Paperwork Reduction Act: Agencies report Slight Decreases in	 
Burden Estimates and Violations (20-APR-04, GAO-04-676T).	 
                                                                 
The Paperwork Reduction Act (PRA) requires federal agencies to	 
minimize the paperwork burden they impose on the public. The act 
also requires agencies to obtain approval from the Office of	 
Management and Budget (OMB) before collecting covered		 
information. At Congress's request, GAO examined changes during  
the past fiscal year in federal agencies' paperwork burden	 
estimates and their causes, focusing on the Internal Revenue	 
Service (IRS). GAO also examined changes in the number of	 
violations of the PRA.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-676T					        
    ACCNO:   A09823						        
  TITLE:     Paperwork Reduction Act: Agencies report Slight Decreases
in Burden Estimates and Violations				 
     DATE:   04/20/2004 
  SUBJECT:   Federal regulations				 
	     Internal controls					 
	     Performance measures				 
	     Work measurement					 
	     Government paperwork				 

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GAO-04-676T

United States General Accounting Office

GAO Testimony

Before the Subcommittee on Energy Policy, Natural Resources and Regulatory
Affairs, Committee on Government Reform, House of Representatives

For Release on Delivery Expected at 2:00 p.m. EDT Tuesday, April 20, 2004

PAPERWORK REDUCTION ACT

Agencies' Paperwork Burden Estimates Due to Federal Actions Continue to Increase

Statement of Patricia A. Dalton, Director Strategic Issues

                                       A

GAO-04-676T

Highlights of GAO-04-676T, a testimony before the Subcommittee on Energy
Policy, Natural Resources and Regulatory Affairs, Committee on Government
Reform, House of Representatives

The Paperwork Reduction Act (PRA) requires federal agencies to minimize
the paperwork burden they impose on the public. The act also requires
agencies to obtain approval from the Office of Management and Budget (OMB)
before collecting covered information. At the Subcommittee's request, GAO
examined changes during the past fiscal year in federal agencies'
paperwork burden estimates and their causes, focusing on the Internal
Revenue Service (IRS). GAO also examined changes in the number of
violations of the PRA.

GAO is not making any recommendations. However, because IRS accounts for
most of the federal paperwork and therefore has a determining impact on
the governmentwide burdenhour estimate, OMB could focus more of its burden
reduction efforts on that agency. Also, OMB and the agencies could do more
to reduce violations. For example, OMB could promote the use of "best
practices" used in agencies with good compliance records.

April 20, 2004

PAPERWORK REDUCTION ACT

Agencies' Paperwork Burden Estimates Due to Federal Actions Continue to Increase

As of September 30, 2003, federal agencies estimated that there was about
8.1 billion "burden hours" of paperwork governmentwide. While it may
appear that the paperwork burden decreased by about 116 million burden
hours from last year, it is important to note that most of the reduction
was achieved through adjustments-actions occurring outside of the
agencies' control or as a result of reestimates of current paperwork
requirements- and not through agency-initiated actions. In fact, the total
paperwork burden, exclusive of adjustments, actually increased by about 72
million burden hours. IRS alone accounted for about 6.5 billion burden
hours (81 percent) of the governmentwide burden-hour estimate as well as
for most of the burden-hour reduction attributable to adjustments.

OMB and the federal agencies identified 223 violations of the PRA that
occurred during fiscal year 2003-a slight reduction in the number of
violations that were reported last year, but still progress from fiscal
year 1998, when there were over 850 violations. OMB continues to take
several actions to address PRA violations since last year's hearing.
Still, 223 violations of the law during a single year continue to be
troubling and should not be tolerated. OMB and the agencies can do more to
ensure that the PRA is not violated.

IRS Accounted for Most of the Federal Paperwork Burden-Hour Estimate as of
September 30, 2003

www.gao.gov/cgi-bin/getrpt?GAO-04-676T.

To view the full product, including the scope and methodology, click on
the link above. For more information, contact Patricia A. Dalton at (202)
512-6806 or [email protected].

Mr. Chairman and Members of the Subcommittee:

I am pleased to be here today to discuss the implementation of the
Paperwork Reduction Act (PRA) of 1995, as amended. As you requested, I
will discuss changes in the estimated federal paperwork burden during the
past year, with a particular focus on the Internal Revenue Service (IRS).
I will also revisit an issue that we have discussed during previous
hearings before this Subcommittee-violations of the PRA in which either
information collections were not authorized by the Office of Management
and Budget (OMB) or those authorizations had expired.

In brief, federal agencies' estimate of federal paperwork at the end of
fiscal year 2003 stood at about 8.1 billion burden hours. While it may
appear that the overall paperwork burden decreased by about 116 million
burden hours from last year, the estimate does not tell the complete
story. First, the agencies' estimates are not precise and the changes from
year to year may not be meaningful. It is equally important to understand
how this reduction took place. Most of this reduction was achieved through
adjustments- caused by factors such as changes in the population
responding to a requirement or agency reestimates of the burden associated
with a collection of information compared to previous paperwork
estimates-and not through agency actions. In fact, the total paperwork
burden, exclusive of adjustments, actually increased by about 72 million
burden hours to about 8.3 billion burden hours. Most of the burden-hour
reduction due to adjustments could be attributed to IRS. IRS alone reduced
its paperwork burden by 166.7 million burden hours due to adjustments. For
example, one IRS information collection resulted in a reduction of 127
million burden hours, of which over 93 million burden hours were reduced
as a result of adjustments to the agency's burden-hour estimate for Form
1120 which is for U.S. corporations reporting income taxes.

