p
Inspectors General: Activities of the Department of State Office
of Inspector General (23-MAR-07, GAO-07-138).
GAO was asked to review the Department of State Office of
Inspector General (State IG) including its (1) organization,
budget levels, and accomplishments; (2) audit and inspection
coverage of the department; (3) role of inspections in the
oversight of the department; (4) quality assurance process
including assurance of independence; and (5) coordination of
State IG investigations with the State Department's Bureau of
Diplomatic Security. GAO obtained information from State IG
reports, interviews, and documentation for a sample of
inspections.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-07-138
ACCNO: A67248
TITLE: Inspectors General: Activities of the Department of State
Office of Inspector General
DATE: 03/23/2007
SUBJECT: Audit oversight
Audit reports
Auditing standards
Information technology
Inspection
Inspectors general
Internal audits
Internal controls
Investigations by federal agencies
Quality control
Reporting requirements
Standards
Policies and procedures
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GAO-07-138
* [1]Results in Brief
* [2]Scope and Methodology
* [3]Background
* [4]State IG Organization, Budgets, and Reported Accomplishments
* [5]State IG Audit and Inspection Coverage of High-Risk Areas an
* [6]Fundamental Differences between Audits and Inspections
* [7]State IG Quality Assurance Process, Including Assurance over
* [8]IG Coordination with State Department Investigations
* [9]Conclusions
* [10]Recommendations for Executive Action
* [11]Agency Comments and Our Response
* [12]Appendix I: A Comparison of Fiscal Year 2001 Budgetary Resou
* [13]Appendix II: A Comparison of Fiscal Year 2005 Budgetary Reso
* [14]Appendix III: Comments from the Inspector General, Departmen
* [15]Appendix IV: GAO Contact and Staff Acknowledgments
* [16]GAO Contact
* [17]Acknowledgments
* [18]Order by Mail or Phone
Report to Congressional Requesters
United States Government Accountability Office
GAO
March 2007
INSPECTORS GENERAL
Activities of the Department of State Office of Inspector General
GAO-07-138
Contents
Letter 1
Results in Brief 2
Scope and Methodology 7
Background 8
State IG Organization, Budgets, and Reported Accomplishments 12
State IG Audit and Inspection Coverage of High-Risk Areas and Management
Challenges 16
Fundamental Differences between Audits and Inspections 19
State IG Quality Assurance Process, Including Assurance over Independence
20
IG Coordination with State Department Investigations 25
Conclusions 27
Recommendations for Executive Action 28
Agency Comments and Our Response 29
Appendix I A Comparison of Fiscal Year 2001 Budgetary Resources for
Selected Inspectors General and Agencies 32
Appendix II A Comparison of Fiscal Year 2005 Budgetary Resources for
Selected Inspectors General and Agencies 34
Appendix III Comments from the Inspector General, Department of State 36
Appendix IV GAO Contact and Staff Acknowledgments 43
Tables
Table 1: State IG Audit and Inspection Coverage of High-Risk Areas and
Management Challenges for Fiscal Years 2004 through 2005 18
Table 2: State Department Positions Held by Management Officials before
and after Serving in an Acting State IG Capacity from January 24, 2003,
through May 2, 2005 24
Figures
Figure 1: State IG Organization 13
Figure 2: Selected State Department and State IG Resources for Fiscal
Years 2001 through 2005 14
Figure 3: Distribution of State IG Onboard Staff, September 30, 2005 15
Abbreviations
DS Bureau of Diplomatic Security
ECIE Executive Council on Integrity and Efficiency
FISMA Federal Information Security Management Act of 2002
FTE Full-time-equivalent
IG Inspector General
IG Act Inspector General Act of 1978, as amended
IRS CI Internal Revenue Service Criminal Investigation
IT information technology
OMB Office of Management and Budget
PCIE President's Council on Integrity and Efficiency
State IG Department of State Office of Inspector General
TIGTA Treasury Inspector General for Tax Administration
TVA Tennessee Valley Authority
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.
United States Government Accountability Office
Washington, DC 20548
March 23, 2007
The Honorable Tom Lantos
Chairman
The Honorable Ileana Ros-Lehtinen
Ranking Member
Committee on Foreign Affairs
The Honorable F. James Sensenbrenner, Jr.
House of Representatives
This report responds to your request that we review the operations and
activities of the Department of State Office of Inspector General (State
IG), including the audit, inspection, and investigative functions of the
office. The State IG was established by section 413 of the Omnibus
Diplomatic Security and Antiterrorism Act of 1986,^1 which amended the
Inspector General Act of 1978 (IG Act),^212 to include an independent
office within the Department of State with a mission to prevent and detect
waste, fraud, abuse and mismanagement, and to improve the efficiency,
effectiveness, economy, integrity, and accountability of the department.
The IG Act created independent and objective Offices of Inspectors General
to conduct and supervise audits and investigations. This report responds
to your request that we review the operations and activities of the
Department of State Office of Inspector General (State IG), including the
audit, inspection, and investigative functions of the office. The State IG
was established by section 413 of the Omnibus Diplomatic Security and
Antiterrorism Act of 1986, which amended the Inspector General Act of 1978
(IG Act), to include an independent office within the Department of State
with a mission to prevent and detect waste, fraud, abuse and
mismanagement, and to improve the efficiency, effectiveness, economy,
integrity, and accountability of the department. The IG Act created
independent and objective Offices of Inspectors General to conduct and
supervise audits and investigations.
The State IG provides oversight of the Department of State, the
Broadcasting Board of Governors, and the foreign affairs community through
audits, inspections, and investigations. The State IG performs financial
and performance audits that cover a wide range of the department's
operations, financial management, contracts and grants, property
management, and procurement. The State IG also performs inspections of the
department's approximately 260 bureaus and posts around the world to
evaluate whether policy goals and objectives are being achieved, U.S.
interests are effectively represented, posts are operating in accordance
with U.S. foreign policy, and security vulnerabilities are identified that
could compromise national security and threaten the safety and well-being
of U.S. personnel and facilities The State IG provides oversight of the
Department of State, the Broadcasting Board of Governors, and the foreign
affairs community through audits, inspections, and investigations. The
State IG performs financial and performance audits that cover a wide range
of the department's operations, financial management, contracts and
grants, property management, and procurement. The State IG also performs
inspections of the department's approximately 260 bureaus and posts around
the world to evaluate whether policy goals and objectives are being
achieved, U.S. interests are effectively represented, posts are operating
in accordance with U.S. foreign policy, and security vulnerabilities are
identified that could compromise national security and threaten the safety
and well-being of U.S. personnel and facilities domestically and abroad.
