Regulatory Flexibility Act:

Status of Agencies' Compliance

GGD-94-105: Published: Apr 27, 1994. Publicly Released: Apr 27, 1994.

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Pursuant to a congressional request, GAO reviewed the Small Business Administration's (SBA) annual reports on federal agencies' implementation of and compliance with the Regulatory Flexibility Act (RFA).

GAO found that: (1) the SBA annual reports indicate that agencies' compliance with the act's requirements varies widely; (2) agencies have not uniformly or fully complied with the act's requirements because the act does not authorize SBA to interpret its key provisions, require SBA to develop criteria to guide agencies in reviewing their rules, or authorize SBA or any other entity to compel rulemaking agencies to comply with the act's provisions; (3) the Office of Management and Budget (OMB) has helped certain rulemaking agencies comply with the act by reviewing and commenting on their regulatory actions when SBA notifies it of their compliance concerns; (4) OMB can return most regulatory actions to agencies for further consideration if it finds that the actions are inconsistent with applicable laws; and (5) OMB enforcement authority is limited because it cannot review independent regulatory agency rules or agricultural marketing orders, has not established any compliance criteria or procedures, and it is often unaware of SBA concerns regarding an agency's compliance.

Matters for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: This was not intended as a GAO recommendation in need of Form 66 followup.

    Matter: Congress may also wish to consider focusing its RFA oversight on the independent regulatory agencies and agricultural marketing orders over which OMB review and comment authority is limited.

  2. Status: Closed - Not Implemented

    Comments: SBREFA made several changes to RFA, but did not require SBA to develop criteria regarding how agencies should conduct RFA analyses. The recommendations were discussed at a hearing on July 24, 1996, by the Senate Small Business Committee. GAO reiterated the recommendation in a 1998 report (GGD-98-36), amending it slightly to indicate that Congress could consider establishing, or requiring SBA or some other entity to develop, governmentwide criteria defining the phrase "significant economic impact on a substantial number of small entities." GAO also discussed the recommendation in a briefing with a senator on July 16, 1998. GAO is closing this recommendation because Congress does not appear to be willing to require SBA to develop criteria as to whether and how federal agencies should conduct RFA analyses.

    Matter: If Congress wishes to strengthen the implementation of RFA, it should consider amending the act to require SBA, in consultation with OMB, to develop criteria as to whether and how federal agencies should conduct RFA analyses.

  3. Status: Closed - Not Implemented

    Comments: The Small Business Regulatory Enforcement Fairness Act (SBREFA) made several changes to RFA, but did not make the changes GAO recommended. The recommendations were discussed at a hearing on July 24, 1996, by the Senate Small Business Committee. GAO reiterated the recommendation in a 1998 report (GGD-98-36), amending it slightly to indicate that Congress could provide SBA or some other entity with clear authority to interpret the RFA's key provisions. GAO also discussed the recommendation in a briefing with a Senator on July 16, 1998. GAO is closing this recommendation because Congress does not appear willing to provide SBA with clearer authority and responsibility to interpret RFA provisions.

    Matter: If Congress wishes to strengthen the implementation of RFA, it should consider amending the act to provide SBA with clearer authority and responsibility to interpret RFA provisions.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In January 1995, the SBA Chief Counsel for Advocacy and the Administrator of OIRA exchanged letters that committed the two offices to work together more closely in enforcing RFA. Specifically, OIRA said that it would consider whether an agency should have prepared a regulatory flexibility analysis in its review of the agency's notice of proposed rulemaking. OIRA said that it would include SBA in the review process if it appeared the agency should have done so.

    Recommendation: The Director, OMB, should in consultation with SBA, establish procedures OMB can use to determine agencies' compliance with RFA. These procedures should be incorporated into OMB processes for reviewing regulations before they are published for notice and comment and before they are published in final.

    Agency Affected: Executive Office of the President: Office of Management and Budget

  2. Status: Closed - Implemented

    Comments: The SBA Chief Counsel for Advocacy and the Administrator of OIRA exchanged letters that commit the two offices to work together more closely in enforcing the Regulatory Flexibility Act. Specifically, SBA said it would provide OIRA with a copy of any correspondence or comments it files with an agency concerning compliance with the act.

    Recommendation: The Administrator, SBA, should direct the Chief Counsel for Advocacy to send OMB a copy of any written notification of RFA noncompliance the Chief Counsel sends to an agency.

    Agency Affected: Small Business Administration

 

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