Regulatory Reform: Prior Reviews of Federal Regulatory Process	 
Initiatives Reveal Opportunities for Improvements (27-JUL-05,	 
GAO-05-939T).							 
                                                                 
Federal regulation is a basic tool of government. Agencies issue 
thousands of rules and regulations each year to achieve goals	 
such as ensuring that workplaces, air travel, and foods are safe;
that the nation's air, water and land are not polluted; and that 
the appropriate amount of taxes are collected. The costs of these
regulations are estimated to be in the hundreds of billions of	 
dollars, and the benefits estimates are even higher. Over the	 
past 25 years, a variety of congressional and presidential	 
regulatory reform initiatives have been instituted to refine the 
federal regulatory process. This testimony discusses findings	 
from the large number of GAO reports and testimonies prepared at 
the request of Congress to review the implementation of 	 
regulatory reform initiatives. Specifically, GAO discusses common
strengths and weaknesses of existing reform initiatives that its 
work has identified. GAO also addresses some general		 
opportunities to reexamine and refine existing initiatives and	 
the federal regulatory process to make them more effective. GAO's
prior reports and testimonies contain a variety of		 
recommendations to improve particular reform initiatives and	 
aspects of the regulatory process.				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-939T					        
    ACCNO:   A31339						        
  TITLE:     Regulatory Reform: Prior Reviews of Federal Regulatory   
Process Initiatives Reveal Opportunities for Improvements	 
     DATE:   07/27/2005 
  SUBJECT:   Agency missions					 
	     Agency proceedings 				 
	     Evaluation methods 				 
	     Federal agencies					 
	     Federal regulations				 
	     Policy evaluation					 
	     Productivity in government 			 
	     Regulatory agencies				 
	     Strategic planning 				 

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GAO-05-939T

                 United States Government Accountability Office

GAO Testimony

Before the Subcommittee on Regulatory Affairs, Committee on Government
Reform, House of Representatives

For Release on Delivery Expected at 10:00 a.m. EDT Wednesday, July 27,
2005

REGULATORY REFORM

Prior Reviews of Federal Regulatory Process Initiatives Reveal Opportunities for
                                  Improvements

Statement of J. Christopher Mihm Managing Director, Strategic Issues

                                       a

GAO-05-939T

[IMG]

July 27, 2005

REGULATORY REFORM

Prior Reviews of Federal Regulatory Process Initiatives Reveal Opportunities for
Improvements

  What GAO Found

GAO's evaluations of regulatory reform initiatives indicate that some of
these initiatives have yielded mixed results. Among the goals of the
initiatives are reducing regulatory burden, requiring more rigorous
regulatory analysis, and enhancing oversight. The initiatives have been
beneficial in a number of ways, but they also were often less effective
than anticipated. GAO's reviews suggest at least four overall strengths or
benefits associated with existing initiatives: (1) increasing the
attention directed to rules and rule making, (2) increasing expectations
regarding the analytical support for proposed rules, (3) encouraging and
facilitating greater public participation in rule making, and (4)
improving the transparency of the rulemaking process. On the other hand,
at least four recurring reasons help explain why reform initiatives have
not been more effective: (1) limited scope and coverage of various
requirements, (2) lack of clarity regarding key terms and definitions, (3)
uneven implementation of the initiatives' requirements, and (4) a
predominant focus on just one part of the regulatory process, agencies'
development of rules.

As Congress develops its regulatory reform agenda, the lessons and
opportunities identified by GAO's body of work suggest two avenues that
might provide a useful starting point. The first would be to broadly
revisit the procedures, definitions, exemptions, and other provisions of
existing initiatives to determine whether changes are needed to better
achieve their goals. As a second avenue to explore, GAO's reviews found
that the regulatory process could benefit from more attention to
evaluations of existing regulations, although recognizing some of the
difficulties associated with carrying out such evaluations. The lessons
that could be learned from retrospective reviews could help to keep the
regulatory process focused on results and inform future action to meet
emerging challenges.

This is a particularly timely point to be reviewing the regulatory
process. The long-term fiscal imbalance facing the United States, along
with other significant trends and challenges, establishes the case for
change and the need to reexamine the base of the federal government and
all of its existing programs, policies, functions, and activities. No
single approach or reform can address all of the questions and program
areas that need to be revisited. However, federal regulation is a critical
tool of government, and regulatory programs play a key part in how the
federal government addresses many of the country's needs. Therefore,
reassessing the regulatory framework must be part of that long-term effort
to transform what the federal government does and how it does it.

                 United States Government Accountability Office

Madam Chairman and Members of the Subcommittee:

I am pleased to be here today to discuss reform initiatives that have been
instituted over the years to improve the federal regulatory process.
Congress has often asked GAO to evaluate the effectiveness of procedures
and requirements established by certain initiatives. Our work included
reviews of agencies' compliance with the initiatives and provided us
opportunities to examine the outcomes of various reforms. My remarks today
are based on this broad body of regulatory work and some of the
significant common themes and lessons that have emerged.

In brief, over the last 25 years Congresses and Presidents initiated a
number of regulatory reforms for a variety of purposes, such as reducing
regulatory burdens or improving the information available to decision
makers and the public about proposed rules. Our reviews indicated that
some of these initiatives have yielded mixed results. There have been
benefits associated with the initiatives, but they were often less
effective than intended. Time and again we noted how features such as the
limited scope of the initiatives, unclear definitions, and broad
exemptions affected the results of these reforms. Also, while many of
these initiatives added more requirements at the beginning of the
regulatory process, fewer of their provisions have focused on evaluating
the actual benefits and costs of rules once implemented and using such
information to revise existing regulations and inform future action.

For these reasons, as this subcommittee begins to develop its regulatory
reform agenda, we suggest two avenues that might provide a useful starting
point. First, the subcommittee might wish to broadly revisit the
procedures, definitions, exemptions, and other provisions of existing
initiatives to determine whether changes are needed to better achieve
their goals. Second, to keep the regulatory process focused on results
meeting emerging challenges, we found that the process could benefit from
more attention on evaluations of existing regulations and the lessons that
could be learned from such retrospective reviews. This is a particularly
timely point to reexamine the regulatory process because the long-term
fiscal imbalance facing the United States, along with other significant
trends and challenges, establishes the case for change and the need to
reexamine the base of the federal government and all of its existing
programs, policies,

functions, and activities.1 Reassessing the regulatory framework must be
part of that discussion.

  Regulatory Reform Initiatives Reveal Some Common Strengths and Weaknesses

Federal regulation is a basic tool of government. Agencies issue thousands
of rules and regulations each year to implement statutes enacted by
Congress. The public policy goals and benefits of regulations include,
among other things, ensuring that workplaces, air travel, foods, and drugs
are safe; that the nation's air, water and land are not polluted; and that
the appropriate amount of taxes is collected. The costs of these
regulations are estimated to be in the hundreds of billions of dollars,
and the benefits estimates are even higher.2 Given the size and impact of
federal regulation, it is no surprise that Congresses and Presidents have
taken a number of actions to refine and reform the regulatory process
within the past 25 years.3 One goal of such initiatives has been to reduce
regulatory burdens on affected parties, but other purposes have also
played a part. Among these are efforts to require more rigorous analyses
of proposed rules and thus provide better information to decision makers,
to enhance oversight of rule making by Congress and the President, and to
promote greater transparency and participation in the process.

Over the last decade, at the request of Congress, GAO has released over 60
reports and testimonies reviewing the implementation of various regulatory
reform initiatives.4 Some initiatives, such as the Paperwork Reduction Act
(PRA), Regulatory Flexibility Act (RFA), Unfunded Mandates Reform Act
(UMRA), and Executive Order 12866 on Regulatory

1See GAO, 21st Century Challenges: Reexamining the Base of the Federal
Government, GAO-05-325SP (Washington, D.C.: Feb. 2005), and 21st Century
Challenges: Transforming Government to Meet Current and Emerging
Challenges, GAO-05-830T (Washington, D.C.: July 13, 2005).