Also, specific allegations or other information indicating possible
violations of law or regulation are investigated by IG investigators,
supported by experts from other IG offices.
^1Pub. L. No. 99-399, Title IV, S 413, 100 Stat. 853, 867-68 (Aug. 27,
1986).
^2Pub. L. No. 95-452, 92 Stat. 1101 (Oct. 12, 1978), codified as amended
at 5 U.S.C. App.
To review the activities of the State IG, our specific objectives were to
provide information regarding (1) organization, budget levels, and
reported accomplishments; (2) audit and inspection coverage of the
department; (3) the role of inspections in the State IG's oversight of the
department; (4) the quality assurance process used by the State IG,
including assurance over independence; and (5) the coordination of the
State IG's investigative activity with the department's Bureau of
Diplomatic Security. We obtained information about the State IG's budget
and staffing levels by analyzing budget data reported by the Office of
Management and Budget (OMB), and information regarding reported
accomplishments in the State IG's semiannual reports to the Congress. We
conducted interviews with State IG officials and reviewed internal
documents to obtain an understanding of the State IG's allocation of
resources and its quality assurance processes. We also reviewed the State
IG's documentation for a sample of inspection reports.
Results in Brief
Over fiscal years 2001 through 2005, the State IG's budget has increased
from $29 million to $32 million, which, when adjusted for inflation,
represents an increase of approximately 1 percent in constant dollars.
During the same period, the overall State Department budget has increased
from $13.7 billion to $22.4 billion, an increase of approximately 50
percent in constant dollars adjusted for inflation. When compared with
other federal IG budgets, State IG's relative ranking has declined in
terms of its ratio of budgetary resources as a percentage of agency budget
resources between fiscal years 2001 and 2005. During these same years, the
State IG's authorized full-time equivalent (FTE) staffing level went from
289 to 314, with staff on board at 191 at the end of fiscal year 2005. In
distributing its resources, the State IG's greatest use of staff during
fiscal year 2005 was in performing inspections, which involved 38 percent
of total staff, with audits representing 28 percent of staff, and
investigations representing 9 percent. The remaining 25 percent of staff
provided administrative, personnel and legal support, and other
specialized services. The State IG's reported accomplishments over fiscal
years 2001 through 2005 include the issuance of 461 inspection reports and
210 audit reports, and the closing of 252 investigative cases. The State
IG also reported $75 million in financial accomplishments and $58.6
million in judicial recoveries and court-ordered fines and restitutions
during that same period.
The State IG provides oversight coverage of the areas designated as
high-risk by GAO and of the significant management challenges identified
by the IG through a combination of audits and inspections, with a heavy
emphasis on inspections and to a lesser extent on audits. To illustrate,
the State IG relies almost exclusively on inspections to provide coverage
for the following four areas identified both as high-risk areas and as
management challenges: human resources, counterterrorism, public
diplomacy, and information security. In the high-risk areas and management
challenges of physical security the State IG provides coverage mostly
through inspections, but includes audits that address specific contracts
and procurements for the purchase of equipment and services. The high-risk
areas and management challenges of financial management are covered by the
State IG's financial audits and by a related component in each post
inspection. As a comparison with other IG offices, in fiscal year 2005,
the State IG's ratio of inspections to audits was over two to one, while
the statutory IGs across the federal government had a combined ratio of
one inspection to every ten audits. Due to the significance of the
high-risk areas covered largely by inspections, the State IG would benefit
by reassessing the mix of audit and inspection coverage of those areas.
There are fundamental differences between inspections and audits. For
example, inspections and audits are typically conducted under separate
standards with different basic requirements. IGs are required by the IG
Act to follow Government Auditing Standards when performing audits.^3 In
contrast, there are no statutorily mandated standards for inspections,
although IGs are encouraged by the President's Council on Integrity and
Efficiency (PCIE) and the Executive Council on Integrity and Efficiency
(ECIE)^4 to follow the councils' jointly created standards, Quality
Standards for Inspections, when conducting inspections. By design, audits
performed under Government Auditing Standards are subject to more in-depth
requirements for levels of evidence and documentation supporting the
findings than are inspections performed under the Quality Standards for
Inspections. Also, auditing standards require external quality reviews of
audits, or peer reviews, on a 3-year cycle, while inspection standards do
not call for any such external reviews.
^35 U.S.C. App. S 4(b)(1).
^4The PCIE is composed principally of the presidentially appointed and
Senate-confirmed IGs, and the ECIE is composed principally of IGs
appointed by the heads of designated federal entities defined by the IG
Act. Both were established by Executive Order to coordinate and enhance
the work of the IGs.
State IG Organization, Budgets, and Reported Accomplishments
The State IG has distinct quality assurance processes that cover, in
varying degrees, its three major lines of work: audits, inspections, and
investigations. The State IG has received "clean" opinions on its audit
practice from the two external peer reviews it has received since 2001.
The State IG has also implemented regular internal reviews of its audit
process. For investigations, the State IG obtained the results of its
first external quality review in November 2005. The results included a
conclusion that the State IG's investigative function was in full
compliance with PCIE Quality Standards for Investigations and the Attorney
General Guidelines For Offices Of Inspector General With Statutory Law
Enforcement Authority. The external review also suggested improvements,
which are being addressed by the IG. An external quality review, or peer
review, of the State IG's inspections is not required under the inspection
standards. However, during our audit, the State IG established an internal
program to review the quality of the inspection practice to determine
whether that work was done in accordance with the PCIE and ECIE inspection
standards. The internal review did not include information technology (IT)
inspections, and a report of the internal review results was not yet
available at the time we completed our work.
