Inspectors General: Proposals to Strengthen Independence and	 
Accountability (20-JUN-07, GAO-07-1021T).			 
                                                                 
H.R. 928, Improving Government Accountability Act, contains	 
proposals intended to enhance the independence of the inspectors 
general and to create a Council of the Inspectors General on	 
Integrity and Efficiency. This testimony provides information and
views about the specific proposals based on GAO's prior work. We 
believe that effective, ongoing coordination of the federal	 
oversight efforts of GAO and the Inspectors General (IG) is more 
critical than ever, due to the challenges and risks currently	 
facing our nation including our immediate and long-term fiscal	 
challenges, increasing demands being made for federal programs,  
and changing risk. Close strategic planning and ongoing 	 
coordination of audit efforts between GAO and the IGs would help 
to enhance the effectiveness and impact of work performed by	 
federal auditors. In May of this year the Comptroller General	 
hosted a meeting with the IGs for the principal purpose of	 
improving the coordination of federal oversight between the IGs  
and GAO. Working together, and in their respective areas, GAO and
the IGs can leverage each other's work and provide valuable input
on the broad range of high-risk programs and management 	 
challenges across government.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-1021T					        
    ACCNO:   A71085						        
  TITLE:     Inspectors General: Proposals to Strengthen Independence 
and Accountability						 
     DATE:   06/20/2007 
  SUBJECT:   Accountability					 
	     Audit authority					 
	     Audit oversight					 
	     Audit reports					 
	     Auditors						 
	     Federal agencies					 
	     Federal legislation				 
	     Government job appointments			 
	     Inspectors general 				 
	     Interagency relations				 
	     Intergovernmental relations			 
	     Internal controls					 
	     Investigations by federal agencies 		 
	     Investigations into federal agencies		 
	     Proposed legislation				 
	     Government agency oversight			 

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GAO-07-1021T

   

     * [1]Auditor Independence

          * [2]Provisions of H.R. 928

               * [3]Terms of office and removal for cause
               * [4]IG budget submission
               * [5]IG Council
               * [6]IG offices as separate agencies
               * [7]IG investigative and law enforcement authorities

          * [8]GAO and IG Coordination

     * [9]Enclosure I: Inspectors General Appointed by the President
     * [10]Enclosure II: Inspectors General Appointed by Agency Heads
     * [11]Related GAO Products

          * [12]Order by Mail or Phone

Testimony

Before the Subcommittee on Government Management, Organization and
Procurement, Committee on Oversight and Government Reform, House of
Representatives

United States Government Accountability Office

GAO

For Release on Delivery
Expected at 2:00 p.m. EST
Wednesday, June 20, 2007

INSPECTORS GENERAL

Proposals to Strengthen Independence and Accountability

Statement of Jeffrey C. Steinhoff
Managing Director Financial Management
and Assurance

GAO-07-1021T

Mr. Chairman and Members of the Subcommittee:

I am pleased to be here today to discuss current legislative proposals
intended to enhance the independence and operations of the inspectors
general (IG) offices. The IG offices play a key role in federal agency
oversight. They were created to prevent and detect fraud, waste, abuse,
and mismanagement in agencies' programs and operations; conduct and
supervise audits and investigations; and recommend policies to promote
economy, efficiency, and effectiveness. In the past almost 3 decades since
passage of the landmark IG Act of 1978, the IGs have played a very
important role in enhancing government accountability and protecting the
government against fraud, waste, abuse, and mismanagement.

The IG Act recognized IG independence as one of the most important
elements of the overall effectiveness of the IG function. In fact, much of
the IG Act, as amended (IG Act), provides specific protections to IG
independence that are unprecedented for an audit and investigative
function located within the organization being reviewed. These protections
were necessary due in large part to the unusual reporting requirements of
the IGs who are both subject to the general supervision and budget
processes of the agencies they audit while at the same time being expected
to provide independent reports of their work externally to the Congress.
Many of the provisions in the Improving Government Accountability Act,
H.R. 928,^1 seek to further strengthen the independence of the IGs to help
ensure their ability to effectively carry out their dual internal and
external reporting roles.

Today, I will discuss (1) the key principles of auditor independence, (2)
the proposals in H.R. 928 regarding IG independence and operations and the
establishment of a statutory council of IGs, and (3) additional matters
concerning IG independence and the coordination of federal oversight from
GAO's recent IG work.

My testimony today draws on provisions of the IG Act, professional
auditing standards, prior GAO reports, and information reported by the
IGs. In May 2006, the Comptroller General hosted a panel discussion on
many of the issues to be discussed today. I will draw upon information
gained from the panel to address several issues in H.R. 928.

^1Improving Government Accountability Act, H.R. 928, 110^TH Cong.
(February 8, 2007).

