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Statement for the Record: 

Committee on Homeland Security and Government Affairs, U. S. Senate: 

United States Government Accountability Office: 

GAO: 

To accompany the Committee hearing record of Wednesday, July 11, 2007: 

Inspectors General: 

Opportunities to Enhance Independence and Accountability: 

Statement for the Record by David M. Walker: 
Comptroller General of the United States: 

GAO-07-1089T: 

GAO Highlights: 

Highlights of GAO-07-1089T, a statement for the record to the Committee 
on Homeland Security and Governmental Affairs, U.S. Senate. 

Why GAO Did This Study: 

The federal inspectors general (IG) play a critical role in addressing 
mismanagement of scarce taxpayer dollars. In the coming years, as we 
enter a period of escalating deficits and increasingly limited 
resources, GAO believes that the greatest single source of savings will 
come from bold, decisive efforts to transform what government does and 
how it does business, and to hold it accountable for results. 
Therefore, it is important that an independent, objective, and reliable 
IG structure be in place to ensure adequate audit and investigative 
coverage of federal programs and operations. 

This statement offers GAO’s 

views on (1) the principles of independence and how they apply to IG 
offices, (2) leveraging IG work as a part of overall federal oversight, 
(3) structural streamlining of IG offices for resource efficiencies, 
and (4) matters discussed in a GAO forum on IG issues. 

This statement draws on provisions of the IG Act, professional auditing 
standards, prior GAO reports and testimony, and information reported by 
the IGs. 

What GAO Found: 

The independence of the IGs is key to the effectiveness of their 
offices. The IGs, in their statutory role of providing oversight of 
their agencies’ operations, represent a unique hybrid of external and 
internal reporting responsibilities. The IG Act requires the IGs to 
report the results of their work both externally to the Congress and 
internally to the agency head. It also provides certain independence 
protection to the IGs. This protection includes specifying that agency 
heads and other officials may not prevent or prohibit the IGs from 
performing any audit or investigation and that IGs are to have access 
to all agency documents and records. In addition, IGs are appointed 
either by the President with the advice and consent of the Senate or by 
their agency heads with removal only by the President or the agency 
head. 

The work of the IGs is coordinated through the President’s Council on 
Integrity and Efficiency and the Executive Council on Integrity and 
Efficiency, which were created by executive order to enhance the work 
of the IGs. In prior testimony GAO has recommended establishing a 
statutory IG Council with a permanent mission to address federal 
oversight challenges and risks. GAO also believes that effective 
ongoing coordination of the federal audit and oversight efforts of GAO 
and the IGs is more critical than ever. In May of this year the 
Comptroller General hosted a meeting with the IGs for the principal 
purpose of improving federal oversight coordination. The Comptroller 
General has also suggested the need for creating a more formal 
mechanism or council for the coordination of audit activities on a 
governmentwide basis. The structure of this council could be similar in 
concept to the Joint Financial Management Improvement Program, whose 
principals meet to discuss issues of mutual concern to promote 
governmentwide financial management. 

In a prior report GAO presented the possible benefits of streamlining 
the structure of IG offices to increase the use of limited IG resources 
through consolidation of their offices. The benefits of consolidating 
the smallest offices of IGs appointed by their agency heads with the 
larger offices of IGs appointed by the President include immediate 
access to a broader range of resources to use in dealing with issues 
requiring technical expertise or areas of critical need. In addition, 
consolidation would strengthen the ability of IGs to improve the 
allocation and use of scarce financial resources. 

In May 2006, at the request of this committee, the Comptroller General 
convened a panel of recognized leaders to discuss the possible benefits 
of proposed legislative changes to the IG Act. The panel members 
generally supported advanced notification to the Congress of the 
reasons for removal of an IG, separate IG budget line items, a funding 
mechanism for an IG Council, the need for IG pay and bonus issues to be 
addressed, and specific investigative and law enforcement authorities 
for the IGs. 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-1089T]. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Jeanette Franzel at (202) 
512-9471 or franzelj@gao.gov. 

[End of section] 

Mr. Chairman and Members of the Committee: 

I am pleased to submit this statement for the record on issues 
surrounding the important role of the inspectors general (IG) in 
providing independent oversight within federal agencies. GAO has 
performed analysis and has issued several reports over the past few 
years dealing with various independence and effectiveness issues 
affecting the IGs. Given comments by GAO and others about the 
independence of certain IG offices, we plan to conduct additional work 
in the area of IG independence and the reporting relationships of IGs 
in designated federal agencies with their respective agency heads. 

The IG offices were created to prevent and detect fraud, waste, abuse, 
and mismanagement in their respective agencies' programs and 
operations; conduct and supervise audits and investigations; and 
recommend policies to promote economy, efficiency, and effectiveness. 
In the past almost three decades since passage of the landmark 
Inspector General Act of 1978 (IG Act), the IGs have played a key role 
in enhancing government accountability and protecting the government 
against fraud, waste, abuse, and mismanagement. 

The IGs play a critical role in identifying mismanagement of scarce 
taxpayer dollars. In the coming years, as we enter a period of 
escalating deficits and increasingly limited resources, we believe that 
the greatest single source of savings will come from bold, decisive 
efforts to transform what government does and how it does business and 
to hold it accountable for achieving real, positive, and sustainable 
results. 

This statement discusses (1) the key principles of auditor independence 
and how they apply to IG offices, (2) leveraging IG work as part of 
overall federal oversight, (3) structural streamlining of IG offices to 
capitalize on available resource efficiencies, and (4) additional 
issues concerning the IG function discussed at a GAO forum I hosted in 
May 2006. This statement draws primarily on our previous reports and 
testimony in this area and on provisions of the IG Act, professional 
auditing standards, and information reported by the IGs. 

Auditor and IG Independence: 

Independence is the cornerstone of professional auditing. Without 
independence, an audit organization cannot do independent audits. 
Likewise, an IG who lacks independence cannot effectively fulfill the 
full range of requirements for the office. Lacking this critical 
attribute, an audit organization's work might be classified as studies, 
research reports, consulting reports, or reviews, rather than 
independent audits. 