Independence is an overarching element critical to the quality and
credibility of all the work of the State IG and is at the heart of
Government Auditing Standards and the IG Act. In addition, the Quality
Standards for Federal Offices of Inspector General issued by the PCIE and
ECIE to provide an overall quality framework for all the activities of the
IG offices states that independence is a critical element of an IG's
obligation to be objective and free of conflicts of interest whether
factual or perceived. Likewise, inspection standards also require that the
inspection organization and each individual inspector be free both in fact
and appearance from impairments to independence. The above standards
recognize that personal impairments to independence can result from having
responsibility for managing an entity or decision making that could affect
operations of the entity or program being reviewed.
Two continuing areas of concern that we have with the independence of the
State IG involve (1) the temporary appointment of State Department
management personnel to head the State IG office in an acting IG capacity
and who subsequently return to management positions, and (2) the rotation
of Foreign Service staff to lead IG inspections, including many who, along
with other IG staff, move to positions in department management offices.
For example, Foreign Service officials with the rank of ambassador or at
the ambassador level typically lead the inspections work in accordance
with the State IG's policy. Such staffing arrangements represent potential
impairments to independence and to the appearance of independence under
all applicable professional standards. We raised concerns about these
independence issues in reports as far back as 1978^5 and 1982.^6
The IG Act established an independent and objective Office of Inspector
General to conduct and supervise audits and investigations to prevent and
detect fraud, waste, abuse, and mismanagement in the State Department.^7
In addition to the State IG, the Bureau of Diplomatic Security (DS) of the
State Department's Office of Management performs investigations for the
department as part of its worldwide law enforcement functions and security
mission. However, there is no functional agreement between DS and the
State IG for coordinating their investigative activities. Both the State
IG and DS investigators have responsibility for pursuing cases of passport
and visa fraud that may involve State Department employees. Other agencies
with investigative functions apart from their IGs, such as at the U.S.
Postal Service and the Internal Revenue Service, have formal arrangements
between the agency and the IG generally making the IG responsible for
internal investigations of agency employees to help ensure not only the
independence of the investigations, but also to prevent duplicative
reviews. The State IG does not have such an agreement with DS regarding
its internal investigations of department employees. Such an agreement
could help to provide independent investigations of fraud with regard to
State Department personnel, promote an efficient use of limited resources,
and prevent duplication of efforts.
Due to the risk and significance of the areas of the State Department's
operations that are largely being covered by inspections, and in light of
the increasing level of funding provided to the department, we recommend
in this report that the State IG reassess the proper mix of audit and
inspection coverage with input from key stakeholders in the department and
the Congress. In addition, to provide for a more complete quality review,
we recommend that the State IG include inspections performed by the State
IG's Office of Information Technology (IT) in its quality review process.
Also, to address our concerns regarding independence, we recommend that
the State IG work with the Secretary of State to develop a succession
planning policy that would prohibit career Foreign Service officers or
other department management staff from heading the State IG office in an
acting IG capacity, and would remove reliance on career Foreign Service
staff, and others who routinely rotate to management offices, to lead
inspections. We also recommend that the State IG work with DS, the State
Department Office of Management, and the Secretary of State to develop a
formal written agreement to help ensure the independence and coordination
of internal department investigations.
^5GAO, State Department's Office of Inspector General, Foreign Service,
Needs to Improve Its Internal Evaluation Process, ID-78-19 (Washington,
D.C.: Dec. 6, 1978).
^6GAO, State Department's Office of Inspector General Should Be More
Independent and Effective, AFMD-83-56 (Washington, D.C.: June 2, 1982).
^75 U.S.C. App. S 2.
In comments on a draft of this report the State IG agreed to include all
IG inspections, including inspections performed by IT, in its quality
review process and to work with DS and others to develop a written
agreement delineating the areas of responsibility for department
investigations. The State IG disagreed with our recommendation to reassess
the mix of audit and inspection coverage and stated that little can be
accomplished by reassessment if there are not more auditors and more
resources to perform audits. In addition, the State IG does not disagree
with our concerns about Foreign Service officers temporarily heading the
IG office in an acting capacity, but believes that our recommendation goes
too far by limiting the pool of eligible candidates to personnel without
State Department management careers. Also, the State IG believes that
ambassadors who serve as team leaders for inspections raise a concern
about the appearance of independence but that this concern is
significantly outweighed by the overriding need for people with the
experience and expertise of ambassadors to lead inspections.
We continue to recommend that the State IG reassess the mix of audits and
inspections as a way for the IG to define the appropriate level of
oversight, reallocate current resources as appropriate, and justify any
additional resources that may be necessary. In addition, we continue to
recommend that the State IG better safeguard the independence requirements
of his office through succession planning that excludes career department
management officials from consideration for acting State IG positions. We
also continue to recommend that the State IG inspections not be led by
career Foreign Service officials, ambassadors, or other staff who could
impair the independence of the inspection team or create the appearance of
impaired independence. As team members rather than team leaders, such
staff could provide the benefits of their experience and expertise without
jeopardizing the inspection team's independence.
Scope and Methodology
We obtained the budget authority and the staffing levels at the State IG
office and the budget authority of the State Department for fiscal years
2001 through 2005 by analyzing OMB budget data for those years. Additional
information on staff levels and resource distribution were obtained from
the State IG to identify trends over this period. We identified audit,
inspection, and investigative accomplishments reported by the State IG in
semiannual reports to the Congress for fiscal years 2001 through 2005. We
did not audit or otherwise verify the dollar amounts of the financial
accomplishments reported by the State IG.
To review the IG's audit and inspection oversight coverage of the State
Department, we compared the contents of the audits and inspections
completed by the State IG in fiscal years 2004 and 2005 with the high-risk
areas designated by GAO and with the management and performance challenges
identified by the State IG. To review the investigative coverage, we used
the investigative accomplishments reported by the State IG to show the
level of investigative activity.
