[WPRT 108-12]
[From the U.S. Government Publishing Office]
108th Congress
1st Session COMMITTEE PRINT WMCP:
108-12
_______________________________________________________________________
SUBCOMMITTEE ON OVERSIGHT
of the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
__________
WRITTEN COMMENTS
on
H.R. 3625, THE ``DEPARTMENT OF THE TREASURY INSPECTOR GENERAL
CONSOLIDATION ACT OF 2003''
[GRAPHIC] [TIFF OMITTED] TONGRESS.#13
DECEMBER 19, 2003
Printed for the use of the Committee on Ways and Means
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COMMITTEE ON WAYS AND MEANS
BILL THOMAS, California, Chairman
PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
E. CLAY SHAW, JR., Florida FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut ROBERT T. MATSUI, California
AMO HOUGHTON, New York SANDER M. LEVIN, Michigan
WALLY HERGER, California BENJAMIN L. CARDIN, Maryland
JIM MCCRERY, Louisiana JIM MCDERMOTT, Washington
DAVE CAMP, Michigan GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota JOHN LEWIS, Georgia
JIM NUSSLE, Iowa RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas MICHAEL R. MCNULTY, New York
JENNIFER DUNN, Washington WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio XAVIER BECERRA, California
PHIL ENGLISH, Pennsylvania LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona EARL POMEROY, North Dakota
JERRY WELLER, Illinois MAX SANDLIN, Texas
KENNY C. HULSHOF, Missouri STEPHANIE TUBBS JONES, Ohio
SCOTT MCINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
ERIC CANTOR, Virginia
Allison H. Giles, Chief of Staff
Janice Mays, Minority Chief Counsel
______
SUBCOMMITTEE ON OVERSIGHT
AMO HOUGHTON, New York, Chairman
ROB PORTMAN, Ohio EARL POMEROY, North Dakota
JERRY WELLER, Illinois GERALD D. KLECZKA, Wisconsin
SCOTT MCINNIS, Colorado MICHAEL R. MCNULTY, New York
MARK FOLEY, Florida JOHN S. TANNER, Tennessee
SAM JOHNSON, Texas MAX SANDLIN, Texas
PAUL RYAN, Wisconsin
ERIC CANTOR, Virginia
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Ways and Means are also published
in electronic form. The printed hearing record remains the official
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current publication process and should diminish as the process is
further refined.
C O N T E N T S
__________
Page
Advisory of Tuesday, November 25, 2003, announcing request for
written comments on H.R. 3625, the ``Department of the Treasury
Inspector General Consolidation Act of 2003''.................. 1
______
U.S. General Accounting Office, Jeanette M. Franzel, Director,
Financial Management and Assurance, letter and attachment...... 2
Council for Citizens Against Government Waste, Thomas A. Schatz,
letter......................................................... 16
ADVISORY
FROM THE
COMMITTEE
ON WAYS
AND
MEANS
SUBCOMMITTEE ON OVERSIGHT
CONTACT: (202) 225-7601
FOR IMMEDIATE RELEASE
November 24, 2003
OV-8
Houghton Announces Request for
Written Comments on H.R. 3625, the
``Department of the Treasury Inspector General
Consolidation Act of 2003''
Congressman Amo Houghton (R-NY), Chairman, Subcommittee on
Oversight of the Committee on Ways and Means, today announced that the
Subcommittee is requesting written comments for the record from all
parties interested in H.R. 3625, the ``Department of the Treasury
Inspector General Consolidation Act of 2003.'' This bill, introduced by
Representative Rob Portman (R-OH), will consolidate the two existing
Inspector General offices at the Department of the U.S. Treasury--the
Office of Inspector General of the Treasury (OIG) and the Office of the
Treasury Inspector General for Tax Administration (TIGTA)--into a new
office called the Office of the Treasury Inspector General (TIG).
BACKGROUND:
In 1988, Congress created OIG. In 1998, Congress, as part of the
Internal Revenue Service (IRS) Restructuring and Reform Act of 1998
(P.L. 105-206), created a second Inspector General at Treasury--the
TIGTA.
With the creation of the U.S. Department of Homeland Security (DHS)
one year ago, there have been significant downsizes at the Treasury
Department. The U.S. Customs Service, the U.S. Secret Service, the
Federal Law Enforcement Training Center, and most of the Bureau of
Alcohol, Tobacco and Firearms were moved to DHS and the U.S. Department
of Justice (DOJ). As a result, a substantial portion of OIG's budget
and responsibilities also were transferred to DHS and DOJ.
In order to maximize efficiencies and effectiveness, and to
eliminate duplication, the President, in his fiscal year 2004 budget,
recommended that OIG and TIGTA be merged into a new single entity,
which would have the same powers and authorities as its predecessors
have under current law. Treasury Secretary John W. Snow said in a
recent letter to Representative Bill Thomas (R-CA), Chairman of the
Committee on Ways and Means, the IRS now constitutes 87 percent of the
remaining personnel resources at the Treasury. Having a separate
Inspector General for the remaining 13 percent is no longer the correct
structure for effective oversight of either the Department, or the IRS.
. . . I strongly believe that this merger will result in better, more
efficient oversight, not only for the IRS, but for the entire
Department.''
In announcing this request for comments, Chairman Houghton stated,
``I have to believe that a single Inspector General at Treasury would
give the Department the tools it needs to operate efficiently and
effectively. I look forward to hearing from those who are interested in
H.R. 3625.''
Rep. Portman added, ``As the sponsor of the IRS Restructuring and
Reform Act, I believe that the Department of the Treasury Inspector
General Consolidation Act of 2003 will continue the comprehensive
reform and oversight improvements at IRS that have occurred over the
past 5 years.''
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
Any person or organization wishing to submit written comments for
the record should send it electronically to
hearingclerks.waysandmeans@mail.house.gov, along with a fax copy to
(202) 225-2610, by close of business Friday, December 19, 2003. Please
Note: Due to the change in House mail policy, the U.S. Capitol Police
will refuse sealed-package deliveries to all House Office Buildings.
FORMATTING REQUIREMENTS:
Each statement presented for printing to the Committee by a
witness, any written statement or exhibit submitted for the printed
record or any written comments in response to a request for written
comments must conform to the guidelines listed below. Any statement or
exhibit not in compliance with these guidelines will not be printed,
but will be maintained in the Committee files for review and use by the
Committee.
1. Due to the change in House mail policy, all statements and any
accompanying exhibits for printing must be submitted electronically to
hearingclerks.waysandmeans@mail.house.gov, along with a fax copy to
(202) 225-2610, in Word Perfect or MS Word format and MUST NOT exceed a
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2. Copies of whole documents submitted as exhibit material will not
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Note: All Committee advisories and news releases are available on
the World Wide Web at http://waysandmeans.house.gov.