Independence is one of the most important elements of an effective IG 
function. In fact, much of 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 both subject to the general 
supervision and budget processes of the agencies they audit, while at 
the same time being expected to provide independent reports of their 
work externally to the Congress. 

Government Auditing Standards[Footnote 1] states, "in all matters 
relating to the audit work, the audit organization and the individual 
auditor, whether government or public, must be free from personal, 
external, and organizational impairments to independence, and must 
avoid the appearance of such impairments to independence. Auditors and 
audit organizations must maintain independence so that their opinions, 
findings, conclusions, judgments, and recommendations will be impartial 
and viewed as impartial by objective third parties with knowledge of 
the relevant information." [Emphasis added.] 

* Personal independence applies to individual auditors at all levels of 
the audit organization, including the head of the organization. 
Personal independence refers to the auditor's ability to remain 
objective and maintain an independent attitude in all matters relating 
to the audit, as well as the auditor's ability to be recognized by 
others as independent. The auditor needs an independent and objective 
state of mind that does not allow personal bias or the undue influence 
of others to override the auditor's professional judgments. This 
attitude is also referred to as intellectual honesty. The auditor must 
also be free from direct financial or managerial involvement with the 
audited entity or other potential conflicts of interest that might 
create the perception that the auditor is not independent. 

* External independence refers to both the auditor's and the audit 
organization's freedom to make independent and objective judgments free 
from external influences or pressures. Examples of impairments to 
external independence include restrictions on access to records, 
government officials, or other individuals needed to conduct the audit; 
external interference over the assignment, appointment, compensation, 
or promotion of audit personnel; restrictions on funds or other 
resources provided to the audit organization that adversely affect the 
audit organization's ability to carry out its responsibilities; or 
external authority to overrule or to inappropriately influence the 
auditors' judgment as to appropriate reporting content. 

* Organizational independence refers to the audit organization's 
placement in relation to the activities being audited. Professional 
auditing standards have different criteria for organizational 
independence for external and internal audit organizations. The IGs, in 
their statutory role of providing oversight of their agencies' 
operations, represent a unique hybrid of external and internal 
reporting responsibilities. 

Under professional auditing standards, external audit organizations are 
organizationally independent when they are organizationally placed 
outside of the entity under audit. In government, this is achieved when 
the audit organization is in a different level of government (for 
example, federal auditors auditing a state government program) or 
different branch of government within the same level of government (for 
example, legislative auditors, such as GAO, auditing an executive 
branch program). External auditors also report externally, meaning that 
their audit reports are disseminated to and used by third parties. 

Internal audit organizations are defined as being organizationally 
independent under professional auditing standards if the head of the 
audit organization (1) is accountable to the head or deputy head of the 
government entity or to those charged with governance; (2) reports the 
audit results both to the head or deputy head of the government entity 
and to those charged with governance; (3) is located organizationally 
outside the staff or line-management function of the unit under audit; 
(4) has access to those charged with governance; and (5) is 
sufficiently removed from political pressures to conduct audits and 
report findings, opinions, and conclusions objectively without fear of 
political reprisal. Under internal auditing standards,[Footnote 2] 
internal auditors are generally limited to reporting internally to the 
organization that they audit, except when certain conditions are met, 
such as when mandated by statutory or regulatory requirements. 

The IG Act requires IGs to perform audits in compliance with Government 
Auditing Standards. In addition, much of the act provides specific 
protections to IG independence for all the work of the IGs. Protections 
to IG independence include a prohibition on the ability of the agency 
head to prevent or prohibit the IG from initiating, carrying out, or 
completing any audit or investigation. This prohibition is directed at 
helping to protect the IG office from external forces that could 
compromise an IG's independence. The IG's personal independence and the 
need to appear independent to knowledgeable third parties is also 
critical when the IG makes decisions related to the nature and scope of 
audit and investigative work performed by the IG office. The IG must 
determine how to utilize the IG Act's protection of independence in 
conducting and pursuing the audit and investigative work. The IG's 
personal independence is necessary to make the proper decisions in such 
cases. 

The IG Act also provides the IG with protections to external 
independence by providing access to all agency documents and records, 
prompt access to the agency head, the ability to select and appoint IG 
staff, the authority to obtain services of experts, and the authority 
to enter into contracts. The IG may choose whether to exercise the 
act's specific authority to obtain access to information that is denied 
by agency officials. Again, each IG must make decisions regarding the 
use of the IG Act's provisions for access to information, and the IG's 
personal independence becomes key in making these decisions. 

The IG Act provides protections to the IGs' organizational independence 
through key provisions that require certain IGs to be appointed by the 
President with the advice and consent of the Senate. This appointment 
is required to be without regard to political affiliation and is to be 
based solely on an assessment of a candidate's integrity and 
demonstrated ability. These presidentially appointed IGs can only be 
removed from office by the President, who must communicate the reasons 
for removal to both houses of Congress. However, this communication is 
not required to occur prior to removal. Government Auditing Standards 
recognizes the external appointment and removal of the IG as key 
independence considerations to enable internal IG offices to report 
their work externally. 

In 1988, the original 1978 IG Act was amended to establish additional 
IG offices in designated federal entities (DFE) named in the 
legislation. Generally, these IGs have the same authorities and 
responsibilities as those IGs established by the original 1978 act, but 
they have a clear distinction in their appointment--they are appointed 
and removed by their entity heads rather than by the President and are 
not subject to Senate confirmation. Organizational independence differs 
between the offices of presidentially appointed IGs and other IGs who 
are agency appointed. 

The DFE IGs, while they are generally covered by many of the same 
provisions of the IG Act as the IGs appointed by the President with 
Senate confirmation, are more closely aligned to independence standards 
for internal auditors than to those for external auditors. At the same 
time, Government Auditing Standards recognizes that additional 
statutory safeguards exist for DFE IG independence for reporting 
externally. These safeguards include establishment by statute, 
communication of the reasons for removal of the head of an audit 
organization to the cognizant legislative oversight body, statutory 
protections that prevent the audited entity from interfering with an 
audit, statutory requirements for the audit organization to report to a 
legislative body on a recurring basis, and statutory access to records 
and documents related to agency programs. 

