 
        agency complies with this section.
    (g) Not later than 3 years after the date of enactment of 
this subsection, and every 3 years thereafter, the Comptroller 
General of the United States shall submit to Congress a report 
on the operation of the cost savings and awards program under 
this section, including any recommendations for legislative 
changes.

           *       *       *       *       *       *       *