U.S. General Accounting Office
Washington, DC 20548
January 29, 2004
The Honorable Amo Houghton
Chairman
Subcommittee on Oversight
Committee on Ways and Means
House of Representatives
Dear Mr. Chairman:
This letter responds to your November 24, 2003, request for written
comments on the bill, H.R. 3625, Department of the Treasury Inspector
General Consolidation Act of 2003. As agreed with your staff, this
letter addresses the feasibility of consolidating the two Offices of
Inspectors General currently established under the Inspector General
(IG) Act of 1978, as amended, at the Department of the Treasury, and
other matters in the bill. In our October 8, 2003,\1\ testimony we
stated that the original concerns that led to the creation of an
additional IG office at the Department of the Treasury are no longer as
compelling.
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\1\ U.S. General Accounting Office, Inspectors General: Enhancing
Federal Accountability, GAO-04-117T (Washington, D.C.: October 8,
2003).
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The Treasury Department IG was established by the IG Act Amendments
of 1988.\2\ In 1978, Treasury had established an administrative IG,
appointed by the Secretary of the Treasury. The 1988 amendments require
that the President appoint the IG, subject to Senate confirmation. The
duties of the former administrative IG office and the internal audit
offices of the United States Customs Service, United States Secret
Service, and the Bureau of Alcohol, Tobacco, and Firearms were
transferred to the newly established statutory Treasury IG. The
Internal Revenue Service (IRS) Office of the Chief Inspector, also
known as the Inspection Service, which was established in 1951,
continued to be responsible for carrying out internal audits and
investigations for the IRS. To clarify the role of the IG and the Chief
Inspector, the IRS Commissioner and the Treasury IG entered into two
memorandums of understanding.
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\2\ Public Law 100-504, 102 Stat. 2515 (1988).
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The Treasury IG for Tax Administration (TIGTA) was established by
the Internal Revenue Service Restructuring and Reform Act of 1998,\3\
which amended the IG Act to include an additional IG at the Treasury
Department to provide oversight of the IRS. The Office of the Chief
Inspector and most of the Inspection Service staff were transferred to
the newly established IG. The creation of TIGTA separate from the
Treasury IG also addressed IRS officials' concerns that if the duties
of the Chief Inspector were transferred to the Treasury IG, the
transferred resources would be used to investigate or audit other
Treasury bureaus--such as the United States Customs Service, United
States Secret Service, and the Bureau of Alcohol, Firearms, and
Tobacco--to the detriment of critical IRS oversight.
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\3\ Public Law 105-206, 112 Stat. 685,705 (1998).
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With passage of the Homeland Security Act of 2002,\4\ the United
States Customs Service; United States Secret Service; Federal Law
Enforcement Training Center; and most of the Bureau of Alcohol,
Firearms, and Tobacco were transferred from the Department of the
Treasury to the new Department of Homeland Security or the Department
of Justice. Consequently, a substantial number of those areas
traditionally audited and investigated by the Treasury IG are no longer
a part of the Treasury Department, and resources in the Treasury IG
Office have decreased accordingly. As a point of comparison, in fiscal
year 2002 the Treasury IG had about 87 staff, whereas TIGTA had about
940. This means that of the IGs appointed by the President, the
Treasury IG now has one of the smallest offices while TIGTA is the
third largest.
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\4\ Public Law 107-296, 116 Stat. 2135 (2002).
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Thus, prior concern that a single Treasury IG would use the
combined oversight resources of the Treasury Department to investigate
or audit other Treasury bureaus to the detriment of critical IRS
oversight is no longer as compelling. We believe consolidation is
appropriate given the relative activity levels of TIGTA and the
Treasury IG, and the current scope and responsibility of the Department
of the Treasury.
Another area of the bill provides that any other audit or
investigation of a matter must cease, or not be initiated if the
Treasury IG notifies the affected Treasury organization that the matter
is being audited or investigated by the IG. We believe that oversight
organizations should exercise proper coordination of audits and
investigations and that duplication of efforts should be avoided.
However, we do not support this provision because the blanket
prohibition of other audits and investigations would likely exclude
proper audits and investigations of the same subject by other federal
oversight organizations, as well as law enforcement agencies.
Enclosed with this letter is our October 8, 2003, testimony
entitled, Inspectors General: Enhancing Federal Accountability, which
addresses this and other issues related to the IGs' role in federal
accountability. If you have questions or would like to discuss this
letter, please contact me at (202) 512-9471, or by e-mail at
franzelj@gao.gov, or Jackson Hufnagle, Assistant Director, at (202)
512-9470, or by e-mail at hufnaglej@gao.gov.
Sincerely yours,
Jeanette M. Franzel
Director, Financial Management and Assurance
Attachment
__________
Mr. Chairman and Members of the Committee:
I appreciate the opportunity to share my thoughts with you on the
important role of the Inspectors General (IG), established in statute
25 years ago this month to provide independent oversight within federal
agencies. More significant for this discussion than the anniversary of
landmark legislation, however, are the new and continuing challenges we
face in assuring open, honest, effective, and accountable government
and the critical role of the IGs, in partnership with GAO and other
performance and accountability organizations, in addressing these
challenges.
A quarter of a century ago, Congress established statutory IGs in
response to serious and widespread internal control breakdowns in major
government departments and agencies, questions about integrity and
accountability in government as a whole, and failures of oversight in
the federal government. The IGs established by the Inspector General
Act of 1978 (IG Act) were charged with preventing and detecting fraud
and abuse in their agencies' programs and operations; conducting audits
and investigations; and recommending policies to promote economy,
efficiency, and effectiveness. The IG Act fortified the position of IG
with provisions protecting independence, provided powers of
investigation, and mandated reporting not just to the agency head but
to Congress as well. (See app. I for a more detailed history of the IG
Act.)
In the years since passage of the IG Act, Congress has also enacted
a series of laws to establish a foundation for efficient, effective,
and accountable government. This body of legislation has given IGs new
responsibilities and greater opportunities to play an increasing role
in government oversight. Clearly, the IGs have made a significant
difference in federal performance and accountability during the past 25
years as indicated by their reports of billions of dollars in savings
to the public and thousands of recommendations and civil and criminal
referrals. They have earned a solid reputation for preventing and
detecting fraud, waste, and abuse; promoting improvements in government
operations; and providing helpful analyses on a host of governmentwide
initiatives. It is safe to say that the federal government is a lot
better off today because of the IGs' efforts.
Notwithstanding the accomplishments of the past, we now face
continuing challenges that demand even more from government performance
and accountability professionals. For example, our nation is fighting
international terrorism while much of the critical government
infrastructure that we are trying to protect dates back to the 1950s.
At the same time, this nation is facing a large and growing structural
deficit due primarily to known demographic trends and rising health
care costs. Recent corporate failures have shaken public confidence in
financial reporting and accountability in the private sector. In
response, Congress passed the Sarbanes-Oxley Act of 2002, which has
significant new requirements for publicly traded companies and their
auditors. Federal auditors can learn important lessons from the
accountability breakdowns in the private sector and the resulting
legislation passed by Congress.
