Members of the panel told the Senate Judiciary Committee on Tuesday that even though the mass collection of phone records is necessary, programs should be changed to protect Americans’ rights.
The review was prompted by former National Security Agency (NSA) contractor Edward Snowden who revealed classified documents about secret US surveillance programs last June that provoked outrage at home and abroad.
On Tuesday Obama said he was "close" to completing his review of US surveillance programs ahead of a planned speech on reforms expected Friday.
The panel also suggested that the collection of phone records should be stored with the telephone companies and not the government.
Lawmakers and phone providers have expressed concern over this option saying it shifts the burden of storing data to private phone companies, which may prove costly and litigious.
However, the panel still backed the spying programs as necessary with former top CIA official Michael Morell, a panel member, saying collecting telephone metadata was important even if it had not yet prevented any terrorist attacks.
"It only has to be successful once," he told the hearing.
US-Germany ties tense
The panel also recommended extending privacy protections against broad surveillance to non-US citizens, which would change policies on surveillance of foreign leaders.
Last August, Germany announced that Berlin and Washington would negotiate a deal not to spy on each other after it was revealed that the US tapped German Chancellor Angela Merkel's mobile phone.
However, talks on what the German domestic press had dubbed a "no spy agreement," have not made any headway. A December New York Times report had hinted that Germany would likely be disappointed in its efforts to broker a deal. The paper reported that Obama's national security advisor Susan Rice had already warned the government in Berlin that Washington did not want to set an international precedent by making an explicit arrangement with Germany.
On Tuesday the Munich-based Süddeutsche Zeitung quoted a German source close to the talks as saying: "We're getting nothing."
Later on Wednesday, the EU parliament is set to debate a draft report about the NSA spying scandal and its implications on European citizens.
hc/mz (AFP, AP, Reuters, dpa)