Also, our review of OMB's and federal agencies' information collection
budgets (ICB) identified 223 violations of the PRA that occurred during
fiscal year 2003-only a slight reduction in the number of violations that
were reported last year, but still progress from the more than 850
violations reported during fiscal year 1998. OMB deserves credit for the
reductions that have occurred in the past year. However, the existence of
223 violations of the law during fiscal year 2003 continues to be
troubling and should not be tolerated. We continue to believe that OMB and
the agencies can do more to ensure that the PRA is not violated.

Background	Before discussing these issues in detail, it is important to
recognize that a large portion of federal paperwork is necessary and most
often serves a useful purpose. Information collection is one way that
agencies carry out their missions. For example, IRS needs to collect
information from taxpayers and their employers to know the correct amount
of taxes owed. The U.S. Census Bureau collected information that was used
to reapportion congressional representation and is being used for a myriad
of other purposes. On several occasions, we have recommended that agencies
collect certain data to improve operations and evaluate their
effectiveness.1

However, under the PRA, federal agencies are required to minimize the
paperwork burden they impose. The original PRA of 1980 established the
Office of Information and Regulatory Affairs (OIRA) within OMB to provide
central agency leadership and oversight of governmentwide efforts to
reduce unnecessary paperwork and improve the management of information
resources. In September 2003, the administration introduced its six-point
plan for the economy that was labeled "a full agenda for the creation of
jobs in America." One of the six points is the streamlining of regulations
and reporting requirements. This is seen by the administration as a
critical part of creating jobs and is reiterated in the President's 2005
budget.

OIRA also has overall responsibility for determining whether agencies'
proposals for collecting information comply with the PRA.2 Agencies must
receive OIRA approval for each information collection request before it is
implemented. Section 3514(a) of the PRA requires OIRA to keep Congress
"fully and currently informed" of the major activities under the act, and
to submit a report to Congress at least annually on those activities. The
report must include, among other things, a list of all PRA violations and
a list of any increases in burden. To satisfy this reporting requirement,
OIRA

1See U.S. General Accounting Office, Veterans' Health Care: VA Needs
Better Data on Extent and Causes of Waiting Times, GAO/HEHS-00-90
(Washington, D.C.: May 31, 2000); Public Housing: HUD Needs Better
Information on Housing Agencies' Management Performance, GAO-01-94
(Washington, D.C.: Nov. 9, 2000); and Environmental Information: EPA Needs
Better Information to Manage Risks and Measure Results, GAO01-97T
(Washington, D.C:, Oct. 3, 2000).

2The act requires the director of OMB to delegate the authority to
administer all functions under the act to the administrator of OIRA, but
does not relieve the OMB director of responsibility for the administration
of those functions. Approvals are made on behalf of the OMB director. In
this testimony, we generally refer to OIRA or the OIRA administrator
wherever the act assigns responsibilities to OMB or the director.

develops a governmentwide ICB by gathering data from executive branch
agencies. In December 2003, the OMB Director sent a bulletin to the heads
of executive departments and agencies requesting information to be used in
preparation for the fiscal year 2004 ICB (reporting on actions during
fiscal year 2003).

OIRA published its ICB for fiscal year 2003 (showing changes in agencies'
burden-hour estimates during fiscal year 2002) in April 2003. OIRA
officials told us that they did not expect to publish the ICB for fiscal
year 2004 until today's hearing. Therefore, we obtained unpublished data
from OIRA to identify changes in governmentwide and agency-specific
burden-hour estimates and PRA violations during fiscal year 2003. We then
compared the data to agencies' burden-hour estimates and violations in
previous ICBs to determine the changes in the data over time.

"Burden hours" has been the principal unit of paperwork burden for more
than 50 years and has been accepted by agencies and the public because it
is a clear, easy-to-understand concept. However, it is important to
recognize that these estimates have limitations. Estimating the amount of
time it will take for an individual to collect and provide the information
or how many individuals an information collection will affect is not a
simple matter.3 Therefore, the degree to which agency burden-hour
estimates reflect real burden is unclear. IRS-which accounts for about 80
percent of the governmentwide burden-is sufficiently concerned about the
methodology it uses to develop burden estimates that it is in the process
of developing and testing alternative means of measuring its paperwork
burden. Nevertheless, these are the best indicators of paperwork burden
available, and we believe they can be useful as long as their limitations
are kept in mind.