We have achieved many important successes in working across
organizational lines with the IGs and state and local government
auditors. An important recent effort in building closer ties in the
government accountability community has been the domestic working
group, which I established in 2001 to bring together key staff from
GAO, the IGs, and state and local audit organizations to explore issues
of mutual interest and concern. The annual roundtable discussions and
interim activities of the domestic working group help to focus
attention on key issues and shared challenges facing the government
audit community and allow participants to compare notes on methods,
tools, benchmarking results, and best practices. In the early 1970s,
GAO organized the intergovernmental audit forums in cooperation with
federal, state, and local audit organizations. These forums provided
the means through which new intergovernmental audit relationships were
developed and improved the usefulness of auditing at each level of
government. Some IGs have become active participants with GAO at the
forums to provide a means for exchanging views, solving common
problems, and promoting the acceptance and implementation of government
auditing standards. Other IGs, however, have not been very involved in
these forums and, in my view, this needs to change.
In addition, we have had the active participation of many IGs and
state and local government auditors on the Comptroller General's
Advisory Council on Government Auditing Standards. The Council provides
advice and guidance on revisions to the Comptroller General's
Government Auditing Standards, commonly known as the ``Yellow Book,''
which is used by government auditors at the federal, state, and local
levels, as well as contracted independent public accountants (IPA), in
the audits of government programs and activities. It is time, however,
for IGs and other members of the federal accountability community to
build on past successes by putting additional focus and efforts on
reaching across institutional lines and forming new alliances to
address the complex challenges facing our government and our nation.
My statement today will focus on five main points:
opportunities for increasing the effectiveness of the
federal performance and accountability community through an enhanced
strategic partnership between the IGs and GAO,
coordination of the IG and GAO roles in agency financial
statement audits and the audit of the U.S. government's consolidated
financial statements,
the IG role in federal financial management advisory
committees,
structural streamlining within the IG community to
increase resource efficiencies, and
matters for congressional consideration to enhance
federal performance and accountability.
The Need for an Enhanced Strategic Partnership between the IGs and GAO
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. Key to this challenge is
determining how GAO and the IGs can best complement each other and
coordinate their efforts. 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 each agency, and their work
has generally concentrated on 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 Congress. As I mentioned earlier,
we share common professional audit standards through the Yellow Book,
and I am proud to say that several current IGs and many of their staff
are GAO alumni, including the Honorable Gaston Gianni, the IG of the
Federal Deposit Insurance Corporation and Vice-Chair of the President's
Council on Integrity and Efficiency, and Barry Snyder, the IG of the
Federal Reserve Board and Vice-Chair of the Executive Council on
Integrity and Efficiency, who are on the panel following me today.
While GAO and the IGs make up the federal performance and
accountability community, the division of responsibilities between them
has not generally included, nor does the IG Act include, strategic
planning and allocation of work across government programs based on
risk and the relative competitive advantages of each organization.
Traditionally, GAO and IG coordination has been applied on an ad-hoc,
job-by-job or issue-by-issue basis. We now have both the need and the
opportunity to enhance the effectiveness of federal oversight through
more strategic and ongoing coordination of efforts between GAO and the
IGs in the following areas:
addressing major management challenges and program risks,
monitoring the top challenges the government faces, such
as implementation of the President's Management Agenda, and
conducting the audit of the government's consolidated
financial statements.
Later in this testimony, I am suggesting that Congress consider
establishing, through statute, assignment of responsibility to a select
group of designated federal accountability and performance
professionals to engage in a formal, periodic strategic planning and
ongoing engagement coordination process to focus federal audit efforts
across the federal government. This process would be in addition to,
and would not replace, the current coordination of information sharing
and technical cooperation being implemented by the domestic working
group, the audit forums, and the President's Council on Integrity and
Efficiency (PCIE) and the Executive Council on Integrity and Efficiency
(ECIE).\1\
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\1\ These councils were established by Executive Order and are
described later in this testimony.
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Major Management Challenges and Program Risks
GAO's latest high-risk report,\2\ released in January 2003,
highlights areas across government that are at risk either due to their
high vulnerability to waste, fraud, abuse, and mismanagement, or as
major challenges associated with the economy, efficiency, and
effectiveness of federal programs, policies, processes, functions, or
activities. Many of the high-risk areas we identified involve essential
government services, such as Medicare and mail delivery, that directly
affect the well-being of the American people. Although some agencies
have made strong efforts to address the deficiencies cited in the high-
risk reports--and some of the programs included on GAO's initial high-
risk list in 1990 have improved enough to warrant removal--we continue
to identify many other areas of high risk. Greater strategic
coordination between GAO and the IGs on a plan for monitoring and
evaluating high-risk issues and keeping the pressure high to reduce the
risk of these programs is not only desirable, it is essential if we are
to reduce the risk of key government programs.
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\2\ U.S. General Accounting Office, High Risk Series: An Update,
GAO-03-119 (Washington, D.C.: January 2003).
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At the request of Congress, the IGs annually report issues similar
to those in GAO's high-risk report identifying the ``Top Management
Challenges'' facing their agencies. In fiscal year 2002, the IGs ranked
information technology, financial management, and human capital
management among the most important challenges confronting their
agencies governmentwide; other priorities included performance
management, public health and safety, and grants management. Each of
these areas closely corresponds to an area on GAO's high-risk list.
Although both GAO and the IGs have efforts in place to identify
major risks and challenges within government, there is no mechanism in
place to carry out an integrated, strategic planning process as a means
through which these issues will be monitored and evaluated in the
future through combined and coordinated GAO and IG oversight.
President's Management Agenda
The administration has signaled its commitment to government
transformation with the President's Management Agenda (PMA), which
targets 14 of the most glaring problem areas in government for
immediate action. Five areas--strategic human capital, budget and
performance integration, improved financial performance, expanded
electronic government, and competitive sourcing--are governmentwide in
scope, while 9 are agency specific. Each area has the potential for
dramatic improvement and concrete results. The areas also reflect many
of the concerns raised by both GAO's high-risk report and the IGs' top
management challenge lists. So far, however, progress on PMA has been
uneven. To achieve consistent progress, sustained attention from
Congress, the administration, and the agencies is needed. I believe
that GAO and the IGs can make important contributions, using our
combined experience, to help monitor the implementation of this
important initiative.
Key policymakers increasingly need to think beyond quick fixes and
carefully consider what the proper role of the federal government
should be in the 21st century. Members of Congress and agency heads can
start by undertaking a top-to-bottom review of federal programs and
policies to determine which should remain priorities, which should be
overhauled, and which have outlived their usefulness or are just no
longer affordable given more pressing demands. Everything that forms
the government's base must be on the table, including tax, spending,
and regulatory policies. Policymakers will need to distinguish
``wants,'' which are optional, from ``needs,'' which can be urgent.
They need to make hard choices that take into account what the American
people will support and what the federal government can afford and
sustain over time. To make informed decisions, Congress and agency
heads will require hard facts and professional analyses that are
objective, fact based, timely, accurate, nonpartisan, fair, and
balanced. GAO and the IGs are important sources of such objective
information and analyses.
With our respective areas of expertise in long-term challenges and
agency-specific issues, GAO and the IGs can provide useful insights and
constructive recommendations on programs that may warrant additional
resources, consolidation, revision, or even elimination. Closer
periodic strategic planning and ongoing engagement coordination between
GAO and the IGs would help to ensure continued effective oversight of
these key issues facing government.