2In terms of quantified and monetized annual benefits and costs, the
Office of Management and Budget reported that the estimated annual
benefits of major federal regulations it reviewed from October 1994
through September 2004 range from $68.1 billion to $259.6 billion, while
estimated annual costs range from $34.8 billion to $39.4 billion. See
Office of Management and Budget, Draft 2005 Report to Congress on the
Costs and Benefits of Federal Regulations (Washington, D.C.: Mar. 9,
2005).

3See app. I for summary descriptions of major regulatory reform
initiatives implemented since 1980.

4Attached to this statement are the highlights pages from some of those
reports and testimonies.

Planning and Review, have undergone repeated scrutiny. While our reviews
identified specific strengths and weaknesses of individual initiatives, it
may be more worthwhile to focus on crosscutting strengths and weaknesses.
The common strengths we identified largely mirror the general purposes of
various reform initiatives. The common weaknesses reflect issues
associated with both the design and implementation of the initiatives.

Initiatives Increase Attention on Proposed Rules and Raise Expectations of
the Rule-Making Process

Our reviews suggest at least four overall strengths or benefits that have
been associated with existing regulatory reform initiatives: (1)
increasing the attention directed to rules and rule making, (2) increasing
expectations regarding the analytical support for proposed rules, (3)
encouraging and facilitating greater public participation in rule making,
and (4) improving the transparency of the rule-making process.

First, the simple fact that such initiatives bring added attention to
rules and the rule-making process is an important benefit. As we have
pointed out in prior reports, oversight of agencies' rule making can
result in useful changes to rules.5 Furthermore, awareness of this added
scrutiny may provide an important indirect effect. For example, in a
previous GAO review, Department of Transportation officials told us that
they will not even propose certain regulatory provisions because they know
that the Office of Management and Budget (OMB), which reviews significant
agency draft rules under Executive Order 12866, will not find them
acceptable.6 Similarly, there is evidence that the focus placed on
potential mandates under UMRA may have helped to discourage or limit the
costs of federal mandates.7

Second, several of the reform initiatives have increased the analytical
requirements and expectations in the regulatory process. These initiatives
have raised the bar for agencies regarding the information and analysis

5See GAO, Rulemaking: OMB's Role in Reviews of Agencies' Draft Rules and
the Transparency of Those Reviews, GAO-03-929 (Sept. 22, 2003), and
Regulatory Reform: Procedural and Analytical Requirements in Federal
Rulemaking, GAO/T-GGD/OGC-00157 (Washington, D.C.: June 8, 2000).

6GAO, Regulatory Reform: Implementation of the Regulatory Review Executive
Order, GAO/T-GGD-96-185 (Washington, D.C.: Sept. 25, 1996).

7GAO, Unfunded Mandates: Analysis of Reform Act Coverage, GAO-04-637
(Washington, D.C.: May 12, 2004).

needed to support policy decisions underlying regulations. Simply put, the
initiatives call for more analysis of the effects-both benefits and
costs-of proposed regulations before they are implemented. Whether imposed
by statute or executive order, these initiatives seek to answer a basic
question, "What are the consequences of this rule?" Closely related are
other requirements that encourage agencies to identify and consider
alternatives when developing regulations. Executive Order 12866, for
example, asks agencies to first identify and assess available alternatives
to direct regulation. Initiatives such as RFA and UMRA ask agencies to
identify regulatory alternatives that will be less burdensome to regulated
parties.

Third, some of the reform initiatives have encouraged and facilitated
greater public participation and consultation in rule making. Initiatives
such as the E-Government Act and the Government Paperwork Elimination Act
encourage agencies to allow the public to communicate with them by
electronic means. Other initiatives require additional consultation by
agencies with the parties that might be affected by rules under
development. These initiatives ask that agencies seek input earlier in the
process, rather than waiting for the public to comment on proposals
published in the Federal Register.

A final shared strength of many of these initiatives, and one closely
connected to the three previous items, is that they help to improve the
transparency of the regulatory process. In prior work, we have cited
transparency as a regulatory best practice.8 By providing more information
about potential effects and alternatives, requiring more documentation and
justification of agencies' decisions, and facilitating public access to
and queries about such information, regulatory reform initiatives can help
make the process more open. We recommended that more could be done to
increase transparency, and we have also highlighted the value of
transparency when agencies had particularly clear and complete
documentation supporting their rule making. As the Administrator of OMB's
Office of Information and Regulatory Affairs (OIRA) pointed out, openness
can help to "transform the public debate about regulation to one of
substance ... rather than process."9

8GAO, Certification Requirements: New Guidance Should Encourage
Transparency in Agency Decisionmaking, GAO/GGD-99-170 (Washington, D.C.:
Sept. 24, 1999).

9See GAO-03-929.

Some Recurring Weaknesses Might Explain Why Reform Initiatives Have Not
Been More Effective

Despite these strengths, the overall results and effectiveness of
regulatory reform initiatives have often been mixed. This may be
particularly true when results of the initiatives are compared to the
goals and purposes originally established for them. For example, despite
the goals set for the reduction of paperwork burdens under PRA, we have
repeatedly testified about the growth in burden hours imposed by federal
information collections.10 We similarly reported that initiatives such as
UMRA, the executive order on federalism, and requirements imposed under
Section 610 of RFA for reviews of existing rules, have had little impact
on agencies' rule making. Our reviews have identified at least four
general reasons that might explain why reform initiatives have not been
more effective: (1) the limited scope and coverage of various
requirements, (2) lack of clarity regarding key terms and definitions, (3)
uneven implementation of the initiatives' requirements, and (4) a
predominant focus on just one part of the regulatory process, agencies'
development of rules.

First, we have pointed out significant limits in the scope and coverage of
certain reform initiatives. UMRA provides one example of the effect of
definitional limitations, exceptions, and thresholds on restricting an
initiative's coverage. As we noted in a report last year, part of the
reason for the relatively small number of rules identified as containing
mandates under UMRA could be traced to 14 different restrictions on the
identification of federal mandates under the Act. Furthermore, our
analysis of all 122 major or economically significant rules (generally,
rules with an impact of $100 million or more) published in 2001 and 2002
also showed that more than one of these restrictions applied to 72 percent
of the 65 rules that were not identified as containing federal mandates
under UMRA but nonetheless appeared to result in significant financial
effects on nonfederal parties.11

UMRA, along with RFA, also illustrates the potential domino effect of
building reform requirements on other procedural requirements. Both acts
only apply to rules for which an agency publishes a notice of proposed
rule making. However, agencies can publish final regulatory actions
without notices of proposed rule making using either good cause,
categorical, or

10However, the total paperwork burden shrank slightly in fiscal year 2004,
according to OMB estimates. See GAO, Paperwork Reduction Act: Burden
Reduction May Require a New Approach, GAO-05-778T (Washington, D.C.: June
14, 2005).