Auditor Independence

Key to a consideration of H.R. 928 are the principles of auditor
independence and how they apply in the IG community. Independence is the
cornerstone of professional auditing. Without independence, an
organization cannot do independent audits. Lacking this critical
attribute, an organization's work might be classified as studies, research
reports, consulting reports, or reviews, but not independent audits.
Government Auditing Standards^2 state, "In all matters relating to the
audit work, the audit organization and the individual auditor, whether
government or public, must be free from personal, external, and
organizational impairments to independence, and must avoid the appearance
of such impairments to independence. Auditors and audit organizations must
maintain independence so that their opinions, findings, conclusions,
judgments, and recommendations will be impartial and viewed as impartial
by objective third parties with knowledge of the relevant information."
[emphasis added].

           o Personal independence applies to individual auditors at all
           levels of the audit organization, including the head of the
           organization. Personal independence refers to the auditor's
           ability to remain objective and maintain an independent attitude
           in all matters relating to the audit, as well as the auditor's
           ability to be recognized by others as independent. The auditor
           needs an independent and objective state of mind that does not
           allow personal bias or the undue influence of others to override
           the auditor's professional judgments. This attitude is also
           referred to as intellectual honesty. The auditor must also be free
           from direct financial or managerial involvement with the audited
           entity or other potential conflicts of interest that might create
           the perception that the auditor is not independent.
           o External independence refers to both the auditor's and the audit
           organization's freedom to make independent and objective judgments
           free from external influences or pressures. Examples of
           impairments to external independence include restrictions on
           access to records, government officials, or other individuals
           needed to conduct the audit; external interference over the
           assignment, appointment, compensation, or promotion of audit
           personnel; restrictions on funds or other resources provided to
           the audit organization that adversely affect the audit
           organization's ability to carry out its responsibilities; or
           external authority to overrule or to inappropriately influence the
           auditors' judgment as to appropriate reporting content.
           o Organizational independence refers to the audit organization's
           placement in relation to the activities being audited.
           Professional auditing standards have different criteria for
           organizational independence for external and internal audit
           organizations. The IGs, in their statutory role of providing
           oversight of their agencies' operations, represent a unique hybrid
           of external and internal reporting responsibilities.

^2GAO, Government Auditing Standards, January 2007 Revision,
[32]GAO-07-162G , Sections 3.02 and 3.03 (Washington, D.C.: January 2007).

           External audit organizations are organizationally independent
           under professional auditing standards when they are
           organizationally placed outside of the entity under audit. In
           government, this is achieved when the audit organization is in a
           different level of government (for example, federal auditors
           auditing a state government program) or different branch of
           government within the same level of government (for example,
           legislative auditors, such as GAO, auditing an executive branch
           program). External auditors also report externally, meaning that
           their audit reports are disseminated to and used by third parties.

           Internal audit organizations are defined as being organizationally
           independent under professional auditing standards if the head of
           the audit organization (1) is accountable to the head or deputy
           head of the government entity or to those charged with governance,
           (2) reports the audit results both to the head or deputy head of
           the government entity and to those charged with governance, (3) is
           located organizationally outside the staff or line-management
           function of the unit under audit, (4) has access to those charged
           with governance, and (5) is sufficiently removed from political
           pressures to conduct audits and report findings, opinions, and
           conclusions objectively without fear of political reprisal. Under
           internal auditing standards,^3 internal auditors are generally
           limited to reporting internally to the organization that they
           audit, except when certain conditions are met.

           The IG offices, having been created to perform a unique role in
           overseeing federal agency operations, have characteristics of both
           external audit organizations and internal audit organizations. For
           example, the IGs have external reporting requirements consistent
           with the reporting requirements for external auditors while at the
           same time being part of their respective agencies. IGs also have a
           dual reporting responsibility to the Congress and the agency head.
           The IG Act also contains many unique provisions to provide for
           independence under this model.
			  
^3The Institute of Internal Auditors, Professional Practices Framework,
International Standards for the Professional Practice of Internal Auditing
(Altamonte Springs, Florida: March 2007).

           Under the IG Act, the IGs (1) may perform any audit or
           investigation without interference from the agency head and others
           except under specific conditions, (2) report to and receive
           general supervision only from the heads or deputy heads of their
           agencies and no other agency officials, and (3) have direct and
           immediate access to their agency heads. The IGs' external
           reporting requirements in the IG Act include reporting the results
           of their work in semiannual reports to the Congress. Under the IG
           Act, the IGs are to report their findings without alteration by
           their respective agencies, and these reports are to be made
           available to the general public.

           The IG Act also directs the IGs to keep the agency head and the
           Congress fully and currently informed by these semiannual reports,
           and otherwise, of any fraud and other serious problems, abuses,
           and deficiencies relating to the administration of programs and
           operations administered or financed by their agencies. Also, the
           IGs are required to report particularly serious or flagrant
           problems, abuses, or deficiencies immediately to their agency
           heads, who are required to transmit the IG's report to the
           Congress within 7 calendar days. Finally, depending on the IG's
           appointment process, either the President or the agency head must
           provide the Congress notification as to the reasons for the
           removal of any IG.