Scope and	In conducting our review, we obtained from OIRA the individual
agencies' submissions to the ICB. These submissions contain the
agency-reported

Methodology	changes to the individual paperwork inventories, as well as
those violations of the PRA they identified as having occurred during
fiscal year 2003. We assessed the data reliability of the individual
agencies' burden-hour estimates and violations by (1) performing
electronic testing for obvious

3See U.S. General Accounting Office, EPA Paperwork: Burden Estimate
Increasing Despite Reduction Claims, GAO/GGD-00-59 (Washington, D.C.: Mar.
16, 2000), for how one agency estimates paperwork burden.

errors in accuracy and completeness, (2) reviewing relevant documents such
as OMB guidance in reporting burden-hour estimates and violations and the
dockets for selected information collections, and (3) interviewing
knowledgeable OMB officials. We determined that the data were sufficiently
reliable for the purpose of this statement. We conducted our review from
February through April 2004 in accordance with generally accepted
government auditing standards.

  Small Decrease in the Governmentwide Paperwork Burden Reported for 2003, but
  Burden Due to Federal Actions Increases

At the end of fiscal year 1995-just before the PRA of 1995 took effect-
federal agencies estimated that their information collections imposed
about 7 billion burden hours on the public. The amendment and
recodification of the PRA that year made several changes in federal
paperwork reduction requirements. One such change required OIRA to set a
goal of at least a 10 percent reduction in the governmentwide burdenhour
estimate for each of fiscal years 1996 and 1997, a 5 percent
governmentwide burden reduction goal in each of the next 4 fiscal years,
and annual agency goals that reduce burden to the "maximum practicable
opportunity." Therefore, if federal agencies had been able to meet each of
these goals, the 7 billion burden-hour estimate in 1995 would have
decreased about 35 percent to about 4.6 billion hours by September 30,
2001.

However, this reduction in paperwork burden did not occur. As of September
30, 2001, the target date in the act, the federal paperwork estimate had
increased by about 9 percent to 7.6 billion burden hours. Last year we
reported that the federal paperwork estimate stood at 8.2 billion hours as
of September 30, 2002. The increase from the previous year (about 570
million burden hours) was the largest 1-year increase since the act was
recodified in 1995.

This year, the story, while on the surface may appear encouraging, is not.
The data we obtained from OIRA indicate that the governmentwide paperwork
estimate as of September 30, 2003, stood at 8.1 billion burden hours.
First, this is about 1.1 billion burden hours larger than it was when the
PRA took effect in 1995. In addition, while it appears that there was a
drop of about 116 million burden hours from the previous year, were it not
for adjustments to the burden estimate, the federal government actually
experienced an increase of about 72 million burden hours in paperwork
burden. However, even at 8.1 billion burden hours, the governmentwide
paperwork estimate is 3.5 billion burden hours higher than the act's
target estimate at the end of September 30, 2001.

The overall burden-hour estimate does not tell the complete story however.
First, the agencies' estimates are not precise and the changes from year
to year may not be meaningful. It is equally important to understand how
the reduction took place. As table 1 shows, were it not for the
burden-hour reduction of about 182 million due to adjustments, there was
an increase in the paperwork burden of 72 million burden-hours. Table 1
also shows that only a few agencies' paperwork estimates changed
substantially during fiscal year 2003. The Department of Homeland Security
(DHS) was created during fiscal year 2003 and by the end of the fiscal
year had an estimated 78.2 million burden hours of paperwork. Most of the
DHS paperwork burden was the result of requirements associated with the
paperwork inventories that were combined in establishing DHS.4 Three
departments-Defense, Labor, and the Treasury-exhibited substantial
decreases in their estimated burdens, with Treasury's decrease far
outstripping the others. However, much of the Treasury's burden-hour
reduction was due to adjustments.

  Table 1: Reported Changes in Federal Agencies' Burden-Hour Estimates during
                                Fiscal Year 2003

                            Burden hours in millions

                                Program changes

                FY 2002      New   Lapses Agency                     Total  FY 2003 
                                       in                                  
               estimate statutes OMB      action Total Adjustments change  estimate 
                                 approval                                  
Governmentwide  8,221.7    122.3   (53.8)    3.6  72.1     (181.7) (116.3)  8,105.4 
 Non-Treasury   1,471.8                                               44.8  1,516.6 

Departments

          Agriculture        88.6  0.7 (0.1)    9.7  10.3  (1.5)  8.8    97.4 
           Commerce          11.7  0.0      -   4.6  4.6     1.0  5.6    17.3 
            Defense          92.4   -  (54.7)  12.1 (42.6)   0.0 (42.6)  49.8 
           Education         38.4  2.8    0.0   0.6  3.4   (1.3)  2.1    40.5 
            Energy            3.8  0.1 (0.1)  (0.4) (0.4)    0.0 (0.4)  
Health and Human Services 224.8 4.1    3.7 (5.3)  2.5   26.4   28.9  253.7 

4For example, 10 information collections were contained within the
Immigration and Naturalization Service (INS) inventory. When the President
signed the Homeland Security Act of 2002 that transferred INS into the
newly established DHS, these information collections became part of the
new department's burden-hour estimate. These 10 information collections
accounted for almost 31 million burden hours-about 38 percent of the
department's paperwork burden.