11GAO-04-637.

statute-specific exceptions to the Administrative Procedure Act's notice
and comment requirements.12 In one of our prior reports, we estimated that
about half of all final regulatory actions published by agencies were
issued without going through the proposed rule stage.13 Although many
final rules without proposed rules were minor actions, in both that
analysis and our recent UMRA review there were major rules that did not
have notices of proposed rule making.14

Another recurring message in our reports has been the effect of unclear
terms and definitions that affect the applicability of requirements.
Combined with the discretion given rule-making agencies to interpret the
requirements in reform initiatives, it is not surprising that we have
observed uneven implementation across agencies. In particular, we have
often cited the need to clarify key terms in the Regulatory Flexibility
Act.15 RFA requires analyses and other actions to help address concerns
about the impact of regulations on small entities, but the requirements do
not apply if the agency head certifies that the agency's rule will not
have a "significant economic impact on a substantial number of small
entities." However, the Act neither defines this key phrase nor places
clear responsibility on any party to define it consistently across
government. As a result, we found that agencies had different
interpretations of RFA's requirements. We said in a series of reports
that, if Congress wanted to strengthen the implementation of RFA, it
should consider amending the Act to define the key phrases or provide some
other entity with clearer authority and responsibility to interpret RFA's
provisions. To date, Congress has not acted on our recommendations. Again,
there is a domino

12The basic process by which federal agencies develop and issue
regulations is spelled out in the Administrative Procedure Act. 5 U.S.C.
S: 553.

13GAO, Federal Rulemaking: Agencies Often Published Final Actions Without
Proposed Rules, GAO/GGD-98-126 (Washington, D.C.: Aug. 31, 1998).

14For the analysis in GAO/GGD-98-126, 11 of 61 final major rules did not
have proposed rules. For the analysis in GAO-04-637, 28 of the subset of
65 major rules mentioned above did not have proposed rules.

15See GAO, Regulatory Flexibility Act: Clarification of Key Terms Still
Needed, GAO-02491T (Washington, D.C.: Mar. 6, 2002); Regulatory
Flexibility Act: Key Terms Still Need to Be Clarified, GAO-01-669T
(Washington, D.C.: Apr. 24, 2001); Regulatory Flexibility Act:
Implementation in EPA Program Offices and Proposed Lead Rule,
GAO/GGD-00-193 (Washington, D.C.: Sept. 20, 2000); Regulatory Flexibility
Act: Agencies' Interpretations of Review Requirements Vary, GAO/GGD-99-55
(Washington, D.C.: Apr. 2, 1999); and Regulatory Flexibility Act: Status
of Agencies' Compliance, GAO/GGD-94-105 (Washington, D.C.: Apr. 27, 1994).

effect associated with this uncertainty, because other reform initiatives,
such as the requirement for agencies to review existing rules under
Section 610 of RFA and a requirement to provide compliance assistance
guides to regulated entities, only apply if an agency has determined the
rule will have a significant economic impact on a substantial number of
small entities.

Sometimes, though, it might not be uncertainty over the provisions of an
initiative that help to limit its effectiveness, but rather an agency's
implementation of the requirements. For example, as noted in our recent
report on the Paperwork Reduction Act, one of the provisions aimed at
helping to achieve the goals of minimizing burden while maximizing utility
is a requirement for chief information officers (CIO) to review and
certify information collections.16 However, our analysis of case studies
showed that CIOs provided these certifications despite often missing or
inadequate support from the program offices sponsoring the collections. We
recommended that OMB clarify the kinds of support it asks agency CIOs to
provide for certifications and that heads of certain agencies direct
responsible CIOs to strengthen agency support for CIO certifications,
including with regard to the necessity of collection, burden reduction
efforts, and plans for the use of information collected.

Our reports over the years have also highlighted issues regarding
agencies' implementation of analytical requirements, such as the economic
analyses that support regulations. Although the economic performance of
some federal actions is assessed prospectively, few federal actions are
monitored for their economic performance retrospectively. In addition, our
reviews have found that economic assessments that analyze regulations
prospectively are often incomplete and inconsistent with general economic
principles.17 Moreover, the assessments are not always useful for
comparisons across the government, because they are often based on
different assumptions for the same key economic variables. In our recent
report on UMRA, we noted that parties from various sectors expressed
concerns about the accuracy and completeness of agencies' cost estimates,
and some also emphasized that more needed to be done to address the

16GAO, Paperwork Reduction Act: New Approach May Be Needed to Reduce
Government Burden on Public, GAO-05-424 (Washington, D.C.: May 20, 2005).

17See GAO, Regulatory Reform: Agencies Could Improve Development,
Documentation, and Clarity of Regulatory Economic Analyses,
GAO/RCED-98-142 (Washington, D.C.: May 26, 1998), and Clean Air Act:
Observations on EPA's Cost-Benefit Analysis of Its Mercury Control
Options, GAO-05-252 (Washington, D.C.: Feb. 28, 2005).

benefits side of the equation.18 Our reviews have found that not all
benefits are quantified and monetized by agencies, partly because of the
difficulty in estimation.

Finally, although not an explicit finding in any of our reports, it is
clear when stepping back to look at the big picture presented by the set
of reform initiatives and our body of regulatory work that these
initiatives primarily target one particular phase of the regulatory
process, agencies' development of rules. While rule making is clearly an
important point in the process when the specific substance and impact of
regulations are most open to public debate, other phases also help
determine the effectiveness of regulation. Few of the reform initiatives
contain major requirements or processes that address those other phases in
the life cycle of regulations- from the underlying statutory
authorizations, through effective implementation and monitoring of
compliance with regulatory provisions, to evaluation and revision of
existing rules. For example, only UMRA explicitly addresses the potential
effect of legislative proposals in creating mandates that would ultimately
be implemented through regulations, and that element of UMRA has generally
been viewed as among its most effective elements. We have reported that
agencies sometimes have little rule-making discretion, so in some cases
concerns raised about burdensome regulations are traceable to the statutes
underlying the regulations, rather than a failure of an agency to comply
with rule-making requirements.19 With regard to other phases in the
regulatory process, RFA is unique among statutory requirements in having a
provision (Section 610) for reviews of existing rules, although it is
limited to rules with significant effects on small entities. Executive
Order 12866 also includes some provisions to encourage agencies to review
and revise existing rules. It is not clear, however, that either the
Section 610 or the executive order look back provisions have been
consistently and effectively implemented.20

18GAO, Unfunded Mandates: Views Vary About Reform Act's Strengths,
Weaknesses, and Options for Improvement, GAO-05-454 (Washington, D.C.:
Mar. 31, 2005).

19GAO, Regulatory Burden: Some Agencies' Claims Regarding Lack of
Rulemaking Discretion Have Merit, GAO/GGD-99-20 (Washington, D.C.: Jan. 8,
1999).

20See also, GAO, Regulatory Reform: Agencies' Efforts to Eliminate and
Revise Rules Yield Mixed Results, GAO/GGD-98-3 (Washington, D.C.: Oct. 2,
1997).

  Opportunities Exist to Refine Existing Reform Initiatives and Explore New Ways
  to Transform the Regulatory Process

As this subcommittee begins to develop its regulatory reform agenda, our
body of work on regulatory issues, and also on results-oriented government
management, suggests two general avenues of effort you may want to
consider as useful starting points. One avenue is to revisit the
procedures, definitions, exemptions, and other provisions of existing
initiatives to determine whether changes might be needed to better achieve
their goals. Second, the subcommittee may wish to explore options to more
effectively and productively evaluate existing regulations and the results
they have generated. Not only could such retrospective evaluations help to
inform Congress and other policymakers about ways to improve the design of
regulations and regulatory programs, but they could play a part in the
overall reexamination of the base of the federal government that we have
recommended in our recent work on addressing 21st century challenges.

With respect to the first avenue, my testimony to this point indicates
that there are ample opportunities to revisit and refine existing
regulatory reform initiatives. Although progress has been made to
implement recommendations and matters for consideration we have raised in
our prior reports, there are still unresolved issues. In particular,
Congress may want to consider whether some provisions of existing
statutory initiatives need to be amended to make those initiatives more
effective. We still believe, for example, that Congress should clarify key
terms and definitions in RFA or provide another entity with the authority
and responsibility to do so.