We believe that the differences in the appointment and removal 
processes between presidentially appointed IGs and those appointed by 
the agency head do result in a clear difference in the organizational 
independence structures of the IGs. Those offices with IGs appointed by 
the President are more closely aligned with the independence standards 
for external audit organizations, while those offices with IGs 
appointed by the agency head are more closely aligned with the 
independence standards for internal audit organizations. The 
implementation of the IGs' reporting relationships with their 
respective agency heads can also significantly affect the independence 
of the IGs. Generally, the IGs represent a unique hybrid of external 
auditing and internal auditing in their oversight roles for federal 
agencies. 

The IG offices, having been created to perform a unique role in 
overseeing federal agency operations, have characteristics of both 
external audit organizations and internal audit organizations. For 
example, the IGs have external reporting requirements consistent with 
the reporting requirements for external auditors while at the same time 
being part of their respective agencies. IGs also have a dual reporting 
responsibility to the Congress and the agency head. 

To illustrate, the IGs' external reporting requirements in the IG Act 
include reporting the results of their work in semiannual reports to 
the Congress. Under the IG Act, the IGs are to report their findings 
without alteration by their respective agencies, and these reports are 
to be made available to the general public. The IG Act also directs the 
IGs to keep the agency head and the Congress fully and currently 
informed, which they do through these semiannual reports and otherwise, 
of any problems, deficiencies, abuses, fraud, or other serious problems 
relating to the administration of programs and operations of their 
agencies. Also, the IGs are required to report particularly serious or 
flagrant problems, abuses, or deficiencies immediately to their agency 
heads, who are required to transmit the IG's report to the Congress 
within 7 calendar days. 

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 at federal agencies to ensure adequate audit 
and investigative coverage of federal programs and operations. The IG 
Act provides each IG with the ability to exercise judgment in the use 
of independence protections specified in the act. The act also provides 
for IGs who, based on their appointment process, are more closely 
aligned with internal audit organizations, and other IGs who are more 
closely aligned with external audit organizations. While the IG Act's 
provisions for IG independence are vital, 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 personal, 
external, and organizational independence both in fact and appearance 
while reporting the results of the office's work to both the agency 
head and to the Congress. 

Leveraging IG Offices as Part of Overall Federal Oversight: 

One of the challenges facing the federal performance and accountability 
community today is the need to meet increasing demands and challenges 
with our current resources. In this regard, Executive Order No. 12805, 
issued in 1992, directs the IGs to meet and coordinate as two groups to 
enhance their work. The IGs appointed by the President and confirmed by 
the Senate are members of the President's Council on Integrity and 
Efficiency (PCIE), and the IGs appointed by their agency heads are 
members of the Executive Council on Integrity and Efficiency (ECIE). 
The purpose of both PCIE and ECIE is to (1) identify, review, and 
discuss areas of weakness and vulnerability in federal programs and 
operations with respect to fraud, waste, and abuse; (2) develop plans 
for coordinated governmentwide activities that address these problems 
and promote economy and efficiency in federal programs and operations; 
and (3) develop policies and professional training to maintain a corps 
of well-trained and highly skilled IG personnel. Both PCIE and ECIE are 
chaired by the Office of Management and Budget's (OMB) Deputy Director 
for Management. 

In a prior testimony[Footnote 3] I recommended establishing an IG 
Council in statute with a designated funding source. We believe that by 
providing a statutory basis for the council's roles and 
responsibilities, the permanence of the council could be established 
and the ability to take on more sensitive issues could be strengthened. 
In addition, we believe that effective, ongoing coordination of the 
federal audit and oversight efforts of GAO and the IGs is more critical 
than ever as a result of challenges and risks currently facing our 
nation, including our immediate and long-term fiscal challenges, 
increasing demands for federal programs, and changing risks. 

The IG Act requires that the IGs coordinate with GAO to avoid 
duplicating efforts. In practice, GAO has largely devoted its efforts 
to program evaluations and policy analyses that look at programs and 
functions across government and with a longer-term perspective. At the 
same time, the IGs have been on the front line of combating fraud, 
waste, and abuse within their respective agencies, and their work has 
generally concentrated on specific program--related issues of immediate 
concern with more of their resources going into uncovering 
inappropriate activities and expenditures through an emphasis on 
investigations. 

GAO and the IGs are, in many respects, natural partners. We both report 
our findings, conclusions, and recommendations to the Congress and we 
share common professional audit standards through Government Auditing 
Standards. Closer strategic planning and ongoing coordination of audit 
efforts between GAO and the IGs would help to enhance the effectiveness 
and impact of work performed by federal auditors. Working together and 
in our respective areas of expertise, GAO and the IGs can better 
leverage each other's work and provide valuable input on the broad 
range of high-risk programs and management challenges across government 
that need significant attention or reform. 

Significant and increased coordination is occurring between GAO and the 
IGs on agency-specific issues and crosscutting issues. In May of this 
year I hosted a meeting at GAO with the IGs for the principal purpose 
of improving the coordination of federal oversight. In 
testifying[Footnote 4] in October 2003, on the 25TH anniversary of the 
IG Act, I suggested, in light of the increased need for a well- 
coordinated federal audit community, the creation of a more formal 
mechanism going forward to include a governmentwide council. The 
structure of this council could be similar in concept to the Joint 
Financial Management Improvement Program (JFMIP), whose 
principals[Footnote 5] meet at their discretion to discuss issues of 
mutual concern to promote governmentwide financial management. A 
similar council focused on accountability could share knowledge and 
coordinate activities to enhance the overall effectiveness of 
government oversight and to preclude duplicate actions. 

A good example of a strong formalized partnership between GAO and the 
IGs is in the area of financial auditing. Under the Chief Financial 
Officers Act of 1990, as amended, the IGs at the 24 agencies covered by 
the act are responsible for the audits of their agencies' financial 
statements. In meeting these responsibilities, most IGs have contracted 
with independent public accountants (IPA) to conduct the audits either 
entirely or in part. In some cases, GAO conducts the audits. GAO is 
responsible for the U.S. government's consolidated financial statement 
audit, which is based largely on the results of the agency-level 
audits. GAO and the IGs have agreed on a common audit methodology 
described in the GAO-PCIE Financial Audit Manual, which is an audit 
tool available to all auditors of federal financial statements. In 
addition, we have established formal ongoing coordination and 
information sharing throughout the audit process so that both the IGs 
and GAO can successfully fulfill their respective responsibilities 
effectively and efficiently. 