           A key provision in the IG Act regarding IG independence is for
           certain IGs to be appointed by the President with the advice and
           consent of the Senate. This appointment is required to be without
           regard to political affiliation and is to be based solely on an
           assessment of a candidate's integrity and demonstrated ability.
           These presidentially appointed IGs can only be removed from office
           by the President, who must communicate the reasons for removal to
           both houses of the Congress. Government auditing standards
           recognize this external appointment/removal of the IG as a key
           independence consideration for IGs as external audit
           organizations.

           Organizational independence differs between the offices of
           presidentially appointed IGs and agency-appointed IGs. In 1988,
           the IG Act was amended to establish additional IG offices in
           designated federal entities (DFE) named in the legislation.
           Generally, these IGs have the same authorities and
           responsibilities as those IGs established by the original 1978
           Act, but they have a clear distinction in their appointment--they
           are appointed and removed by their entity heads rather than by the
           President and are not subject to Senate confirmation. In addition,
           the DFE IGs do not have the requirement that their appointment is
           to be without regard to political affiliation and based solely on
           integrity and demonstrated ability. The DFE IGs, while they are
           covered by many of the same provisions of the IG Act as the IGs
           appointed by the President with Senate confirmation, are more
           closely aligned to independence standards for internal auditors
           rather than external auditors. At the same time, Government
           Auditing Standards recognize that additional statutory safeguards
           exist for DFE IG independence for reporting externally. These
           safeguards include establishment by statute, communication of the
           reasons for removal of the head of an audit organization to the
           cognizant legislative oversight body, statutory protections that
           prevent the audited entity from interfering with an audit,
           statutory requirements for the audit organization to report to a
           legislative body on a recurring basis, and statutory access to
           records and documents related to agency programs.

           We believe that the differences in the appointment and removal
           processes between presidentially appointed IGs and those appointed
           by the agency head do result in a clear difference in the
           organizational independence structures of the IGs. Those offices
           with IGs appointed by the President are more closely aligned with
           the independence standards for external audit organizations, while
           those offices with IGs appointed by the agency head are more
           closely aligned with the independence standards for internal audit
           organizations. However, as I mentioned earlier, the IGs represent
           a unique hybrid of external auditing and internal auditing in
           their oversight roles for the federal agencies.
			  
			  Provisions of H.R. 928

           In May 2006, at the request of the Senate Committee on Homeland
           Security and Governmental Affairs, the Comptroller General
           convened a panel of recognized leaders of the federal audit and
           investigative community to discuss many of the same proposals that
           are in H.R. 928, Improving Government Accountability Act. We drew
           the panel from the current IG leadership, former IGs,
           knowledgeable former and current federal managers, representatives
           of academia and research institutions, a former member of the
           Congress, and congressional staff, including the congressional
           staff person closely involved in the development of the 1978 Act.
           Among other issues, the panel members discussed terms of office
           and removal for cause, submission of IG budgets, a proposed IG
           Council, and investigative and law enforcement authorities for
           agency-appointed IGs. The panel members did not discuss the
           proposal in H.R. 928 calling for establishing IG offices as
           separate agencies for purposes related to personnel matters. In
           September 2006 we issued the results of the panel discussion.^4

           I would now like to highlight the overall perspectives of the
           panel in the context of H.R. 928.
			  
			    Terms of office and removal for cause

           Depending on the nature of their appointment, IGs serve at the
           pleasure of either the President or their agency head. The IGs
           appointed by the President with Senate confirmation may be removed
           only by the President, while the IGs appointed by their agency
           heads may be removed or transferred from their office only by the
           agency head. However, in both types of removal, the reasons must
           be communicated to the Congress after the action has taken place.

           H.R. 928 includes a provision to specify a 7-year term of office
           for each IG with more than one term possible. In addition, the
           bill provides a removal-for-cause provision whereby an IG may be
           removed from office prior to the expiration of his or her term
           only on the basis of permanent incapacity, inefficiency, neglect
           of duty, malfeasance, conviction of a felony, or conduct involving
           moral turpitude.

           The majority of the panel participants did not favor statutorily
           establishing a fixed term of office for IGs. The reasons included
           the panelists' belief that the proposal could disrupt current
           agency/IG relationships and that agency flexibility is needed to
           remove a poor-performing IG if necessary. On the other hand, a
           statutory term of office and removal for specified causes was
           viewed positively by some panelists as a means of enhancing
           independence by relieving some of the immediate pressure
           surrounding removal. The panel members did generally support a
           statutory requirement to notify the Congress in writing in advance
           of removing an IG, with an explanation of the reason for removal.
           The participants cautioned that this procedure should consist only
           of notification, without building in additional steps or actions
           in the removal process.
			  