Audit of the U.S. Government's Consolidated Financial Statements
GAO and the IGs are already partners in one of the most far-
reaching financial management initiatives in government--the yearly
audits of the federal government's consolidated financial statements.
Under the Chief Financial Officers (CFO) Act of 1990 as expanded by the
Government Management Reform Act of 1994, the IGs at the 24 agencies
\3\ named in the CFO Act are responsible for the audits of their
agencies' financial statements. In meeting these responsibilities, most
IGs have contracted with IPAs to conduct the audits either entirely or
in part. GAO is responsible for the U.S. government's consolidated
financial statements audit, which by necessity is based largely on the
results of the IGs' agency-level audits.
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\3\ The Federal Emergency Management Agency (FEMA), one of 24
agencies named in the CFO Act, was transferred to the new Department of
Homeland Security (DHS), effective March 1, 2003. With the transfer,
FEMA will no longer be required to prepare audited stand-alone
financial statements under the CFO Act. Consideration is now being
given to making DHS a CFO Act agency, which would bring the number of
CFO Act agencies back up to 24.
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Since 1997, GAO has been unable to give an opinion on the
consolidated financial statements, in large part because of continuing
financial management problems at several agencies that also have
resulted in disclaimers of opinion by some IGs on their agency
financial statements--most notably the Department of Defense (DOD). In
recent years, we have seen progress in the results of the audits of the
CFO Act agency financial statements with more and more IGs and their
contracted IPAs moving from issuing a disclaimer of opinion to issuing
an unqualified (``clean'') opinion on their respective agency financial
statements. In fact, 21 of the 24 CFO Act agencies received an
unqualified opinion on their fiscal year 2002 financial statements, up
from only 6 agencies for fiscal year 1996. We anticipate that if
sufficient progress continues to be made, there is a chance that we may
be able to render a qualified opinion on the consolidated balance sheet
in a few years as a first step toward rendering an opinion on the full
set of financial statements.
Our reviews of the work done by other IGs and IPAs on agency-level
financial statement audits during the last 2 years identified
opportunities for improvement in sampling, audit documentation, audit
testing, analytical procedures, and auditing liabilities. The varying
quality of the audit work has been of concern to us because of our need
to use the work of the agency auditors to support expressing an opinion
on the U.S. government's consolidated financial statements--an opinion
for which, in the final analysis, GAO is solely responsible and
accountable.
Earlier involvement and access by GAO in the agency-level financial
statement audits would help to strengthen the IG and IPA audit process
and bolster our ability to use their work in rendering an opinion. At a
minimum, GAO needs to (1) be involved up front in the planning phase of
each agency-level audit; (2) have unrestricted access to IG and IPA
audit documentation and personnel throughout the performance of the
audit; (3) receive assurances that each agency-level audit is planned,
performed, and reported in conformity with the Financial Audit Manual
(FAM) developed jointly and adopted by GAO and the PCIE; and (4) be
notified in advance of any planned deviation from the FAM's
requirements that could affect GAO's ability to use the agency
auditors' work.
At one agency (Department of Energy), for the selected areas we
reviewed, we found that the audit work was performed in conformity with
the FAM and that we would have been able to use the work without having
to perform additional audit procedures. The IG has an oversight team
composed of senior level-staff who perform moderate-level quality
control reviews of the contracted IPA's work throughout the audit
process. The oversight team evaluates its IPA in areas such as audit
planning and execution, audit documentation, and staff qualifications.
These types of practices could be shared and expanded upon across the
IG community. As an initial step to make the IG and IPA audit process
stronger and enhance GAO's ability to use their work in rendering an
opinion, we are considering holding a forum with the IGs and the IPAs
to share information--based on GAO's review of the IG and IPA work--
regarding best practices and areas to focus on that need additional
audit work, and to establish a framework for enhanced coordination of
the financial statement audit work.
Changes to enhance the agency financial statement audit process are
especially important given the planned acceleration of reporting
deadlines for agency audits. Although some agencies accelerated their
reports for fiscal year 2002, starting with fiscal year 2004, the
Office of Management and Budget (OMB) has required that agencies issue
their audited financial statements no later than 45 days after the end
of the fiscal year, with the consolidated financial statements to be
issued 30 days later. In past years, when the reporting deadlines were
4 and 5 months after the end of the fiscal year, agencies made
extraordinary efforts in which they spent considerable resources on
extensive ad hoc procedures and made adjustments of billions of dollars
to produce financial statements months after the fiscal year had ended.
Given the accelerated reporting dates, such extraordinary approaches
will no longer be an option. Over the next few years, as the government
addresses the impediments to receiving an opinion on its consolidated
financial statements, and we move closer to being able to render an
opinion on the consolidated financial statements, GAO will need to
invest more resources in assuring that the work of the IGs and IPAs on
the agency-level financial statement audits can be used by GAO to
support the audit of the consolidated financial statements. This
resource investment is necessary if GAO is to be able to render an
opinion on the consolidated financial statements.
Another matter of concern regarding the audit of the U.S.
government's consolidated financial statements involves the approaches
used by the IGs and IPAs for reporting on internal control at the
agency level. Our position is that an opinion on internal control is
important in the government environment and that the public should be
able to expect audit assurance on the adequacy of internal control over
financial reporting. We believe that auditor opinions on internal
control are a critical component of monitoring the effectiveness of an
entity's risk management and accountability systems. We also believe
that auditor opinions on internal control are appropriate and necessary
for major public entities such as the CFO Act agencies currently
included in the U.S. government's consolidated financial statements.
As does GAO in connection with our own audits, several agency
auditors are voluntarily providing opinions on the agencies' internal
control; but most do not. When an auditor renders an opinion on
internal control, the auditor is providing reasonable assurance that
the entity has maintained effective internal control over financial
reporting (including safeguarding of assets) and compliance such that
material misstatements, losses, or noncompliance that are material to
the financial statements would be detected in a timely fashion. For
fiscal year 2002, however, only 3 of the 24 CFO Act agencies received
opinions on internal control from their auditors.\4\ The remaining 21
reported on internal control, but provided no opinion on the
effectiveness of the agency's internal control. As we move closer to
being able to issue an opinion on the consolidated financial
statements, a disparity in reporting on internal control would hinder
our ability to provide an opinion on internal control for the
consolidated audit. Current agency-level reporting on internal control
would fall short of what the public should be able to expect from an
audit, and, moreover, what is now legally required from the auditors of
publicly traded companies.
---------------------------------------------------------------------------
\4\ The three agencies receiving opinions on internal control for
fiscal year 2002 are the Social Security Administration, General
Services Administration, and Nuclear Regulatory Commission.
---------------------------------------------------------------------------
Congress has prescribed auditor opinions on internal controls for
publicly traded corporations under the Sarbanes-Oxley Act of 2002.\5\ A
final rule issued by the Securities and Exchange Commission in June
2003 and effective August 2003 provides guidance for implementation of
section 404 of the act, which contains requirements for management and
auditor reporting on internal controls. The final rule requires
companies to obtain a report in which a registered public accounting
firm expresses an opinion, or states that an opinion cannot be
expressed, concerning management's assessment of the effectiveness of
internal controls over financial reporting.