(Continued From Previous Page)

Burden hours in millions

                                Program changes

                FY 2002      New   Lapses Agency                     Total  FY 2003 
                                       in                                  
               estimate statutes OMB      action Total Adjustments change  estimate 
                                 approval                                  
Homeland           -    (0.5)    (2.0)   37.5  35.1        43.0    78.2     78.2 
Security                                                                
 Housing and                                                               
    Urban                                                                  
 Development       21.9      0.0      1.0  (0.1)   0.9         2.9     3.8     25.7 
Interior         7.7      0.0      0.0  (0.1) (0.1)       (0.1)   (0.2) 
Justice         46.6      0.7    (0.1)    0.1   0.1      (32.0)  (31.2)     15.3 
    Labor         189.2      0.2        -  (0.1)   0.1      (29.8)  (29.7)    159.5 
    State          29.2        -      0.0    0.3   0.3       (0.1)     0.2     29.4 
Transportation    244.7      2.9    (1.4)    4.9   6.4       (1.5)     4.9    249.6 
Treasury     6,750.4    105.4        - (70.0)  35.4     (197.0) (161.6)  6,588.8 
Veterans         7.4      0.1        -          0.0           -     0.0 
Affairs                                 (0.1)                           

Agencies

        Environmental                                                   
      Protection Agency    140.5  2.7       -    7.4  10.1  (1.8)  8.3  148.3 
     Federal Acquisition                                                
         Regulations        24.5   -        - (0.8)  (0.8)    6.9  6.1   30.6 
Federal Communications                                               
         Commission         26.8  0.1  (0.2)     1.1  1.0   (1.1) (0.1)  26.7 
       Federal Deposit                                                  
    Insurance Corporation     9.9  -        -    0.0  0.0     0.1  0.1   10.0 
       Federal Energy                                                   
    Regulatory Commission     4.4  -      0.0    0.0   -        -     - 

      Federal Trade Commission    69.7  0.5   -   0.7  1.2  (4.0) (2.8)  66.9 
      National Aeronautics and                                          
        Space Administration       6.0   -    - (0.2) (0.2)   0.0 (0.2)   5.8 
    National Science Foundation    4.5   -    -     -   -     0.0  0.0    4.5 
         Nuclear Regulatory                                             
             Commission            8.3   -    -   0.0  0.0    0.5  0.5    8.8 
      Securities and Exchange                                           
             Commission           136.6 0.7   -   0.9  1.6    7.1  8.7  145.3 
Small Business Administration   2.8   -  0.0     -  0.0    0.0  0.0    2.8 
Social Security Administration 24.9  2.0   -   0.8  2.8    0.6  3.4   28.3 

Sources: OMB and agencies' ICB submissions.

Note: The General Services Administration submitted data on the Federal
Acquisition Regulatory Council. Data from the 27 departments and agencies
may not equal the governmentwide figure because smaller agencies'
requirements are also included. Cells with "0.0" values were nonzero
values rounded to zero. Cells with "-" entries were zero values. Addition
of individual elements may not equal totals due to rounding.

It is important to understand how the agencies accomplish these results.
OIRA classifies modifications-either increases or decreases-in agencies'
burden-hour estimates as either "program changes" or "adjustments."

o 	Program changes are the result of deliberate federal government action
(e.g., the addition or deletion of questions on a form) and can occur as a
result of new statutory requirements or agency-initiated actions or
through the expiration or reinstatement of OIRA-approved collections.

o 	Adjustments are not the result of direct federal government action but
rather are caused by factors such as changes in the population responding
to a requirement or agency reestimates of the burden associated with a
collection of information. For example, if the economy declines and more
people complete applications for food stamps, the resulting increase in
the Department of Agriculture's paperwork estimate is considered an
adjustment because it is not the result of deliberate federal action.

The agencies' ICB submissions identified what drove the changes in the
agencies' bottom-line burden-hour estimates during fiscal year 2003. Some
of the changes in the agencies' burden-hour estimates are the results of
legislative actions and are partially outside the agencies' control.
However, much of the burden-hour decrease experienced during fiscal year
2003 was driven by agencies' adjustments to their inventories of paperwork
requirements and not through agency-initiated actions. As table 2 shows,
the number of burden hours attributable to program changes has increased
every fiscal year from 1998 to 2002. During fiscal year 2003 the total
paperwork burden, exclusive of adjustments, increased again by about 72
million burden hours.

Table 2: Increases in Burden Hours due to Program Changes Between Fiscal
Years 1998 and 2003

In millions

Fiscal year

Total governmentwide burden-hour estimate

                 Number of burden hours due to program changes

                         2003         8,105.4                            72.1 
                         2002         8,223.2                           294.1 
                         2001         7,651.4                           158.7 
                         2000         7,361.0                           188.0 

                         (Continued From Previous Page)

                                  In millions

                              Total governmentwide     Number of burden hours 
             Fiscal year      burden-hour estimate     due to program changes 
                    1999                   7,183.9                      189.0 
                    1998                   6,951.1 

                        Sources: OMB and agencies' ICBs.