A practical issue that should also be dealt with is the adequacy of 
resources to provide for agency financial statement audits. Over the 
years, a number of IGs have told us that the cost of agency financial 
audits has taken resources away from their traditional work. In the 
private sector, the cost of an annual financial audit is a routine 
business expense borne by the entity being audited, and the cost of the 
audit represents a very small percentage of total expenditures for the 
audited entity. We support enacting legislation that would make 
agencies responsible for paying the cost of their financial statement 
audits. We also believe that an arrangement in which the agencies pay 
for their own audits provides them with positive incentives for taking 
actions, such as streamlining systems and cleaning up their financial 
records, prior to the audit. 

Under the arrangement in which agencies pay the cost of their own 
audits, we believe the IG should continue in the current role of 
selecting and overseeing audits in those cases in which the IG does not 
perform the audit but hires an IPA to conduct the audit. This would 
leverage the IGs' expertise to help ensure the quality of the audits. 
We also advocate an approach whereby the IGs would be required to 
consult with the Comptroller General during the IPA selection process 
to obtain input from the results of GAO's reviews of the IPAs' previous 
work and the potential impact on GAO's audit of the consolidated 
financial statements of the U.S. government. We will continue in our 
coordination with the IGs to help achieve our mutual goals of providing 
the oversight needed to help ensure that the federal government 
operates in a transparent, economical, efficient, effective, ethical, 
and equitable manner. 

Structural Streamlining of IG Offices for Resource Efficiencies: 

One of the issues facing the IG community as well as others in the 
performance and accountability community is how to use limited 
resources most efficiently to achieve the greatest value. In fiscal 
year 2006, the 64 IG offices operated with total fiscal year budgets of 
about $1.9 billion and about 12,000 staff. (See encs. I and II for more 
detail on IG budgets and staff.) Most IG offices for cabinet 
departments and major agencies have IGs appointed by the President and 
confirmed by the Senate, and have larger budgets and more staff than 
those IGs in DFEs who are appointed by their agency heads. While agency-
appointed IGs make up about half of all IG offices, the total of their 
fiscal year 2006 budgets was $267 million compared to $1.66 billion for 
presidentially appointed IGs. The agency-appointed IGs at the United 
States Postal Service (USPS), Special IG for Iraq Reconstruction 
(SIGIR), Amtrak, National Science Foundation (NSF), and Federal Reserve 
Board (FRB) have budgets that are comparable in size to those of 
presidentially appointed IGs. When the staffing and budget figures for 
these IG offices are removed from the DFE totals, the remaining 29 
agency-appointed IGs have a total of 239 staff and budgets that make up 
about 2 percent of all IG budgets. In addition, 19 of those 29 agency-
appointed IG offices had 10 or fewer staff. 

In a 2002 report,[Footnote 6] we presented the possible benefits of 
consolidating the smallest IG offices with the offices of IGs appointed 
by the President. We also suggested the conversion of agency-appointed 
IGs to presidential appointment where their budgets were comparable to 
those of the presidentially appointed IG offices. A benefit of 
consolidating the offices of agency-appointed IGs with those of 
presidentially appointed IGs would be to eliminate the differences in 
organizational independence between their offices. The review of a 
designated federal entity provided by a consolidated IG office would 
remove the need for the entity's internal audit organization to report 
externally, remove the need to apply the independence safeguards in 
Government Auditing Standards, and result in improved independence 
provided through audits performed by an external audit organization. 

In addition, we believe that if properly structured and implemented, 
the consolidation of IG offices could provide for a more effective and 
efficient allocation of IG resources across government to address high- 
risk and priority areas. It would not only achieve potential economies 
of scale but also provide a critical mass of skills, particularly given 
advancing technology and the ever-increasing need for technical staff 
with specialized skills. We believe this point is especially 
appropriate for the 19 IG offices with 10 or fewer staff. IG staff now 
in smaller offices would, in large consolidated IG offices, have 
immediate access to a broader range of resources to use in addressing 
issues requiring technical expertise or areas of critical need. 
Consolidation would also strengthen the IGs' ability to improve the 
allocation of human capital and scarce financial resources within their 
offices and to attract and retain a more professional workforce with 
talents, multidisciplinary knowledge, and up-to-date skills. 
Consolidation can also add flexibility and increase options for IG 
coverage and help ensure that the IG function is better equipped to 
achieve its mission. Consolidation would also increase the ability of 
larger IG offices to provide methods and systems of quality control in 
the smaller agencies. 

We recognize that there are potential risks resulting from 
consolidation that would have to be mitigated through proactive and 
targeted actions in order for the benefits of consolidation to be 
realized without adversely affecting the audit coverage of small 
agencies. For example, the potential reduction in day-to-day contact 
between the IG and officials at smaller agencies as result of 
consolidation could be mitigated by posting IG staff at the agencies to 
keep both the IG and the agency head informed and to coordinate 
necessary meetings. In preparation for consolidation, staff in the 
smaller IG offices could be consulted in planning oversight procedures 
and audit coverage for their agencies. There may be fewer audits or 
even less coverage of those issues currently audited by the IGs at 
smaller agencies, but coverage by a consolidated IG could address areas 
of higher risk, value, and priority, resulting in potentially more 
efficient and effective use of IG resources across the government. 
Furthermore, consolidation of selected IG offices could be coupled with 
a decentralized deployment approach that establishes a minimum IG 
presence or coverage of each DFE entity in order to mitigate risks 
related to any loss of audit coverage. By providing such coverage from 
a centralized, external IG organization, independence would also be 
enhanced. 