To obtain information about the quality control process used by the State
IG, we obtained an understanding of the internal quality review process
used by the IG. We also obtained reports of the most recent external
quality peer reviews of the State IG's audit and investigative activities
performed by other IG offices. Due to the lack of a peer review
requirement for inspections, we compared the State IG's inspections with
relevant standards related to independence, quality control, and evidence
from the PCIE and ECIE Quality Standards for Inspections, 2005 revision,
as well as the State IG's implementing policies and procedures for these
standards. We also compared relevant inspection standards with Government
Auditing Standards, and compared additional activities of the State IG
related to independence with PCIE and ECIE Quality Standards for Offices
of Inspector General, revised in October 2003. Specifically, we gained an
understanding of the types of documentation and evidence supporting
inspection recommendations through a judgmental sample of 10 inspection
reports selected from a total of 112 inspection reports issued over fiscal
years 2004 through 2005 that were not classified for national security
purposes, and that did not include inspections of the Board of
Broadcasting Governors. We did not test the reasonableness of the
inspection recommendations or otherwise re-perform the inspections. Our
sample covered different months, various team leaders, and different State
Department locations.
Due to the concerns of the State IG about the confidentiality of
information sources used to complete the IG's inspections, we agreed to
limit the types of documentation subject to our review. Officials for the
IG stated that the documents not provided for our review were memorandums
with information from confidential sources. We base our conclusions on the
documents and information that we reviewed related to our sample of
inspection reports. In those examples where inspection report
recommendations lacked documented support, we verified that this was not
due to any such limitation to our review.
To review the coordination of the State IG with DS, we obtained the annual
reports issued by DS and additional information on cases of visa fraud
that were investigated during fiscal years 2004 through 2005 from DS
reports and a prior GAO report.^8 We also compared the coordination of
investigations at the State Department with the practices of other IG
offices at the U.S. Postal Service and the Internal Revenue Service.
We obtained comments on a draft of this report from the State IG which are
reprinted in their entirety in appendix III. A summary of the State IG's
written comments and our response are presented on page 29. We performed
our audit from November 2005 through October 2006, in accordance with U.S.
generally accepted government auditing standards.
Background
The inspection function within the State Department originated in 1906,
when the Congress statutorily created a consular inspection corps of five
officers to inspect the activities of the U.S. consulates at least once
every 2 years.^9 In 1924, the Congress established the Foreign Service to
replace the Diplomatic and Consular Service, and required the officers of
the newly created Foreign Service to inspect diplomatic and consular
branches, as provided under the 1906 Act.^10 The provisions of the 1906
and 1924 acts were repealed by the Foreign Service Act of 1946,^11 which
required the Secretary of State to assign Foreign Service officers to
inspect the diplomatic and consular establishments of the United States at
least once every 2 years. In 1957, the State Department established an
Inspector General of Foreign Service, which carried out the inspections of
diplomatic and consular offices for the State Department. In 1961, the
Congress created a statutory Inspector General in the State Department
with duties separate from that of the Inspector General of Foreign
Service, which had been established by the State Department. The new
inspector general had the statutory responsibility to conduct reviews,
inspections, and audits of State Department economic and military
assistance programs and the activities of the Peace Corps.^12 Effective
July 1, 1978, the statutory IG office created in 1961 was abolished by law
and all of the duties of that office were statutorily transferred to the
Inspector General of Foreign Service.^13 The newly designated Inspector
General of Foreign Service was tasked with carrying out the foreign
assistance program review function and the inspections of diplomatic and
consular offices that had previously been conducted by the two separate
offices.
^8GAO, Border Security: More Emphasis on State's Consular Safeguards Could
Mitigate Visa Malfeasance Risks, [19]GAO-06-115 (Washington, D.C.: Oct. 6,
2005).
^9Pub. L. No. 83, ch. 1366, S 4, 34 Stat. 99, 100 (Apr. 5, 1906).
^10Pub. L. No. 135, ch. 182, S 10, 43 Stat. 140, 142 (May 24, 1924).
^11Pub. L. No. 724, ch. 957, S 681, 60 Stat. 999, 1018 (Aug. 13, 1946).
In 1978, GAO reviewed the operations of the Inspector General of Foreign
Service and determined that the IG's inspection reports lacked substance
because of the legal requirement for biennial inspections and the
exceedingly broad scope and thin coverage of each inspection.^14 GAO
recommended that the Congress substitute the requirement for an inspection
of each diplomatic and consular post at least every 2 years with a more
flexible review schedule. GAO also questioned the independence of Foreign
Service officers who were temporarily detailed to the IG's office and
recommended the elimination of this requirement provided by the Foreign
Service Act of 1946.
In 1980, the Congress again established a statutory IG, this time to act
as a centralized unit within the State Department to include the functions
of the previous IG of Foreign Service and to perform all audits,
inspections, and investigations. Section 209 of the Foreign Service Act of
1980 established the Inspector General of the Department of State and
Foreign Service and outlined the authority and functions of that position
in specific terms.^15 Section 209 patterned the State Department IG office
after similar offices in other agencies under the IG Act, but added
functions from the Foreign Service Act of 1946 specific to the State
Department. With regard to inspections, the Congress directed the IG to
"periodically (at least every 5 years) inspect and audit the
administration of activities and operations of each Foreign Service post
and each bureau and other operating units of the Department of State."
^12Pub. L. No. 87-195, S 624, 75 Stat. 424, 447 (Sept. 4, 1961).
^13Pub. L. No. 95-88, S 124, 91 Stat. 533, 541-42 (Aug. 3, 1977). Section
124 authorized the President to assign to the Inspector General of Foreign
Service all of the duties and responsibilities of the Inspector General of
Foreign Assistance, which he did by Executive Order 12066, June 29, 1978.
^14ID-78-19.
^15Pub. L. No. 96-465, Title I, ch. 2, S 209, 94 Stat. 2071, 2080 (Oct.
17, 1980).
