Regulatory Reform: Compliance Guide Requirement Has Had Little
Effect on Agency Practices (28-DEC-01, GAO-02-172).
Section 212 of the Small Business Regulatory Enforcement Fairness
Act requires agencies to publish compliance guides for each rule
or group of related rules for which the agency is required to
prepare a final regulatory flexibility analysis. GAO found that
Section 212 has had little impact, and its implementation has
varied across and sometimes within the agencies. None of the
agencies in GAO's review provided GAO with guidance documents
that met all of the statutory requirements for all of their 1999
and 2000 final rules. The agencies indicated that they tried to
put their compliance guides in plain language--just as they have
for all their regulatory materials. The guidance documents that
the agencies gave GAO were often published on the agencies' web
sites. Direct mail, electronic list servers, agency/regional
offices, and workshops were also used for distribution.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-02-172
ACCNO: A02585
TITLE: Regulatory Reform: Compliance Guide Requirement Has Had
Little Effect on Agency Practices
DATE: 12/28/2001
SUBJECT: Electronic publications
Federal agencies
Noncompliance
Reporting requirements
Small business
Web sites
******************************************************************
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GAO-02-172
United States General Accounting Office
GAO Report to the Ranking Minority Member Committee on Small Business and
Entrepreneurship, U.S. Senate
December 2001
REGULATORY REFORM
Compliance Guide Requirement Has Had Little Effect on Agency Practices
GAO-02-172
Contents
Letter
Results in Brief
Background
Objectives, Scope, and Methodology
Agencies Did Not Develop Compliance Guides for Some Covered
Rules Agencies Varied in Development, Timing, and Distribution of
Compliance Guides Conclusions Matters for Congressional Consideration Agency
Comments and Our Evaluation 1
2 3 6
10
25 34 35 37
Appendix I Comments From the Federal Communications
Commission 41
Appendix II Comments From the Securities and Exchange
Commission 43
Appendix III Comments From the Department of Health and Human Services 46
Tables
Table 1: Number of Final Rules Published in Calendar Years 1999
and 2000 That Agencies Considered Covered by Section
212 of SBREFA 15 Table 2: Number of Covered Rules for Which Agencies
Provided Guidance Documents and Number of Documents Provided 17 Table 3:
Number of Covered Rules With Compliance Requirements Whose Related Documents
Met Section 212 Requirements 22
United States General Accounting Office Washington, DC 20548
December 28, 2001
The Honorable Christopher S. Bond
Ranking Minority Member
Committee on Small Business and Entrepreneurship
United States Senate
Dear Senator Bond:
Small businesses comprise a significant portion of the United States'
economy, accounting for 99 percent of all businesses, about 50 percent of
the gross domestic product, and about 53 percent of the private industry's
workforce. However, small businesses and other small entities (small
governments and small nonprofit organizations) can be disproportionately
affected by federal agencies' regulatory requirements, and agencies may
inadequately consider the impact of those requirements on small entities
when the requirements are implemented. In March 1996, Congress passed
the Small Business Regulatory Enforcement Fairness Act (SBREFA) (5
U.S.C. 601 note), which was intended to, among other things, "simplify the
language of Federal regulations affecting small businesses" and "develop
more accessible sources of information on regulatory and reporting
requirements for small businesses." Section 212 of SBREFA requires
agencies to publish one or more compliance guides for each rule or group
of related rules for which the agency is required to prepare a final
regulatory flexibility analysis (FRFA) under the Regulatory Flexibility Act
(RFA). The relevant sections of the RFA (codified at 5 U.S.C. 604 and 605)
generally require agencies to prepare a FRFA for every final rule for which
a general notice of proposed rulemaking (NPRM) is required unless the
head of the agency certifies that the rule will not have a "significant
economic impact on a substantial number of small entities."1
You asked us to examine the implementation of section 212 of SBREFA in
selected agencies. Specifically, you asked us to (1) determine whether the
agencies have published small entity compliance guides for each covered
rule published in selected years, and (2) describe how the agencies
1In this report, we will refer to rules that the agencies have determined
will not have a significant economic impact on a substantial number of small
entities as rules that will not have "a significant impact on small
entities."
Results in Brief
developed the guides and made them available to small entities affected by
the rules. We focused our review on final rules published during calendar
years 1999 and 2000 by six federal agencies: the Department of Commerce
(DOC), the Centers for Medicare and Medicaid Services (CMS)2 and the Food
and Drug Administration (FDA) within the Department of Health and Human
Services (HHS), the Environmental Protection Agency (EPA), the Federal
Communications Commission (FCC), and the Securities and Exchange Commission
(SEC). All of these agencies except EPA were selected based on the frequency
with which they prepared FRFAs.
Section 212 does not appear to have had much of an impact in the agencies
and years that we examined, and its implementation has varied across and
sometimes within the agencies. The statute gives agencies broad discretion
to decide which of their rules require compliance guides, what has to be in
the guides, how they are developed, when they have to be published, and how
they are distributed to affected small entities. Using that discretion, an
agency could legally exclude all of its rules from coverage by the statute,
designate a previously published document as its small entity compliance
guide, or develop and publish a guide with no input from small entities
years after the covered rule takes effect. Some of the ineffectiveness and
inconsistency in the implementation of section 212 are traceable to the
broad discretion provided to agencies in the RFA regarding the term
"significant economic impact on a substantial number of small entities."
Although a single, rigid definition of this term may not be feasible, we
believe that some additional clarity can be provided. Other problems with
the compliance guide requirement are traceable to section 212 itself. We
offer suggestions on how Congress may wish to amend the statute to make
clear when agencies must prepare a compliance guide under section 212 and
the meaning of key terms in the statute.
None of the agencies in our review provided us with guidance documents that
met all of the statutory requirements for all of their 1999 and 2000 final
rules that they said were covered by section 212. The agencies said that
they did not provide documents for some of the rules because they had no
compliance requirements, the requirements had not taken effect, or the rules
were so clear that a compliance guide was not needed. The documents that EPA
and FDA provided to us for their covered rules with active compliance
requirements met all of the nondiscretionary provisions
2Prior to 2001, CMS was the Health Care Financing Administration.
in section 212. However, almost 90 percent of the documents that the other
agencies provided for their covered rules with compliance requirements did
not meet all of the statute's requirements. Specifically, many of the
documents were not designated as small entity compliance guides and/or did
not explain what small entities had to do to comply with the associated
rule. Some of the documents appeared to have been prepared for reasons
unrelated to section 212, and the agencies identified those documents as
small entity compliance guides only in response to our inquiry. Notably, the
agencies varied widely in the types of rules they considered covered by
section 212. Some of the agencies (e.g., FCC and SEC) established low
coverage thresholds and included rules that they viewed as having little or
no effect on small entities. EPA, on the other hand, established a high
coverage threshold, excluding virtually all of the agency's final rules from
coverage by section 212. Some of the agencies had difficulty determining
which of their previously issued rules were covered by the compliance guide
requirement.
The responsibility for developing the compliance guides was decentralized to
the rule-writing units in all of the agencies that we contacted. The
agencies generally indicated that they attempted to put their compliance
guides in "plain language"-just as they have for all of their regulatory
materials. The guidance documents that the agencies gave us were often
published on the agencies' web sites. In other respects, though, the
development, timing, and distribution of the guidance documents varied among
the agencies. Some agencies consulted small entities during the development
of their guides, but others did not. Some of the documents were published
before the final rules were published, while others were not published until
after the rules had taken effect. In addition to the agencies' web sites,
modes of distribution included direct mailing, electronic list servers, use
of agency/regional offices, and workshops.
Background The basic elements of the federal rulemaking process are spelled
out in the Administrative Procedure Act (APA), as codified in section 553 of
title 5, United States Code. The APA generally requires agencies to (1)
publish an NPRM in the Federal Register, (2) allow interested persons an
opportunity to participate in the rulemaking process by providing "written
data, views, or arguments," and (3) publish the final rule 30 days before it
becomes effective. However, the APA allows agencies to issue final rules
without the publication of an NPRM in certain situations, such as for rules
dealing with foreign or military affairs; interpretative rules; and rules of
agency organization, procedure, or practice. It also permits non-NPRM
rulemaking when the agency determines for "good cause" that notice and
comment
procedures are "impracticable, unnecessary, or contrary to the public
interest." When agencies use the good cause exception, the APA requires them
to explicitly say so and provide an explanation for the exception's use. Two
specific applications of the good cause exception are known as "direct
final" and "interim final" rulemaking.3 In August 1998, we estimated that
about half of the nearly 4,700 final regulatory actions published during
1997 were published without NPRMs, and that some of the agencies'
explanations for why the good cause exception was used were not clear or
4
understandable.
Congress has added requirements to the federal rulemaking process several
times during the past 25 years. For example, the RFA was enacted in 1980 in
response to concerns about the effect that federal regulations can have on
small entities. The act (5 U.S.C. 604 and 605) requires agencies to prepare
regulatory flexibility analyses when publishing proposed or final rules-but
only for rules that require an NPRM. In our August 1998 report on non-NPRM
rulemaking, we estimated that in more than 500 final rules published in 1997
without a notice, the agencies specifically stated that a regulatory
flexibility analysis was not required because the action was not preceded by
an NPRM.5 Also, an agency does not have to prepare an analysis when the
agency certifies that the rule will not have a significant impact on small
entities. (See 5 U.S.C. 605(b).) However, the statute does not define the
terms "significant economic impact" or "substantial number of small
entities." As a result, agencies have broad discretion in defining these
terms, and their definitions vary widely.6 Under the RFA (5 U.S.C. 612), the
Small Business Administration's (SBA) Chief Counsel for Advocacy is
responsible for monitoring agencies' compliance with the act. We have
recommended several times in the past 10 years that SBA or some other entity
be given the authority and responsibility to
3Direct final rulemaking involves agency publications of a rule in the
Federal Register with a statement that the rule will be effective on a
particular date unless an adverse comment is received within a specified
period of time. If an adverse comment is filed, the direct final rule is
withdrawn and the agency must publish the rule as a proposed rule. In
interim final rulemaking, the agency issues a final rule without an NPRM
that is generally effective immediately, but with a post-promulgation
opportunity for the public to comment, and an opportunity for the agency to
be persuaded by those comments and revise the rule.