We also believe there is some value to taking a broader look at how all of
the pieces of existing initiatives have, or have not, contributed to
achieving the purposes intended. For example, we suggested in our recent
review of PRA that a new approach might be required to address burden
reduction. As illustrated by our work on lessons learned about UMRA in the
10 years since it was enacted, such reviews can reveal opportunities and
options for both reinforcing the strengths and addressing the weaknesses
that have emerged in practice.21 The options can take a number of
different directions. For example, in our work on UMRA, concerns about the
scope of coverage were most frequently raised by the many knowledgeable
parties we consulted, but issues and options were also identified
regarding enforcement, consultation, and the analytic framework, among
other topics. In undertaking reviews of existing initiatives, it will be
important to

21GAO-05-454.

also revisit the reasons why particular limitations and exceptions were
included in the initiatives to begin with. As pointed out in the UMRA
work, this probably needs to be an inclusive effort to be successful,
involving all affected parties in the debate to find common ground if
changes are to be accepted.

The second broad avenue I would suggest the subcommittee consider in its
reform agenda would be to explore using retrospective evaluations of
existing regulations. Such evaluations could help to keep the regulatory
process focused on results and identify ways to better meet emerging
challenges. Among the potential benefits of more retrospective analysis of
federal regulations are that it could enable policymakers to better gauge
actual benefits and costs and whether regulations are achieving their
desired goals, bring additional accountability to the regulatory process,
identify opportunities to revise existing regulations, and provide
information that could lead to better decisions regarding future
regulations.

In our work this year on both UMRA and economic performance measures, we
clearly heard from the experts we consulted that they believe more
retrospective analysis is needed and, further, that there are ways to
improve the quality and credibility of the analyses that are done. In the
UMRA work, parties had particularly strong views about the need for better
evaluation and research of federal mandates, including those imposed by
regulations. The most frequently suggested option to address this issue
was to do more postimplementation evaluation of existing mandates or "look
backs" at their effectiveness. As one of the parties pointed out,
retrospective evaluation of regulations is useful because rules can change
people's behavior in ways that cannot be predicted prior to
implementation. In our recent workshop where we obtained the views of
experts about the use of economic performance measures, such as a
comparison of benefits and costs (net benefits) and cost-effectiveness,
participants identified several gaps in the application of these measures
to analyze federal regulations and programs.22 For example, while some
agencies have done retrospective economic performance assessments, the
participants said that in general federal agencies often do not assess the
performance of regulations or existing programs retrospectively, even
though this information could be useful in managing programs. However,

22GAO, Economic Performance: Highlights of a Workshop on Economic
Performance Measures, GAO-05-796SP (Washington, D.C.: July 18, 2005).

there are also challenges to effectively implementing retrospective
evaluations. For example, we previously identified some of the
difficulties regulatory agencies face in demonstrating the results of
their work, such as identifying and collecting the data needed to
demonstrate results, the diverse and complex factors that affect agencies'
results (for example, the need to achieve results through the actions of
third parties), and the long time period required to see results in some
areas of federal regulation.23 There is also a potential balance concern
because, as I noted earlier, it may be more difficult to quantify the
benefits of regulations than it is to quantify the costs.

Finally, I want to emphasize that this is a particularly timely point to
be reviewing the regulatory process because of the long-term fiscal
imbalance facing the United States, along with other significant trends
and challenges. The 21st century challenges that we have been highlighting
this year establish the case for change and the need to reexamine the base
of the federal government and all of its existing programs, policies,
functions, and activities. We recognize that a successful reexamination of
the base of the federal government will entail multiple approaches over a
period of years. No single approach or reform can address all of the
questions and program areas that need to be revisited. However, federal
regulation is a critical tool of government, and regulatory programs play
a key part in how the federal government addresses many of the country's
needs. Asking the questions necessary to begin reexamining the federal
regulatory process is an important first step in the long-term effort to
transform what the federal government does and how it does it.

Madam Chairman, this concludes my prepared statement. Once again, I
appreciate the opportunity to testify on these important issues. I would
be pleased to address any questions you or other members of the
subcommittee might have at this time.

If additional information is needed regarding this testimony, please
contact J. Christopher Mihm, Managing Director, Strategic Issues, at (202)
512-6806 or [email protected].

23GAO, Managing for Results: Regulatory Agencies Identified Significant
Barriers to Focusing on Results, GAO/GGD-97-83 (Washington, D.C.: June 24,
1997).

Appendix I

Summary of Regulatory Reform Initiatives Implemented since 1980

Congresses and Presidents have taken a number of actions to refine and
reform the regulatory process within the past 25 years. The following
paragraphs summarize the general purpose, applicability, and requirements
imposed by some of those regulatory reform initiatives.

Paperwork Reduction Act (PRA)

PRA1 was originally enacted in 1980, then amended in 1986 and 1995.2 PRA
requires agencies to justify any collection of information from the public
in order to minimize the paperwork burden they impose and to maximize the
practical utility of the information collected.3 The Act applies to
independent and nonindependent regulatory agencies. Under PRA, agencies
are required to submit all proposed information collections to the Office
of Management and Budget (OMB) for approval. In their submissions,
agencies must establish the need and intended use of the information,
estimate the burden that the collection will impose on respondents, and
show that the collection is the least burdensome way to gather the
information.

PRA also established the Office of Information and Regulatory Affairs
(OIRA) within OMB to provide central agency leadership and oversight of
government efforts to reduce unnecessary paperwork and improve the
management of information resources. Subsequent reform initiatives,
including amendments of PRA, have added responsibilities for OIRA, such as
making the office responsible for overseeing and reporting on agencies'
compliance with new regulatory requirements. PRA of 1995, for example,
included a requirement that OIRA, in consultation with agency heads, set
annual governmentwide goals for the reduction of information collection
burdens.

144 U.S.C. S:S: 3501-3520.

2PRA was originally enacted into law in 1980, Pub. L. No. 96-511, 94 Stat.
2812 (Dec. 11, 1980). It was reauthorized with minor amendments in 1986,
Pub. L. No. 99-591, 100 Stat. 3341 (Oct. 30, 1986) and was reauthorized a
second time with more significant changes in 1995, Pub. L. No. 104-13, 109
Stat. 163 (May 22, 1995).

3PRA generally defines a "collection of information" as the obtaining or
disclosure of facts or opinions by or for an agency from 10 or more
nonfederal persons. 44 U.S.C. S: 3502(3). Many information collections,
recordkeeping requirements, and third-party disclosures are contained in
or are authorized by regulations as monitoring or enforcement tools, while
others appear in separate written questionnaires.

                                   Appendix I
                    Summary of Regulatory Reform Initiatives
                             Implemented since 1980

Regulatory Flexibility Act of 1980 (RFA) and Small Business Regulatory
Enforcement Fairness Act (SBREFA)

RFA4 was enacted in response to concerns about the effect that federal
regulations can have on small entities. RFA requires independent and
nonindependent regulatory agencies to assess the impact of their rules on
"small entities," defined as including small businesses, small
governmental jurisdictions, and certain small not-for-profit
organizations. Under RFA an agency must prepare an initial regulatory
flexibility analysis at the time proposed rules are issued unless the head
of the agency determines that the proposed rule would not have a
"significant economic impact upon a substantial number of small entities."
The Act also requires agencies to ensure that small entities have an
opportunity to participate in the rulemaking process and requires the
Chief Counsel of the Small Business Administration's Office of Advocacy to
monitor agencies' compliance. Further, Section 610 of RFA requires
agencies to review existing rules within 10 years of promulgation that
have or will have a significant impact on small entities to determine
whether they should be continued without change or amended or rescinded to
minimize their impact on small entities.