In 1982, we reviewed the operations of the Inspector General for the
Department of State and Foreign Service.^16 In that report, we compared
the differences between the Foreign Service Act and the IG Act and noted
that the 5-year inspection cycle required by the Foreign Service Act led
to problems with the IG's effectiveness by limiting the ability to do
other work. In addition, our report expressed our persistent concerns
about independence. These concerns were due, in part, to the IG's
continued use of temporarily assigned Foreign Service officers and other
persons from operational units within the department to staff the IG
office. Our report also noted that the IG had not established a quality
review system to help ensure that the work of the office complied with
professional standards, and that the IG used staff from the State
Department's Office of Security, a unit of management, to conduct
investigations of fraud, waste, and abuse. We recommended that the
Secretary of State work with the IG to establish a permanent IG staff and
discontinue its reliance on temporary staff who rotate back to assignments
in the Foreign Service or management positions. We also recommended that
the Secretary and the IG establish an investigative capability within the
IG office to enable it to conduct its own investigations, and to transfer
qualified investigators from the Office of Security to the IG for this
work.
Reacting to concerns similar to those expressed in our 1982 report, the
Congress established an IG for the Department of State through amendments
to the IG Act in both 1985^17 and 1986.^18 These amendments designated the
State Department as an agency requiring an IG under the IG Act and
abolished the previous Office of Inspector General of State and Foreign
Service, which was created under section 209 of the Foreign Service Act of
1980. The 1986 Act authorized the State IG to perform all duties and
responsibilities, and to exercise the authorities, stated in section 209
of the Foreign Service Act and in the IG Act. The 1986 Act also prohibited
a career member of the Foreign Service from being appointed as the State
IG.
^16AFMD-83-56.
^17Pub. L. No. 99-93, S 150, 99 Stat. 405, 427 (Aug. 16, 1985).
^18Pub. L. No. 99-399, Title IV, S 413.
Since 1996, the Congress, through Department of State appropriations acts,
annually waives the language in section 209(a) of the Foreign Service Act
that calls for every post to be inspected every 5 years. The State IG
continues to inspect the department's approximately 260 posts and bureaus,
and international broadcasting installations throughout the world by
applying a risk-based approach. To illustrate, the State IG completed
inspections at 223 bureaus and posts over the 5-year period of fiscal
years 2001 through 2005. These inspections encompass a wide range of
objectives, which include reviewing whether department policy goals are
being achieved and whether the interests of the United States are being
represented and advanced effectively. In addition, the State IG performs
specialized security inspections and audits in support of the department's
mission to provide effective protection to its personnel, facilities, and
sensitive intelligence information. Therefore, while there is no
requirement as a result of the annual waiver that inspections be
performed, the State IG continues to conduct inspections as part of its
plan for oversight of the department, using a risk-based approach to
identify locations for inspections rather than the 5-year requirement.
Inspections are defined by the PCIE and ECIE^19 as a process that
evaluates, reviews, studies, and analyzes the programs and activities of
an agency for the purposes of providing information to managers for
decision making; making recommendations for improvements to programs,
polices, or procedures; and identifying where administrative action may be
necessary. Inspections may be used to provide factual and analytical
information; monitor compliance; measure performance; assess the
efficiency and effectiveness of programs and operations; share best
practices; and inquire into allegations of fraud, waste, abuse, and
mismanagement.
The IG Act requires the IGs to recommend policies, and to conduct,
supervise, or coordinate other activities, in addition to audits and
investigations, carried out by the department for the purpose of promoting
economy and efficiency, and preventing fraud and abuse in its programs and
operations.^20 These requirements of the IG Act are broad enough to cover
inspections, which are widely used by the IG community. According to the
IG community, inspections provide the benefits of a flexible mechanism for
optimizing resources, expanding agency coverage, and using alternative
review methods and techniques. In fiscal year 2005, across the federal
government, the statutory IGs issued a total of 443 inspection reports
compared to a total of 4,354 audit reports, a ratio of inspections to
audits of about 1 to 10. As a comparison, the State IG issued 99
inspection reports and 44 audit reports during fiscal year 2005, or a
ratio of inspections to audits of over 2 to 1.
^19The PCIE and ECIE make no distinction between inspections and
evaluations and include both in their definition.
State IG Organization, Budgets, and Reported Accomplishments
The State IG currently provides oversight of the Department of State, the
Broadcasting Board of Governors, and the foreign affairs community through
audits, inspections, and investigations. This work is led by the State
Department Inspector General, Deputy Inspector General, Assistant
Inspectors General for Audits; Inspections; Management, Policy, and
Planning; and Investigations, and a Director for Information Technology.
In addition, the State IG has four advisory and support offices, which are
the Office of Counsel, Congressional and Public Affairs, Senior Advisor
for Security and Intelligence, and Coordinator for Iraq and Afghanistan.
(See fig. 1.)
^205 U.S.C. App. S 4(a)(3).
Figure 1: State IG Organization
From fiscal year 2001 through 2005, the State IG's overall budget
authority went from $29 million to $32 million, which, when expressed in
constant dollars,^21 is an increase of approximately 1 percent. (See fig.
2.) Over the same period of time, the State Department's overall budget
authority increased from $13.7 billion in fiscal year 2001 to $22.4
billion in fiscal year 2005, an increase of approximately 50 percent in
constant dollars. When compared with other federal IG budgets, the State
IG's ranking in terms of percentage of total agency budgetary resources
decreased from eighth (0.21 percent of total agency budgetary resources)
to twelfth (0.14 percent of total agency budgetary resources) between
fiscal years 2001 and 2005. (See apps. I and II.) The department's
budgetary increases reflect, in part, initiatives in transformational
diplomacy, particularly in Iraq and Afghanistan, and substantial increases
in programs for counter narcotics, counterterrorism, embassy construction
and security, and IT. During the same time period, the State IG's
authorized FTE staff increased from 289 in fiscal year 2001 to 314 in
fiscal year 2005; however, during 2005, the IG limited the actual onboard
staffing to 191 of the 314 authorized FTEs due to budgetary constraints.
This represents a 16 percent reduction of onboard staff when compared to
the fiscal year onboard staffing level of 227 in fiscal year 2001. The
State IG has reported that its limited resources are further strained by
the significant growth in the number of department programs and grants
with mandated IG oversight and requests for joint activities with other
departments, agencies, and IG offices.
^21We adjusted for inflation using the OMB Gross Domestic Product (GDP)
inflator.
