everybody's function is. Even to this day the localities are still divided as to whether they are going to try to get grants that come directly to them or whether they are going to go through the States.

It is clear that the national strategy and structure that has been set out would be to have that organized on a State basis. What good does it do to talk about-to argue over the question of whether chemical plants are the most vulnerable, because they are very vulnerable, but lots of things are vulnerable, railroads, bridges. One can talk all day and create a parade of potential horribles.

I think what we really have to do is focus our attention on trying to make some policy decisions. The Congress, it seems to me, and the executive branch have to make policy decisions about how you set up the proper national strategy in order to deal with what is most likely that could occur, threat assessment, as one of the Congressman said a little while ago, and then playing off that. You understand that you may not be able to foresee every evil thing that a well-financed, militarily trained enemy could do, but you can foresee reasonably what they may be prepared to do and then prepare against that to the greatest extent possible.

The most important thing is this. How do you develop a national strategy that works with the States and create the State plans which have been directed and to make sure that those State plans take into consideration what the locals believe that they have to have in order to respond to reasonable risks, which they don't know what they are, by the way.

It seems to me that the national government has to help identify what the real threats might be so that the localities can respond and say, well, we don't need a fire truck, we need something else, and to make sure that the money that is requested and the grants that go on are appropriate to a genuine overarching, hanging together national strategy that puts money into the proper places so that you can train and exercise and prepare in that way, and that is the overarching need that we see right now.

Mr. TURNER. Well, I appreciate that observation. I know on this committee we have all shared the concern that the first task that our new Department of Homeland Security must complete as soon as possible is that national threat assessment, assessment of our vulnerabilities, so that we can develop some prioritization of what we need to be doing first, because you are correct, there are many risks that we can face, many vulnerabilities out there. But selecting the ones we need to deal with first cannot be successfully done unless we have that national threat assessment, that vulnerability assessment, and the matching of the threats and the vulnerabilities.

So I think that is a number one. I am also impressed with your comments about developing the necessary definition of preparedness. One of the things that I think we must have is a clear definition of what are the essential capabilities that our States and local governments need to respond, and I know you have spent some time working on that. I would welcome your comment on that issue as well.

Mr. GILMORE. Yes, sir. And let me refer you, Congressman, if I could, to our 1999 report, which was virtually exclusively a threat

assessment. After the 2001 attack we heard a lot of things in the papers, on the radio and TV and in the halls of Congress and everywhere about threat that did not match up to what we had said in 1999, and the Commission suggested that we do a reassessment of the threat, which we did again in our report of 2002.

So I would direct you to those. And, by the way, we didn't feel the threat was different at all when we took a second look at it in 2002.

And, Congressman, your specific question was?

Mr. TURNER. Well, I picked up your remark earlier about trying to establish a definition of preparedness, I believe is the way you expressed it. I have thought of it in terms of establishing those essential capabilities to respond that we need to have available in our States, and in our communities that would protect us in the event of

Mr. GILMORE. Yes, sir. The strategy, Congressman, is everything. If you understand what it is you are trying to protect in this country, specifically and you understand what the locals need, only then does the grant to them make any sense. Otherwise you end up with local agencies and organizations simply following their old priorities they have always followed. That then becomes what we all know as pork barrel. I guess there will be plenty of that.

But the fact is it would be nice if we can get most of this money focused into an actual direction of a strategy against real threats. Now, that means that of course the threat picture in Montana will look different from the threat picture in Virginia, for example.

But the locals working together with the executive branch within the respective States ought to be able to create a State plan. That isn't the end of it, however. I am one who believes, that while you can create things from the bottom down, you really need top up, top down leadership also, to then make all of that harmonize so that we all understand that we are playing on the same sheet of music, and that is where I think the direction is that we are going and where we should go.

Mr. TURNER. Thank you.

Mr. GILMORE. I hope that was responsive.

Chairman Cox. I thank the gentleman. The vice chairwoman, Ms. Dunn, is recognized for questions.