Congress amended RFA in 1996 with SBREFA.5 SBREFA made certain agency
actions under RFA judicially reviewable. Other provisions in SBREFA added
new requirements. For example, SBREFA requires agencies to develop one or
more compliance guides for each final rule or group of related final rules
for which the agency is required to prepare a regulatory flexibility
analysis, and the Act requires agencies to provide small entities with
some form of relief from civil monetary penalties. SBREFA also requires
the Environmental Protection Agency and the Occupational Safety and Health
Administration to convene advocacy review panels before publishing an
initial regulatory flexibility analysis.

Unfunded Mandates Reform UMRA6 was enacted to address concerns about
federal statutes and

Act of 1995 (UMRA) 	regulations that require nonfederal parties to expend
resources to achieve legislative goals without being provided funding to
cover the costs. UMRA generates information about the nature and size of
potential federal mandates but does not preclude the implementation of
such mandates. UMRA applies to proposed federal mandates in both
legislation and

45 U.S.C. S:S: 601-612.
55 U.S.C. S: 601 note, 15 U.S.C. S: 657.
62 U.S.C. S:S: 658-658(g), 1501-1571.

                                   Appendix I
                    Summary of Regulatory Reform Initiatives
                             Implemented since 1980

regulations, but it does not apply to rules published by independent
regulatory agencies. With regard to the regulatory process, UMRA requires
federal agencies to prepare written statements containing a "qualitative
and quantitative assessment of the anticipated costs and benefits" for any
rule for which a proposed rule was published that includes a federal
mandate that may result in the expenditure of $100 million or more in any
1 year by state, local, and tribal governments in the aggregate, or by the
private sector.7 For such rules, agencies are to identify and consider a
reasonable number of regulatory alternatives and from those select the
least costly, most cost-effective, or least burdensome alternative that
achieves the objectives of the rule (or explain why that alternative was
not selected). UMRA also includes a consultation requirement that agencies
develop a process to permit elected officers of state, local, and tribal
governments (or their designees) to provide input in the development of
regulatory proposals containing significant intergovernmental mandates.

Congressional Review Act (CRA)

CRA8 was enacted as part of SBREFA in 1996 to better ensure that Congress
has an opportunity to review, and possibly reject, rules before they
become effective. CRA established expedited procedures by which members of
Congress may disapprove agencies' rules by introducing a resolution of
disapproval that, if adopted by both Houses of Congress and signed by the
President, can nullify an agency's rule. CRA applies to rules issued by
nonindependent and independent regulatory agencies. CRA requires agencies
to file final rules with both Congress and GAO before the rules can become
effective.9 GAO's role under CRA is to provide Congress with a report on
each major rule (for example, rules with a $100 million impact on the
economy) including GAO's assessment of the issuing agency's compliance
with the procedural steps required by various acts and executive orders
governing the rule-making process.10

7The dollar thresholds in UMRA are in 1996 dollars and are adjusted
annually for inflation.

85 U.S.C. S:S: 801-808.

9The joint resolution process has been used only once. In Pub. L. No.
107-5, 115 Stat. 7 (Mar. 20, 2001) Congress disapproved the Department of
Labor's rule on ergonomics.

10As of July 22, 2005, GAO has reviewed and reported to Congress on 576
rules under CRA.

                                   Appendix I
                    Summary of Regulatory Reform Initiatives
                             Implemented since 1980

                  Government Paperwork Elimination Act (GPEA)

Congress enacted GPEA11 in 1998, and the Act promoted the expansion of a
trend in the federal government toward using e-government applications to
collect and disseminate information and forms. GPEA requires federal
agencies to provide the public, when practicable, the option of
submitting, maintaining, and disclosing required information-such as
employment records, tax forms, and loan applications-electronically,
instead of on paper. GPEA also requires agencies to guard the privacy and
protect documents from being altered and encourages federal government use
of a range of electronic signature alternatives when practicable.

Truth in Regulating Act (TIRA)

In 2000, Congress enacted TIRA12 to provide a mechanism for Congress to
obtain more information about certain rules. TIRA contemplated a 3-year
pilot project during which GAO would perform independent evaluations of
"economically significant" agency rules when requested by a chairman or
ranking member of a committee of jurisdiction of either House of Congress.
The independent evaluation would include an evaluation of the agency's
analysis of the potential benefits, potential costs, and alternative
approaches considered during the rule-making proceeding.13 Under TIRA, GAO
was required to report on its evaluations within 180 calendar days after
receiving a committee request. Section 6(b) of the Act, however, provided
that the pilot project would continue only if, in each fiscal year, a
specific annual appropriation was made. During the 3-year period
contemplated for the pilot project, Congress did not enact any specific
appropriation to cover TIRA evaluations, and the authority for the 3-year
pilot project expired on January 15, 2004. Congress has considered
reauthorizing TIRA, and we have strongly urged that any reauthorization of
TIRA continue to contain language requiring a specific annual
appropriation before we are required to undertake independent evaluations
of major rule makings. We have also recommended that TIRA evaluations be
conducted under a pilot project basis.

1144 U.S.C. S:3504 note.

12Pub. L. No. 106-312, 114 Stat. 1248 (Oct. 17, 2000); 5 U.S.C. S: 801
note.

13TIRA defines an "independent evaluation" as a "substantive evaluation of
the agency's data, methodology, and assumptions used in developing the
economically significant rule, including - - (A) an explanation of how any
strengths or weaknesses in those data, methodology, and assumptions
support or detract from conclusions reached by the agency; and (B) the
implications, if any, of those strengths or weaknesses for the
rulemaking." Pub.

L. No. 106-312, S:3(3).

                                   Appendix I
                    Summary of Regulatory Reform Initiatives
                             Implemented since 1980

Information Quality Act (IQA)

Enacted in Section 515 of the Treasury and General Government
Appropriations Act of 2001, the Information Quality Act14 directed OMB to
issue governmentwide guidelines to ensure and maximize the quality,
objectivity, utility, and integrity of information (including statistical
information) disseminated by federal agencies. The Act requires OMB to
issue guidelines directing all agencies to issue their own guidelines
within 1 year and to establish administrative mechanisms allowing affected
persons to seek and obtain correction of information maintained and
disseminated by the agency. The Act also requires agencies to report
periodically to the Director of OMB on the number and nature of complaints
received and how such complaints were handled by the agency.

E-Government Act	The E-Government Act15 was intended to enhance the
management and promotion of electronic government services and processes.
With regard to the regulatory process, the Act requires agencies, to the
extent practicable, to accept public comments on proposed rules by
electronic means. The Act also requires agencies to ensure that publicly
accessible federal Web sites contain electronic dockets for their proposed
rules, including all comments submitted on the rules and other relevant
materials. The E-Government Act also established an Office of Electronic
Government within OMB, headed by an administrator appointed by the
President.

Related Executive Orders In addition to congressional regulatory reform
initiatives enacted in

and Initiatives	statutes, it is important to also recognize the key role
that presidential initiatives have in the regulatory process. Centralized
review of agencies' regulations within the Executive Office of the
President has been part of the rule-making process for more than 30 years.
The formal process by which OIRA currently reviews agencies' proposed
rules and final rules is essentially unchanged since Executive Order 12866
was issued in 1993.16 Under Executive Order 12866, OIRA reviews
significant proposed and final

14IQA is also known as the Data Quality Act. Pub. L. No. 106-554 S: 515,
114 Stat. 2763 (Dec. 12, 2001).

1531 U.S.C. S: 507, 40 U.S.C. S: 11331, 44 U.S.C. S:S: 3541-3549,
3601-3606.

16Exec. Order No. 12866, 58 Fed. Reg. 51,735 (Sept. 30, 1993).

Appendix I
Summary of Regulatory Reform Initiatives
Implemented since 1980

rules from all agencies, other than independent regulatory agencies,
before they are published in the Federal Register.