			    IG budget submission

           The IG Act Amendments of 1988 require the President's budget to
           include a separate appropriation account for each of those IGs who
           are appointed by the President or otherwise specified by the act.
           In this context, IG budget requests are generally part of each
           agency's budget process and are submitted as a separate budget
           line item to the Office of Management and Budget (OMB) and the
           Congress as a part of each agency's overall budget. In contrast,
           most IGs appointed by their agency heads do not have a separate
           appropriation account.
			  
^4GAO, Highlights of the Comptroller General's Panel on Federal Oversight
and the Inspectors General, [33]GAO-06-931SP (Washington, D.C.: Sept. 11,
2006).

           H.R. 928 would give the IGs an opportunity to justify their
           funding requests directly to OMB and the Congress in addition to
           being a part of their agencies' budget processes. In those cases
           where the IGs make their budget requests directly to OMB and the
           Congress, H.R. 928 would also require a comparison of the budget
           requests submitted by the IGs to the funds requested by the agency
           heads for their IGs included in the Budget of the United States
           Government. The panel members had mixed views about whether IGs
           should submit their budget requests directly to OMB and the
           Congress. The panel believed that the current system of separate
           budget line items for the presidential IGs works well and that all
           IGs should have separate budget line items. This is an issue the
           Congress would need to consider in the context of the broader
           budget and appropriations process.
			  
			    IG Council

           In accordance with Executive Order No. 12805 issued in 1992, the
           IGs meet and coordinate as two groups. The IGs appointed by the
           President and confirmed by the Senate are members of the
           President's Council on Integrity and Efficiency (PCIE), and the
           IGs appointed by their agency heads are members of the Executive
           Council on Integrity and Efficiency (ECIE). Both the PCIE and ECIE
           are chaired by the OMB Deputy Director for Management.

           H.R. 928 provides for a combined IG Council with duties and
           functions similar to the current PCIE and ECIE, including (1)
           identifying, reviewing, and discussing areas of weakness and
           vulnerability in federal programs and operations with respect to
           fraud, waste, and abuse; (2) developing plans for coordinated
           governmentwide activities that address these problems and promote
           economy and efficiency in federal programs and operations; and (3)
           developing policies and professional training to maintain a corps
           of well-trained and highly skilled IG personnel. The bill also
           provides for a separate appropriation account for the IG Council.

           In a prior report^5 we recommended establishing an IG Council in
           statute with a designated funding source. We believe that by
           providing a statutory basis for the council's roles and
           responsibilities, the permanence of the council could be
           established and the ability to take on more sensitive issues could
           be strengthened. In contrast, the participants in our May 2006
           panel discussion had mixed views about statutorily establishing a
           joint IG Council but did favor establishing a funding mechanism.
			  
^5GAO, Inspectors General: Enhancing Federal Accountability,
[34]GAO-04-117T (Washington, D.C.: Oct. 8, 2003).

           H.R. 928 also provides for an Integrity Committee of the IG
           Council to review and investigate allegations of IG misconduct.
           The Integrity Committee's function would be similar to that of the
           current Integrity Committee of the PCIE and ECIE, which is charged
           with receiving, reviewing, and referring for investigation, where
           appropriate, allegations of wrongdoing against IGs and members of
           the IG's senior staff operating with the IG's knowledge.
           Currently, the Integrity Committee receives its authority under
           Executive Order 12993, signed in 1996, and is chaired by a
           representative of the FBI. Other members of the committee are the
           Special Counsel of the Office of Special Counsel, the Director of
           the Office of Government Ethics, and three IGs representing the
           PCIE and the ECIE. Cases investigated by members of the Integrity
           Committee may be forwarded to the PCIE and ECIE Chairperson for
           further action.

           We believe that H.R. 928 would provide the IG councils--formed
           currently through executive order--with needed statutory
           permanence, and we continue to support formalizing a combined
           council in statute, along with the Integrity Committee. We also
           strongly support the concept behind the Integrity Committee. We
           believe it is imperative that the independence of the Integrity
           Committee be preserved and view this legislation as being directed
           to ensure permanence of this important function and not to change
           the basic underpinnings.
			  
			    IG offices as separate agencies

           In order to better attract and retain highly qualified IG
           employees, H.R. 928 would provide the IGs with personnel authority
           separate and apart from that of their agencies. To accomplish
           this, the bill would consider each IG office to be a separate
           agency for purposes of implementing certain provisions in Title 5
           of the United State Code dealing with employment, retention,
           separation, and retirement.

           We have concerns about this proposal. First, we are concerned
           about the inherent inefficiencies in enforcing a splitting of
           administrative processes currently often being shared by agencies
           and their IGs. Secondly, in providing such authorities to the IGs,
           there could be a great disparity in how this would be implemented
           by each IG office. The IG community has suggested that, as an
           alternative, the IGs could seek legislative authorization to apply
           to the Office of Personnel Management (OPM) for certain personnel
           authorities. We believe that if implementation is properly
           coordinated through the PCIE and ECIE, the IGs' proposal
           represents a good alternative and would address the intent of H.R.
           928.