Figure 2: Selected State Department and State IG Resources for Fiscal
Years 2001 through 2005
For fiscal year 2005, the State IG Office distributed its 191 onboard
staff as follows: 38 percent of the staff performing inspections in the
Office of Inspections and in the Office of Information Technology, 28
percent in the Office of Audits, 9 percent in the Office of
Investigations, and the remaining 25 percent in support positions to
address administrative, personnel, legal and other specialized issues.
(See fig. 3.) This distribution shows the significant emphasis that the
State IG places on inspections in relation to either audits or
investigations.
Figure 3: Distribution of State IG Onboard Staff, September 30, 2005
Statutory IGs, including the State IG, are required by the IG Act to
summarize the activities and accomplishments of their offices and include
this information in semiannual reports provided for the Congress.^22 The
information includes the number of audit reports issued and the dollar
amount of questioned costs, unsupported costs, and funds to be put to
better use. As defined by the IG Act, questioned costs include alleged
violations of laws, regulations, contracts, grants, or agreements; costs
not supported by adequate documentation; or the expenditure of funds for
an intended purpose that was unnecessary or unreasonable. In addition,
unsupported costs are defined as costs that do not have adequate
documentation, and funds to be put to better use are defined as
inefficiencies in the use of agency funds identified by the IG. As an
illustration of funds to be put to better use, the State IG identified
weaknesses in the department's purchase card program that resulted in
untimely purchase card payments that precluded the department from earning
rebates from the purchase card provider.^23
225 U.S.C. App. S 5.
During fiscal years 2001 through 2005 the State IG reported that it issued
a total of 210 audit reports with total financial accomplishments of
approximately $75 million. This included $37.1 million in questioned costs
of which $17.9 million were unsupported costs, and $38 million in funds to
be put to better use. The investigative activity reported over the same
5-year period included 252 cases closed and financial accomplishments of
$29.4 million in judicial recoveries, $17.6 million in court-ordered
fines, and $11.5 million in court-ordered restitutions. In addition, the
State IG reported that its investigations resulted in 92 prosecutorial
referrals, 53 indictments, 52 convictions, and 42 criminal sentences.
Over the same 5-year period the State IG reported that it had issued 461
inspection reports. The State IG's semiannual reports include summarized
results of its inspection activity even though this information is not
specifically required by the IG Act. The results vary from identification
of weaknesses in operations to recommendations for proper implementation
of State Department policies. There were no significant monetary results
reported from the State IG's inspections.
State IG Audit and Inspection Coverage of High-Risk Areas and Management
Challenges
The State IG provides oversight coverage of the department primarily
through a combination of audits and inspections, with, as shown earlier, a
heavier emphasis on inspections. Although the Congress annually waives the
requirement to conduct inspections under section 209(a) of the Foreign
Service Act, State IG officials told us that State Department management
encourages the IG inspections and have found the results very significant
and useful. Therefore, the IG continues to plan for inspections on a
cyclical basis using a risk-based approach. As a result, over the 5-year
period of fiscal years 2001 through 2005, the IG completed inspections at
223 of the 260 department bureaus and posts.
^23State IG, Review of the Department of State's Overseas Purchase Card
Program, AUD/PPA-05-01 (Washington, D.C.: December 2004).
We also analyzed the State IG's coverage of the areas designated as high
risk by GAO and the significant management challenges identified by the
State IG. Since 1990, we have periodically reported on government
operations, including those of the State Department that we have
designated as high risk because of their greater vulnerabilities to fraud,
waste, abuse, and mismanagement. In addition, the IGs began the
identification of management challenges in 1997 at the request of
congressional members who asked the IGs to identify the most serious
management problems in their respective agencies. This began a yearly
process that continues as a result of the Reports Consolidation Act of
2000.^24 The act requires executive agencies, including the State
Department, to include their IGs' lists of significant management
challenges in their annual performance and accountability reports to the
President, OMB, and the Congress.
In our most recent reports of government high-risk areas issued in January
2003^25 and January 2005,^26 we identified seven such areas at the State
Department. These high-risk areas were also included in management
challenges identified by the State IG. (See table 1.) Each year the State
IG's Office of Inspections includes the management challenges identified
by the IG as areas of emphasis in inspections of the department's bureaus
or missions. Some areas of emphasis may be applicable only to embassies
and other missions, while other areas of emphasis may be applicable only
to domestic entities such as bureaus, offices, and other units.
In our review of the issues addressed by the State IG's audit and
inspection reports for fiscal years 2004 and 2005, we determined that the
State IG had provided oversight of all identified high-risk areas and
management challenges largely through inspections. The State IG inspectors
use a questionnaire during each inspection to compile the information
regarding the areas of emphasis including management challenges identified
by the IG. Each questionnaire can cover numerous areas of emphasis,
including several management challenges. Therefore, while the State IG
issued a total of 203 inspection reports over fiscal years 2004 through
2005, these inspections addressed 605 management challenges in the various
posts, bureaus, and offices reviewed. In addition, the State IG relies
almost exclusively on the results of inspections, as compared to audits,
to cover the four high-risk areas and management challenges related to
human resources, counterterrorism, public diplomacy and information
security. (See table 1.)
^24Pub. L. No. 106-531, 114 Stat. 2537 (Nov. 22, 2000).
^25GAO, High-Risk Series: An Update, [20]GAO-03-119 (Washington, D.C.:
January 2003).
^26GAO, High-Risk Series: An Update, [21]GAO-05-207 (Washington, D.C.:
January 2005).