4Federal Rulemaking: Agencies Often Published Final Actions Without Proposed
Rules (GAO/GGD-98-126, Aug. 31, 1998).
5See GAO/GGD-98-126.
6Regulatory Flexibility Act: Inherent Weaknesses May Limit Its Usefulness
for Small Governments (GAO/HRD-91-16, Jan. 11, 1991).
define key terms in the RFA.7 Legislation currently under congressional
consideration-the Agency Accountability Act of 2001 (S. 849)-could provide
some of the definition that we believe is needed. It directs the SBA Chief
Counsel for Advocacy to promulgate a rule defining the terms "significant
economic impact" and "substantial number of small entities."
One of the reasons that SBREFA was enacted in 1996 was to strengthen the
implementation of the RFA. As previously noted, section 212 of SBREFA
requires federal departments and agencies to publish one or more small
entity compliance guides for each rule or group of related rules for which
the agency is required to prepare a FRFA. Because this provision in SBREFA
was built on the FRFA determination, all of the discretion inherent in the
RFA regarding whether to do an analysis also applies to whether compliance
guides must be developed. Section 212 requires the guides to (1) be
published, (2) be designated as "small entity compliance guides," and (3)
explain the actions a small entity is required to take to comply with an
associated final rule. However, it gives agencies broad discretion in other
areas. For example, it says agencies "may" prepare separate guides covering
groups or classes of similarly affected small entities, and "may" cooperate
with associations of small entities to develop and distribute the guides.
Agencies are given "sole discretion" in the use of plain language in the
guides. The statute does not indicate when the guides must be developed or
how they must be published.
The small entity compliance guides developed pursuant to section 212 of
SBREFA are only one part of a wide range of compliance assistance provided
by federal agencies. Earlier this year we issued a report describing, among
other things, agencies' efforts to use information technology to provide
compliance assistance.8 For example, we noted that EPA has partnered with
industry associations, environmental groups, universities, and other
government agencies to create 10 compliance assistance centers for specific
sectors, many of which are heavily populated with small entities. Agency
officials told us that other statutes also require compliance assistance
efforts, and that many of their compliance assistance efforts predate
SBREFA. Also, section 213 of
7See GAO/HRD-91-16; Regulatory Flexibility Act: Status of Agencies'
Compliance (GAO/GGD-94-105, Apr. 27, 1994); and Regulatory Reform:
Implementation of the Small Business Advocacy Review Panel Requirements
(GAO/GGD-98-36, Mar. 18, 1998).
8Regulatory Management: Communication About Technology-Based Innovations Can
Be Improved (GAO-01-232, Feb. 12, 2001).
Objectives, Scope,
and Methodology
SBREFA requires agencies regulating the activities of small entities to
establish a program for responding to inquiries from small entities
concerning compliance with the agencies' statutes and regulations.
The objectives of our review were to (1) determine whether the agencies we
included in our review have published small entity compliance guides for
each covered rule published in selected years, and (2) describe how the
agencies developed the guides and made them available to small entities
affected by the rules. Federal agencies issue thousands of final rules each
year, and SBREFA had been in effect for more than 5 years at the start of
our review. Determining whether each rule issued during this 5-year period
required a section 212 compliance guide would have been an extremely
difficult and time-consuming effort. Therefore, as agreed with your office,
we decided to focus our review on the final rules issued by certain agencies
during calendar years 1999 and 2000. We selected those years because they
were the most recent complete years for which data were available, and
because agencies could reasonably be expected to have put their section 212
procedures in place by the start of this period (more than 2 years after the
passage of SBREFA).
To select the agencies for our review, we initially contacted SBA's Office
of Advocacy and asked if they had data showing which agencies published the
most final rules with a FRFA. However, SBA officials said they had no such
data, and were not aware that such data were available. We then obtained
data from the Regulatory Information Service Center (RISC) showing which
agencies most frequently reported in recent editions of the Unified Agenda
of Federal Regulatory and Deregulatory Actions that their final rules
required a FRFA.9 Specifically, we asked RISC to identify entries listed in
the "completed action" fields in the five editions of the Unified Agenda
from April 1999 through April 2001 for which the agencies said a regulatory
flexibility analysis was required. According to the Unified Agenda,
completed actions are supposed to include all final rules issued since the
last Agenda edition 6 months earlier. Therefore, completed actions in the
April 1999 through April 2001 editions of the Unified Agenda
9RISC is part of the General Services Administration but works closely with
the Office of Management and Budget to provide the President, Congress, and
the public with information on federal regulatory policies. RISC publishes
the Unified Agenda twice each year, which provides for uniform reporting of
data on regulatory activities under development throughout the federal
government.
should reflect final rules published in calendar years 1999 and 2000, and
the regulatory flexibility analyses for those rules should reflect FRFAs.
The RISC data indicated that four departments and agencies-DOC, HHS, FCC,
and SEC-accounted for more than 54 percent of the Unified Agenda entries
during this period in which the agencies indicated a regulatory flexibility
analysis was required. The Unified Agenda entries for DOC were only from the
National Oceanic and Atmospheric Administration (NOAA). DOC officials told
us that, in general, only two agencies within the department regulate the
activities of small entities-NOAA and the Bureau of Export Administration.
However, they said that the Bureau of Export Administration's regulations
are not subject to the notice and comment provisions of the APA or any other
law because the regulations relate to military and foreign affairs
functions, and are therefore exempt from the requirements of the RFA. As a
result, our review within DOC focused solely on NOAA. The Unified Agenda
entries for HHS were almost all from FDA and CMS, so we considered them
separate agencies for purposes of our review. We included EPA in our review
at the suggestion of the requester.
We also used the Unified Agenda data to address the first part of objective
one-to identify each final rule published by the selected agencies in
calendar years 1999 and 2000 that appeared to be covered by the requirements
of section 212. If the agency indicated in the Unified Agenda that a
regulatory flexibility analysis was required for a completed action, and if
the action was a final rule that was published during 1999 or 2000, we
tentatively considered it a covered rule. We also did a Lexis/Nexis search
to identify any additional final rules for which a FRFA appeared to have
been prepared, and obtained a copy of each final rule identified through
either the Unified Agenda or Lexis/Nexis to confirm that a FRFA had been
prepared and that the rule had been published during the specified time
frame. In developing our lists of covered rules, we consulted with staff in
SBA's Office of Advocacy. We then met with officials in the selected
agencies, shared our tentative lists of covered rules, and asked the
officials to add to or subtract from the lists as they believed appropriate.
We accepted any final rule that the agencies indicated was covered as long
as it was published during 1999 or 2000 and had an NPRM. We also asked the
agencies to provide copies of any small entity compliance guides that they
had produced for each covered rule. Finally, we used a GAO database to
identify the total number of final rules
and substantive and significant final rules that each agency issued during
the covered time frames.10
Some of the rules that the agencies said were covered by section 212 did not
appear to have compliance requirements. Therefore, to determine whether the
documents provided for each covered rule met the compliance guide
requirements in section 212, we focused our analysis on those rules that
appeared to have compliance elements. We examined the documents that the
agencies provided for each such rule and determined whether each document
met the three requirements in section 212: (1) the agency shall designate
such publications as "small entity compliance guides," (2) the agency shall
publish the guide, and (3) the guides shall explain the actions a small
entity is required to take to comply with a rule or group of rules. Because
key terms in these requirements are not defined in the act, we developed
working definitions of those terms.
* We considered a document to be "designated" as a small entity compliance
guide if it (1) was entitled "small entity compliance guide" or (2) had been
otherwise designated by the agency (e.g., a statement by the agency in the
document or elsewhere that the guide was prepared pursuant to section 212
and/or satisfies that section's requirements).
* We considered a compliance guide to be "published" if it was a written
document that was either provided directly to all affected small entities or
otherwise made available to all affected small entities (e.g., via the
internet).
* We considered a document to have "explained" the actions that small
entities are required to take to comply with the related rule if it
contained at least some discussion of the rule's requirements. General
background information about a rule or a program would not meet the
standard.
10The Unified Agenda defines a significant rulemaking action as one that the
agency anticipates will be reviewed under Executive Order 12866 as well as
other rules that are considered important and a priority by the agency head.
The executive order defines a significant rule in a number of ways,
including rules that have an annual effect on the economy of $100 million or
more, that create a serious inconsistency with an action planned by another
agency, or that raise novel legal or policy issues. The Unified Agenda
defines a substantive action as one that has substantive impacts but the
magnitude of the impact is less than significant. GAO maintains a regulatory
database pursuant to its responsibilities under section 801(a)(2)(A) of
title 5, United States Code.
We interviewed agency officials in each of the selected agencies to address
our second and third objectives of describing how the agencies developed the
guides and made them available to small entities. Specifically, we asked
what guidance the agencies had developed regarding section 212, what
entities within the agencies were primarily responsible for the development
and/or review of the guides, and the general procedures that were followed
in the preparation and dissemination of the materials developed. We also
reviewed any written materials that the agencies provided on these subjects,
searched the agencies' web sites for relevant documents, and reviewed some
of the guides provided for covered rules in the first objective to identify
trends in their development and publication.
This review focused on six selected agencies and cannot be used to
characterize implementation practices of section 212 of SBREFA in other
agencies. In fact, five of the six agencies in our review (all except EPA)
were selected because they appeared to prepare more FRFAs than other federal
agencies. Therefore, in that respect, they may be among the best federal
agencies in terms of RFA implementation. We focused on these agencies
because the trigger for the implementation of section 212 is the publication
of a rule that requires a FRFA. Furthermore, we believe these six federal
agencies can illustrate any variation in the implementation of section 212
among other agencies.