           H.R. 928 also covers all provisions in Title 5 relating to the
           Senior Executive Service including receiving pay increases and
           bonuses. Issues over IG pay and bonuses have arisen over the past
           few years due to recent requirements^6 that rates of pay for the
           federal Senior Executive Service (SES) be based on performance
           evaluations as part of a certified performance management system.
           IGs who are subject to these requirements must therefore receive
           performance evaluations in order to qualify for an increase to
           their pay. The IGs are provided general supervision by their
           agency heads in accordance with the IG Act. However, independence
           issues arise if the agency head is evaluating IG performance when
           that evaluation is used as a basis for an increase in the IG's pay
           or for providing a bonus. As a result, some IGs have effectively
           had their pay capped without the ability to receive pay increases
           or bonuses.

           The majority of panel participants believed that the pay structure
           for IGs needs to be addressed. The discussion emphasized the
           importance of providing comparable compensation for IGs as
           appropriate, while maintaining the IGs' independence in reporting
           the results of their work, and providing them with performance
           evaluations that could be used to justify higher pay. However,
           responses to IGs' receiving performance bonuses were mixed, mainly
           due to uncertainty about the overall framework that would be used
           to evaluate performance and make decisions about bonuses. We
           believe that an independent framework could be established through
           the PCIE and ECIE, in cooperation with OPM, to conduct performance
           evaluations of the IGs.
			  
			    IG investigative and law enforcement authorities

           The IG Act has been amended by subsequent legislation to provide
           IGs appointed by the President with law enforcement powers to make
           arrests, obtain and execute search warrants, and carry firearms.
           The IGs appointed by their agency heads were not included under
           this amendment but may obtain law enforcement authority by
           applying to the Attorney General for deputation on a case-by-case
           basis. In addition, the Program Fraud Civil Remedies Act of 1986^7
           provides agencies with IGs appointed by the President with the
           authority to investigate and report false claims and recoup losses
           resulting from fraud below $150,000. The agencies with IGs
           appointed by their agency heads do not have this authority. Also,
           the IG Act provides all IGs with the authority to subpoena any
           information, documents, reports, answers, records, accounts,
           papers, and other data and documentary evidence necessary to
           perform the functions of the IG Act. This subpoena authority does
           not specifically address electronically stored information or
           other forms of data.
			  
^6National Defense Authorization Act, Pub. L. No. 108-136, 117 Stat. 1392,
1638 (Nov. 24, 2003).

           H.R. 928 would allow IGs appointed by their agency heads to apply
           to the Attorney General for full law enforcement authority instead
           of having to renew their authority on a case-by-case basis or
           through a blanket authority that must be renewed after an
           established period of time. The bill would also provide the
           designated federal entities with IGs appointed by their agency
           heads the authority under the Program Fraud Civil Remedies Act to
           address and prosecute false claims and recoup losses resulting
           from fraud. In addition, the bill would provide the authority for
           all IGs to require, by subpoena, information and data in any
           medium, including electronically stored information as well as any
           "tangible thing."

           Panel participants overwhelmingly supported the provisions to (1)
           allow IGs appointed by their agency heads to apply to the Attorney
           General for full law enforcement authority instead of having to
           renew their authority on a case-by-case basis or through a blanket
           authority, (2) provide designated federal entities with IGs by
           their agency heads the authority under the Program Fraud Civil
           Remedies Act to investigate and report false claims and recoup
           losses resulting from fraud, and (3) define IG subpoena power to
           include any medium of information and data.
			  
			  GAO and IG Coordination

           In May of this year the Comptroller General hosted a meeting with
           the IGs for the principal purpose of improving the coordination of
           federal oversight between the IGs and GAO. We believe that
           effective, ongoing coordination of the federal audit and oversight
           efforts of GAO and the IGs is more critical than ever, due to the
           challenges and risks currently facing our nation, including our
           immediate and long-term fiscal challenges, increasing demands
           being made for federal programs, and changing risks. Closer
           strategic planning and ongoing coordination of audit efforts
           between GAO and the IGs would help to enhance the effectiveness
           and impact of work performed by federal auditors. Working together
           and in our respective areas of expertise, GAO and the IGs can
           leverage each other's work and provide valuable input on the broad
           range of high-risk programs and management challenges across
           government that need significant attention and reform.
			  
^731 U.S.C. SS 3801-3812.