---------------------------------------------------------------------------
\5\ Pub. L. No. 107-204, 116 Stat. 745 (2002).
---------------------------------------------------------------------------
As you know, Mr. Chairman, we provided testimony before this
Subcommittee several weeks ago on the challenges of establishing sound
financial management within DHS.\6\ In that testimony, we supported
provisions of H.R. 2886 that would require DHS to obtain an audit
opinion on its internal controls. During the testimony, we also
supported provisions of H.R. 2886 that would require the Chief
Financial Officers Council and the PCIE to jointly study the potential
costs and benefits of requiring CFO Act agencies to obtain audit
opinions of their internal controls over financial reporting. In
addition, the current version of H.R. 2886 would require GAO to perform
an analysis of the information provided in the report and report the
findings to the House Committee on Government Reform and the Senate
Committee on Governmental Affairs. We believe that the study and
related analysis are important first steps in to resolving the issues
associated with the current reporting on internal control.
---------------------------------------------------------------------------
\6\ U.S. General Accounting Office, Department of Homeland
Security: Challenges and Steps in Establishing Sound Financial
Management, GAO-03-1134T (Washington, D.C.: Sept. 10, 2003).
---------------------------------------------------------------------------
Ultimately, we are hopeful that federal performance and
accountability professionals will not settle for anything less than
opinion-level work on internal control at the CFO Act agency level and
on the governmentwide audit. Increased planning and coordination will
be needed among GAO, IGs, and IPAs to determine the appropriate timing
for requiring an opinion on controls at the agency level. The specific
timing will depend on the current state of the agency's control efforts
so that an audit opinion on internal control would add value and
mitigate risk in a cost beneficial manner.
A practical issue that should also be dealt with is the adequacy of
resources to provide for the 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--in order to
reduce the costs of the audit and avoid the ``heroic'' audit efforts
that we have seen in the past at some agencies.
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 assure 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 the consolidated audit.
The IG Role in Federal Financial Management Advisory Committees
We envision an important role for the IGs in audit or financial
management advisory committees established at the federal agency level
for the purpose of overseeing an agency's financial management, audits,
and performance.
In the government arena, some state and local governments and
federal government corporations, as well as several federal agencies,
have adopted an audit committee, or ``financial management advisory
committee,'' approach to governance. In the federal government, such
audit committees or advisory committees are intended to protect the
public interest by promoting and facilitating effective accountability
and financial management by providing independent, objective, and
experienced advice and counsel, including oversight of audit and
internal control issues. Responsibilities of the committees would
likely include communicating with the auditors about the audit and any
related issues. The work of the IGs logically provides much of the
basis for financial management advisory committees in overseeing
agencies' financial management, audits, and internal control. The work
of the IGs would also be critical for the financial management advisory
committees in their general governance roles. Specific roles and
responsibilities of the committees will most likely vary by agency. A
recently published guide, Financial Management Advisory Committees for
Federal Agencies,\7\ provides a helpful road map of suggested practices
for federal agency financial management advisory committees.
---------------------------------------------------------------------------
\7\ Financial Management Advisory Committees for Federal Agencies:
Suggested Practices, March 2003, prepared by KPMG, LLP.
---------------------------------------------------------------------------
The concept of financial management advisory committees is very
similar to the audit committee structure being used in the private
sector. To help facilitate the audit process and promote disclosure and
transparency, the governing boards of publicly traded companies use
audit committees. Audit committees generally oversee the independent
audit of the organization's financial statements and address financial
management, reporting, and internal control issues. The Sarbanes-Oxley
Act has requirements for the audit committees of publicly traded
companies and their auditors regarding communications and resolution of
significant audit matters.
We strongly support the implementation of financial management
advisory committees for selected federal agencies, based on risk and
value added. Some agencies,\8\ including GAO, which has had such a
committee in place since 1995, have already implemented such an
approach, even though the committees have not been mandated or
established by statute. As these committees are implemented or required
in government, we would advocate amending the IG Act to emphasize the
IGs' unique role in reporting the results of their work to the advisory
committees while maintaining their independence and dual reporting
authority to Congress.
---------------------------------------------------------------------------
\8\ Agencies that currently have audit committees or financial
management advisory committees include the National Science Foundation,
Federal Deposit Insurance Corporation, and the Architect of the
Capitol.
---------------------------------------------------------------------------
Structural Streamlining to Increase 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 to the best effect. In fiscal year 2002, the 57 IG offices
operated with total fiscal year budgets of about $1.6 billion and about
11,000 staff. (See app. II for more detail on IG budgets and staffs.)
Most IGs for cabinet departments and major agencies are appointed by
the President and confirmed by the Senate; however, IGs for some
agencies are appointed by the agency head, and these IGs generally have
smaller budgets and fewer staff than IGs appointed by the President.
While agency-appointed IGs make up about half of all IG offices, the
total of their fiscal year 2002 budgets was $162.2 million, a little
more than 10 percent of all IG budgets. Of these IGs, the offices at
the U.S. Postal Service (USPS), Amtrak, National Science Foundation
(NSF), and Federal Reserve Board (FRB) are exceptions and have budgets
that are comparable in size to those of presidentially appointed IGs.
The remaining 24 agency-appointed IGs have a total of 191 staff and
have budgets that make up about 2 percent of all IG budgets.
Importantly, 16 of the 28 agency-appointed IGs have fewer than 10
staff.
Potential IG Office Consolidations
Last year we reported the views of the IGs, as well as our own, on
the possible benefits of consolidating the smallest IG offices with the
offices of IGs appointed by the President.\9\ We also considered the
conversion of agency-appointed IGs to presidential appointment where
their budgets were comparable to the presidentially appointed IG
offices. The August 2002 report contains several matters for
congressional consideration to address issues of IG conversion and
consolidation. We are reaffirming these views, which are included at
the end of my statement.
---------------------------------------------------------------------------
\9\ U.S. General Accounting Office, Inspectors General: Office
Consolidation and Related Issues, GAO-02-575 (Washington, D.C.: August
2002).
---------------------------------------------------------------------------
We believe that if properly structured and implemented, the
conversion or consolidation of IG offices could increase the overall
independence, efficiency, and effectiveness of the IG community.
Consolidation 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. This point is especially appropriate to the 12
IG offices with five or fewer staff. IG staff now in smaller offices
would, in a large, consolidated IG office, have immediate access to a
broader range of resources to use in dealing with issues requiring
technical expertise or areas of critical need.
Consolidation would also strengthen the ability of IGs to improve
the allocation of human capital and scarce financial resources within
their offices and to attract and retain a work force with talents,
multidisciplinary knowledge, and up-to-date skills to ensure that each
IG office is 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 also 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 lack of day-to-day contact between
the IG and officials at smaller agencies as a result of consolidation
could be mitigated by posting IG staff at the agency 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.
Results of the survey conducted for our August 2002 report indicate
a clear delineation between the responses of the presidentially
appointed IGs and the responses of the agency-appointed IGs. The
presidentially appointed IGs generally indicated that agency-appointed
IG independence, quality, and use of resources could be strengthened by
conversion and consolidation. The agency-appointed IGs indicated that
there would either be no impact or that these elements could be
weakened. The difference in views is not surprising given the
difference in the potential impact of consolidation on the interests of
the two groups of IGs. We believe that this difference in perspective,
more than any other factor, helps to explain the significant divergence
in the responses to the survey.