Ms. DUNN. Thank you very much. Ms. Hill, I wanted to ask you a question. In your recommendations for reform it emphasizes the need for the development of a national watch list for terrorists. It is my understanding that the development of this watch list has not yet happened, and I am wondering how important this component of reform is, how close are we to making it reality, what obstacles exist in its way, and ought we, DHS, ought the Department of Homeland Security, actually be its home?

Ms. HILL. Well, I think it is very important. I mean, one of the things that we saw when we did our investigation was that there were many different watch lists. As with a lot of other things in the government, we have more than one agency handling one watch list. And I think, like the fusion center the important point the committees wanted to make is that we should have all of this information together in one place. We should have a watch list in one place that people can go to and everyone can get access to

those names so that we can be sure that people do not fall through the cracks.

I have not, since the conclusion of the Inquiry, continued to work on this at the committee. I am no longer with the committee. So I have not addressed what is the current status of the watch list situation. So I really cannot, you know, speak to how far they have come along in correcting that and getting it into one agency.

But it is extremely important, because of what we found. Not only did Mihdhar and Hazmi not make it to the watch list until very late in the game, we found that after September 11th the CIA provided a lot more information to the State Department for the watch list and more individuals were watch listed after September 11th. So there was clearly some, you know, lack of getting those names to the list for use by the other agencies at a time when obviously it could have made a big difference, particularly with those two individuals.

So it is extremely important. We were told during the course of our investigation that there was anything from several watch lists to 50, 60 watch lists in the U.S. Government. So it is a big job to put it all in one place, but it should be done.

Ms. DUNN. And it is a scary term, isn't it? I think it frightens people out there until they understand how the lack of such a watch list caused us huge horror the last time.

In your testimony, you also outlined your findings that clearly point to systemic communications problems across the Federal intelligence agencies and law enforcement agencies.

On the Federal level has the Intelligence Community responded to correct those situations? And would you suggest that Congress exercise more aggressive oversight in this area, in this area or some other area, to help in the effort?

Ms. HILL. Well, both Director Tenet and Director Mueller testified in front of our inquiry, and both stated that they were doing everything in their power to increase communication and cooperation between the two agencies, and between the rest of the Intelligence Community. So we clearly were told that things were changing and things had improved.

Part of the problem is we have a huge Intelligence Community. We have, I believe, 13 different agencies and you need to have good communication and good exchange of information. Not just the top leaders have to agree to do it, but it has to filter all the way down through these agencies to the people on the front lines, to the field agents who are in the offices dealing with the Intelligence Community. As Governor Gilmore knows, it is also critically important to then get cooperation and exchange of information between our Federal community, law enforcement and intelligence, and the State and locals, who we also heard from in our investigation.

So I believe, and again, as I said, I have not continued to update and focus in depth on what is happening right now, but I believe that given the events of 9/11, given the focus and the level of interest in that, that people are clearly more alerted now to the need for that kind of exchange. I would be surprised if every piece of the problem has been eliminated, just simply because of the size of the problem. We are talking about all of the Federal intelligence agencies, the rest of the Federal Government, the gap between

forcement and intelligence and then the State and local. So it is a huge area where we need to focus attention.

I think there is more attention now, more direction to share information, but we need to sustain that emphasis on information sharing.

Ms. DUNN. Thank you. May I ask the Governor a question, Mr. Chairman?

Chairman Cox. Without objection.

Ms. DUNN. Governor, let me just ask you one question. We heard testimony yesterday from former Speakers Tom Foley and Newt Gingrich that was very useful in laying out why they believed this committee, the Select Committee on Oversight of the Department of Homeland Security ought to be made a permanent standing committee.

The most recent report of your panel includes the observation that Congress is, quote, still not well organized to address issues involving homeland security in a cohesive way, and certainly we have seen that overlapping jurisdictions lead to lack of focus.

I am wondering if you could expand on your recommendation for improving this oversight aspect.