           We will continue in our coordination with the IGs to help achieve
           our mutual goals of providing the oversight needed to help ensure
           that the federal government is transparent, economical, efficient,
           effective, ethical, and equitable. Significant coordination has
           been and is occurring between GAO and the IGs on agency-specific
           issues and cross-cutting issues. The Comptroller General in
           testifying^8 on the 25th anniversary of the IG Act, suggested, in
           light of this increased need for a well-coordinated federal audit
           community, the creation of a more formal mechanism going forward
           for a governmentwide council. In addition, panel participants
           recognized a critical need for a governmentwide council to address
           broad accountability issues among GAO, the IGs, and OMB. The
           structure of this council could be similar in concept to the Joint
           Financial Management Improvement Program (JFMIP), whose
           principals^9 meet at their discretion to discuss issues of mutual
           concern to promote governmentwide financial management. An
           accountability council could share knowledge and coordinate
           activities to enhance the overall effectiveness of government
           oversight and to preclude duplicate actions.

           A good example of a strong formalized partnership between the GAO
           and the IGs is in the area of financial auditing. Under the Chief
           Financial Officers Act of 1990, as amended, the IGs at the 24
           agencies covered by the act are responsible for the audits of
           their agencies' financial statements. In meeting these
           responsibilities, most IGs have contracted with independent public
           accountants to conduct the audits either entirely or in part. In
           some cases, GAO conducts the audits. GAO is responsible for the
           U.S. government's consolidated financial statement audit, which is
           based largely on the results of the agency-level audits. GAO and
           the IGs have agreed on a common audit methodology, the GAO-PCIE
           Financial Audit Manual, which is used by all auditors of federal
           financial statements, whether the IG, an independent public
           accounting firm, or GAO. In addition, we have established formal
           ongoing coordination and information-sharing throughout the audit
           process so that both the IGs and GAO can successfully fulfill
           their respective responsibilities in an effective and efficient
           manner.

^8GAO, Inspectors General: Enhancing Federal Accountability,
[35]GAO-04-117T (Washington, D.C.: Oct. 8, 2003).

^9The Comptroller General, the Director of OMB, the Secretary of the
Treasury, and the Director of the Office of Personnel Management

           In closing, under the landmark IG Act, the IGs have continued to
           be an essential component of the government accountability
           framework and the contributions of the IGs have been most
           noteworthy. IG independence is critical to the effectiveness of
           the IG offices in carrying out their unique roles of overseeing
           federal agencies. Independence not only depends on organizational
           characteristics, but also on the personal independence of the
           individual appointed to the office and this individual's freedom
           from external factors that can impair independence. The IG must
           maintain this independence while reporting to two
           organizations--its agency and the Congress. This task requires an
           IG to maintain a prudent balance between loyalty to the agency and
           responsibility for conducting objective and independent audits and
           investigations as required by the IG Act. We believe that a number
           of the provisions in H.R. 928 would help to enhance IG
           independence and effectiveness, and we would be pleased to assist
           the Subcommittee as it considers this legislation.

           This completes my formal statement. Mr. Chairman, I would be
           pleased to answer any questions that you or the Subcommittee
           members may have at this time.
			  
			  Enclosure I: Inspectors General Appointed by the President

           Fiscal Year 2006 Appropriated Budgets and Actual FTEs
			  
      Federal departments and agencies                   Budgets   FTEs 
1  Department of Health and Human Services         $ 222,000,000  1,445 
2  Department of Defense                             206,772,130  1,370 
3  Treasury IG for Tax Administration                131,953,140    838 
4  Department of Housing and Urban Development       104,940,000    646 
5  Social Security Administration                     91,476,000    608 
6  Department of Homeland Security                    82,187,000    520 
7  Department of Agriculture                          80,336,000    598 
8  Department of Labor                                71,445,000    450 
9  Department of Veterans Affairs                     70,174,000    464 
10 Department of Justice                              68,000,000    411 
11 Department of Transportation                       61,874,000    419 
12 Environmental Protection Agency                    50,241,000    337 
13 Department of Education                            48,510,000    288 
14 General Services Administration                    42,900,000    293 
15 Department of Energy                               41,580,000    262 
16 Department of the Interior                         38,541,000    261 
17 Agency for International Development               36,640,000    172 
18 National Aeronautics and Space Administration      32,400,000    203 
19 Department of State                                30,945,000    186 
20 Federal Deposit Insurance Corporation              30,690,000    125 
21 Department of Commerce                             22,467,000    122 
22 Small Business Administration                      20,361,080     95 
23 Office of Personnel Management                     18,216,000    131 
24 Department of the Treasury                         16,830,000    116 
25 Tennessee Valley Authority                         14,700,000     90 
26 Nuclear Regulatory Commission                       8,308,000     49 
27 Railroad Retirement Board                           7,124,000     53 
28 Corporation for National and Community Service      5,940,000     23 
29 Export-Import Bank                                  1,000,000      0 
30 Central Intelligence Agency                                na     na 
      Totals                                         $1,658,550,350 10,575 

           Source: PCIE and ECIE.

           na - Information not available.