There are already some examples where consolidation of IG offices
and oversight is working. The Department of State IG provides, through
statute, oversight of the Broadcasting Board of Governors and the
International Broadcasting Bureau. The IG at the Agency for
International Development is authorized by specific statutes to provide
oversight of the Overseas Private Investment Corporation, the Inter-
American Foundation, and the African Development Foundation.
In terms of budget size, the agency-appointed IGs at the USPS,
Amtrak, NSF, and FRB are comparable to the offices of IGs appointed by
the President. Moreover, in the case of the Postal IG, the office is
the fourth largest of all the IGs. (See app. II.) On that basis, these
IGs could be considered for conversion to appointment by the President
with Senate confirmation. While the Amtrak IG could be converted
because of comparable budget size, oversight of Amtrak is closely
related to the work of the Department of Transportation IG. Moreover,
the Transportation IG currently provides some oversight of Amtrak
programs. Therefore, the consolidation of the Amtrak IG with the
Transportation IG could be considered, rather than conversion.
Consideration has been given in the Fiscal Year 2004 Budget of the
U.S. Government to the consolidation of the two IG offices at the
Department of the Treasury, unique in the federal government. The
original statutory IG for the Department of the Treasury was
established by the IG Act amendments of 1988. The Treasury IG for Tax
Administration was established in 1998 as part of an Internal Revenue
Service (IRS) reorganization because the former IRS Inspection Service
was not perceived as being sufficiently independent from management.
Consequently, the IRS Office of the Chief Inspector, along with most of
the Inspection Service staff, was transferred to the new IG office to
ensure independent reviews.
The separate office of Treasury IG for Tax Administration was
created because IRS officials were concerned that if the resources of
the IRS Inspection Service were transferred to the original Treasury IG
office, they would be used to investigate or audit other Treasury
bureaus to the detriment of critical IRS oversight. With the passage of
the Homeland Security Act of 2002, and the transfer of Treasury's
United States Customs Service and United States Secret Service to the
new Department of Homeland Security, the original concerns about
competition for resources within the department should no longer be as
compelling.
IG Councils
The PCIE is an interagency council comprising principally the
presidentially appointed and Senate-confirmed IGs. It was established
by Executive Order No. 12301 in 1981 to coordinate and enhance the work
of the IGs. In 1992, Executive Order No. 12805 created the ECIE, which
comprises primarily statutory IGs appointed by the heads of designated
federal entities as defined in the IG Act. The Deputy Director for
Management in OMB serves as the chair of both organizations. These IG
councils have been effective in coordinating the activities of the IGs
in their efforts to prevent and detect fraud, waste, and abuse
throughout the federal government and in reporting these results to
both the President and Congress.
The IG councils have provided a valuable forum for auditor
coordination. However, we believe that the current environment demands
a more formal, action-oriented, and strategic approach for coordination
among federal audit organizations and that the IG councils could be
strengthened in a number of ways. First, by providing a statutory basis
for their roles and responsibilities, the permanence of the councils
could be established and their ability to take on more sensitive issues
strengthened. In addition, the strategic focus of the councils could be
clearly established. As such, the councils would also be key in the
overall strategic planning process for federal audit oversight that I
described earlier in this statement.
Matters for Congressional Consideration
As I stated at the beginning of my testimony, IGs have made a
significant difference in federal performance and accountability during
the last quarter century. The 25th anniversary of the landmark
legislation establishing the IGs is an opportune time to reflect on the
IGs' success while also considering ways to enhance coordination and
utilization of resources across the federal performance and
accountability community.
In order to enhance the effectiveness and impact of the federal
accountability community, Congress may want to consider establishing,
through statute, assignment of responsibility to a selected group of
designated federal accountability officials, such as representatives
from GAO, the PCIE, and the ECIE, to develop and implement a periodic,
formal strategic planning and ongoing engagement coordination process
for focusing GAO and IG work will be focused to provide oversight to
high-risk areas and significant management challenges across
government, while leveraging each other's work and minimizing
duplication.
In order to resolve resource issues and provide positive incentives
to agencies to take prudent actions to reduce overall audit costs,
Congress may want to consider enacting legislation that makes agencies
responsible for paying the cost of their financial statement audits.
In order to achieve potential efficiencies and increased
effectiveness across the federal IG community, Congress may also want
to consider whether to proceed with a restructuring of the IG
community, which could include the following:
amending the IG Act to elevate the IGs at USPS, NSF, and
FRB to presidential status,
amending the IG Act to consolidate agency-appointed IGs
with presidentially appointed IGs based on related agency missions or
where potential benefits to IG effectiveness can be shown, and
establishing an IG council by statute that includes
stated roles and responsibilities and designated funding sources.
Mr. Chairman, that concludes my prepared statement. I would be
happy to respond to any questions you or Members of the Subcommittee
might have.
Appendix I: The Inspector General Act
The Inspector General Act of 1978 was enacted following a series of
events that emphasized the need for more-independent and coordinated
audits and investigations in federal departments and agencies. First,
in 1974, the Secretary of Agriculture abolished the department's
administratively established IG office, demonstrating the impermanent
nature of a nonstatutory IG. Later, in 1974 and 1975, a study by the
Intergovernmental Relations and Human Resources Subcommittee of the
House Government Operations Committee disclosed inadequacies in the
internal audit and investigative procedures in the Department of
Health, Education, and Welfare, now the Department of Health and Human
Services. The need to deal more effectively with the danger of loss
from fraud and abuse in the department's programs led to the
establishment of the first statutory IG in 1976. The Congress also
established an IG in the Department of Energy when that department was
created in 1977.
In 1977, the House Intergovernmental and Human Resources
Subcommittee began a comprehensive inquiry to determine whether other
federal departments and agencies had a similar need for statutory IGs.
The Subcommittee's study revealed serious deficiencies in a number of
department and agency audit and investigative efforts, including the
following:
No central leadership of auditors and investigators
existed.
Auditors and investigators exhibited a lack of
independence by reporting to officials who had responsibility for
programs that were being audited.
No procedures had been established to ensure that the
Congress was informed of serious problems.
No program existed to look for possible fraud or abuse.
As an initial effort to correct these deficiencies, the IG Act of
1978 established 12 additional statutory OIGs to be patterned after the
one at the Department of Health, Education, and Welfare. The act
consolidated the audit and investigative responsibilities of each
department and agency under the direction of one senior official--the
Inspector General--who reports to the head of the agency or, if
delegated, the official next in rank below the agency head. The
President appoints the IGs, by and with the consent of the Senate,
without regard to political affiliation and solely on the basis of
integrity and demonstrated ability in accounting, financial analysis,
law, management analysis, public administration, or investigations.
The IGs are responsible for (1) conducting and supervising audits
and investigations, (2) providing leadership and coordination and
recommending policies to promote economy, efficiency, and
effectiveness, and (3) detecting fraud and abuse in their agencies'
programs and operations. In addition, the IG Act requires IGs to
prepare semiannual reports which summarize the activities of the IG
during the preceding 6-month period. The reports are forwarded to the
department or agency head, who is responsible for transmitting them to
the appropriate congressional committees.