We generally did not validate the reliability of the information that
agencies provided, and we generally did not evaluate the appropriateness of
agency decisions of what is a covered rule under section 212. However,
during our review we discovered several errors in the information that
agencies provided to RISC for the Unified Agenda, and notified RISC of those
errors.11 RISC, in turn, notified federal agencies of our concern. Also, our
questioning of the agencies' initial determinations of covered section 212
rules led to some modifications of their initial determinations. This report
discusses the implementation of the specific requirement in SBREFA that
agencies publish small entity compliance guides; it does not discuss the
extent to which small entities use those guides or how useful the guides are
to small entities that access them. We conducted our work between May 1,
2001, and September 1, 2001, at the headquarters offices of EPA, FCC, FDA,
CMS, NOAA, and SEC in accordance with generally accepted government auditing
standards.
11 Accuracy of Information in the Unified Agenda (GAO-01-1024R, July 27,
2001).
We provided a draft of this report to the Secretaries of Commerce and HHS,
the Commissioners of FCC and SEC, and the Administrator of EPA for their
review and comment. The comments that we received are reflected in the
"Agency Comments and Our Evaluation" section and in appendixes I-III of this
report.
Agencies Did Not Develop Compliance Guides for Some Covered Rules
The agencies varied in the type of rules they believed required a FRFA and,
therefore, a section 212 small entity compliance guide. EPA established a
high threshold for when a FRFA was required, and therefore certified all but
5 of the agency's more than 1,000 final rules published in the target years.
FCC and SEC, on the other hand, established a much lower threshold,
preparing FRFAs for rules that had little or no effect on small entities or
that only had positive economic effects. None of the agencies provided us
with guidance documents that met all of the statutory requirements for all
of their covered rules. In explanation, the agencies said that the
compliance requirements for some of the rules without guides had not taken
effect, some of those requirements were clear without compliance guides, and
some of the rules did not contain compliance requirements applicable to
small entities. The guidance documents that the agencies provided for rules
with compliance requirements varied in the degree to which they met the
requirements in the statute. Few of the documents provided were designated
as small entity compliance guides, many did not explain what small entities
had to do to comply, and some were not published.
Agencies Defined "Covered Rule" Differently
The first step in determining whether the selected agencies had published
small entity compliance guides for each covered rule was identifying the
covered rules in each agency. Section 212 of SBREFA states that a compliance
guide must be published for each rule or group of related rules that require
a FRFA. The RFA (5 U.S.C. 604) generally requires agencies to prepare a FRFA
for all final rules for which they are required to prepare an NPRM. However,
the act (5 U.S.C. 605(b)) gives agencies broad discretion in determining
which rules they can certify as not requiring a FRFA because they will not
have a significant impact on small entities. Because section 212 was built
upon the RFA and is triggered by the preparation of a FRFA, the same broad
discretion applies to the compliance guide requirement.
The six agencies in our review have very different views regarding the type
of rules that required the preparation of a FRFA and, therefore, the
development of a small entity compliance guide.
* FCC and SEC have established a relatively low threshold for what rules
required a FRFA, resulting in the preparation of FRFAs for many of their
rules. For example, in response to our inquiry, SEC provided us with a list
of covered rules published in 1999 and 2000 that included not only rules
that the agency believed may have a significant impact on small entities
(six rules), but also rules whose primary impact was on large or foreign
entities (six rules), rules that were primarily deregulatory or permit
voluntary cooperation (eight rules), and rules that were expected to have
little or no impact on a substantial number of small entities (seven rules).
SEC officials pointed out that the language in the RFA is "permissive" in
nature, allowing (but not requiring) agencies to certify rules out of the
FRFA process. Therefore, they said, if SEC elects not to certify a rule, the
agency is technically required to prepare a FRFA and a section 212
compliance guide. FCC officials said their agency takes a somewhat similar
position, electing to prepare a FRFA for rules that have minimal adverse or
even positive impacts on small entities-even when certification was
possible. A January 1998 internal memo prepared by the agency's Office of
Communications Business Opportunities says that agency staff should prepare
a FRFA for every final rule that requires notice and comment that is not
certified. The memo states that there is "no case law that identifies the
`trigger' level of `significant economic impact' or `substantial number of
small entities,'" but notes SBA's Office of Advocacy advises that an
analysis should be prepared whenever the rule's impact cannot be described
as de minimis.
* In contrast to the policies in place at FCC and SEC, EPA has established a
relatively high threshold for which of its rules require a FRFA. Although
the agency's guidance on the RFA and SBREFA gives agency staff substantial
discretion in determining whether a rule is eligible for certification, it
also provides numerical guidelines using different mixes of economic impacts
and the number and percent of affected small entities to help them make that
determination. For example, the guidelines indicate that EPA staff should
prepare a FRFA for any final rule that imposes compliance costs amounting to
3 percent of annual revenues on 1,000 or more small entities. On the other
hand, the guidelines indicate that EPA staff can presume a rule is eligible
for certification if it imposes compliance costs of less than 1 percent of
annual revenues on any number of small entities. Therefore, if a rule
imposes $10,000 in compliance costs on 10,000 small businesses, the
guidelines indicate that EPA staff can presume that the rule does not have a
significant impact on small entities
and certify it as long as those costs do not represent at least 1 percent of
the businesses' annual revenues.12
* NOAA's policy on when agency employees should prepare a FRFA changed
during the period covered by our review. Until August 2000, NOAA had what
appeared to be a relatively high FRFA threshold. Under that policy, NOAA
considered a substantial number of small entities to be more than 20 percent
of the industry, and said a rule should be considered to have a significant
economic effect if it is likely to (1) reduce gross revenues by more than 5
percent, (2) increase total production costs by more than 5 percent, (3)
cause small entities to incur compliance costs 10 percent higher than
compliance costs of large entities, or (4) cause 2 percent of small entities
to cease business operations. However, in August 2000, NOAA established less
numerically driven guidelines for making RFA determinations. Those
guidelines delineate two general criteria to consider in determining the
significance of regulatory impacts- disproportionality and profitability.
Specifically, the guidelines state that a rule should not be certified if it
places a substantial number of small entities at a significant competitive
disadvantage in relation to large entities, or if the rule significantly
reduces the profitability of a substantial number of small entities. They
indicate that the term "substantial number" depends on the context, but
generally means "more than just a few." The guidelines describe the
significance of profit reduction in terms of the affected firms' ability to
meet both short-term and long-term obligations. If the costs or reductions
in revenue imposed by the regulation cannot be absorbed by the firm or
passed on to its customers, the guidelines indicate that the agency should
not certify the rule.
* FDA officials told us that the agency has no formal definition or
generally accepted numerical criteria regarding what rules require a FRFA.
However, they indicated that, in practice, the agency generally uses a
relatively low FRFA threshold. When in doubt, the officials indicated that
FDA staff will err on the side of doing an analysis.
* CMS officials did not provide us with a clear definition of what the
agency considers a covered rule. One CMS official told us that because most
of the entities affected by the agency's rules were small, the agency
12See Regulatory Flexibility Act: Implementation in EPA Program Offices and
Proposed Lead Rule (GAO/GGD-00-193, Sept. 20, 2000). As detailed in that
report, until SBREFA was enacted in 1996, EPA had established a very low
FRFA threshold, preparing the analysis for rules that had any impact on any
small entities.
considered every "economically significant" rule (e.g., those with a $100
million impact on the economy) to have a significant impact on small
entities, and therefore to require a FRFA.13 However, CMS prepared FRFAs for
some rules that were not economically significant, and certified some rules
that were economically significant as not having a significant impact on
small entities. In several of the agency's 1999 and 2000 covered rules, CMS
said that it considered all hospitals to be small entities, and considered a
small entity in the health care sector to be one with less than $5 million
in annual revenues.
One area in which several of the agencies clearly differed was whether they
should prepare a FRFA (and therefore a compliance guide) for a rule that is
expected to have a significant positive economic impact on a substantial
number of small entities. As previously noted, many of the rules for which
FCC and SEC prepared a FRFA were deregulatory in nature, permitting small
entities to take actions that they were previously not permitted to take.
However, EPA officials said that they did not believe that a FRFA was
required when rules are deregulatory and/or have positive economic effects,
pointing out that the RFA requires an agency to describe steps it has taken
to minimize the impact of the rule on small entities. Why, they asked,
should an agency take steps to minimize a positive economic impact on small
entities? SBA's Office of Advocacy's implementation guide to the RFA states
that "Congress apparently considered the term `significant' neutral with
respect to whether the impact benefits or harms small businesses, therefore
suggesting the need to consider both in an analysis." However, SBA also
notes that "[s]everal agencies have taken issue with the Office of
Advocacy's interpretation of significant economic impact."
Several of the agencies also differed in whether preparation of a
"voluntary" FRFA-i.e., an analysis for a rule that the agency could have
certified as not having a significant impact on small entities-triggers the
requirement for a section 212 small entity compliance guide. Some officials
indicated that their agencies may prepare these voluntary FRFAs to help
ensure that the rule won't be overturned via judicial review and/or to
provide greater transparency of the rulemaking process. Both FCC and
13The Unified Agenda, referencing Executive Order 12866, defines an
economically significant regulatory action as one that "may have an annual
effect on the economy of $100 million or more or will adversely affect in a
material way the economy, a sector of the economy, productivity,
competition, jobs, the environment, public health or safety, or State,
local, or tribal governments or communities."
SEC officials viewed these voluntary FRFAs as triggering the requirements of
section 212. However, NOAA officials said that voluntary FRFAs do not
trigger the requirements of section 212 because the rules do not technically
"require" the preparation of a FRFA. There were also differences within one
of the agencies with regard to this issue. FDA officials said that in the
Center for Food Safety and Applied Nutrition, the preparation of a voluntary
FRFA triggers the requirement for a section 212 compliance guide. However,
they said that in other FDA centers the preparation of a voluntary FRFA
would not trigger section 212.