Also important, consolidation of the IG offices at USPS, NSF, 
Corporation for Public Broadcasting (CPB), and Legal Services 
Corporation (LSC) with offices of presidentially appointed IGs may not 
be necessary to further the independence of these IGs because they are 
appointed and may be removed by their boards of directors. We believe 
that by requiring the vote of a majority of board members for such 
actions regarding their IGs, the potential for the independence of the 
IG to be impaired through the threat of removal is greatly reduced as 
compared to appointment and removal by an individual agency head. In 
addition, we continue to believe that the consolidation of IG offices 
based on related agency missions could help provide for more efficient 
use of increasingly scarce IG resources. (See enc. III.) For example, 
the consolidation of the Amtrak IG with the Department of 
Transportation IG would be appropriate given the similar 
transportation--related subjects of their oversight. 

Results of the Comptroller General's Forum on IG Issues: 

In May 2006, at the request of this committee, I convened a panel of 
recognized leaders of the federal audit and investigative community to 
discuss proposed amendments to the IG Act. We drew the panel from the 
current IG leadership, former IGs, knowledgeable former and current 
federal managers, representatives of academia and research 
institutions, a former member of the Congress, and congressional staff, 
including the congressional staff person closely involved in the 
development of the 1978 IG Act. Among other issues, the panel members 
discussed terms of office and removal for cause, submission of IG 
budgets, a proposed IG Council, IG pay and bonuses, and investigative 
and law enforcement authorities for agency-appointed IGs. In September 
2006 we issued the results of the panel discussion.[Footnote 7] The 
overall perspectives of the panel are discussed below. 

Terms of office and removal for cause: 

IGs serve at the pleasure of either the President or their agency 
heads, depending on the nature of their appointments. The IGs appointed 
by the President with Senate confirmation may be removed only by the 
President, while the IGs appointed by their agency heads may be removed 
or transferred from their offices only by their agency heads. However, 
for both types of IGs the reasons for removal must be communicated to 
the Congress after the action has taken place. 

The panel members discussed the possible effects of having a 7-year 
term of office for each IG with more than one term possible, and a 
removal-for-cause provision whereby an IG may be removed from office 
prior to the expiration of his or her term only on the basis of 
permanent incapacity, inefficiency, neglect of duty, malfeasance, 
conviction of a felony, or conduct involving moral turpitude. 

The majority of the panel participants did not favor statutorily 
establishing a fixed term of office for IGs. The reasons included the 
panelists' belief that the proposal could disrupt agency management and 
IG relationships, and that agency flexibility is needed to remove a 
poor-performing IG if necessary. On the other hand, a statutory term of 
office and removal only for specified causes was viewed positively by 
some panelists as a means of enhancing independence by relieving some 
of the immediate pressure surrounding removal without appropriate 
justification. The panel members also generally supported a statutory 
requirement to notify the Congress in writing in advance of removing an 
IG, with an explanation of the reason for removal. The participants 
cautioned that this procedure should consist only of notification, 
without building in additional steps or actions in the removal process. 

IG budget submission: 

The IG Act Amendments of 1988 require the President's budget to include 
a separate appropriation account for each of the IGs appointed by the 
President or otherwise specified by the act. In this context, IG budget 
requests are generally reviewed as part of each agency's budget process 
and are submitted as a separate budget line item to OMB and the 
Congress as a part of each agency's overall budget. In contrast, most 
IGs appointed by their agency heads do not have separate appropriation 
accounts. 

The panel members discussed the possibility of having IGs justify their 
funding requests directly to OMB and the Congress in addition to being 
a part of their agencies' budget processes. In addition, the panel 
members considered having the budget requests submitted by the IGs 
compared to the funds requested by the agency heads for their IGs and 
including the comparison in the Budget of the United States Government. 
Overall, the panel members supported additional transparency for the IG 
budgets and agreed that the funding and other resource needs of the IGs 
should be clearly identified as a separate account or line item. 

IG Council: 

The panel members considered a combined statutory IG Council with 
duties and functions similar to PCIE and ECIE which includes an 
Integrity Committee charged with receiving, reviewing, and referring 
for investigation, where appropriate, allegations of wrongdoing against 
an IG and members of the IG's senior staff operating with the IG's 
knowledge. 

Currently, the Integrity Committee receives its authority under 
Executive Order 12993, signed in 1996, and is chaired by a 
representative of the Federal Bureau of Investigation. Other members of 
the committee are the Special Counsel of the Office of Special Counsel, 
the Director of the Office of Government Ethics, and three IGs 
representing PCIE and ECIE. Cases investigated by members of the 
Integrity Committee may be forwarded to the PCIE and ECIE Chairperson 
for further action. 

As called for in prior testimony,[Footnote 8] I continue to support 
formalizing a combined IG council in statute, along with the Integrity 
Committee. We also strongly support the concept behind the Integrity 
Committee. We believe it is imperative that the independence of the 
Integrity Committee be preserved and the basic underpinnings not be 
changed. In contrast, the participants in our May 2006 panel discussion 
had mixed views about statutorily establishing a joint IG Council but 
did favor establishing a funding mechanism for the councils. 

IG pay and bonuses: 

Issues over IG pay and bonuses have arisen over the past few years as a 
result of recent requirements[Footnote 9] that rates of pay for the 
federal Senior Executive Service be based on performance evaluations as 
part of a certified performance management system. IGs who are subject 
to these requirements must therefore receive performance evaluations in 
order to qualify for increases to their pay. The IGs are provided 
general supervision by their agency heads in accordance with the IG 
Act. However, independence issues arise if the agency head is 
evaluating IG performance when that evaluation is used as a basis for 
an increase in the IG's pay or for providing a bonus. As a result, some 
IGs have effectively had their pay capped without the ability to 
receive pay increases or bonuses. 

The majority of panel participants believed that the pay structure for 
the IGs needs to be addressed. The panelists emphasized the importance 
of providing comparable compensation for IGs as appropriate, while 
maintaining the IGs' independence in reporting the results of their 
work, and providing them with performance evaluations that could be 
used to justify higher pay. However, the panelists' views on IGs' 
receiving performance bonuses were mixed, mainly because of uncertainty 
about the overall framework that would be used to evaluate performance 
and make decisions about bonuses. I believe that an independent 
framework could be established through PCIE and ECIE, in cooperation 
with the Office of Personnel Management, to provide IGs with 
performance evaluations independent of undue influence by agency heads. 