IRS Burden-Hour Estimates Greatly Influence the Governmentwide Paperwork
Estimate

We have previously reported that the increases in paperwork burden
experienced by the federal government were largely attributable to the
increases in IRS paperwork. For example, last year, when the government
reported an increase of 570 million burden hours, IRS accounted for almost
60 percent (about 330 million burden hours) of the reported increase. For
fiscal year 2003, the decrease in the governmentwide paperwork burden is
also attributable to changes in IRS paperwork that resulted in a decrease
in burden. IRS reported a decrease of 131.4 million burden hours that was
more than enough to offset the increases experienced by the other federal
agencies. Therefore, although all agencies must ensure that their
information collections impose the least amount of burden possible, it is
clear that the key to controlling federal paperwork governmentwide lies in
understanding the influence of increases and decreases at IRS.

As of September 30, 2003, IRS accounted for about 99 percent of the
Department of the Treasury's burden-hour estimate-nearly 6,539.7 billion
burden hours. In fact, as figure 1 shows, IRS accounted for about 81
percent of the governmentwide burden-hour estimate (up from about 75
percent in September 1995). Other agencies with burden-hour estimates of
100 million hours or more as of that date were the Departments of Health
and Human Services (HHS), Labor (DOL), and Transportation (DOT), the
Environmental Protection Agency (EPA); and the Securities and Exchange
Commission. Still, because IRS constitutes such a significant portion of
the governmentwide burden-hour estimate, changes in IRS's estimate can
have a significant-and even determinative-effect on the governmentwide
estimate.

Figure 1: IRS Accounted for Most of the Federal Paperwork Burden-Hour
Estimate as of September 30, 2003

HHS

DOT

DOL

EPA

Other

Note: The governmentwide burden-hour estimate as of September 30, 2003,
was about 8.1 billion burden hours.

Treasury's ICB submission indicated that the decrease in the department's
estimate during fiscal year 2003 (about 162 million burden hours) was
largely achieved through adjustments. Decreases of 70 million burden hours
due to agency actions and 190 million burden hours due to adjustments were
reported, while there was an increase of 105 million burden hours due to
statutory requirements. According to the ICB submission, this adjustment
was largely driven by adjustments associated with the Forms 1040 and 1040A
that are used by individual taxpayers to report their taxable incomes, and
Form 1120, which is used by corporations to compute their taxable income
and tax liability.

During fiscal year 2003, IRS's paperwork burden decreased by about 70
million burden hours due to agency actions. As table 3 shows, five
information collections resulted in a reduction of about 64 million burden
hours as a result of implementing burden reduction initiatives developed
in previous fiscal years. Another 17 million burden-hour reduction was
achieved as a result of IRS changing paperwork requirements not directed
by a burden reduction initiative. However, four of these information
collections resulted in a burden-hour decrease of over 190 million hours
due to adjustments to the collections. Since OMB does not require agencies
to report on the reasons for changes in paperwork burden due to
adjustments in their ICB submissions, we are unable to identify the

                                                                    3.1%      
                                                                    3.1%      
                                                                    2.0%      
                                                                    1.8%      
                                                                    9.3%      

underlying factors that resulted in these decreases in IRS paperwork
burden.

 Table 3: IRS Information Collections with Burden-Hour Reductions of 500,000 or
                           More Due to Agency Actions

OMB Due to Due to
control statutory agency Due to
number Title changes actions adjustments Reason(s) for decrease

              2003 Form                                              IRS made 
1545-0074  1040 and   +15,974,817 -9,875,098 -87,978,659 changes-deletions 
                                                             of lines--to the 
             Schedules,                                     Form 1040 and its 
                U.S.                                         instructions and 
                                                                   schedules. 
             Individual                                        (9,664,549)    
             Income Tax                                     
               Returns                                      
                                                            The number of new 
                                                             filers for Form  
                                                                 1040-V       
                                                            should have been  
                                                            an adjustment     
                                                            instead of a      
                                                             program change.  
                                                                (210,549)     

2003 Form 1040, U.S.  +2,840,101 -15,616,147         As part of the Burden 
                                                   Reduction Initiatives, the 
Individual Income Tax                           Department of the Treasury 
                                                          decided to increase 
          Returns                                    the threshold for filing 
                                                       Schedule B (Form 1040) 
                                                to $1,500. As a result, this  
                                                         changed the          
                                                      number of filers.       
                                                        (15,616,147)          

1545-0085  2002 Form 1040A  +4,219,190 -992,751      IRS removed two check 
                    and                                   boxes on the Social 
              Schedules, U.S.                          Benefits Worksheet for 
                                                    clarification purposes to 
             Individual Income                      reduce burden and provide 
                                                             consistency with 
                  Returns                              various products.      
                                                           (992,721)          

2002 Form 1040 A and  -1,612,553           As part of the Burden Reduction 
                                                             Initiatives, the 
      Schedules, U.S.                   Department of the Treasury decided to 
                                                                     increase 
Individual Income Tax            the threshold for filing Schedule 1 (Form 
          Returns                    1040A) from $400 to $1,500. As a result, 
                                                                         this 
                                    changed the number of filers. (1,612,553) 

1545-0092 U.S. Income Tax 2,272,477 -1,492,190 IRS deleted lines from the  
                 Return                                   Schedule D          
             for Estates and                      worksheet and from Schedule 
                 Trusts                                      I that offset an 
                                                    increase from added lines 
                                                               to Schedule D. 
                                                          (1,492,190)         