The executive order states, among other things, that agencies should
assess all costs and benefits of available regulatory alternatives,
including both quantitative and qualitative measures. It also provides
that agencies should select regulatory approaches that maximize net
benefits (unless a statute requires another approach). Among other
principles, the executive order encourages agencies to tailor regulations
to impose the least burden on society needed to achieve the regulatory
objectives. The executive order also established agency and OIRA
responsibilities in the review of regulations, including transparency
requirements. OIRA provides guidance to federal agencies on implementing
the requirements of the executive order, such as guidance on preparing
economic analyses required for significant rules.

There are also other orders that impose requirements on agencies during
rule making, such as Executive Order 13132 on federalism that requires
agencies to prepare a federalism summary impact statement for actions that
have federalism implications.17 Also, in January 2005, OMB published a
final bulletin on peer review that establishes minimum standards for when
peer review is required for scientific information, including stricter
minimum standards for the peer review of "highly influential" scientific
assessments, and the types of peer review that should be considered by
agencies in different circumstances.18 The selection of an appropriate
peer review mechanism is left to the agency's discretion.

More detailed information about these various initiatives is available in
the related GAO products listed at the end of this testimony.

17Exec. Order No. 13132, 64 Fed. Reg. 43,255 (Aug. 4, 1999). 1870 Fed.
Reg. 2664 (Jan. 14, 2005).

Related GAO Products

Economic Performance: Highlights of a Workshop on Economic Performance
Measures. GAO-05-796SP. Washington, D.C.: July 2005.

Paperwork Reduction Act: New Approach May Be Needed to Reduce Government
Burden on Public. GAO-05-424. Washington, D.C.: May 20, 2005.

Unfunded Mandates: Views Vary About Reform Act's Strengths, Weaknesses,
and Options for Improvement. GAO-05-454. Washington, D.C.: March 31, 2005.

21st Century Challenges: Reexamining the Base of the Federal Government.
GAO-05-325SP. Washington, D.C.: February 2005.

Electronic Government: Federal Agencies Have Made Progress Implementing
the E-Government Act of 2002. GAO-05-12. Washington, D.C.: December 10,
2004.

Unfunded Mandates: Analysis of Reform Act Coverage. GAO-04-637.
Washington, D.C.: May 12, 2004.

Paperwork Reduction Act: Agencies' Paperwork Burden Estimates Due to
Federal Actions Continue to Increase. GAO-04-676T. Washington, D.C.: April
20, 2004.

Rulemaking: OMB's Role in Reviews of Agencies' Draft Rules and the
Transparency of Those Reviews. GAO-03-929. Washington, D.C.: September 22,
2003.

Electronic Rulemaking: Efforts to Facilitate Public Participation Can Be
Improved. GAO-03-901. Washington, D.C.: September 17, 2003.

Civil Penalties: Agencies Unable to Fully Adjust Penalties for Inflation
Under Current Law. GAO-03-409. Washington, D.C.: March 14, 2003.

Regulatory Flexibility Act: Clarification of Key Terms Still Needed.
GAO02-491T. Washington, D.C.: March 6, 2002.

Regulatory Reform: Compliance Guide Requirement Has Had Little Effect on
Agency Practices. GAO-02-172. Washington, D.C.: December 28, 2001.

Related GAO Products

Federal Rulemaking: Procedural and Analytical Requirements at OSHA and
Other Agencies. GAO-01-852T. Washington, D.C.: June 14, 2001.

Regulatory Reform: Implementation of Selected Agencies' Civil Penalties
Relief Policies for Small Entities. GAO-01-280. Washington, D.C.: February
20, 2001.

Regulatory Flexibility Act: Implementation in EPA Program Offices and
Proposed Lead Rule. GAO/GGD-00-193. Washington, D.C.: September 20, 2000.

Electronic Government: Government Paperwork Elimination Act Presents
Challenges for Agencies. GAO/AIMD-00-282. Washington, D.C.: September 15,
2000.

Regulatory Reform: Procedural and Analytical Requirements in Federal
Rulemaking. GAO/T-GGD/OGC-00-157. Washington, D.C.: June 8, 2000.

Federalism: Previous Initiatives Have Little Effect on Agency Rulemaking.
GAO/T-GGD-99-131. Washington, D.C.: June 30, 1999.

Regulatory Accounting: Analysis of OMB's Reports on the Costs and Benefits
of Federal Regulation. GAO/GGD-99-59. Washington, D.C.: April 20, 1999.

Regulatory Flexibility Act: Agencies' Interpretations of Review
Requirements Vary. GAO/GGD-99-55. Washington, D.C.: April 2, 1999.

Regulatory Burden: Some Agencies' Claims Regarding Lack of Rulemaking
Discretion Have Merit. GAO/GGD-99-20. Washington, D.C.: January 8, 1999.

Federal Rulemaking: Agencies Often Published Final Actions Without
Proposed Rules. GAO/GGD-98-126. Washington, D.C.: August 31, 1998.

Regulatory Management: Implementation of Selected OMB Responsibilities
Under the Paperwork Reduction Act. GAO/GGD-98-120. Washington, D.C.: July
9, 1998.

Regulatory Reform: Agencies Could Improve Development, Documentation, and
Clarity of Regulatory Economic Analyses. GAO/RCED-98-142. Washington,
D.C.: May 26, 1998.

Related GAO Products

Regulatory Reform: Implementation of Small Business Advocacy Review Panel
Requirements. GAO/GGD-98-36. Washington, D.C.: March 18, 1998.

Congressional Review Act: Implementation and Coordination.
GAO/T-OGC-98-38. Washington, D.C.: March 10, 1998.

Regulatory Reform: Agencies' Section 610 Review Notices Often Did Not Meet
Statutory Requirements. GAO/T-GGD-98-64. Washington, D.C.: February 12,
1998.

Unfunded Mandates: Reform Act Has Had Little Effect on Agencies'
Rulemaking Actions. GAO/GGD-98-30. Washington, D.C.: February 4, 1998.

Regulatory Reform: Changes Made to Agencies' Rules Are Not Always Clearly
Documented. GAO/GGD-98-31. Washington, D.C.: January 8, 1998.

Regulatory Reform: Agencies' Efforts to Eliminate and Revise Rules Yield
Mixed Results. GAO/GGD-98-3. Washington, D.C.: October 2, 1997.

Managing for Results: Regulatory Agencies Identified Significant Barriers
to Focusing on Results. GAO-GGD-97-83. Washington, D.C.: June 24, 1997.

Regulatory Burden: Measurement Challenges and Concerns Raised by Select
Companies. GAO/GGD-97-2. Washington, D.C.: November 18, 1996.

Regulatory Reform: Implementation of the Regulatory Review Executive
Order. GAO/T-GGD-96-185. Washington, D.C.: September 25, 1996.

Regulatory Flexibility Act: Status of Agencies' Compliance. GAO/GGD-94105.
Washington, D.C.: April 27, 1994.

July 2005

ECONOMIC PERFORMANCE

Highlights of a Workshop on Economic Performance Measures

[IMG]

What Participants Said

Workshop participants identified a number of issues regarding the use of
economic performance analysis-benefit-cost or cost-effectiveness
analysis-in evaluating federal program performance. They generally said
the following:

o  	The quality of the economic performance assessment of federal programs
has improved but is still highly variable and not sufficient to adequately
inform decision makers.

o  	The gaps in applying economic performance measures are that they are
not widely used, mechanisms for revisiting a regulation or program are
lacking, retrospective analyses are often not done, and homeland security
regulations present additional challenges and typically do not include
economic analysis.

o  	Barriers include agencies' lack of resources and only limited demand
from decision makers for benefit-cost analysis. In addition, some
participants stated that organizational barriers called stovepipes or
silos hinder communication.

o  	Some analytical issues that affect the application of economic
performance measures are limited guidance on assessing unquantifiable
benefits, equity, and distributional effects of federal actions; lack of
agreement on some values for key assumptions; and lack of guidance on
tools that do not monetize outcomes, such as multiobjective analysis.

o  	Opportunities to expand the use of measures include evaluation of
existing programs retrospectively and application to homeland security
issues.

o  	Ways to improve the general economic principles and guidance that
economic performance analysis is based upon include developing a minimum
set of principles and abbreviated guidelines for economic performance
analysis, developing one-page summaries and scorecards of analysis
results, standardizing some key values for assumptions, and creating an
independent and flexible organization to provide guidance and develop
standards.