IG investigative and law enforcement authorities: 

The IG Act has been amended by subsequent legislation[Footnote 10] to 
provide IGs appointed by the President with law enforcement powers to 
make arrests, obtain and execute search warrants, and carry firearms. 
The IGs appointed by their agency heads were not included under this 
amendment but may obtain law enforcement authority by applying to the 
Attorney General for deputation on a case-by-case basis. In addition, 
the Program Fraud Civil Remedies Act of 1986[Footnote 11] provides 
agencies with IGs appointed by the President with the authority to 
investigate and report false claims and recoup losses resulting from 
fraud below $150,000. The agencies with IGs appointed by their agency 
heads do not have this authority. Also, the IG Act provides all IGs 
with the authority to subpoena any information, documents, reports, 
answers, records, accounts, papers, and other data and documentary 
evidence necessary to perform the functions assigned by the IG Act. 
This subpoena authority does not specifically address many forms of 
data including electronically stored information. 

Panel participants overwhelmingly supported the provisions to (1) allow 
IGs appointed by their agency heads to apply to the Attorney General 
for full law enforcement authority instead of having to renew their 
authority on a case-by-case basis or through a blanket authority, (2) 
provide designated federal entities with IGs appointed by their agency 
heads the authority under the Program Fraud Civil Remedies Act to 
investigate and report false claims and recoup losses resulting from 
fraud, and (3) define IG subpoena power to include any medium of 
information and data. 

Concluding Observations: 

The IG offices play a critical role in federal oversight. The 
independence of the IGs through protections in the IG Act, adherence to 
standards, and personal independence on the part of individual IGs and 
their staff are key to ensuring the continued overall independence and 
effectiveness of federal IG offices. As we enter a period where great 
transformation will be needed in the way government does business, it 
will be increasingly important to consider the IGs' role in this 
process and to take advantage of opportunities to make the IG offices 
more efficient and effective. It will also be critical to ensure IG 
coordination across government to identify and build on opportunities 
to better leverage existing resources for achieving effective federal 
oversight and accountability. 

I would be pleased to meet with you or your staff to answer any 
questions that you may have or to discuss this statement. 

[End of section] 

Enclosure I: Inspectors General Appointed by the President: Fiscal Year 
2006 Appropriated Budgets and Actual FTEs: 

1; 
Federal departments and agencies: Department of Health and Human 
Services; 
Budgets: $ 222,000,000; 
FTEs: 1,445. 

2; 
Federal departments and agencies: Department of Defense; 
Budgets: 206,772,130; 
FTEs: 1,370. 

3; 
Federal departments and agencies: Treasury IG for Tax Administration; 
Budgets: 131,953,140; 
FTEs: 838. 

4; 
Federal departments and agencies: Department of Housing and Urban 
Development; 
Budgets: 104,940,000; 
FTEs: 646. 

5; 
Federal departments and agencies: Social Security Administration; 
Budgets: 91,476,000; 
FTEs: 608. 

6; 
Federal departments and agencies: Department of Homeland Security; 
Budgets: 82,187,000; 
FTEs: 520. 

7; 
Federal departments and agencies: Department of Agriculture; 
Budgets: 80,336,000; 
FTEs: 598. 

8; 
Federal departments and agencies: Department of Labor; 
Budgets: 71,445,000; 
FTEs: 450. 

9; 
Federal departments and agencies: Department of Veterans Affairs; 
Budgets: 70,174,000; 
FTEs: 464. 

10; 
Federal departments and agencies: Department of Justice; 
Budgets: 68,000,000; 
FTEs: 411. 

11; 
Federal departments and agencies: Department of Transportation; 
Budgets: 61,874,000; 
FTEs: 419. 

12; 
Federal departments and agencies: Environmental Protection Agency; 
Budgets: 50,241,000; 
FTEs: 337. 

13; 
Federal departments and agencies: Department of Education; 
Budgets: 48,510,000; 
FTEs: 288. 

14; 
Federal departments and agencies: General Services Administration; 
Budgets: 42,900,000; 
FTEs: 293. 

15; 
Federal departments and agencies: Department of Energy; 
Budgets: 41,580,000; 
FTEs: 262. 

16; 
Federal departments and agencies: Department of the Interior; 
Budgets: 38,541,000; 
FTEs: 261. 

17; 
Federal departments and agencies: Agency for International Development; 
Budgets: 36,640,000; 
FTEs: 172. 

18; 
Federal departments and agencies: National Aeronautics and Space 
Administration; 
Budgets: 32,400,000; 
FTEs: 203. 

19; 
Federal departments and agencies: Department of State; 
Budgets: 30,945,000; 
FTEs: 186. 

20; 
Federal departments and agencies: Federal Deposit Insurance 
Corporation; 
Budgets: 30,690,000; 
FTEs: 125. 

21; 
Federal departments and agencies: Department of Commerce; 
Budgets: 22,467,000; 
FTEs: 122. 

22; 
Federal departments and agencies: Small Business Administration; 
Budgets: 20,361,080; 
FTEs: 95. 

23; 
Federal departments and agencies: Office of Personnel Management; 
Budgets: 18,216,000; 
FTEs: 131. 

24; 
Federal departments and agencies: Department of the Treasury; 
Budgets: 16,830,000; 
FTEs: 116. 

25; 
Federal departments and agencies: Tennessee Valley Authority; 
Budgets: 14,700,000; 
FTEs: 90. 

26; 
Federal departments and agencies: Nuclear Regulatory Commission; 
Budgets: 8,308,000; 
FTEs: 49. 

27; 
Federal departments and agencies: Railroad Retirement Board; 
Budgets: 7,124,000; 
FTEs: 53. 

28; 
Federal departments and agencies: Corporation for National and 
Community Service; 
Budgets: 5,940,000; 
FTEs: 23. 

29; 
Federal departments and agencies: Export-Import Bank; 
Budgets: 1,000,000; 
FTEs: 0. 