                                                               As part of the 
                                                                       Burden 
1545-0123 Form 1120 and -4,439,447 -29,316,584 -93,263,395       Reduction 
                                                                 Initiatives, 
                                                                          the 
              Schedules,                                       Department of  
                 U.S.                                          the Treasury   
                                                               decided that   
                                                              corporations    
             Corporation                                      with total      
             Income Tax                                       receipts and    
                                                              assets of       
                                                                 less than    
                Return                                         $250,000 are   
                                                              not required to 
                                                                 complete     
                                                               Schedules L,   
                                                               M-1, and M-2.  
                                                               (26,211,719)   
                                                                IRS also made 
                                                                      changes 
                                                              throughout Form 
                                                                        1120, 
                                                              schedules, and  
                                                               instructions.  
                                                                (3,104,865)   

1545-0130  2002 Form 1120S and   -14,262,930         As part of the Burden 
                                                   Reduction Initiatives, the 
             Schedules, U.S. Income              Department of the Treasury   
                                                        decided that          
              Tax Returns for an S                    corporations with total 
                                                       receipts and assets of 
                  Corporation                    less than $250,000 are not   
                                                         required to          
                                                complete Schedules L and M-1. 
                                                                 (14,262,930) 

(Continued From Previous Page)

      OMB                        Due to   Due to             
    control                  statutory    agency      Due to 
    number        Title       changes    actions adjustments  Reason(s) for   
                                                                 decrease     
                                                                  IRS deleted 
1545-0130 2002 Form 1120S                                 Schedule D (Part 
                   and                                            III-Capital 
                             +5,035,690 -585,430                        Gains 
             Schedules, U.S.                                 Tax) because it  
             Income                                           was no longer   
                                                               relevant and   
             Tax Returns for                                  added one line  
                  an S                                        to Schedule B.  
                                                                (585,430)     
               Corporation                                   

               2002 Form                                       As part of the 
1545-0890 1120-A, U.S.  -427,645 -2,950,743 -11,045,000   Burden Reduction 
                                                             Initiatives, the 
              Corporation                                  Department of the  
              Short-Form                                    Treasury decided  
                                                                  that        
              Income Tax                                   corporations with  
                Return                                     total receipts and 
                                                           assets of          
                                                           less than $250,000 
                                                            are not required  
                                                                   to         
                                                           complete Parts III 
                                                                and IV.       
                                                              (2,576,794)     
                                                            IRS also deleted  
                                                             lines from the   
                                                                form and      
                                                             deleted a form   
                                                              attachment.     
                                                               (373,949)      

1545-0975 2002 Form 1120-W and -549,735   IRS deleted 3 code references to 
                                                                   Form 1120- 
             Schedules, Estimated                     W. (549,000)            
             Tax for Corporations          
                                           IRS deleted a line to Schedule A.  
                                                         (735)                

1545-1696 Political Organization 37,600 -408,400 In its ICB submission,    
                                                    the Department of the     
                   Report of                           Treasury originally    
                 Contributions                       reported this as a net   
                and Expenditures                      reduction of 370,800    
                                                       burden hours due to    
                                                    agency action. Our review 
                                                    of the information        
                                                           collection request 
                                                            submission to OMB 
                                                                    indicates 
                                                    that the majority of the  
                                                    reduction should have     
                                                      been classified as an   
                                                      adjustment since IRS    
                                                    said it was correcting a  
                                                         previous burden      
                                                          computation.        

1545-1722	Extraterritorial Income -520,000 IRS deleted 3 lines from the
form. (520,000) Inclusion, Form 8873

Sources: OMB and the Department of the Treasury.

While IRS achieved paperwork burden decreases through agency actions and
adjustments, it experienced a paperwork burden increase of about 105
million burden hours due to statutory requirements. According to
Treasury's ICB, the implementation of the Jobs and Growth Tax Relief
Reconciliation Act of 2003 resulted in an increase in IRS's paperwork
burden of about 55 million burden hours-about 51 percent of the IRS's
total increase due to statutory requirements.5 The ICB indicates another
24 million burden-hour increase was due to changes to sections of the
Internal

5Pub. L. No. 108-27.

Revenue Code.6 Another 17 million burden-hour increase resulted from
implementation of the Community Renewal Tax Relief Act of 2000.

Furthermore, IRS is responsible for over 80 percent of the governmentwide
information collection burden; therefore, its paperwork estimate is often
the driver of increases or decreases in the governmentwide burden
estimate. Without the 166.7 million burden-hour reduction due to
adjustments reported by IRS, governmentwide paperwork would have increased
during fiscal year 2003.

IRS Continues to Develop Program Initiatives to Reduce Its Burden Estimate

In our previous testimony, we reported that Treasury had indicated in its
ICB that it had taken a number of initiatives to reduce paperwork burden.
In fiscal year 2002, IRS decided to increase the threshold for taxpayers
having to file Schedule B (Form 1040) from $400 to $1,500. Treasury
estimated that more than 10 million fewer taxpayers would have to file the
schedule, about one-third of those who previously had to file. In its
recent ICB submission, Treasury reported that this initiative resulted in
a reduction of about 17.2 million burden hours.