                 United States Government Accountability Office

May 2005

PAPERWORK REDUCTION ACT

New Approach May Be Needed to Reduce Government Burden on Public

[IMG]

What GAO Found

Governmentwide, agency CIOs generally reviewed information collections and
certified that they met the standards in the act. However, GAO's analysis
of 12 case studies at the Internal Revenue Service (IRS) and the
Departments of Veterans Affairs, Housing and Urban Development, and Labor
showed that CIOs certified collections even though support was often
missing or partial (see table). For example, in nine of the case studies,
agencies did not provide support, as the law requires, for the standard
that the collection was developed by an office with a plan and resources
to use the information effectively. Because OMB instructions do not ask
explicitly for this support, agencies generally did not address it.
Further, although the law requires agencies both to publish notices in the
Federal Register and to otherwise consult with the public, agencies
governmentwide generally limited consultation to the publication of
notices, which generated little public comment. Without appropriate
support and public consultation, agencies have reduced assurance that
collections satisfy the standards in the act.

Processes outside the PRA review process, which are more rigorous and
involve greater public outreach, have been set up by IRS and the
Environmental Protection Agency (EPA), whose missions involve numerous
information collections and whose management is focused on minimizing
burden. For example, each year, IRS subjects a few forms to highly
detailed, in-depth analyses, including extensive outreach to the public
affected and the information users. IRS reports that this
process-performed on forms that have undergone CIO review and received OMB
approval-has reduced burden by over 200 million hours since 2002. In
contrast, for the 12 case studies, the CIO review process did not reduce
burden. Without rigorous evaluative processes, agencies are unlikely to
achieve the PRA goal of minimizing burden while maximizing utility.

Support Provided by Agencies for Paperwork Reduction Act Standards in 12
Case Studies Support provided Standards: The information collection-
Totala Yes Partial No

               Is necessary for the proper performance of agency  12 6   6  0 
                                                      functions.           
                                 Avoids unnecessary duplication.  11 2   2  7 
                   Reduces burden on the public, including small  12 5   7  0 
                                                       entities.           
            Uses language that is understandable to respondents.  12 1   0 11 
              Will be compatible with respondents' recordkeeping  12 3   0  9 
                                                      practices.           
            Indicates period for which records must be retained.   6 3   3  0 
           Gives required information (e.g., whether response is  12 4   8  0 
                                                     mandatory).           
              Was developed by an office with necessary plan and  11 2   0  9 
                                                      resources.           
             Uses appropriate statistical survey methodology (if   1 1   0  0 
                                                    applicable).           
                Makes appropriate use of information technology.  12 8   4  0 
                                                           Total 101 35 30 36 

Source: Paperwork Reduction Act, Pub. L. 104-13, 109 Stat. 173-4, sec.
3506(c)(3).

aThe total is not always 12 because not all certifications applied to all
collections. United States Government Accountability Office

[IMG]

March 2005

UNFUNDED MANDATES

Views Vary About Reform Act's Strengths, Weaknesses, and Options for
Improvement

What GAO Found

The parties GAO contacted provided a significant number of comments about
UMRA, specifically, and federal mandates, generally. Their views often
varied across and within the five sectors we identified (academic/think
tank, public interest advocacy, business, federal agencies, and state and
local governments). Overall, the numerous strengths, weaknesses and
options for improvement identified during the review fell into several
broad themes, including UMRA-specific issues such as coverage and
enforcement, among others, and more general issues about the design,
funding, and evaluation of federal mandates. First, UMRA coverage was, by
far, the most frequently cited issue by parties from the various sectors.
Parties across most sectors that provided comments said UMRA's numerous
definitions, exclusions, and exceptions leave out many federal actions
that may significantly impact nonfederal entities and should be revisited.
Among the most commonly suggested options were to expand UMRA's coverage
to include a broader set of actions by limiting the various exclusions and
exceptions and lowering the cost thresholds, which would make more federal
actions mandates under UMRA. However, a few parties, primarily from the
public interest advocacy sector, viewed UMRA's narrow coverage as a
strength that should be maintained.

Second, parties from various sectors also raised a number of issues about
federal mandates in general. In particular, they had strong views about
the need for better evaluation and research of federal mandates and more
complete estimates of both the direct and indirect costs of mandates on
nonfederal entities. The most frequently suggested option to address these
issues was more post-implementation evaluation of existing mandates or
"look backs." Such evaluations of the actual performance of mandates could
enable policymakers to better understand mandates' benefits, impacts and
costs among other issues. In turn, developing such evaluation information
could lead to the adjustment of existing mandate programs in terms of
design and/or funding , perhaps resulting in more effective or efficient
programs.

Going forward, the issue of unfunded mandates raises broader questions
about assigning fiscal responsibilities within our federal system. Federal
and state governments face serious fiscal challenges both in the short and
longer term. As GAO reported in its February 2005 report entitled 21st
Century Challenges: Reexamining the Base of the Federal Government

(GAO-05-325SP), the long-term fiscal challenges facing the federal budget
and numerous other geopolitical changes challenging the continued
relevance of existing programs and priorities warrant a national debate to
review what the government does, how it does business and how it finances
its priorities. Such a reexamination includes considering how
responsibilities for financing public services are allocated and shared
across the many nonfederal entities in the U.S. system as well.

                 United States Government Accountability Office

Highlights of GAO-05-12, a report to congressional requesters

The E-Government Act (E-Gov Act) of 2002 was enacted to promote the use of
the Internet and other information technologies to improve government
services for citizens, internal government operations, and opportunities
for citizen participation in government.

The act directs the Office of Management and Budget (OMB) and federal
agencies to take specific actions to promote electronic government. GAO
was asked to review the implementation status of major provisions from
Titles I and II of the act, which include provisions covering a wide range
of activities across the federal government.

GAO is making recommendations to OMB regarding implementation of the act
in the areas of e-government approaches to crisis preparedness, contractor
innovation, and federally funded research and development, to help ensure
that the act's objectives are achieved.

In commenting on a draft of this report, officials from the Department of
Homeland Security, General Services Administration, and OMB generally
agreed with its content and recommendations.

December 2004

ELECTRONIC GOVERNMENT

Federal Agencies Have Made Progress Implementing the E-Government Act of
2002

In most cases, OMB and federal agencies have taken positive steps toward
implementing provisions of Titles I and II of the E-Gov Act that GAO
reviewed. For example, OMB established the Office of E-Government,
designated its Assistant Director for Information Technology (IT) and
E-Government as the office's Administrator in April 2003, and published
guidance to federal agencies on implementing the act in August 2003. Apart
from general requirements applicable to all agencies (which GAO did not
review), in most cases, OMB and designated federal agencies have taken
action to address the act's requirements within stipulated time frames.
For example, OMB established the Interagency Committee on Government
Information in June 2003, within the deadline prescribed by the act. The
committee is to develop recommendations on the categorization of
government information and public access to electronic information.
Similarly, in most cases where deadlines are not specified, OMB and
designated federal agencies have either fully implemented the provisions
or demonstrated positive action toward implementation. For example, in May
2003, the E-Government Administrator issued a memorandum detailing
procedures for requesting funds from the E-Government Fund, although the
act did not specify a deadline for this action. As stipulated by the act,
the E-Government Fund is to be used to support projects that enable the
federal government to expand its ability to conduct activities
electronically.