The act states that neither the agency head nor the official next
in rank shall prevent or prohibit \10\ the IG from initiating, carrying
out, or completing any audit or investigation, or from issuing any
subpoena during the course of any audit or investigation. This enhances
the independence of auditors and investigators by ensuring that they
are free to carry out their work unobstructed by agency officials. The
act further enhances independence by requiring IGs to comply with the
Comptroller General's Government Auditing Standards. One of these
standards requires auditors and audit organizations to be personally
and organizationally independent and to maintain the appearance of
independence so that opinions, conclusions, judgments, and
recommendations will be impartial and will be viewed as such by
knowledgeable third parties.
---------------------------------------------------------------------------
\10\ The IG Act, as amended, does allow the heads of the
Departments of Defense, Justice, and the Treasury to prohibit their IGs
from initiating or carrying out audits and investigations in certain
circumstances.
---------------------------------------------------------------------------
Between the enactment of the IG Act in 1978 and 1988, the Congress
passed legislation to establish statutory IGs, who are appointed by the
President with Senate confirmation, in 8 additional departments and
agencies. In 1988, the Congress enacted the Inspector General Act
Amendments of 1988 and the Government Printing Office (GPO) Inspector
General Act of 1988 (Titles I and II, Public Law 100-504) to establish
additional presidentially appointed IGs in 5 departments and agencies
and 34 IGs appointed by their agency heads (33 in designated federal
entities and 1 in GPO) \11\ in order to strengthen the capability of
the existing internal audit offices and improve audit oversight. Both
GAO and the President's Council on Integrity and Efficiency (PCIE) had
previously reported that the existing internal audit offices lacked
independence, adequate coverage of important programs, and permanent
investigative staff.
---------------------------------------------------------------------------
\11\ The act defines the term ``designated federal entities'' by
listing the entities covered.
---------------------------------------------------------------------------
Appendix II: Inspector General Budgets and Staffing
Table 1: Inspectors General Appointed by the President Fiscal Year 2002 Budgets and Full-Time Equivalents (FTEs)
----------------------------------------------------------------------------------------------------------------
I60Federal Departments/Agencies Budgets FTEs
----------------------------------------------------------------------------------------------------------------
1 Department of Health and Human Services \a\ $227,000,000 1,569
----------------------------------------------------------------------------------------------------------------
2 Department of Defense 151,000,000 1,215
----------------------------------------------------------------------------------------------------------------
3 Treasury IG for Tax Administration 130,000,000 943
----------------------------------------------------------------------------------------------------------------
4 Department of Housing and Urban Development 95,000,000 648
----------------------------------------------------------------------------------------------------------------
5 Social Security Administration 75,000,000 564
----------------------------------------------------------------------------------------------------------------
6 Department of Agriculture 75,000,000 642
----------------------------------------------------------------------------------------------------------------
7 Department of Labor 67,000,000 426
----------------------------------------------------------------------------------------------------------------
8 Department of Justice 65,000,000 329
----------------------------------------------------------------------------------------------------------------
9 Department of Veterans Affairs 57,000,000 393
----------------------------------------------------------------------------------------------------------------
10 Department of Transportation 50,000,000 454
----------------------------------------------------------------------------------------------------------------
11 Department of Homeland Security 47,000,000 336
----------------------------------------------------------------------------------------------------------------
12 Environmental Protection Agency 46,000,000 444
----------------------------------------------------------------------------------------------------------------
13 Department of Education 39,000,000 276
----------------------------------------------------------------------------------------------------------------
14 Department of the Interior 37,000,000 251
----------------------------------------------------------------------------------------------------------------
15 General Services Administration 36,000,000 273
----------------------------------------------------------------------------------------------------------------
16 Department of Energy 32,000,000 250
----------------------------------------------------------------------------------------------------------------
17 Agency for International Development 32,000,000 166
----------------------------------------------------------------------------------------------------------------
18 Federal Deposit Insurance Corporation 32,000,000 201
----------------------------------------------------------------------------------------------------------------
19 Department of State 29,000,000 234
----------------------------------------------------------------------------------------------------------------
20 National Aeronautics and Space Administration 24,000,000 200
----------------------------------------------------------------------------------------------------------------
21 Department of Commerce 21,000,000 136
----------------------------------------------------------------------------------------------------------------
22 Small Business Administration 12,000,000 108
----------------------------------------------------------------------------------------------------------------
23 Department of the Treasury 12,000,000 87
----------------------------------------------------------------------------------------------------------------
24 Office of Personnel Management 11,000,000 89
----------------------------------------------------------------------------------------------------------------
25 Tennessee Valley Authority 7,000,000 87
----------------------------------------------------------------------------------------------------------------
26 Nuclear Regulatory Commission 6,000,000 41
----------------------------------------------------------------------------------------------------------------
27 Railroad Retirement Board 6,000,000 51
----------------------------------------------------------------------------------------------------------------
28 Corporation for National and Community Service 5,000,000 16
----------------------------------------------------------------------------------------------------------------
29 Central Intelligence Agency \b\ na na
----------------------------------------------------------------------------------------------------------------
Totals 1,426,000,000 10,429
----------------------------------------------------------------------------------------------------------------
Source: Budget authority and FTEs from Fiscal Year 2004 Budget of the U.S. Government.
\a\ Includes budget authority to combat health care fraud.
\b\ Budget and FTE information not available.