           Fiscal Year 2006 Appropriated Budgets and Actual FTEs
			  
			  
Enclosure II: Inspectors General Appointed by Agency Heads

      Federal departments and agencies               Budgets  FTEs 
1  United States Postal Service                 $158,000,000   916 
2  Special IG for Iraq Reconstruction             34,000,000   115 
3  Amtrak                                         16,984,000    87 
4  National Science Foundation                    11,500,000    62 
5  Federal Reserve Board                           5,118,740    33 
6  Government Printing Office                      4,950,200    23 
7  Pension Benefit Guaranty Corporation            4,038,990    21 
8  Peace Corps                                     3,064,000    19 
9  Federal Communications Commission               2,597,903    20 
10 Securities and Exchange Commission              2,507,300    10 
11 Legal Services Corporation                      2,507,000    18 
12 Library of Congress                             2,457,000    17 
13 National Archives and Records Administration    2,200,000    16 
14 Smithsonian Institution                         1,938,932    14 
15 Equal Employment Opportunity Commission         1,810,307    11 
16 National Credit Union Administration            1,764,926     8 
17 Election Assistance Commission                  1,600,000     1 
18 National Labor Relation Board                   1,080,327     7 
19 Farm Credit Administration                        998,248     5 
20 Federal Housing Finance Board                     959,271     4 
21 Federal Trade Commission                          917,500     5 
22 Corporation for Public Broadcasting               834,264     9 
23 Commodity Futures Trading Commission              795,000     4 
24 Federal Election Commission                       691,584     5 
25 National Endowment for the Humanities             589,600     5 
26 U.S. International Trade Commission               521,205     1 
27 Appalachian Regional Commission                   476,000     3 
28 Federal Maritime Commission                       469,885     2 
29 National Endowment for the Arts                   402,000     3 
30 Federal Labor Relations Authority                 284,487     1 
31 Consumer Product Safety Commission                241,270     2 
32 Denali Commission                                    na^a     1 
33 U.S. Capitol Police                                  na^b  na^b 
34 Office of Director of National Intelligence          na^b  na^b 
      Totals                                       $266,299,939 1,448 

           Source: PCIE and ECIE.

           na - Information not available.

           aIG budget is not determined separately from the agency's budget.

           bIG offices established in 2006.
			  
			  Related GAO Products

           Inspectors General: Activities of the Department of State Office
           of Inspector General. [13]GAO-07-138 . Washington, D.C.: March 23,
           2007.

           Highlights of the Comptroller General's Panel on Federal Oversight
           and the Inspectors General. [14]GAO-06-931SP . Washington, D.C.:
           September 11, 2006.

           United Nations: Funding Arrangements Impede Independence of
           Internal Auditors. [15]GAO-06-575 . Washington, D.C.: April 25,
           2002.

           Activities of the Treasury Inspector General for Tax
           Administration. [16]GAO-05-999R . Washington, D.C.: September 27,
           2005.

           Activities of the Amtrak Inspector General. [17]GAO-05-306R .
           Washington, D.C.: March 4, 2005.

           Kennedy Center: Stronger Oversight of Fire Safety Issues,
           Construction Projects, and Financial Management Needed.
           [18]GAO-05-334 . Washington, D.C.: April 22, 2005.

           Inspectors General: Enhancing Federal Accountability.
           [19]GAO-04-117T . Washington, D.C.: October 8, 2003.

           Department of Health and Human Services: Review of the Management
           of Inspector General Operations. [20]GAO-03-685 . Washington,
           D.C.: June 10, 2003.

           Inspectors General: Office Consolidation and Related Issues.
           [21]GAO-02-575 . Washington, D.C.: August 15, 2002.

           Inspectors General: Comparison of Ways Law Enforcement Authority
           Is Granted. [22]GAO-02-437 . Washington, D.C.: May 22, 2002

           Inspectors General: Department of Defense IG Peer Reviews.
           [23]GAO-02-253R . Washington, D.C.: December 21, 2001.

           HUD Inspector General: Actions Needed to Strengthen Management and
           Oversight of Operation Safe Home. [24]GAO-01-794 . Washington,
           D.C.: June 29, 2001.

           U.S. Export-Import Bank: Views on Inspector General Oversight.
           [25]GAO-01-1038R . Washington, D.C.: September 6, 200l.
			
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[37]www.gao.gov/cgi-bin/getrpt?GAO-07-1021T .

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Highlights of [38]GAO-07-1021T , testimony before the Subcommittee on
Government Management, Organization and Procurement, Committee on
Oversight and Government Reform, House of Representatives

June 20, 2007

INSPECTORS GENERAL

Proposals to Strengthen Independence and Accountability

H.R. 928, Improving Government Accountability Act, contains proposals
intended to enhance the independence of the inspectors general and to
create a Council of the Inspectors General on Integrity and Efficiency.
This testimony provides information and views about the specific proposals
based on GAO's prior work.