Although the government has made progress in implementing the act, the
act's requirements have not always been fully addressed. In several cases,
actions taken do not satisfy the requirements of the act or no significant
action has been taken. In particular, OMB has not ensured that specified
activities have taken place regarding e-government approaches to crisis
preparedness (a study and follow-up response), contractor innovation
(establishment of a program), and federally funded research and
development (support of an information repository and Web site). In these
cases, either the actions OMB has taken do not fully address the act's
provisions, or OMB has not yet made key decisions that would allow actions
to take place. Until these issues are addressed, the government may be at
risk of not fully achieving the objective of the E-Government Act to
promote better use of the Internet and other information technologies to
improve government services and enhance opportunities for citizen
participation in government.

www.gao.gov/cgi-bin/getrpt?GAO-05-12.

To view the full product, including the scope and methodology, click on
the link above. For more information, contact Linda D. Koontz at (202)
512-6240 or [email protected].

Highlights of GAO-04-637, a report to the Chairman, Senate Subcommittee on
Oversight of Government Management, the Federal Workforce, and the
District of Columbia

The Unfunded Mandates Reform Act of 1995 (UMRA) was enacted to address
concerns about federal statutes and rules that require state, local, and
tribal governments or the private sector to expend resources to achieve
legislative goals. UMRA generates information about the nature and size of
potential federal mandates to assist Congress and agency decision makers
in their consideration of proposed legislation and rules. However,
concerns about actual or perceived federal mandates continue. To provide
information and analysis regarding UMRA's implementation, GAO was asked to
(1) describe the applicable procedures, definitions, and exclusions under
UMRA for identifying federal mandates in statutes and rules, (2) identify
statutes and final rules that contained federal mandates under UMRA, and
(3) provide examples of statutes and final rules that were not identified
as federal mandates, but that affected parties might perceive as "unfunded
mandates," and the reasons these statutes and rules were not federal
mandates under UMRA. GAO focused on statutes enacted and final rules
issued in 2001 and 2002 to address the second and third objectives.

May 2004

UNFUNDED MANDATES

Analysis of Reform Act Coverage

UMRA generally requires congressional committees and the Congressional
Budget Office (CBO) to identify and estimate the costs of federal mandates
contained in proposed legislation and federal agencies to do so for
federal mandates contained in their rules. Identification of mandates is a
complex process with multiple definitions, exclusions, and cost
thresholds. Also, some legislation and rules may be enacted or issued via
procedures that do not trigger UMRA reviews.

In 2001 and 2002, 5 of 377 statutes enacted and 9 of 122 major or
economically significant final rules issued were identified as containing
federal mandates at or above UMRA's thresholds. Of the other federal
actions in those 2 years, at least 43 statutes and 65 rules contained new
requirements on nonfederal parties that might be perceived as "unfunded
mandates." For 24 of those statutes and 26 of those rules, CBO or federal
agencies had determined that the estimated direct costs or expenditures
would not meet or exceed applicable thresholds. For the remaining examples
of statues, most often UMRA did not require a CBO review prior to their
enactment. The remaining rules most often did not trigger UMRA because
they were issued by independent regulatory agencies. Despite the
determinations made under UMRA, some statutes and rules not triggering
UMRA's thresholds appeared to have potential financial impacts on affected
nonfederal parties similar to those of the actions that were identified as
containing mandates at or above the act's thresholds.

Proposed Legislation Must Pass Multiple Steps to Be Identified as
Containing Federal Mandates at or Above UMRA'sCost Thresholds

Provision is contained in authorizing legislation reported by an
authorizing committee and not added after initial CBO UMRA review.

Automatic CBO Review Provision is not one of seven UMRA exclusions.

Provision is an enforceable duty on state, local, or tribal governments or
the private sector, and it is not an UMRA exception.

Direct cost estimate is feasible.

www.gao.gov/cgi-bin/getrpt?GAO-04-637. Source: GAO.

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].

Highlights of GAO-03-929, a report to congressional requesters

Under Executive Order 12866, the Office of Management and Budget's Office
of Information and Regulatory Affairs (OIRA) reviews hundreds of agency
rules each year before they are published in the Federal Register. Those
reviews can have a significant effect on a broad array of public policies.
GAO was asked to (1) describe OIRA's review process and any changes in its
policies or processes in recent years, (2) provide detailed information
about rules submitted by nine health, safety, or environmental agencies
that were returned, withdrawn, or changed at OIRA's suggestion, and (3)
describe how OIRA decided that certain existing rules merited high
priority review.

GAO recommends that the OMB Director build on recent improvements that
have been made in the transparency of the OIRA review process. In
particular, GAO recommends that agencies be instructed to document
substantive changes made at OIRA's suggestion to draft rules submitted for
review whenever they occur, not just changes that OIRA recommended during
formal reviews.

OMB said the factual foundations of our report were well grounded but
disagreed with most of our recommendations, saying that the report had not
demonstrated the need or desirability of changing the agency's existing
level of transparency.

www.gao.gov/cgi-bin/getrpt?GAO-03-929.

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

September 2003

RULEMAKING

OMB's Role in Reviews of Agencies' Draft Rules and the Transparency of
Those Reviews

The formal process by which OIRA reviews agencies' proposed and final
rules is essentially unchanged since Executive Order 12866 was issued in
1993. However, there have been several changes in OIRA's policies in
recent years, including increased use of public letters explaining why
rules were returned to the agencies and prompting the development of new
rules, increased emphasis on economic analysis, stricter adherence to the
90-day time limit for OIRA review, and improvements in the transparency of
the OIRA review process (although some elements of that process are still
unclear). Underlying many of these changes is a shift in how recent OIRA
administrators view the office's role in the rulemaking process-from
"counselor" to "gatekeeper." OIRA sometimes reviews drafts of rules before
they are formally submitted, and OIRA has said it can have its greatest
influence on agencies' rules during this informal review period. However,
OIRA contends that agencies need only document the changes made to rules
during what are sometimes very brief formal review periods.

Because about 400 rules were changed, returned, or withdrawn during the
1-year period that GAO examined, the review focused on 85 rules from the
nine health, safety, or environmental agencies with five or more such
rules. OIRA significantly affected 25 of those 85 rules. The Environmental
Protection Agency's rules were most often significantly changed, and
almost all of the returned rules were from the Department of
Transportation. OIRA's suggestions appeared to have at least some effect
on almost all of the 25 rules' potential costs and benefits or the
agencies' estimates of those costs and benefits. Outside parties contacted
OIRA before or during its formal review regarding 11 of the 25 rules that
OIRA significantly affected. In 7 of these 11 cases, at least some of
OIRA's recommendations were similar to those of the outside parties, but
we could not determine whether those contacts influenced OIRA's actions.
The agencies' docket files did not always provide clear and complete
documentation of the changes made during OIRA's review or at OIRA's
suggestion, as required by the executive order. However, some agencies
clearly documented these changes, sometimes including changes suggested
during OIRA's informal reviews.

OIRA did not publicly disclose how it determined that 23 of the 71 rules
nominated by the public for change or elimination in 2001 merited high
priority review. As explained to GAO, OIRA desk officers made the initial
determinations regarding issues with which they were familiar, subject to
the approval by OIRA management. The Mercatus Center at George Mason
University made most of the nominations overall and in the high priority
group. Regulatory agencies or OIRA have at least begun to address the
issues raised in many of the 23 suggestions. OIRA's 2002 nomination and
review process was different from the 2001 process in several respects
(e.g., broader request for reforms, more responses from more commentors,
prioritization of the suggestions being made by the agencies, and clearer
discussion of process and criteria).

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