Agencies Said Many of Their Final Rules Did Not Require Compliance Guides
As table 1 illustrates, the agencies varied widely in the number of their
rules that they considered covered by the section 212 compliance guide
requirement. The first column in table 1 shows the number of final rules
that each selected agency published in the Federal Register during calendar
years 1999 and 2000. However, some agencies produce a large number of
routine or administrative rules that may have little or no effect on small
entities.14 There are no readily available and reliable data on how many of
these agencies' final rules affect small entities. Nevertheless, to provide
some perspective, the second column of the table shows the number of final
rules that the agencies published during the target years that were
substantive or significant-and therefore more likely to have a significant
impact on small entities. Finally, the third column shows the number of
final rules that the agencies said required a small entity compliance guide
under section 212 of SBREFA.
14The Unified Agenda indicates that "routine and frequent" rules represent
recurring applications of a regulatory program and do not alter the body of
the regulation. Informational or administrative rules pertain to matters not
central to the agency's regulatory mandate, but inform the public of the
actions taken.
Table 1: Number of Final Rules Published in Calendar Years 1999 and 2000
That Agencies Considered Covered by Section 212 of SBREFA
Number of substantive/ significant final rules published Number of final
rules agencies considered covered by section 212 of SBREFA
Number of final rules published
Source: GAO rules
database (final
rules and
substantive/significant
rules) and agency
officials
(covered rules).
The reasons why the agencies did not consider some of their rules covered by
section 212 can be traced back to the requirements in the RFA. For example,
some of the rules that the agencies published were interim or direct final
rules. Because these rules were published without an NPRM, the issuing
agencies were not required to prepare a FRFA. Consequently, because a FRFA
was not required, section 212 did not apply to the rules.
Also, the extent to which the agencies considered their rules to be covered
varied in direct proportion to the agencies' policies regarding when a FRFA
should be prepared. For example, EPA (which established a high threshold for
when rules require a FRFA) considered a much smaller proportion of both its
final rules and its substantive final rules as requiring compliance guides
than any of the other agencies.15 In contrast, FCC and SEC (which
established relatively low FRFA thresholds) considered a substantial portion
of their final rules to be covered by the section 212 requirement.
In some cases, only certain components of the selected agencies published
rules that they considered covered by section 212. As previously noted,
15Strict adherence to the numerical guidelines in EPA's guidance document
would have resulted in even fewer covered rules. For example, in its
December 22, 2000, centralized waste treatment final rule (65 Fed. Reg.
81242), EPA estimated that 53 small companies would experience compliance
costs amounting to more than 1 percent of sales, and 30 would experience
costs of greater than 3 percent of sales. Although EPA could have certified
the rule (because fewer than 100 small entities would experience these
effects), it elected to use the discretion permitted in the guidance and
prepare a compliance guide.
Agencies Had Difficulty Identifying Covered Rules
DOC officials said that the only agency within the department whose rules
typically could require a FRFA was NOAA. Within NOAA, only the National
Marine Fisheries Service (NMFS) published final rules during 1999 and 2000
that the agency said required a FRFA (and thus a section 212 compliance
guide). Similarly, within EPA, only two of the four major program offices
(the Office of Air and Radiation and the Office of Water) published rules
with a FRFA during the target years. The other two major program offices
(the Office of Pollution, Pesticides and Toxic Substances and the Office of
Solid Waste and Emergency Response) certified all of the hundreds of final
rules that they published in 1999 and 2000 as not having a significant
impact on small entities.
Some of the agencies had difficulty determining which of their previously
published final rules were covered by section 212.
* In June 2001, we provided FCC with a list of 46 final rules that the
agency had published during 1999 and 2000 and that we had tentatively
identified as covered by the requirements of section 212. In July 2001, FCC
officials indicated that they did not believe 5 of the rules on our list
were subject to section 212, thereby reducing the list to 41 rules. In early
August 2001, FCC officials compiled a more comprehensive list of 142 rules
that they believed were covered, reinstating some of the rules that they had
previously eliminated. Later in August 2001, after consultations with us,
FCC officials removed 14 rules from the covered rule list. In total, FCC
officials changed their minds on at least 18 rules, sometimes two or more
times.
* CMS officials were also unsure which of their rules published during the
target period were covered by the compliance guide requirement. One agency
official initially said that section 212 applied to all of the agency's
economically significant rules, but we pointed out that CMS had prepared
FRFAs for some non-economically significant rules and had certified some
economically significant rules as not having a significant impact on small
entities. The official then identified 91 CMS rules as covered, but some of
the listed rules were published after 2000, some had been certified, some
had no NPRM, and some were not even final rules. After we discussed the
problems concerning the list of rules, the official agreed that eight of the
rules on the list appeared to be covered by section 212.
* SEC officials initially said that 24 of the agency's final rules published
in 1999 and 2000 were covered by section 212, but later amended the total to
27 rules.
Agencies Did Not Provide We asked agency officials in each of the agencies
to provide copies of any Guidance Documents for Some small entity compliance
guides that they developed for each rule they Covered Rules considered
covered by section 212 of SBREFA. As table 2 shows, by the
end of our audit work, most of the agencies provided at least one guidance
document (and sometimes numerous documents) for most of the covered rules.
However, only the SEC provided documents for all of the agency's covered
rules.
Table 2: Number of Covered Rules for Which Agencies Provided Guidance
Documents and Number of Documents Provided
Agency
Note:
After
our
audit
work
was
completed,
CMS
provided copies of instructions
issued to Medicare contractors.
An agency official said that
these contractors repackage the information for inclusion in their provider
bulletins. Also, on September 25, 2001, FDA published a third small entity
compliance guide covering the agency's January 6, 2000, final rule on
dietary supplements (65 Fed. Reg. 1000)-after our audit work was completed.
Source: GAO analysis of agency submissions.
We asked officials in the agencies why compliance guides were not available
for certain covered rules, some of which were published more than 2 years
earlier. In some cases, the officials said that guides were not yet
necessary because the rules' compliance requirements had still not taken
effect. For example, EPA officials said that compliance guides for two of
the agency's five covered rules were not yet needed because the rules'
requirements did not take effect until 2003 and 2004.16 Similarly, FDA
officials said that the compliance date for its March 1999 labeling rule had
been extended to May 2003 for small entities, therefore extending the date
16The compliance requirements for "Control of Air Pollution from New Motor
Vehicles: Tier 2 Motor Vehicle Emissions Standards and Gasoline Sulfur
Control Requirements" (65 Fed. Reg. 6698 (Feb. 10, 2000)) do not occur until
2004. The requirements for "National Primary Drinking Water Regulations;
Radionuclides" (65 Fed. Reg. 76708 (Dec. 7, 2000)) take effect in 2003.
by which a small entity compliance guide was needed for this rule as well as
three other related rules.17 In addition, FDA officials pointed out that
many of the provisions in the agency's December 1999 rule on prescription
drug marketing do not take effect until April 1, 2002.18
In other cases, the agencies indicated that compliance guides might not be
needed for certain rules because their compliance requirements were obvious.
For example, NMFS officials said that some of their covered rules were very
straightforward (e.g., banning fishing within a particular geographic area,
or prohibiting the use of certain types of fishing gear). In those cases,
they said, it was unclear what more a compliance guide could do to explain
what small entities must do to comply with the rule.19 Similarly, FDA
officials said that the actions required for three of the agency's covered
rules were "unambiguously clear." For example, the officials said that FDA's
August 2000 topical antifungal rule merely added the word "most" to the
indications on the label for these products.20 As a result, the label now is
required to say "cures most athlete's foot" instead of "cures athlete's
foot."
Although EPA had prepared or was in the process of preparing a compliance
guide for each of its covered rules, an EPA official also told us that it
was not clear that a small entity compliance guide was useful or necessary
for every rule that requires a FRFA. In some cases, the official said, the
regulated community is well aware of how to comply with the rule, and the
guide is just a restatement of current industry practices. In other cases,
the official said the rule simply bans a particular activity, and a guide
explaining the ban is unnecessary. For example, one part of EPA's class V
injection well rule prohibited the development of new wells.21 The
17For the final rule, see 64 Fed. Reg. 13254 (March 19, 1999). For the
extension in the compliance date, see 65 Fed. Reg. 38191 (June 20, 2000).
18See 64 Fed. Reg. 67720 (Dec. 3, 1999). FDA said the compliance guide for
this rule is currently scheduled for publication in December 2001.
19However, in some straightforward rules, NMFS developed brief guidance
materials. For example, NMFS developed a one-page guidance document for a
January 27, 1999, rule prohibiting the use of driftnets in Atlantic
swordfish fishery (64 Fed. Reg. 4055). The document was sent to permit
holders, indicated that NMFS had issued the rule, and said "no vessel with a
driftnet on board may retain a swordfish."
20See 65 Fed. Reg. 52302 (Aug. 29, 2000).
21See 64 Fed. Reg. 68546 (Dec. 7, 1999).
official said that it was not clear what additional guidance was needed with
regard to this type of prohibition.
Other agencies indicated that compliance guides were not appropriate or
necessary for some of their covered rules because the rules had no
compliance requirements applicable to small entities. For example:
* One CMS official said that four of the agency's eight covered rules were
"rate setting" rules, establishing the rates that CMS would pay for
particular services under the Medicare program. For example, a November 2000
rule published revisions to the Medicare physician fee payment schedule for
calendar year 2001.22 The official said it was illogical to require CMS to
prepare a compliance guide for rules that did not have compliance
requirements applicable to small entities.
* At least six of the NMFS covered rules appeared to have no compliance
requirements applicable to small entities. For example, the agency stated in
one rule that it "has no specific requirements for regulatory compliance; it
essentially sets an enforceable performance standard (do not take listed
fish) that applies to all entities and individuals."23 In another rule, NMFS
said that it only established year-long quotas for the purpose of closing
for certain types of fish in the northeastern United States, and "does not
establish any requirements for which a regulated entity must come into
compliance."24
* Nine of the SEC covered rules appeared to have no compliance requirements
applicable to small entities. Five of these nine rules primarily affected
large entities (e.g., national security exchanges) or foreign entities
(e.g., foreign issuers of securities). Two other rules without compliance
requirements were deregulatory in nature or permitted voluntary cooperation.