Table 1: State IG Audit and Inspection Coverage of High-Risk Areas and
Management Challenges for Fiscal Years 2004 through 2005
Fiscal Fiscal
year 2004 year 2005
State IG State IG
reports^c reports^d
Management
challenges
GAO high-risk identified by
areas^a the State IG^b Audits Inspections Audits Inspections
Physical Protection of 27 98 21 92
security and people and
management of facilities
U.S. facilities
overseas
Enhance Information 1 6 0 7
information security
technology and
security,
strengthen
financial Financial 10 0^f 16 0^f
management, management
improve
performance
planning^e
Continue to Human resources 1 50 0 53
right-size
embassy
staffing levels
Better manage
human capital
strategies
Strengthen the Counterterrorism 0 98 2 92
visa process and border
through security
issuance of
policies and
procedures as
an
antiterrorism
tool
Improve the Public diplomacy 1 50 1 53
management of
public
diplomacy
programs
Manage the Postconflict 4 0 4 6
large-scale stabilization
reconstruction and
and reconstruction
nation-building
programs
Total high-risk 44 302 44 303
areas and
management
challenges
addressed by
audit and
inspection
reports
Total audit and 44 104 44 99
inspection
reports issued
Source: GAO.
aGAO, High-Risk Series: An Update, [22]GAO-05-207 (Washington, D.C.:
January 2005) and GAO, High-Risk Series: An Update, [23]GAO-03-119
(Washington, D.C.: January 2003).
bDepartment of State, FY 2005 Performance and Accountability Report.
cState IG semiannual reports to the Congress for the periods ending March
31 and September 30, 2004.
dState IG semiannual reports to the Congress for the periods ending March
31 and September 30, 2005.
eStrategic and performance planning were removed in recognition of the
State Department's considerable progress in addressing that challenge.
fPost inspections include a selected financial management component.
To illustrate, for fiscal years 2004 and 2005 combined, the State IG
covered human resource issues with 1 audit and 103 inspections,
counterterrorism and border security with 2 audits and 190 inspections,
public diplomacy with 2 audits and 103 inspections, and information
security with 1 audit and 13 inspections. (See table 1.) In contrast, over
the same 2-year period, the State IG issued 88 audit reports and each
addressed a single management challenge. For example, in the high-risk
areas and management challenges of physical security, the State IG
provides coverage mostly through inspections but includes audits that
address specific contracts and procurements for the purchase of equipment
and services. Also, while the State IG's inspections obtain financial
information at the department's bureaus and posts, the high-risk areas and
management challenges of financial management are covered almost
exclusively by the State IG's financial audits. Due to the significance of
the high-risk areas covered largely by inspections, the State IG would
benefit by reassessing the mix of audit and inspection coverage for those
areas.
Fundamental Differences between Audits and Inspections
There are fundamental differences between inspections and audits. The PCIE
and ECIE developed Quality Standards for Inspections in 1993, and revised
them in 2005, to provide a framework for performing inspections. There are
similarities between these inspection standards and the Government
Auditing Standards required by the IG Act for audits; but there are
fundamental differences as well. Both standards require that (1) staff be
independent, (2) evidence for reported results be documented, and (3) the
elements of a finding--criteria, condition, cause, and effect--be included
with the reported results. A fundamental difference between audits and
inspections is the level of detail and requirements in the areas of
sufficient, appropriate evidence to support findings and conclusions, and
the levels of documentation of evidence needed to support findings,
conclusions, and recommendations. Audits performed under Government
Auditing Standards, by design, are subject to more depth in the
requirements for levels of evidence and documentation supporting the
findings than inspections performed under the inspection standards. In
addition, while auditing standards require external quality reviews of
auditing practices, or peer reviews, on a 3-year cycle by reviewers
independent of the State IG's office, neither the inspection standards nor
the State IG's policies and procedures require such external reviews of
inspections.
We reviewed the documentation for 10 inspections to gain an understanding
of the extent of documented evidence in the inspectors' working papers to
support each report's recommendations. The 10 inspections were taken from
a total of 112 inspections, completed over fiscal years 2004 and 2005 that
were not classified for national security purposes, and for which we had
access. The reports for the 10 inspections included a total of 183
recommendations. We found that the inspectors relied heavily on
questionnaires completed by the staff at each bureau or post that was
inspected, official State Department documents, correspondence and
electronic mail, internal department memos including those from the
Secretary, interview memorandums, and the inspectors' review summaries. We
did not find additional testing of evidence or sampling of agency
responses to test for the relevance, validity, and reliability of the
evidence as would be required under auditing standards.
We also found that for 43 of the 183 recommendations contained in the 10
inspections we reviewed, the related inspection files did not contain
documented support beyond written summaries of the findings and
recommendations. While the State IG's inspection policies for implementing
the PCIE and ECIE inspection standards require that supporting
documentation be attached to the written summaries, the summaries
indicated that there was no additional supporting documentation.
State IG Quality Assurance Process, Including Assurance over Independence
The State IG has quality assurance processes that cover its three main
lines of work: (1) audits, (2) investigations, and (3) inspections.
Independence is a key element that should permeate all of the IG's major
lines of work. For audits, Government Auditing Standards requires an
appropriate internal quality control system and an external peer review of
audit quality every 3 years. These standards specify that quality control
systems should include procedures for monitoring, on an ongoing basis,
whether the policies and procedures related to the standards are suitably
designed and are being effectively applied. For investigations, the
Homeland Security Act of 2002^27 amended the IG Act to require that each
IG office with investigative or law enforcement authority under the act
have its investigative function reviewed periodically by another IG office
and that the results be communicated in writing to the IG and to the
Attorney General. For inspections, PCIE and ECIE inspection standards
provide guidance for quality control and include a requirement for ongoing
internal quality inspection, but they do not contain a requirement for an
external quality review, or peer review.
^27Pub. L. No. 107-296, S 812, 116 Stat. 2135, 2223 (Nov. 25, 2002).
Following is a summary of recent quality reviews of the State IG's audit,
inspection, and investigative work:
Audits. Peer reviews provide an independent opinion on the quality control
system related to audits. The State IG has obtained two external peer
reviews of its audit practice from other IG offices since the beginning of
fiscal year 2001 and obtained an unqualified, or "clean," opinion in each
review. Both peer reviews concluded that the State IG's quality control
system for the audit function had been designed in accordance with
professional auditing standards. In addition, the most recent peer review
completed by the Department of the Interior IG in 2004, provided useful
suggestions for improvement. The most significant suggestion was for the
State IG to establish ongoing internal quality reviews of the audit
function as required by professional auditing standards. While the State
IG did conduct internal quality reviews for its audit practice that were
completed in May 2001 and March 2003, the Interior IG found that the
reviews were not the result of an ongoing process. To address the peer
review's suggestion, the State IG established the Policy, Planning, and
Quality Assurance Division in November 2005 under the Assistant IG for
Audits, to conduct internal reviews and provide summary reports on a
semiannual basis, which we view as a very positive action to help ensure
ongoing audit quality.