Treasury also indicated in its ICB submission that it had taken additional
initiatives to reduce paperwork burden. For example, it has decided to
require certain employers to submit Form 941 annually, instead of
quarterly, in order to

o  reduce taxpayer burden,

o  maintain current payment compliance levels, and

o  encourage the use of paperless filing.7

Once Treasury, in consultation with other stakeholders (e.g., the Social
Security Administration, the U.S. Census Bureau, and the Small Business
Administration) has identified a group of taxpayers who would be allowed
to provide the required information annually, rather than quarterly, it
would

6According to Treasury's ICB, changes were made to its paperwork inventory
as a result of requirements under sections 403(b), 457(b), 501(c), 679,
and 3406 of the Internal Revenue Code.

7Form 941 is used by employers to report to IRS how much they paid in
employment taxes for their employees.

experience a further reduction in its paperwork burden. However, Treasury
does not expect to implement this annual reporting option until January
2006, and it could not estimate how many burden hours would be reduced as
a result of this action.

                More Needs to Be Done to Reduce Paperwork Burden

In summary, the agencies' information collection estimates for the
governmentwide ICB indicate that federal paperwork experienced its first
reduction since 1996, and that IRS continues to be a determining factor in
whether the federal government experiences a decrease or an increase in
its paperwork burden. While there is a small decrease in the reported
paperwork burden for fiscal year 2003, it is important to note that most
of the reduction was achieved through adjustments to information
collections and not through program changes, including agency actions.
Therefore, this reduction appears to be achieved as a result of external
factors, or as a result of reestimations of current paperwork
requirements. These adjustments are not actual reductions experienced by
the affected parties, rather, they are reestimations of the number of
people or businesses required to provide the information or the time it
takes to complete the form(s) used to collect the information. In some
cases these adjustments may be corrections of mathematical errors.
Exclusive of these adjustments, the paperwork burden actually increased
during fiscal year 2003.

Clearly, there is much that needs to be done to reduce the governmentwide
paperwork burden. Currently, the government's paperwork burden estimate is
nearly double the PRA target estimate for fiscal year 2001 of 4.6 billion
burden hours. In addition, one component of the President's initiative to
promote job growth focuses on reducing regulatory and reporting
requirements. However, paperwork burden reduction goals and the means of
achieving these goals were not articulated in the President's 2005 budget.

Because IRS constitutes such a significant portion of the federal burden,
one strategy to address agency-initiated decreases is to focus more of
OIRA's burden-reduction efforts on IRS. As we reported last year, five IRS
information collections represented nearly half of the governmentwide
paperwork burden estimate. A small reduction in the burden associated with
those five collections could have a major effect on reducing the paperwork
burden governmentwide.

  Agencies Report a Slight Reduction in PRA Violations

I would now like to turn another topic that you asked us to address-PRA
violations. The PRA prohibits an agency from conducting or sponsoring the
collection of information unless (1) the agency has submitted the proposed
collection and other documents to OIRA, (2) OIRA has approved the proposed
collection, and (3) the agency displays an OMB control number on the
collection. The act also requires each agency to establish a process to
ensure that each information collection is in compliance with these
clearance requirements. OIRA is required to submit an annual report to
Congress that includes a list of all violations. Under the PRA, no one can
be penalized for failing to comply with a collection of information
subject to the act if the collection does not display a valid OMB control
number. OIRA may not approve a collection of information for more than 3
years, and there are currently over 8,100 approved collections.

As table 4 shows, the agencies indicated in their ICB submissions that 223
PRA violations occurred during fiscal year 2003 (i.e., were either carried
over from the previous year or were new violations). As in previous years,
most of these violations were collections for which OIRA approvals had
expired and had not been reauthorized. Five cabinet departments were
responsible for 57 percent of the violations-the Departments of
Agriculture, Commerce, Defense, Health and Human Services, and Housing and
Urban Development.

Table 4: Reported Violations of the PRA during Fiscal Year 2003

                               Department/agency

Expired information collections

Other violations

Total violations

                                  Departments

                                  Agriculture     25         7     
                                     Commerce     10         4     
                                      Defense     27         0             27 
                                    Education          2     3              5 
                                       Energy          3     0              3 
                    Health and Human Services     21         2             23 
                            Homeland Security     18         0             18 
                Housing and Urban Development     26         0             26 
                                     Interior          1     4              5 
                                      Justice     16         0             16 

                         (Continued From Previous Page)

                                        Expired                
                                    information          Other          Total 
             Department/agency      collections   violations       violations 
                         Labor                0              0 
                         State                7              1 
                Transportation                5              1 
                      Treasury                0              0 
              Veterans Affairs                3              0 

                                    Agencies

                       Environmental Protection Agency      0               0 
                        Federal Acquisition Regulation      0               0 
                     Federal Communications Commission      4               0 
                 Federal Deposit Insurance Corporation      0               0 
                  Federal Energy Regulatory Commission      4               0 
                              Federal Trade Commission      0               0 
                        National Aeronautics and Space             
                                        Administration      1               1 
                           National Science Foundation      0               0 
                         Nuclear Regulatory Commission      0               0 
                    Securities and Exchange Commission      2               0 
                         Small Business Administration     17               2 

Social Security Administration 0 7 7

Total 192 31 223

Sources: OMB and agencies' ICB submissions.