SEC said that the two remaining rules without compliance requirements had
little or no impact on small entities. For example, one of the rules amended
SEC's Freedom of Information Act and Privacy Act rules to conform to current
statutes, case law, and administrative practice, and, according to SEC,
"will not impose any additional reporting,
22See 65 Fed. Reg. 65376 (Nov. 1, 2000). 23See 65 Fed. Reg. 42422, 42473
(July 10, 2000). 24See 64 Fed. Reg. 1139, 1141 (Jan. 8, 1999).
recordkeeping, or other compliance requirements."25
* Fifty-eight of the FCC rules did not appear to have compliance
requirements applicable to small entities. For example, FCC stated in the
FRFA summary for one of its rules that it "merely clarifies an existing
requirement imposed on accounting authorities. It, therefore, does not alter
the reporting, recordkeeping or other compliance requirements of certified
accounting authorities in the maritime mobile, maritime mobile satellite,
aeronautical and other satellite-based radio services."26
In some cases, the agencies offered other explanations for why compliance
guides had not been prepared for covered rules. For example, FDA officials
said that, as of September 1, 2001, a compliance guide for its January 2000
final rule on dietary supplements had been drafted and was being reviewed.27
The rule took effect in February 2000. The officials said that resource
constraints and other priorities had prevented the preparation of the guide
prior to its effective date.
Guidance Documents Provided for Most Covered Rules Did Not Meet All of the
Requirements in Section 212
Section 212 gives the agencies broad discretion with regard to the
development and content of the required compliance guides. For example, it
says that the agency "may" prepare separate guides for groups of similarly
affected small entities, and "may" cooperate with associations of small
entities in the development and distribution of the guides. However, section
212 does contain three requirements: (1) the agency must "publish" the
guides, (2) the agency must "designate" the publications as "small entity
compliance guides," and (3) the guides must "explain the actions a small
entity is required to take to comply with a rule or group of rules." The
section does not specify how the agencies should "publish," "designate," or
"explain" the actions required.
We initially intended to examine each of the guidance documents that the
agencies provided to us for each of the identified covered rules in terms of
these three statutory requirements. However, as previously noted, some of
the agencies' covered rules had no compliance requirements applicable to
25See 65 Fed. Reg. 55180 (Sept. 13, 2000).
26See 64 Fed. Reg. 40774 (July 28, 1999).
27As previously noted, a compliance guide was issued for this rule after our
audit work was completed.
small entities. Because it seemed inappropriate to include these types of
rules in this part of our review, we focused our analysis on the rules that
explicitly had compliance requirements applicable to at least some small
entities. For each such rule, we determined whether the guidance documents
provided to us by the agency:
* had been "designated" as small entity compliance guides (i.e., had been
entitled as such, or had been otherwise "designated" by the agency [such as
a statement by the agency in the document or elsewhere that a guide was
prepared pursuant to section 212 or satisfies its requirements]);
* had been "published" (i.e., was a written document that was either
provided directly to all affected small entities or otherwise made available
to all affected small entities); and
* explained the actions a small entity (or anyone else) had to do to comply
with the rule or group of related rules. We considered any substantive
discussion of the rules' requirements to meet the standard.
Table 3 presents the results of our analysis. Overall, the six agencies
provided at least one guidance document during our review that met all three
requirements in section 212 of SBREFA for 21 (about 14 percent) of their 153
covered rules with compliance requirements. The documents for 76 of these
rules (about 50 percent) were not designated as small entity compliance
guides, but otherwise met the statutory requirements.
Table 3: Number of Covered Rules With Compliance Requirements Whose Related
Documents Met Section 212 Requirements
Number of
rules Number of rules Number of rules
with with documents
compliance with compliance that
requirements requirements
for for were not
Number of Number of which agencies which at least "designated"
covered rules one but
rules with small provided at document met
published in entity least all met other
calendar compliance one guidance three requirements in
years requirements
Agency 1999 and requirements document in section 212 section 212
2000
DOC/NOAA/NMFS 51 46 44 15
HHS/FDA 10 10 2 2
HHS/CMS 8 4 0 0
EPA 5 5 3 3
FCC 128 70 70 0
SEC 27 18 18 1
Total 229 153 137 21
Note: After our audit work was completed, FCC developed a page on the
agency's Office of Communications and Business Opportunity web site that
listed the internet locations of the guidance documents the agency
identified to us as their small entity compliance guides for the agency's
covered rules published in 1999 and 2000. On that page, FCC said it had
"designated the following educational materials to be "small entity
compliance guides" under (SBREFA)." See www.fcc.gov/ocbo/guides.pdf.
Source: GAO analysis of agency submissions.
The table also illustrates that the agencies varied in the extent to which
the guidance documents met the three statutory requirements. All three of
the documents that EPA provided for three of its five covered rules with
compliance requirements appeared to meet all three statutory criteria. Each
EPA document was published on the agency's SBREFA web site
(www.epa.gov/sbrefa), each was entitled "small entity compliance guide," and
each described in great detail the steps that small entities and others had
to take to comply with the rules' requirements. Similarly, the guidance
documents for 2 of FDA's 10 covered rules with compliance requirements,
although much less detailed than those developed by EPA, also appeared to
meet all of the statutory requirements. In contrast, none of the more than
200 FCC guidance documents that the agency provided for 70 covered rules
with compliance requirements appeared to meet all of the statutory criteria.
The documents for 38 of these rules were not designated as small entity
compliance guides, but otherwise met the statutory requirements. The
documents for another 32 FCC rules appeared to be deficient in other ways
(i.e., were not published and/or did not explain the compliance actions
required). The documents that SEC provided were only somewhat more likely to
meet the statutory criteria. SEC provided nearly 70 guidance documents for
its 18 covered rules with compliance requirements, but the documents for
only 1 of the 18 rules appeared to
Designation
Publication
meet all of the statutory requirements. On the other hand, the documents for
13 of the 18 SEC rules were published and explained what small entities had
to do to comply with the related rule. We concluded that the documents for
15 of the 46 NMFS covered rules with compliance requirements met all of the
requirements. However, the documents for most of the remaining NMFS rules
were published and explained compliance requirements.
Many of the guidance documents we received from some agencies were not
"designated" as small entity compliance guides. They often were not entitled
as such, did not reference section 212 or SBREFA, and were not otherwise
designated by the agencies. They also often appeared to be generic documents
that generally related to the overall topic of the rules, but did not
mention the rules specifically and/or were not directed at small entities or
any individuals or organizations subject to the rules' requirements. For
example:
* More than 90 of the undesignated documents that FCC provided were news
releases, public notices, consumer facts, or consumer information notices.
Nine documents were notices or agendas for upcoming meetings or events. Some
of the documents did not mention the rule for which FCC associated them as
compliance guides, some bore no relation to the rule, and some were
published weeks or even months in advance of the rule.
* Many of the undesignated documents that SEC provided were general fact
sheets, media briefings, press releases, standard application forms and
instructions, speeches, and staff legal bulletins. As was the case with the
FCC rules, many of the SEC documents did not mention the associated final
rules, and some were published in advance of the rules.
* Some of the documents that NMFS provided were also not designated as small
entity compliance guides. NMFS officials noted that most of the entities
affected by the agency's rules are small businesses, and some of those
businesses may consider the term "small entity compliance guide" to be
derogatory in that they do not consider themselves small.
Most of the documents that the agencies provided for the covered rules were,
in some sense, "published." For example, all of the EPA and FDA compliance
documents, and most of the SEC and FCC documents, had been published on the
agencies' web sites. Many of the documents that NMFS identified as
compliance guides were published in the preamble to the final rule or were
mailed to all affected entities. However, a few of the
Explanation
documents that the agencies provided did not appear to have been published
in any form.
* SEC provided us with letters about an August 1999 rule involving the Year
2000 problem that were sent to the heads of federal banking regulators.
However, there was no indication that these letters were sent to
organizations that were affected by the rule. Also, one of the documents
that SEC provided for a March 1999 rule revising a part of Regulation D was
entitled "4 Town Hall meetings in Seattle, Kansas City." However, SEC did
not indicate that any documents related to these meetings were prepared,
much less published.
* Several of the documents that FCC provided to us were forms or application
materials. However, FCC did not indicate whether any of these documents were
published or were otherwise sent to or made available to all small entities.
Most notably, however, many of the documents provided by certain agencies
did not accomplish the basic task that is contemplated by section 212 of
SBREFA-i.e., explain the actions that small entities had to take to comply
with the rules' requirements.
* The guidance documents that FCC provided for 31 of its 70 covered rules
with compliance requirements (136 of the 210 documents) did not explain the
compliance actions required. The documents for many of these rules were the
previously mentioned public notices, fact sheets, and consumer information
bulletins as well as notices of upcoming meetings, workshops, or other
events. In some cases, the documents provided did not directly apply to the
covered rule. For example, FCC gave us three guidance documents for its
October 1999 rule on telecommunications carriers' use of customer
proprietary network information.28 However, all three documents were
published before the rule was published, and two were notices of meetings
involving different but related rules. None of the three documents explained
what actions small entities had to take to comply with the covered rule.
* The documents that NMFS gave us for several covered rules did not explain
small entities' compliance requirements. As was the case with FCC, some of
these documents did not directly relate to the final rules. For
28See 64 Fed. Reg. 53944 (Oct. 5, 1999).
example, NMFS provided us with a June 1999 fishery bulletin that agency
officials described as the compliance guide for a November 1999 rule on
coral reef resources of Puerto Rico and the U.S. Virgin Islands.29 The
bulletin predated the final rule by 5 months, and was a request for comments
on the proposed rule, not the final rule.