Mr. GILMORE. See, Congresswoman, that is the trouble with the Commission, it just doesn't mince words. The Commission believes and has discussed over years and still believes that there needs to be the greatest concentration possible in both Houses of the Congress of oversight and budgetary authority of the Department of Homeland Security.

It is hard to set up a new department. That also has been discussed extensively in our reports, very difficult to do. Our emphasis has been on the implementation of appropriate strategy and policy. That has to be the focus, not so much the organizational aspects that can in fact get in the way of that.

If the Congress contributes to that, by having so many different committees that are dealing with different monetary aspects or different aspects of the organization, and so on, it is going to be even harder for Governor Ridge to make that Department the effective tool that I believe that he will make it be.

So, yes, our recommendation is the greatest possible concentration of these resources and assets into one, even a joint committee, but at least one committee in each House.

Chairman Cox. The gentleman from the State of Washington, Mr. Dicks.

Mr. DICKS. I would point out that both of the Appropriations committees, House and Senate, have created subcommittees to do that. I think that brings some focus, though I strongly support the effort of having this as a permanent committee. You know, the one thing that always worried me about this, your Inquiry, Ms. Hill, was that there was some good work done and in one of the findings it talks about the July 10th, 2001, Phoenix FBI field office agent who sent an electronic communications to four individuals in the Radical Fundamentalist Unit, and two people in the Osama bin Laden Unit at FBI headquarters, and two agents on international terrorism squads in the New York field office.

In the communication the agent expressed his concerns, based on his firsthand knowledge, that there was a coordinated effort under

way by bin Laden to send students to the United States for civil aviation related training. He noted that there was an inordinate number of individuals of investigative interest participating in this type of training in Arizona and expressed his suspicions that this was an effort to establish a cadre of individuals in civil aviation who would conduct future terrorist activity.

The Phoenix EC requested that FBI headquarters consider implementing four recommendations: Accumulate a list of civil aviation university colleges around the country, establish liaison with these schools, discuss the theories contained in the Phoenix EC with the Intelligence Community, and consider seeking authority to obtain visa information concerning individuals seeking to attend flight schools.

However, the FBI headquarters personnel did not take the action requested by the Phoenix agent prior to September 11th, 2001. The communication generated little or no interest at either FBI headquarters or the FBI's New York field office.

In your inquiry, what was the reason for that? That still to me is so shocking that—even though they had information going back to 1994 that an aircraft could be used, and you had these people who were highly questionable, that this did not spark any interest in either the FBI national headquarters or at their New York office, which was in charge of counterterrorism. Why is that?

Ms. HILL. Well, there were several, I guess, contributing factors. The agent who wrote that communication told us that he knew how big the FBI is, how many other things were going on. I think he used the words that he thought it would go to "the bottom of the pile,” which it pretty much did. It didn't get much attention.

Part of the problem was the FBI's electronic systems for data and sending data. There are questions whether or not it went to all of the people it should have gone to. It went to some intelligence specialists in FBI headquarters. They told us they were going to act on it, but that they didn't get around to getting back to it.

They looked at it more in terms of what case would this be relevant to. And they sent it to one field office where there was a case where it might have potentially been relevant. They weren't looking at it as a national kind of analytical product.

The New York FBI office, which was heavily involved in counterterrorism, did get it but it wasn't considered particularly unusual to the New York agents, because they knew through, I believe some of the testimony in the embassy bombing case, for example, that pilots or al-Qaeda related pilots had come to light before.

So they didn't focus on whether the pilot might be for another reason, or this might be something else. Basically, it didn't get a lot of attention. And the FBI agent in Phoenix who wrote it, of course, I don't think he expected it would get a lot of attention. That is what he told us. But he sent it up anyway.

Mr. DICKS. Did he try to follow up or go back a second time?

Ms. HILL. No, he didn't. Well, that memo went out in July of 2001. So it was within a month or two of the September 11th bombings. And he did not. Because he as I said, he thought it would take a long time.

One of the things that we heard repeatedly throughout the whole course of this was how long it took for things to get turned around,