30; 
Federal departments and agencies: Central Intelligence Agency; 
Budgets: na; 
FTEs: na. 

Federal departments and agencies: Totals; 
Budgets: $1,658,550,350; 
FTEs: 10,575. 

Sources: PCIE and ECIE. 

Legend: FTE = Fill-time equivalent; na = not available. 

[End of table] 

[End of section] 

Enclosure II: Inspectors General Appointed by Agency Heads: Fiscal Year 
2006 Appropriated Budgets and Actual FTEs: 

1; 
Federal departments and agencies: United States Postal Service; 
Budgets: $158,000,000; 
FTEs: 916. 

2; 
Federal departments and agencies: Special IG for Iraq Reconstruction; 
Budgets: 34,000,000; 
FTEs: 115. 

3; 
Federal departments and agencies: Amtrak; 
Budgets: 16,984,000; 
FTEs: 87. 

4; 
Federal departments and agencies: National Science Foundation; 
Budgets: 11,500,000; 
FTEs: 62. 

5; 
Federal departments and agencies: Federal Reserve Board; 
Budgets: 5,118,740; 
FTEs: 33. 

6; 
Federal departments and agencies: Government Printing Office; 
Budgets: 4,950,200; 
FTEs: 23. 

7; 
Federal departments and agencies: Pension Benefit Guaranty Corporation; 
Budgets: 4,038,990; 
FTEs: 21. 

8; 
Federal departments and agencies: Peace Corps; 
Budgets: 3,064,000; 
FTEs: 19. 

9; 
Federal departments and agencies: Federal Communications Commission; 
Budgets: 2,597,903; 
FTEs: 20. 

10; 
Federal departments and agencies: Securities and Exchange Commission; 
Budgets: 2,507,300; 
FTEs: 10. 

11; 
Federal departments and agencies: Legal Services Corporation; 
Budgets: 2,507,000; 
FTEs: 18. 

12; 
Federal departments and agencies: Library of Congress; 
Budgets: 2,457,000; 
FTEs: 17. 

13; 
Federal departments and agencies: National Archives and Records 
Administration; 
Budgets: 2,200,000; 
FTEs: 16. 

14; 
Federal departments and agencies: Smithsonian Institution; 
Budgets: 1,938,932; 
FTEs: 14. 

15; 
Federal departments and agencies: Equal Employment Opportunity 
Commission; 
Budgets: 1,810,307; 
FTEs: 11. 

16; 
Federal departments and agencies: National Credit Union Administration; 
Budgets: 1,764,926; 
FTEs: 8. 

17; 
Federal departments and agencies: Election Assistance Commission; 
Budgets: 1,600,000; 
FTEs: 1. 

18; 
Federal departments and agencies: National Labor Relation Board; 
Budgets: 1,080,327; 
FTEs: 7. 

19; 
Federal departments and agencies: Farm Credit Administration; 
Budgets: 998,248; 
FTEs: 5. 

20; 
Federal departments and agencies: Federal Housing Finance Board; 
Budgets: 959,271; 
FTEs: 4. 

21; 
Federal departments and agencies: Federal Trade Commission; 
Budgets: 917,500; 
FTEs: 5. 

22; 
Federal departments and agencies: Corporation for Public Broadcasting; 
Budgets: 834,264; 
FTEs: 9. 

23; 
Federal departments and agencies: Commodity Futures Trading Commission; 
Budgets: 795,000; 
FTEs: 4. 

24; 
Federal departments and agencies: Federal Election Commission; 
Budgets: 691,584; 
FTEs: 5. 

25; 
Federal departments and agencies: National Endowment for the 
Humanities; 
Budgets: 589,600; 
FTEs: 5. 

26; 
Federal departments and agencies: U.S. International Trade Commission; 
Budgets: 521,205; 
FTEs: 1. 

27; 
Federal departments and agencies: Appalachian Regional Commission; 
Budgets: 476,000; 
FTEs: 3. 

28; 
Federal departments and agencies: Federal Maritime Commission; 
Budgets: 469,885; 
FTEs: 2. 

29; 
Federal departments and agencies: National Endowment for the Arts; 
Budgets: 402,000; 
FTEs: 3. 

30; 
Federal departments and agencies: Federal Labor Relations Authority; 
Budgets: 284,487; 
FTEs: 1. 

31; 
Federal departments and agencies: Consumer Product Safety Commission; 
Budgets: 241,270; 
FTEs: 2. 

32; 
Federal departments and agencies: U.S. Capitol Police; 
Budgets: 583,000; 
FTEs: 4[A]. 

33; 
Federal departments and agencies: Denali Commission; 
Budgets: na[B]; 
FTEs: 1. 

34; 
Federal departments and agencies: Office of Director of National 
Intelligence; 
Budgets: na; 
FTEs: na. 

Federal departments and agencies: Totals; 
Budgets: 266,882,939; 
FTEs: 1,452. 

Source: PCIE and ECIE and agency information. 

Legend: FTE = Fill-time equivalent; na = not available. 

[A] Fiscal year 2007 FTEs. 

[B] IG budget is not determined separately from the agency's budget. 

[End of table] 

[End of section] 

Enclosure III: Potential IG Consolidations and Related Agency Missions: 

Illustrative examples of agencies that could consolidate IG oversight; 
Primary agency missions. 

Department of Agriculture; 
Enhance the quality of life by supporting the production of 
agriculture. 

Farm Credit Administration; 
Promote a safe and sound competitive Farm Credit System. 

Department of Commerce; 
Promote job creation, economic growth and sustain development and 
improved living standards. 

Federal Communications Commission; 
Regulation of communications by radio, television, mire satellite, and 
cable. 

Corporation for Public Broadcasting; 
Provide grants to qualified public television and radio stations to be 
used primarily for program production or acquisition. 

Appalachian Regional Commission; 
Support economic and social development in the Appalachian region. 

U.S. International Trade Commission; 
Administer U.S. trade laws and provide information on trade matters. 

Consumer Product Safety Commission; 
Reduce the risk of injuries and deaths from consumer products. 

Department of Housing and Urban Development; 
Promote a decent, safe, and sanitary home and living environment for 
all. 