* The guidance documents provided for 5 of the 18 SEC covered rules with
compliance requirements did not adequately explain the actions that affected
entities were required to take. For example, although the guidance document
provided for a November 2000 rule on the delivery of proxy statements and
information statements to households contained a brief general description
of the scope and content of the rule, it did not identify what actions
affected entities needed to take to satisfy the rule's requirements.30
Agencies Varied in Section 212 generally does not require agencies to
develop or distribute the small entity compliance guides in any particular
way or at anyDevelopment, Timing, particular time. Although the statute says
agencies "may cooperate with
and Distribution of
Compliance Guides
associations of small entities to develop and distribute such guides," it
does not require them to do so. The responsibility for developing the guides
was decentralized in most of the agencies in our review, and some of the
agencies developed their guides without substantial input from small entity
representatives. The timing of the documents varied, with some published
before the final rule was issued and others not published until after the
rules took effect. The agencies generally used the same procedures to ensure
that their guides were written in plain language as they had for their other
regulatory materials, but the agencies varied in how they publicized and
distributed the guides they developed.
Agencies' Section 212 In order to determine how the selected agencies' small
entity compliance
Guidance Varies guides were developed, we asked officials in each agency
whether any section 212 guidance or procedures had been developed. The
guidance that they identified varies in terms of its specificity, accuracy,
completeness, and availability. EPA's guidance is the most detailed, and is
located in chapter 5 of the agency's March 1999 revised interim guidance on
the RFA and SBREFA. (A copy of this document is available at
29See 64 Fed. Reg. 60132 (Nov. 4, 1999). 30See 65 Fed. Reg. 65736 (Nov. 2,
2000).
www.epa.gov/sbrefa.) The guidance includes sections describing, among other
things, what individuals and organizations should participate in the
development of the compliance guides, when the guide should be developed,
and questions to ask reviewers. The guidance also includes a template
developed by an agency workgroup to help EPA staff in developing the guides,
including standard language within certain sections that they can use.
Suggested standard headings and subheadings for the guides include "who
should use this guide," "how do I obtain a complete copy of the rule," "how
can I tell if I am subject to this rule," "when do I need to comply," and
"what do I need to do to comply."
FDA's guidance on the preparation of small entity compliance guides is not
as extensive as EPA's guidance and is not available on the agency's web
site. The guidance includes a one-page question-and-answer document that
briefly describes, among other things, when the guides are required and the
legal consequences of failing to issue a guide. The guidance also includes a
one-page "Checklist For Small Entity Compliance Guides" that describes four
"requirements " and four "optional" features. However, two of the listed
requirements-that the guides be "written in sufficiently plain language that
it is likely to be understood by affected small entities" and that they will
be "available at the time of publication of the final rule"-are not imposed
by section 212 of SBREFA.
Other agencies prepared guidance on section 212 that is even less detailed,
or had no guidance at all. For example, NMFS officials said that their
agency's guidance on the statute is contained in the agency's economic
analysis guidelines. The relevant portion of those guidelines essentially
repeats the statute, noting, for example, that compliance guides must be
prepared when the agency is required to prepare a FRFA for a rule or group
of related rules and must explain the actions a small entity is required to
take to comply with the rule/rules. The guidelines do not specifically
mention that the publications must be designated as small entity compliance
guides.
Responsibility For Developing Guides Is Usually Given to Agency Rule Writers
The agencies in our review generally delegated the responsibility for
developing small entity compliance guides to the bureau or office
responsible for writing the associated rule. For example, EPA's March 1999
guidance document states that "the lead rule-writing office is responsible
for developing the rule-specific compliance guide as part of the rulemaking
process." However, the guidance indicates that numerous other offices (e.g.,
EPA's Small Business Ombudsman, regional offices, and the Small Business
Advocacy Chair's staff) can also be called upon to
provide assistance and support, or to develop sections of the compliance
guides. In addition, the EPA guidance says that the small entity compliance
guides should be reviewed by the agency's Office of General Counsel and the
Office of Enforcement and Compliance Assistance.
Officials in the other agencies indicated that they used similarly
decentralized guidance development procedures. For example, FCC officials
said the agency's bureaus and offices with rulemaking responsibilities
develop compliance guide materials. These bureaus or offices determine the
nature and level of additional guidance that small entities and the public
need to understand and follow the rules. The materials developed are then
subject to review at the highest levels of the bureaus or offices. FDA
officials said that there is no single approach to developing the guides
within the agency, with each of FDA's major centers (e.g., the Center for
Food Safety and Applied Nutrition) given great flexibility for the
development of small entity compliance guides under their jurisdiction. They
said that responsibility for the preparation of the guide generally lies
with the original rule writer within those centers. NMFS officials said that
each of the service's regional offices has been granted the flexibility to
determine their own practices for developing and publicizing the compliance
guides. Within those regions, they said the Division of Sustainable
Fisheries is primarily responsible for preparing the guides, working in
coordination with the Regional Fishery Management Councils and Highly
Migratory Species Division at NOAA Headquarters. Ultimately, though, the
officials said the guides are developed during the preparation of the final
rules by those working on the rules and related documents.
Small Entity Input to Guides Varied Across the Agencies
Section 212 says that agencies "may cooperate with associations of small
entities to develop and distribute such guides," but does not require the
involvement of small entities in either process. Some of the agencies
indicated that they attempt to contact small entities during the development
of their compliance guides, sending them drafts and obtaining comments
before publication of the guides. For example, EPA's March 1999 guidance
states that "[s]mall entity representatives should typically be involved in
reviewing the draft compliance guide after the rule is promulgated so that
we have the benefit of their comments and advice in preparing the final
version of the guide." However, the guidance goes on to say that EPA staff
"will need to balance such review with equal concern for timely issuance of
the guide." In "unusual circumstances" in which the outline of the guide is
clear before proposal, the guidance says that draft compliance guides can be
released to small entity representatives prior to
the rule's promulgation. The EPA guidance suggests obtaining input from the
small entity representatives who participated in the SBREFA advocacy review
panel process during the development of the proposed rule,31 and asking such
questions as whether the format of the guide is appropriate, whether the
guide is clear and easy to read, and whether it accurately describes the
rule as published.
EPA officials said that this outreach process was used in the development of
the agency's three small entity compliance guides for the covered rules in
our review. For one of the rules, EPA officials said they sent formal
letters to 11 stakeholder groups soliciting their review and comment on a
draft of the compliance guide, 3 or 4 of which responded. One of the groups
that responded represented only small entities; the others represented
entities of varying sizes, including small ones. On another rule, EPA
officials said some small entity representatives were consulted that had
been small entity representatives for the SBAR panel. Similarly, NMFS
officials said that commercial and recreational groups (e.g., the Maine
Lobstermen's Association and the Coastal Conservation Association) are
consulted in the development of their guides.
However, some of the other agencies indicated that they did not directly
involve small entities in the development of some of their guides. For
example, FCC said that most of their compliance guide materials are written
without the direct assistance of associations of small entities. However,
they said that if small entities file comments in a specific rulemaking
proceeding, those comments are taken into account in the preparation of the
compliance guide materials. Similarly, FDA officials said that the Center
for Food Safety and Applied Nutrition did not consult with small entities
during the preparation of the two compliance guides. They said that the
input the center had received during the process of developing the rules was
sufficient, and additional clarification from small entities was not needed.
Timing of Guides' Section 212 does not indicate when small entity compliance
guides must
Publication Varied be published. Although both FDA and EPA have indicated
when their guides should be published, the agencies did not publish any of
their guides within those timeframes.
31The advocacy review panel requirements in SBREFA were codified in 5 U.S.C.
609. For a description of the initial implementation of this requirement,
see GAO/GGD-98-36.
* A checklist that FDA developed at the time SBREFA was passed states that a
compliance guide "will be available at the time of publication of the final
rule." However, FDA did not publish compliance guides for any of the
agency's 10 covered final rules by their dates of publication. Notably, the
compliance guides that FDA had published at the time of our review for 2 of
the agency's 10 covered rules were both published in July 2001-after we
notified FDA that we were beginning our study.32 FDA officials said that the
guides had been in development for some time, but their publication was
accelerated because of our review.
* EPA's March 1999 guidance on the RFA and SBREFA states that agency staff
should "make every effort to issue the guide within two months of the
promulgation of the final rule." However, all three of the compliance guides
published at the time of our review were issued more than 2 months after the
final rules were published. For example, EPA's interstate ozone transport
rule was published in May 1999, but the related compliance guide was not
published until August 2000.33 The agency's class V injection wells rule was
published in December 1999, but the compliance guide was not published until
November 2000.34 EPA officials also told us that guides for the other
covered rules would not be published until more than 2 months after the
rules were published.35 For example, the agency's tier II motor vehicle
emissions rule was published in February 2000, but the small entity
compliance guide for the rule is not expected to be published until March
2002.36 The effective dates for four of the five EPA covered rules had
passed by the time the related compliance guides were published. However,
EPA officials pointed out that the compliance requirements for some of these
rules do not take effect until well after the
32The two rules were FDA's March 16, 1999, food labeling rule (64 Fed.
Reg.12887), and December 5, 2000, shell egg labeling rule (65 Fed.
Reg.76092).
3364 Fed. Reg. 28250 (May 25, 1999).
3464 Fed. Reg. 68546 (Dec. 7, 1999).
35Although not technically part of our review, EPA's RFA/SBREFA tracking
system indicated that one rule published by EPA's Office of Prevention,
Pesticides and Toxic Substances in August 1996 (prior to the period covered
by our review) had a projected small entity compliance guide issuance date
of October 2001-more than 5 years after the final rule was published.