Table 2: Inspectors General Appointed by Agency Heads Fiscal Year 2002 Budgets and Full-Time Equivalents (FTEs)
----------------------------------------------------------------------------------------------------------------
I60Federal Agencies Budgets FTEs
----------------------------------------------------------------------------------------------------------------
1 U.S. Postal Service $117,324,000 713
----------------------------------------------------------------------------------------------------------------
2 Amtrak 8,706,539 64
----------------------------------------------------------------------------------------------------------------
3 National Science Foundation 6,760,000 50
----------------------------------------------------------------------------------------------------------------
4 Federal Reserve Board 3,878,000 29
----------------------------------------------------------------------------------------------------------------
5 Government Printing Office 3,400,000 24
----------------------------------------------------------------------------------------------------------------
6 Legal Ser2,500,000poratio15
----------------------------------------------------------------------------------------------------------------
7 Peace Corps 2,006,000 16
----------------------------------------------------------------------------------------------------------------
8 Smithsonian Institution 1,800,000 17
----------------------------------------------------------------------------------------------------------------
9 Federal Communications Commission 1,569,000 10
----------------------------------------------------------------------------------------------------------------
10 National Archives and Records Administration 1,375,000 13
----------------------------------------------------------------------------------------------------------------
11 Securities and Exchange Commission 1,372,559 8
----------------------------------------------------------------------------------------------------------------
12 National Credit Union Administration 1,338,135 7
----------------------------------------------------------------------------------------------------------------
13 Pension Benefit Guaranty Corporation 1,300,000 11
----------------------------------------------------------------------------------------------------------------
14 Equal Employment Opportunity Commission 1,106,119 10
----------------------------------------------------------------------------------------------------------------
15 Federal Housing Finance Board 858,237 3
----------------------------------------------------------------------------------------------------------------
16 Farm Credit Administration 829,621 5
----------------------------------------------------------------------------------------------------------------
17 Commodity Futures Trading Commission 735,800 4
----------------------------------------------------------------------------------------------------------------
18 Corporation for Public Broadcasting 735,000 9
----------------------------------------------------------------------------------------------------------------
19 National Labor Relat711,900ard 6
----------------------------------------------------------------------------------------------------------------
20 Federal Trade Commission 710,000 5
----------------------------------------------------------------------------------------------------------------
21 National Endowment for the Humanities 497,000 5
----------------------------------------------------------------------------------------------------------------
22 Appalachian Regional Commission 466,000 3
----------------------------------------------------------------------------------------------------------------
23 Federal Maritime Commission 441,034 3
----------------------------------------------------------------------------------------------------------------
24 Consumer Product Safety Commission 407,000 3
----------------------------------------------------------------------------------------------------------------
25 Federal Election Commission 392,600 4
----------------------------------------------------------------------------------------------------------------
26 National Endowment for the Arts 392,577 4
----------------------------------------------------------------------------------------------------------------
27 International Trade Commission 389,500 4
----------------------------------------------------------------------------------------------------------------
28 Federal Labor Relat222,500thority 2
----------------------------------------------------------------------------------------------------------------
Total $162,224,121 1,047
----------------------------------------------------------------------------------------------------------------
Source: As reported by the ECIE.
Table 3: Inspectors General Appointed by the President with Four Comparable Agency Appointed IGs Fiscal Year
2002 Budgets
----------------------------------------------------------------------------------------------------------------
I60Department/Agency IGs Budgets
----------------------------------------------------------------------------------------------------------------
1 Department of Health and Human Services \a\ $227,000,000
----------------------------------------------------------------------------------------------------------------
2 Department of Defense 151,000,000
----------------------------------------------------------------------------------------------------------------
3 Treasury's IG for Tax Administration 130,000,000
----------------------------------------------------------------------------------------------------------------
4 U.S. Postal Service \b\ 117,324,000
----------------------------------------------------------------------------------------------------------------
5 Department of Housing and Urban Development 95,000,000
----------------------------------------------------------------------------------------------------------------
6 Department of Agriculture 75,000,000
----------------------------------------------------------------------------------------------------------------
7 Social Security Administration 75,000,000
----------------------------------------------------------------------------------------------------------------
8 Department of Labor 67,000,000
----------------------------------------------------------------------------------------------------------------
9 Department of Justice 65,000,000
----------------------------------------------------------------------------------------------------------------
10 Department of Veterans Affairs 57,000,000
----------------------------------------------------------------------------------------------------------------
11 Department of Transportation 50,000,000
----------------------------------------------------------------------------------------------------------------
12 Department of Homeland Security 47,000,000
----------------------------------------------------------------------------------------------------------------
13 Environmental Protection Agency 46,000,000
----------------------------------------------------------------------------------------------------------------
14 Department of Education 39,000,000
----------------------------------------------------------------------------------------------------------------
15 Department of the Interior 37,000,000
----------------------------------------------------------------------------------------------------------------
16 General Services Administration 36,000,000
----------------------------------------------------------------------------------------------------------------
17 Department of Energy 32,000,000
----------------------------------------------------------------------------------------------------------------
18 Agency for International Development 32,000,000
----------------------------------------------------------------------------------------------------------------
19 Federal Deposit Insurance Corporation 32,000,000
----------------------------------------------------------------------------------------------------------------
20 Department of State 29,000,000
----------------------------------------------------------------------------------------------------------------
21 National Aeronautics and Space Administration 24,000,000
----------------------------------------------------------------------------------------------------------------
22 Department of Commerce 21,000,000
----------------------------------------------------------------------------------------------------------------
23 Department of the Treasury 12,000,000
----------------------------------------------------------------------------------------------------------------
24 Small Business Administration 12,000,000
----------------------------------------------------------------------------------------------------------------
25 Office of Personnel Management 11,000,000
----------------------------------------------------------------------------------------------------------------
26 Amtrak \b\ 8,706,539
----------------------------------------------------------------------------------------------------------------
27 Tennessee Valley Authority 7,000,000
----------------------------------------------------------------------------------------------------------------
28 National Science Foundation \b\ 6,760,000
----------------------------------------------------------------------------------------------------------------
29 Nuclear Regulatory Commission 6,000,000
----------------------------------------------------------------------------------------------------------------
30 Railroad Retirement Board 6,000,000
----------------------------------------------------------------------------------------------------------------
31 Corporation for National and Community Service 5,000,000
----------------------------------------------------------------------------------------------------------------
32 Federal Reserve Board \b\ 3,878,000
----------------------------------------------------------------------------------------------------------------
33 Central Intelligence Agency \c\ na
----------------------------------------------------------------------------------------------------------------
Total $1,562,668,539
----------------------------------------------------------------------------------------------------------------
Source: Budget authority from Fiscal Year 2004 Budget of the U.S. Government.
Note: The four comparable agency appointed IGs are in bold.
a Includes budget authority to combat health care fraud.
b Information supplied by the ECIE.
c Budget information not available.
Council for Citizens Against Government Waste
Washington, DC 20036
March 12, 2004
The Honorable Amory Houghton, Jr.
Chairman, Subcommittee on Oversight
Committee on Ways and Means
1136 Longworth House Office Building
Washington, D.C. 20515
Dear Chairman Houghton:
On behalf of the more than one million members and supporters of
the Council for Citizens Against Government Waste, I am writing to
support your efforts to consolidate the two existing Inspector General
offices at the Department of the U.S. Treasury--the Office of Inspector
General of the Treasury (OIG) and the Office of the Treasury Inspector
General for Tax Administration (TIGTA)--into a new office called the
Office of the Treasury Inspector General (TIG).
H.R. 3625, the Department of the Treasury Inspector General
Consolidation Act of 2003, is a sound and practical way to save
taxpayer dollars and to create a more cost-effective department. With
the creation of the U.S. Department of Homeland Security (DHS), the
Treasury Department has been downsized because several of its agencies
were moved into DHS or the Department of Justice (DOJ). Naturally, a
large portion of Treasury's OIG's responsibilities and budget were also
transferred to DHS and DOJ.
Treasury Secretary John W. Snow has said that the Internal Revenue
Service now constitutes approximately 87 percent of the remaining
personnel at the Department and having a separate IG for the remaining
13 percent is no longer the proper arrangement for effective oversight.
The President recommended, in both his fiscal year 2004 and 2005
budgets, that the OIG and the TIGTA be combined into a single new
office with the same powers and authorities that existed before the
split. The Administration believes that the merger will result in
better and more efficient oversight for the entire department. We
agree.
Please let us know whatever CCAGW can do to make sure H.R. 3625
becomes law so this consolidation can occur. It's the right thing to
do, for the Treasury Department and taxpayers.
Sincerely,
Thomas A. Schatz
President