We believe that effective, ongoing coordination of the federal oversight
efforts of GAO and the IGs is more critical than ever, due to the
challenges and risks currently facing our nation including our immediate
and long-term fiscal challenges, increasing demands being made for federal
programs, and changing risk. Close strategic planning and ongoing
coordination of audit efforts between GAO and the IGs would help to
enhance the effectiveness and impact of work performed by federal
auditors.

In May of this year the Comptroller General hosted a meeting with the IGs
for the principal purpose of improving the coordination of federal
oversight between the IGs and GAO. Working together, and in their
respective areas, GAO and the IGs can leverage each other's work and
provide valuable input on the broad range of high-risk programs and
management challenges across government.

IG independence is one of the most important elements of the overall
effectiveness of the IG function. The IG Act, as amended, (IG Act)
provides specific protections to IG independence that are necessary due in
large part to the unusual reporting requirements of the IGs who are both
subject to the general supervision and budget processes of the agencies
they audit while at the same time being expected to provide independent
reports of their work externally to the Congress.

The IGs, in their statutory role of providing oversight of their agencies'
operations, represent a unique hybrid of external and internal reporting
responsibilities. IG offices have characteristics of both external audit
organizations and internal audit organizations by reporting the results

of their work both externally to the Congress and internally to the agency

head. A key provision of the IG Act regarding IG independence is for
certain IGs to be appointed by the President with the advice and consent
of the Senate. Other IGs established by amendments to the IG Act, are
appointed by their agency heads.

In May 2006, at the request of the Senate Committee on Homeland Security
and Governmental Affairs, the Comptroller General convened a panel of
recognized leaders in the federal government and in academia to discuss
many of the same proposals that are in H.R. 928. Many of the provisions

in H.R. 928, Improving Government Accountability Act, address IG
independence. Today we are providing our views and the views of the panel
on the following provisions: (1) providing IGs with specified terms of
office and limiting IG removal for specified cause, (2) changes to how IGs
submit their budget requests, (3) a statutorily established IG Council,
(4) defining

IG offices as separate agencies for purposes of personnel authority, and

(5) providing additional investigative and law enforcement authorities.

The majority of the panelists did not favor a term of office, but they did
favor advanced notification to the Congress of the reasons for removal.
Regarding IG budgets, the panelists had mixed views about the IGs sending
their budget requests directly to OMB and the Congress, but supported
separate budget line items for all IGs. In a prior report, GAO recommended
establishing an IG Council in statute with a designated funding source and
strongly supports the proposal in H.R. 928. In contrast, the panelists had
mixed views about statutorily establishing a joint IG Council but did
favor establishing a funding mechanism. While the panel did not address
the proposal to formalize the Integrity Committee in statute, GAO strongly
supports this provision and believes it is important that the independence
and work of the Integrity Committee be preserved. We do not support the
proposal to define IG offices as separate agencies, but do support the
intent of the bill in addressing IG pay and personnel issues. Finally, the
panel overwhelmingly supported the provisions in H.R. 928 related to IG
investigative and law enforcement authorities.

References

Visible links
  13. http://www.gao.gov/cgi-bin/getrpt?GAO-07-138
  14. http://www.gao.gov/cgi-bin/getrpt?GAO-06-931SP
  15. http://www.gao.gov/cgi-bin/getrpt?GAO-06-575
  16. http://www.gao.gov/cgi-bin/getrpt?GAO-05-999R
  17. http://www.gao.gov/cgi-bin/getrpt?GAO-05-306R
  18. http://www.gao.gov/cgi-bin/getrpt?GAO-05-334
  19. http://www.gao.gov/cgi-bin/getrpt?GAO-04-117T
  20. http://www.gao.gov/cgi-bin/getrpt?GAO-03-685
  21. http://www.gao.gov/cgi-bin/getrpt?GAO-02-575
  22. http://www.gao.gov/cgi-bin/getrpt?GAO-02-437
  23. http://www.gao.gov/cgi-bin/getrpt?GAO-02-253R
  24. http://www.gao.gov/cgi-bin/getrpt?GAO-01-794
  25. http://www.gao.gov/cgi-bin/getrpt?GAO-01-1038R
  26. http://www.gao.gov/
  27. http://www.gao.gov/
  28. http://www.gao.gov/fraudnet/fraudnet.htm
  29. mailto:[email protected]
  30. mailto:[email protected]
  31. mailto:[email protected]
  32. http://www.gao.gov/cgi-bin/getrpt?GAO-07-162G
  33. http://www.gao.gov/cgi-bin/getrpt?GAO-06-931SP
  34. http://www.gao.gov/cgi-bin/getrpt?GAO-04-117T
  35. http://www.gao.gov/cgi-bin/getrpt?GAO-04-117T
  37. http://www.gao.gov/cgi-bin/getrpt?GAO-07-1021T
  38. http://www.gao.gov/cgi-bin/getrpt?GAO-07-1021T
*** End of document. ***