3665 Fed. Reg. 6698 (Feb. 10, 2000).
rules' effective dates. For example, the emission requirements in the tier
II rule (with an effective date of April 2000) do not take effect until
2004.37
The timing of the compliance guides for the covered rules published by the
other agencies in our review varied markedly. Some of the documents that the
agencies provided were published before the final rules were published-in
some cases months or even years earlier. For example, one of the documents
that FCC provided for its June 2000 final rule on competitive bidding in the
narrowband personal communication services was a "Narrowband Fact Sheet"
that was published more than 6 years before the rule was published.38 In
contrast, other documents that the agencies characterized as small entity
compliance guides were not published until some time after the related rules
took effect-sometimes months or even years later. For example, three of the
documents that FCC characterized as compliance guides for its April 1999
final rule designed to promote competition in the advanced services market
were public notices for the release of FCC Form 477 that were published
between 1 and 2 years after the rule's June 1999 effective date.39
Section 212 gives the agencies broad discretion to ensure that their
compliance guides are written in "plain language." Officials in most of the
agencies told us that they attempt to write all of their regulatory
materials (e.g., the rules themselves, guidance documents, and other
materials) in plain language. Several of the agencies cited a June 1, 1998,
presidential memorandum entitled "Plain Language in Government Writing,"
which requires that agencies use plain language in all documents that
explain how to obtain a benefit or service or comply with a regulation. For
example, FCC said that it adopted a five-step action plan to implement the
plain language initiative, including training for FCC staff and
identification of regulatory initiatives appropriate for plain language
writing. Sometimes the agencies indicated that clarity in guidance is
statutorily mandated. For example, FDA noted that the Food and Drug
Administration Modernization Act of 1997 required the agency to amend its
"good guidance practice" regulations to make the agency's procedures for
development, issuance, and use of guidance documents clear to the public.
Agencies Said Guides Used Plain Language
37EPA delayed the implementation of this rule for small entities pursuant to
the recommendation of the agency's small business advocacy review panel.
3865 Fed. Reg. 35843 (June 6, 2000).
3964 Fed. Reg. 23229 (Apr. 30, 1999).
EPA said that all of its guides were in "plain language" except for the
guide prepared for engineers responsible for certifying non-road diesel
engines. EPA said that although this guide was more technical than the
others, the language was appropriate for the intended audience. In at least
one of the rules (the motor vehicle waste rule), EPA used "readability"
software and consulted with a plain language specialist. Also, reviewers
from outside the agency (e.g., American Trucking Association) were asked for
suggestions on how to use language the target audiences could understand.
DOC and NMFS officials told us that each rule writer and compliance guide
reviewer is expected to pay attention to section 212's plain language
provisions. They noted that the guides are often drafted in a
question-and-answer format that simplifies complicated regulatory text, and
include illustrations when appropriate. Similarly, FDA officials said the
two guides published at the time of our review were both developed by the
Center for Food Safety and Applied Nutrition in a question-and-answer format
to ensure readability. However, they emphasized that each center has the
flexibility to take whatever steps they believe are necessary to achieve
this goal.
Agencies Publicize/Distribute Guides in Various Ways
The agencies included in our review varied with regard to how their small
entity compliance guides were publicized and distributed. EPA's March 1999
guidance states that agency staff should provide copies of the compliance
guides to staff of the Small Business Advocacy Chair; the Office of the
Small Business Ombudsman; the Office of Regional and State/Local Relations;
and the Office of Communications, Education and Public Affairs, who will
distribute copies to their small entity contacts. In addition, the guidance
says that the compliance guides should be included in the agency's Enhanced
Public Access system, which makes agency guidance documents related to
statutory or regulatory requirements electronically available. All three of
the compliance guides that have been published for the rules included in our
review were available on EPA's SBREFA web site. Otherwise, though, the
specific methods by which EPA distributed the three compliance guides
varied. EPA officials provided the following examples.
* Compliance guides for the centralized wastewater treatment rule were
distributed to small entities at workshops (250 compact discs) and via
e-mail prior to their availability on the agency's web site.
* Compliance guides for the interstate ozone transport rule were sent to the
agency's regional offices and cognizant state offices, and they were
responsible for making copies available to affected small entities.
* Compliance guides for the motor vehicle waste rule were provided to the
agency's 10 regional offices, which distributed 8,000 copies to small
entities, the small business ombudsman, and various industry associations
(e.g., the American Trucking Association and the National Automobile Dealers
Association). Some regions have provided special training on the rule and
guide. At the time of our review, EPA was developing a video as another
means of reaching affected small entities.
FCC officials said that the agency uses a number of mechanisms to publicize
its compliance guides, most notably a web site maintained by FCC's Consumer
Information Bureau (CIB). (See www.fcc.gov/cib.) CIB was established in 1999
and has overall responsibility for ensuring the public's understanding of
and compliance with the Commission's regulatory requirements. A
comprehensive listing of all FCC consumer documents and pertinent internet
links for each document is available on this web site. FCC also said that
each bureau and office of the FCC also "prominently" features compliance
guide materials on their internet home pages.40
SEC officials said that the processes they use to publicize and distribute
the guides vary from rule to rule. They said available processes include
media briefings, postings of "hot topics" to the agency's web site, mailings
to affected small entities, and speeches at meetings and conferences. They
said that if the compliance guide is in the preamble to the related rule,
the Federal Register is the mode of distribution.
FDA officials said the agency generally publishes its designated small
entity compliance guides on its web site and includes a notice of
availability in the Federal Register. They indicated that additional
distribution varies among FDA's five centers because of the diverse nature
of the industries and small entities that each center regulates. For
40As previously noted, after our audit work was completed FCC developed a
page on the agency's Office of Communications and Business Opportunity web
site that listed the internet locations of the guidance documents the agency
identified to us as their small entity compliance guides for the agency's
covered rules published in 1999 and 2000. On that page, FCC said it had
"designated the following educational materials to be "small entity
compliance guides" under (SBREFA)." See www.fcc.gov/ocbo/guides.pdf.
example, we were told that certain guides under development for rules to be
issued by the Center for Drug Evaluation and Research will be distributed by
electronic mail using an existing list serve database of small entities
commonly impacted by the Center's regulations.
NMFS officials said that NOAA Fisheries and Councils keep a registry of all
permit holders, industry groups, and interested parties. Using that
information, they said compliance guides are generally mailed to all those
to whom the rule will apply and to others who have expressed interest. They
said the guides are also made available at sites frequently visited by
constituents, such as docks, bait and tackle shops, and on web sites.41
However, our review indicated that NMFS practices with regard to the rules
published in 1999 and 2000 varied by region within the agency. For example:
* The Alaska region included a "small entity compliance guide" section in
the preamble of some of the final rules. The region usually took no other
action to publicize or distribute these guides, relying on small entities
and others to find them in the Federal Register notices. However, in one
case a synopsis of the local area management plan for the halibut fishery in
Sitka Sound was reduced to fit on a laminated card suitable for posting on
fishing vessels.
* The guides developed for certain covered rules by the Northeast,
Northwest, and Southwest regions were standard form letters provided to each
holder of fishing permits in certain fisheries. For example, on December 6,
1999, the Northeast regional administrator sent a standard form letter to
each permit holder containing a detailed summary of the "American Lobster
Fishery Regulations."
* The Southeast region issued guides in the form of notices or bulletins
containing a summary of the rule with the phone number, fax number, and
e-mail address of an information contact. For example, a June 13, 2000,
"Southeast Fishery Bulletin" announced the approval of a new rule
prohibiting certain types of fishing in certain areas in the south Atlantic
to protect and facilitate the recovery of Oculina coral.42
41NMFS also noted other general outreach efforts, such as public information
meetings about new regulations and distribution by NOAA special agents and
officers of materials when they board vessels and visit fish dealers.
4265 Fed. Reg. 37292 (June 14, 2000).
Conclusions
Section 212 does not appear to have had much of an impact in the agencies
and years that we examined, and its implementation has varied across and
sometimes within the agencies. Some of the statute's ineffectiveness and
inconsistent implementation is traceable to previously identified concerns
with the implementation of the RFA-the statute upon which the compliance
guide requirement is based. Other concerns with and variations in the
statute's implementation are traceable to section 212 itself.
The RFA gives agencies broad discretion to decide which of their rules
require a FRFA, and therefore a compliance guide. For example, an agency can
decide that there is "good cause" not to prepare an NPRM for a final rule,
and thereby avoid having to prepare a FRFA or a compliance guide. If an NPRM
was prepared, an agency can also avoid preparing a FRFA or a compliance
guide by certifying that the final rule does not have a significant impact
on small entities, with agencies allowed to determine when a rule reaches
that threshold. Given this broad discretion, it is not surprising that the
agencies in our review varied with regard to when a FRFA (and thus a small
entity compliance guide) was required. For example, some of the agencies
considered rules with a positive impact on small entities to trigger the
requirements of the RFA and section 212; other agencies did not consider
such rules to require a FRFA or a compliance guide. Some of the agencies
indicated that preparation of a voluntary FRFA would trigger the
requirements of section 212; other agencies said a compliance guide was
required only when a FRFA was required, not when voluntarily provided.
Section 212 also gives agencies broad discretion in how its provisions are
implemented. Agencies can decide when compliance guides should be published,
how they are developed, what they contain, and how they are distributed to
affected small entities. Therefore, an agency could designate a previously
published document as its small entity compliance guide for a covered rule,
or develop and publish a guide with no input from small entities years after
the rule takes effect. Again, given this amount of discretion, it is not
surprising that the agencies in our review varied in how section 212 was
implemented. For example, some of the documents that the agencies gave us
were prepared before the associated rules were published, but others were
not published until well after the rules' compliance requirements took
effect. Some of the agencies contacted small entities during the development
of their guides, while others did not.
The agencies also varied in the extent to which they satisfied the three
nondiscretionary provisions in section 212-that the guides be published,
Matters for Congressional Consideration
designated as small entity compliance guides, and explain what small
entities have to do to comply with the related rule. For example, the
agencies with the broadest view regarding the coverage of the RFA and
section 212-FCC and SEC-often provided us with documents that they
characterized as small entity compliance guides that were not designated as
such and, most troubling of all, did not explain the actions small entities
needed to take to comply with the covered rules. Many of the documents did
not mention the associated rule, section 212, or small entities; they were
generic descriptions of the program or topic addressed by the rule. It
appeared that many of the documents that these agencies provided were
prepared for reasons unrelated to section 212, and the agencies identified
those documents as small entity compliance guides only in response to our
inquiry. In contrast, EPA-the agency that had the narrowest view of the
scope of the RFA and section 212, excluding almost all of its rules from
coverage-provided us with documents for three rules that appeared to have
been prepared in recognition of the compliance guide requirement and
meticulously described how to satisfy the rules' provisions.
