Senate Homeland Security and Governmental Affairs Subcommittee on Financial and Contracting Oversight Hearing
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Chairman
I am pleased to be here today to discuss the oversight of federal agencies with relatively small budgets and resources and the role of the inspectors general (IG). IG offices play a key role in federal agency oversight by enhancing government accountability and protecting the government's resources. This includes a strong leadership role in recommending improvements to the effectiveness and efficiency of government offices and programs at a time when they are needed most. The Inspector General Act of 1978, as amended (IG Act), established IG offices at major departments and agencies to conduct and supervise audits and investigations; recommend policies to promote economy, efficiency, and effectiveness; and prevent and detect fraud and abuse in their departments' and agencies' programs and operations. n1
My testimony today focuses on (1) an overview of the creation of independent IG offices, (2) IG oversight of small agencies, and (3) IG independence and budgetary resources. In preparing this testimony, we included updates of current IG responsibilities and provisions of the IG Act and relied on our prior work related to these issues. More detail on our scope and methodology is included in each issued product. The work on which this testimony is based was conducted in accordance with all sections of GAO's Quality Assurance Framework that are relevant to our objectives. The framework requires that we plan and perform the engagement to meet our stated objectives and that we discuss any limitations in our work. We believe that the information and data obtained, and the analysis conducted, provide a reasonable basis for any findings and conclusions in this product. See the specific reports cited throughout this testimony for information on the standards applied.
Overview of the Creation of IG Offices
The IG Act originally established IGs appointed by the President and confirmed by the
Prior to the 1988 amendments, both GAO and the President's
The 1988 amendments established a new category of "federal entity," which is defined to exclude departments and agencies and DFEs with statutory IGs under the IG Act, as well as judicial and legislative branch entities and others as specified. Further, the 1988 amendments require the
The IGs appointed by the President are generally located in the largest departments and agencies of the government; the DFEs generally have smaller budgets and their IGs have correspondingly smaller budgets and fewer staff members. In our 2011 report of survey results of the IG community, n7 we found 30 departments and agencies with IGs appointed by the President, 33 DFEs with IGs, and 10 IGs established by various statutes similar to the IG Act that were not included in our survey. The presidentially appointed IGs and the DFE IGs reported to us total budget authority for fiscal year 2010 of about
IG Oversight of Small Agencies
GAO has long supported the creation of independent IG offices in appropriate federal departments, agencies, and entities, and we continue to believe that significant federal programs and entities should be subject to oversight by independent IGs. At the same time, we have reported some concerns about creating and maintaining small IG offices with limited resources, where an IG might not have the ability to obtain the technical skills and expertise needed to provide adequate and cost-effective oversight. In the final analysis, the determination of whether to place IGs in specific agencies is a policy decision to be decided by the
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There are a number of examples where IGs in federal departments and agencies with relatively large budgets currently provide oversight of federal entities with relatively small budgets. To illustrate, the
IG Independence and Budgetary Resources
Independence is the cornerstone of professional auditing and one of the most important elements of an effective IG function. The IG Act provides specific protections to IG independence that are unprecedented for an audit and investigative function located within the organization being reviewed. These protections are necessary in large part because of the unusual reporting requirements of the IGs, who are subject to the general supervision of their agency heads and are also expected to provide independent reports of their work externally to the
The IG Act provides the IGs with independence by authorizing them to select and employ their own staffs, make such investigations and reports as they deem necessary, and report the results of their work directly to the
With the growing complexity of the federal government, the severity of the problems it faces, and the fiscal constraints under which it operates, it is important that an independent, objective, and reliable IG structure be in place where appropriate in the federal government to ensure adequate audit and investigative coverage. The IG Act provides each IG with the ability to exercise judgment in the use of independence protections specified in the act; therefore, the ultimate success or failure of an IG office is largely determined by the individual IG placed in that office and that person's ability to maintain independence both in fact and appearance. n20
The
The Reform Act also increased the visibility of the IGs' budgetary resources through the annual budget process. Specifically, the act requires that IG budget requests include certain information and be separately identified in the President's budget submission to the
In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) amended the IG Act with provisions to enhance the independence of IGs in DFEs with boards or commissions. n22 Specifically, the Dodd-Frank Act changed who would be considered the head of certain DFEs for purposes of IG appointment, general supervision, and reporting under the IG Act. If the DFE has a board or commission, the IG Act now requires each of these IGs to report organizationally to the entire board or commission as the head of the DFE rather than an individual chairman. In addition, the IG Act requires the written concurrence of a two-thirds majority of the board or commission to remove an IG. Prior to this protection, most DFE IGs reported to, and were subject to removal by, the individual serving as head of the DFE.
In other past legislative reforms, the
Concluding Observations
IGs play a critical role in federal oversight and we believe that all significant federal programs and entities should be subject to oversight by IGs. We have supported the creation of additional IG offices and the enhancements to their independence by past legislation. However, we continue to have some concerns about creating and maintaining IG offices in relatively small federal agencies where it may not be cost-effective to obtain the skills and expertise needed to provide adequate oversight. We believe there are alternatives to creating additional IG offices that can be both effective and less costly. These alternatives for oversight should be decided on a case-by-case basis depending on the critical nature of the small agencies' missions and the risks identified that require increased oversight. Because the
This concludes my formal statement. Chairman
n1 Pub. L. No. 95-452, 92
n2 In 1978, 12 IGs were established by the IG Act at the Departments of Agriculture, Commerce,
n3 Pub. L. No. 100-504, 102
n4 In addition to IGs established by amendments to the IG Act, we reported in 2011 that there were 10 IG offices established by various other statutes similar to the IG Act. They are the IG offices at the Architect of the Capitol,
n5 CIGIE was established by the Inspector General Reform Act of 2008, Pub. L. 110-409, 122
n6 OMB published its most recent list on
n7 GAO-11-770.
n8 GAO,
n9 GAO-01-1038R.
n10 Pub. L. No. 107-189, [Sec.] 22(a)(c)(d), 116 Stat. 707,708 (
n11 GAO,
n12 See, e.g., Consolidated Appropriations Act, 2004, Pub. L. 108-199, 118
n13
n14 GAO,
n15 Foreign Affairs Reform and Restructuring Act of 1998, Pub. L. No. 105-277, div. G, [Sec.] 1314, 112
n16 Millennium Challenge Corporation Act, Pub. L. No. 108-199, title VI, [Sec.] 614(f)(1), 118
n17 Consolidated Appropriations Act, 2000, Pub. L. No. 106-133, div. B, [Sec.] 1000(a)(7), 113
n18
n19 National Transportation Safety Board Amendments Act of 2000, Pub. L. No. 106-424, [Sec.] 12, 114
n20 GAO, Inspectors General: Opportunities to Enhance Independence and Accountability, GAO-07-1089T (
n21 Pub. L. No 110-409, 122
n22 Pub. L. No. 111-203, [Subsec.] 989B-D,1081, 124
n23 Resolution Trust Corporation Completion Act, Pub. L. No.103-204, [Sec.] 23, 107 Stat.2369, 2407-08 (
n24 Pub. L. No. 106-422, [Sec.] 1, 114
Read this original document at: http://www.hsgac.senate.gov/download/?id=7da39be4-151b-4c46-8f2f-1dd641645ce4
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