Number of Violations As figure 2 shows, the number of PRA violations that
the agencies

Continues to Decline	identified has continued to fall over the past 6
fiscal years-from 872 violations during fiscal year 1998 to 223 during
fiscal year 2003. The 223 violations reported for fiscal year 2003 is
slightly less than the number of violations reported in the previous
fiscal year (244), but still progress from the more than 850 violations
reported during fiscal year 1998. However, the agencies' ICBs showed that
there were an additional 24 information collections in fiscal year 2003
that appear to be violations but were reported by the agencies as
nonviolations. According to OMB, these nonviolations were instances in
which the agencies allowed information collections to expire, and then
determined that they still needed to collect the information, and
therefore requested reinstatements for the information collections. OMB
states that in these instances, the agencies did not collect information
during the time lapse between the expiration

date and reinstatement date, and therefore the agencies did not commit any
violations.

Figure 2: PRA Violations during the Past 6 Fiscal Years

Number of violations 1000

872

750

500

250

0 1998 1999 2000 2001 2002 2003 Fiscal year

Sources: OMB and agencies' ICB submissions.

Note: In fiscal year 2001, OMB reported the violations only for the
cabinet-level departments and EPA. Therefore, the data for that year do
not include information for 12 independent agencies included in the other
years.

However, as figure 3 shows, our review of the violations reported by the
agencies indicates that while violations based on collections where OIRA
authorization had expired continue to decline, there was an increase in
the number of violations where the agencies had not received OIRA approval
prior to collecting the information. While OIRA is able to track those
violations where the authorization has expired, it is unable to track, and
control, those information collections that had not received its approval.

      Figure 3: Changes in Violations from Fiscal Years 2001 through 2003

                            Number of violations 500

                                      400

                                      374

In May 2003, the OIRA Administrator sent a memorandum to agency chief
information officers emphasizing the importance of "full compliance" with
the PRA. The Administrator said that "the recurring high level of PRA
violations, although decreasing over time, was unacceptable," and that
OIRA, together with the agencies, "can and must meet a goal of full
compliance." He continued to encourage agencies to review their procedures
for preventing future violations and the status of the collections of the
agencies' PRA inventories.

When OIRA issued its bulletin requesting data from the agencies for the
fiscal year 2004 ICB, it provided the agencies with three lists for
tracking violations in fiscal year 2003. The first list consisted of all
information collections in OIRA's inventory that expired and had not been
reinstated during fiscal year 2003. The second list consisted of all
information collections in its inventory that expired and were reinstated
during fiscal year 2003. For these lists, the agencies were asked to
verify the

                                      300

                                      200

                                     100 0

Expired information collections

                                Other violations

                                  Fiscal year

2001 2002 2003

                        Sources: OMB and agencies' ICBs.

OIRA Continues to Emphasize Zero Tolerance for Violations

information and correct any missing or incorrect information. In addition,
for the list of expired and reinstated collections, the agencies were
asked to indicate if expirations were intentional lapses (where the
agencies did not collect information) or violations. Thus, agencies were
reminded of OIRA's efforts to reduce the number of PRA violations.

OIRA Can Do More to Address Violations

Although OIRA and the agencies have clearly made progress in reducing the
overall number of PRA violations in recent years, more progress is needed.
As I am sure that the Administrator would agree, 223 violations of the law
in 1 year is not acceptable. Agencies can and should achieve OIRA's goal
of zero violations.

As I noted earlier, OIRA has taken a number of steps during the past year
to try to address this problem. As we recommended last year, OIRA has used
its database to identify information collections that have recently
expired and attempted to determine whether the agencies are continuing to
collect the information. OIRA also continues to ask the agencies to
describe the procedures that they have in place to prevent future
violations. We believe that these actions resulted in the improvements
that occurred during fiscal year 2003 and will have positive benefits for
years to come.

However, OIRA still has not taken some of the actions that we previously
recommended to improve compliance with the PRA. For example, OIRA could
notify the budget side of OMB that an agency is collecting information in
violation of the PRA and encourage the appropriate resource management
office to use its influence to bring the agency into compliance. OIRA
could also encourage the use of "best practices" in agencies with good
records of PRA compliance. Agencies that have recently eliminated their
violations altogether (e.g., the DOL, DOT, and Treasury) may have much to
teach agencies that continue to violate the act.

Although OIRA's current workload is clearly substantial, we do not believe
the kinds of actions that we suggest would require significant additional
resources. Primarily, the actions require a continued commitment by OIRA
leadership to improve the operation of the current paperwork clearance
process. However, we also recognize that OIRA cannot eliminate PRA
violations by itself. Federal agencies committing these violations need to
demonstrate a similar level of resolve.

Mr. Chairman, this completes my prepared statement. I would be pleased to
answer any questions.

Contacts and	For future information regarding this testimony, please
contact Patricia A. Dalton, Director, Strategic Issues, at (202) 512-6806,
or [email protected].

Acknowledgments	Other individuals who made key contributions to this
testimony were Leah Nash and Joseph Santiago.

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