As we have said many times in the past, we believe that there needs to be
greater clarity and consistency with regard to how key terms in the RFA are
defined and implemented. Such clarity and consistency becomes even more
important when RFA determinations serve as the trigger for requirements such
as section 212. The requirement in S. 849 directing the SBA Chief Counsel
for Advocacy to promulgate a rule to define the terms "significant economic
impact" and "substantial number of small entities" can go a long way toward
defining what rules require a FRFA and, therefore, require a small entity
compliance guide. Although a single, rigid definition may not be feasible
for all agencies or even all rulemaking within a single agency, the rule
could establish some reasonable parameters and provide useful examples of
what types of regulatory effects should and should not be considered
"significant" and how broadly those effects must be felt to be considered
affecting a "substantial" number of small entities.
We also believe that changes are needed with regard to the requirements in
section 212. For example, to address the question of whether an agency must
prepare a compliance guide when it prepares a voluntary FRFA, section 212
could be amended to require a guide whenever the agency does not certify the
rule under section 605(b) of title 5, United States Code. Doing so would
exclude rules for which a FRFA was prepared (either voluntary or otherwise)
but that the agency ultimately certified as not having a significant impact
on small entities.
Section 212 could also be clarified regarding its applicability to rules
that have no compliance requirements. Some of the rules that agencies issue
have no compliance requirements but require a compliance guide because they
have a significant impact on small entities and require a FRFA. We do not
believe that agencies should be required to prepare compliance guides for
these types of rules. Therefore, the language in section 212 could be
changed to limit its application to rules that agencies do not certify under
subsection 605(b) of title 5 and that have compliance requirements
applicable to small entities.
We also believe that Congress can strengthen the implementation of section
212 by clarifying other key terms in the statute, either by directly
amending the statute or by directing some other entity to provide such
clarity. For example:
* Section 212 currently says that agencies must "designate" the publications
prepared under the section as small entity compliance guides. However, the
form in which those designations should occur is not clear. If Congress
wants agencies to make "small entity compliance guides" part of these
publications' titles, Congress could change the word "designate" in the
statute to "entitle." Consistent use of this phrase in the title could make
it easier for small entities to locate the guides that the agencies develop.
On the other hand, if Congress envisions another meaning to the term
"designate," it could direct some other entity to clarify the issue.
* Section 212 currently says agencies "shall publish" the guides, but does
not indicate where they should be published. At least one agency has
published the guides as part of the preamble to the subject rule, thereby
requiring affected small entities to read the Federal Register to obtain the
guides. If Congress does not want agencies to publish the guides in this
manner, it could require publication in some venue separate from the rule.
Although publication on the agencies' web sites has certain advantages,
other more proactive forms of publication could also be permitted and
encouraged (e.g., sending the guides out to affected parties).
* Section 212 also does not indicate when the compliance guides should be
published-before the related final rule is published, coincident with the
publication of the rule, or even before the rule takes effect. We do not
believe that compliance guides should be published prior to the publication
of a final rule, as changes to rules are sometimes made at the last minute.
Neither do we believe that agencies should wait to publish compliance guides
until the compliance requirements for their final rules take effect.
Agencies could be instructed to publish the compliance guides
coincident with or as soon as possible after the final rule is published,
provided that the guides must be published no later than the effective date
of the rule's compliance requirements.
* If Congress decides to limit the applicability of section 212 to
uncertified
Agency Comments
and Our Evaluation
rules with compliance requirements applicable to small entities, Congress
could also clarify what is meant by the term "compliance requirements." Part
of this clarification could include delineation of how relatively
straightforward compliance requirements should be treated. For example, if
an NMFS rule simply bans fishing within a particular geographic area, should
the agency prepare a compliance guide? If so, the guide could be very short,
essentially taking the form of a public notice.
Therefore, if Congress wishes to clarify and strengthen the implementation
of section 212 of SBREFA, we recommend that Congress consider amending the
language in section 212 to limit its application to rules that the agencies
did not certify under subsection 605(b) of title 5 and that contain
compliance requirements applicable to small entities. We also recommend that
Congress clarify, or give the responsibility and authority to some other
entity to clarify, key terms in the section such as "designate," "publish,"
and, if the previous recommendation is accepted, "compliance requirements."
On November 13, 2001, we sent a draft of this report to the Secretaries of
Commerce and Health and Human Services, the Chairmen of the FCC and the SEC,
and the Administrator of EPA for their review and comment. EPA officials
told us that they had no comments on the report. In a letter dated December
7, 2001, the Secretary of Commerce said that the Department had no
substantive comments on the report.
On November 30, 2001, the Managing Director of the FCC provided us with
written comments on the draft report, which are reproduced in appendix I.
The Managing Director said that "in our view, the FCC has met the goals of
section 212," and the agency "goes beyond the requirements of section 212 in
offering guidance to small entities." He said that the FCC has long issued
guidance on its rules to ensure that all entities understand what is
required of them, and noted the agency's use of its web site and other
mechanisms to distribute guidance materials. However, the Managing
Director's comments did not directly address any of the draft report's
findings regarding the FCC's implementation of section 212 or the report's
conclusions or recommendations. Also, it is not clear how the Managing
Director can contend that FCC "goes beyond the requirements of section
212" when none of the more than 200 guidance documents that the agency
provided for 70 of its covered rules met all of the requirements in section
212.
On November 30, 2001, the General Counsel of the SEC provided us with
written comments on the draft report, which are reproduced in appendix
II. The General Counsel first identified several SEC small business
initiatives, and then addressed the draft report's conclusions and
recommendations. He said that they were pleased with the draft report's
conclusion that the preparation of a FRFA may not be the most accurate
trigger for determining when an agency should prepare a SBREFA compliance
guide, noting that no inference can be drawn about a rule's impact on small
entities simply because an agency prepared a FRFA. The SEC General Counsel
also said that they "do not necessarily disagree" with the report's
conclusion that SBREFA may warrant clarification. Nevertheless, he said that
agencies should retain flexibility and discretion on how best to formulate
small entity guidance and on when to issue guidance. For example, he noted
that some rules raise implementation issues only after they go into effect,
so an agency should have discretion with regard to the timing of its SBREFA
guidance. However, as we said in the draft report, we believe that agencies
should not wait to publish compliance guides until after the compliance
requirements for their final rules take effect. If agencies were required to
publish the guides coincident with the publication of the final rule,
nothing would prevent the agency from issuing subsequent guidance in the
event that questions arise during implementation.
In a letter dated December 7, 2001, the Inspector General of HHS transmitted
the Department's comments on the draft report, which are reproduced in
appendix III. In those comments, the Department thanked us for pointing out
its inconsistent application of the FRFA requirements in the RFA and
acknowledged that CMS does not publish the small entity compliance guides
required by section 212. Nevertheless, the Department suggested "that it
would be of more value to assess the efforts and actions of the Federal
agencies included in GAO's study to...develop more accessible sources of
information on regulatory and reporting requirements for small businesses."
The Department also said that it would be "more beneficial and useful to
assess the small entity community's awareness of, reaction to, and
assessment of information that CMS makes available to them." The Department
described a number of CMS efforts to apprise regulated entities of their
responsibilities, and said it "believes these efforts go well beyond the
simple publication of a compliance guide." However, as requested, our
objectives were to (1)
determine whether the agencies have published small entity compliance guides
for each covered rule published in selected years, and (2) describe how the
agencies developed the guides and made them available to small entities
affected by the rules. Therefore, the Department's suggestions are beyond
the scope of our review.
The Department also said that it believes that FDA is using appropriate
definitions of the terms "significant" and "substantial" as triggers for
section 212, and that it would be difficult to develop definitions that work
for different agencies with vastly different types of rulemaking. We did not
indicate in our draft report that FDA was using inappropriate definitions of
those terms. We did say that, although a single, rigid definition for these
terms may not be feasible for all agencies or all rulemaking, a definition
could establish some reasonable parameters that the agencies could use. In
the absence of those parameters, agencies can conclude that rules that
impose thousands of dollars in compliance costs on thousands of small
entities do not represent a "significant" economic impact on a "substantial"
number of small entities, thereby avoiding the requirements in the RFA and
SBREFA.
Finally, pursuant to a suggestion from the Department, we changed the draft
report to note that a statement that FDA's compliance guides should "be
available at the time of the publication of the final rule" was contained in
a "checklist" developed at the time SBREFA was passed, not in the agency's
official, one-page "guidance document." However, we did not accept the
Department's suggestion that we eliminate other portions of the draft report
indicating that FDA did not publish any of its covered rules by the dates
the rules were published, and that the publication dates for two guides were
accelerated because of our review. In its comments on the draft, the
Department agreed that congressional clarification of section 212 might be
useful with regard to when the compliance guides should be published.
As arranged with your office, unless you publicly announce the contents of
this report earlier, we plan no further distribution until 30 days after the
date of this report. At that time, we will send copies of this report to the
Chairman, Senate Committee on Small Business; the Chairman and Ranking
Minority Member, House Committee on Small Business; the Secretaries of
Commerce and Health and Human Services; the Administrator of EPA; and the
Chairmen of the FCC and the SEC. We will also make copies available to
others on request.
If you have any questions concerning this report, please call me or Curtis
Copeland at (202) 512-6806. Key contributors to this assignment were John
Tavares and Matthew Ebert.
Sincerely,
Victor S. Rezendes
Managing Director, Strategic Issues
Page 41 GAO-02-172 Small Entity Compliance Guide Requirements
Page 42 GAO-02-172 Small Entity Compliance Guide Requirements
Appendix II: Comments From the Securities and Exchange Commission
Appendix II: Comments From the Securities and Exchange Commission
Appendix II: Comments From the Securities and Exchange Commission
Appendix III: Comments From the Department of Health and Human Services
Appendix III: Comments From the Department of Health and Human Services
Appendix III: Comments From the Department of Health and Human Services
Appendix III: Comments From the Department of Health and Human Services
Appendix III: Comments From the Department of Health and Human Services
Appendix III: Comments From the Department of Health and Human Services
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