Federal Housing Finance Board; 
Regulate banks that help finance community development needs. 

Department of Justice; 
Enforcement of laws in the public interest. 

Legal Services Corporation; 
Ensure equal access to justice under law. 

Equal Employment Opportunity Commission; 
Enforce federal statutes prohibiting discrimination. 

Federal Trade Commission; 
Prevent monopolies, restraints and unfair and deceptive practices that 
affect free enterprise. 

Department of the Treasury; 
Responsible for financial, economic, and tax policy, as well as 
financial law enforcement and the manufacturing of coins and currency. 

Securities and Exchange Commission; 
Administer federal securities laws that seek to provide protection for 
investors, to ensure that securities markets are fair and honest, and 
to provide the means to enforce securities laws through sanctions. 

Commodity Futures Trading Commission; 
Protect market participants against manipulation, abusive trade 
practices, and fraud. 

Federal Deposit Insurance Corporation; 
Contribute to the stability of and confidence in the nation's financial 
system. 

National Credit Union Administration; 
Regulate and insure federal credit unions and insure state-chartered 
credit unions. 

General Services Administration; 
Provide quality services, space, and products at competitive cost to 
enable federal employees to accomplish their missions. 

Smithsonian Institution; 
Hold artifacts and specimens for the increase and diffusion of 
knowledge. 

National Archives and Records Administration; 
Preserve the nation's history by overseeing and managing federal 
records. 

National Endowment for the Arts; 
Nurture human creativity and foster appreciation of artistic 
accomplishments. 

National Endowment for the Humanities; 
Support research, education, and public programs in the humanities. 

Federal Election Commission; 
Disclose campaign finance information, enforce provisions of the 
Federal Election Campaign Act, and oversee public funding of 
presidential elections. 

Department of Labor; 
Foster, promote, and develop the welfare of U.S. wage earners. 

Federal Labor Relations Authority; 
Enforce the laws governing relations between unions and employees. 

National Labor Relations Board; 
Enforce the laws governing relations between unions and employees. 

Pension Benefit Guaranty Corporation; 
Encourage the growth and operations of defined benefit pension plans. 

Department of State; 
Promote U.S. interests and the President's foreign policy in shaping a 
free, secure, and prosperous world. 

Peace Corps; 
Promote world peace and friendship. 

Department of Transportation; 
Develop policies for the national transportation system with regard for 
need, the environment, and national defense. 

Amtrak; 
Develop modern rail service in meeting inter-city passenger 
transportation needs. 

Federal Maritime Commission; 
Regulate shipping in foreign U.S. trade. 

Source: The United States Government Manual. 

[End of table] 

[End of section] 

Related GAO Products: 

Inspectors General: Proposals to Strengthen Independence and 
Accountability. GAO-07-1021T. Washington, D.C.: June 20, 2007. 

Inspectors General: Activities of the Department of State Office of 
Inspector General. GAO-07-138. Washington, D.C.: March 23, 2007. 

Highlights of the Comptroller General's Panel on Federal Oversight and 
the Inspectors General. GAO-06-931SP. Washington, D.C.: September 11, 
2006. 

United Nations: Funding Arrangements Impede Independence of Internal 
Auditors. GAO-06-575. Washington, D.C.: April 25, 2006. 

Activities of the Treasury Inspector General for Tax Administration. 
GAO-05-999R. Washington, D.C.: September 27, 2005. 

Kennedy Center: Stronger Oversight of Fire Safety Issues, Construction 
Projects, and Financial Management Needed. GAO-05-334. Washington, 
D.C.: April 22, 2005. 

Activities of the Amtrak Inspector General. GAO-05-306R. Washington, 
D.C.: March 4, 2005. 

Inspectors General: Enhancing Federal Accountability. GAO-04-117T. 
Washington, D.C.: October 8, 2003. 

Department of Health and Human Services: Review of the Management of 
Inspector General Operations. GAO-03-685. Washington, D.C.: June 10, 
2003. 

Inspectors General: Office Consolidation and Related Issues. GAO-02- 
575. Washington, D.C.: August 15, 2002. 

Inspectors General: Comparison of Ways Law Enforcement Authority Is 
Granted. GAO-02-437. Washington, D.C.: May 22, 2002: 

Inspectors General: Department of Defense IG Peer Reviews. GAO-02- 
253R. Washington, D.C.: December 21, 2001. 

HUD Inspector General: Actions Needed to Strengthen Management and 
Oversight of Operation Safe Home. GAO-01-794. Washington, D.C.: June 
29, 2001. 

U.S. Export-Import Bank: Views on Inspector General Oversight. GAO-01- 
1038R. Washington, D.C.: September 6, 200l. 

FOOTNOTES 

[1] GAO, Government Auditing Standards, January 2007 Revision, GAO-07-
162G, Sections 3.02 and 3.03 (Washington, D.C.: January 2007). 

[2] The Institute of Internal Auditors, Professional Practices 
Framework, International Standards for the Professional Practice of 
Internal Auditing (Altamonte Springs, Fla: March 2007). 

[3] GAO, Inspectors General: Enhancing Federal Accountability, GAO-04-
117T (Washington, D.C.: Oct. 8, 2003). 

[4] GAO-04-117T. 

[5] The principals are the Comptroller General, the Director of OMB, 
the Secretary of the Treasury, and the Director of the Office of 
Personnel Management. The JFMIP is authorized by 31 U.S.C. § 3511(d). 

[6] GAO, Inspectors General: Office Consolidation and Related Issues, 
GAO-02-575 (Washington, D.C.: Aug. 15, 2002). 

[7] GAO, Highlights of the Comptroller General's Panel on Federal 
Oversight and the Inspectors General, GAO-06-931SP (Washington, D.C.: 
Sept. 11, 2006). 

[8] GAO-04-117T. 

[9] National Defense Authorization Act, Pub. L. No. 108-136, 117 Stat. 
1392, 1638 (Nov. 24, 2003). 

[10] The Homeland Security Act of 2002, Pub. L. No. 107-296, 116 Stat. 
2135 (Nov. 25, 2002). 

[11] 31 U.S.C. §§ 3801-3812.

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