Investigations. The State IG obtained the results of the first external
quality review of its investigations from the Tennessee Valley Authority
(TVA) IG on November 16, 2005. The TVA IG used the PCIE Quality Standards
for Investigations, the Quality Assessment Review guidelines established
by the PCIE, and the Attorney General Guidelines For Offices Of Inspector
General With Statutory Law Enforcement Authority to review the quality of
the State IG's investigations. The TVA IG concluded that the State IG's
system of internal safeguards and management procedures for the
investigative function was in full compliance with quality standards
established by the PCIE and the Attorney General's guidelines, and
provides reasonable assurance of conforming with professional standards.
The reviewers also suggested improvements for the State IG and these are
currently being addressed by the Assistant IG for Investigations.
Inspections. An external quality review, or peer review, of the State IG's
inspections is not required under the inspection standards. During our
review, the State IG implemented a plan for conducting an internal quality
review of inspections as called for by the PCIE and ECIE inspection
standards. The first such review was currently being conducted at the time
of our audit, but the report on inspection quality had not yet been
completed. This review includes a sample of completed inspections to
determine whether they meet the PCIE and ECIE quality inspection
standards. Currently, the State IG's quality review does not include
inspections by the Office of Information Technology, and at the time of
our review there was no internal quality review process for IT
inspections. Because the inspection work of the IG's IT office is used, at
least in part, by the department to ensure its compliance with the
requirements of the Federal Information Security Management Act of 2002
(FISMA)^28 for effective information security controls, the quality of the
IT inspections is critical to the department for providing overall
assurance of FISMA compliance. Inspection quality is critical also because
of the State IG's almost exclusive reliance on inspections to cover the
information security area, which has been identified by GAO as high-risk
and by the State IG as a management challenge for the department.
Independence. Independence is an overarching element that is critical to
quality and credibility across all of the work of the State IG and is
fundamental to Government Auditing Standards and the IG Act. Quality
Standards for Federal Offices of Inspector General, updated by the PCIE
and ECIE in October 2003, also addresses independence in its quality
standards for the management, operations, and conduct of federal IG
offices. Both sets of standards recognize that IG independence is a
critical element of the IG's obligation to be objective, impartial,
intellectually honest, and free of conflicts of interest. Also, consistent
with Government Auditing Standards, the IG quality standards for IG
offices state that without independence both in fact and in appearance,
objectivity is impaired. In addition, the PCIE and ECIE Quality Standards
for Inspections require that the inspections organization and each
individual inspector to be free both in fact and appearance from
impairments to independence.
^28Title III, E-Government Act of 2002, Pub. L. No. 107-347, 116 Stat.
2899, 2946 (Dec. 17, 2002).
Two areas of continuing concern regarding independence are (1) the
temporary appointment of management personnel with various titles such as
Deputy IG, Acting IG, or Acting Deputy IG, to head the State IG office;
and (2) the use of Foreign Service staff to lead State IG inspections. For
example, between the last two presidentially appointed IGs--covering a
period of over 2 years from January 24, 2003, until May 2, 2005--all four
of those heading the State IG office in an acting IG capacity were
selected from State Department management staff and temporarily employed
in the State IG office. These individuals had served in the Foreign
Service in prior management positions, including as U.S. ambassadors to
foreign countries. In addition, three of these individuals returned to
significant management positions within the State Department after heading
the State IG office. Table 2 shows prior and subsequent positions held by
those heading the State IG office for a recent 27-month period until the
current IG was confirmed on May 2, 2005. This use of temporarily assigned
State Department management staff to head the State IG office can affect
the perceived independence of the entire office in its reviews of
department operations, and the practice is not consistent with (1)
independence requirements of Government Auditing Standards, (2) other
professional standards followed by the IGs, and (3) the purpose of the IG
Act. Career members of the Foreign Service are prohibited by statute from
being appointed as State IG.^29 This exclusion of career Foreign Service
staff from consideration when appointing the State IG avoids the personal
impairments to independence that could result when reviewing the bureaus
and posts of fellow Foreign Service officers and diplomats. The same
concern with independence arises when career Foreign Service officers and
diplomats temporarily head the State IG office in an acting IG capacity.
^2922 U.S.C. S 4861(d).
Table 2: State Department Positions Held by Management Officials before
and after Serving in an Acting State IG Capacity from January 24, 2003,
through May 2, 2005
Department Period of
positions prior to Department positions Beginning dates time serving
serving as acting after serving as acting of service as as the acting
State IG State IG acting State IG State IG
Ambassador to Retired from government January 24, 8 months
Kyrgyzstan service 2003
Ambassador to Deputy and Acting September 28, 10 months
Columbia Permanent Representative 2003
at the U.S. Mission to
the United Nations^a
Deputy Global AIDS Special Representative August 3, 2004 1 month
Coordinator on Avian and Pandemic
Influenza
Ambassador to South Charge d'Affaires, August 23, 2004 8 months
Africa Khartoum, Sudan
Source: State IG.
aCurrently the Assistant Secretary for International Narcotics and Law
Enforcement Affairs.
In addition to the potential independence impairment of acting IGs, the
State IG can impair its independence with its reliance on staff in the
Foreign Service temporarily employed by the IG office to lead inspections.
As a condition of their employment, Foreign Service staff are expected to
help formulate, implement, and defend government policy, which severely
limits the appearance of objectivity when reviewing department activities
that may require them to question official policies.
The State IG's inspection policy is for Foreign Service staff with the
rank of ambassador, or other staff who serve at the ambassador level, to
lead inspections. Long-serving State IG officials told us that the program
knowledge of these State Department officials is important when reviewing
the department's bureaus and posts. In the 112 inspections completed
during fiscal years 2004 and 2005 for which we had access, 79 had team
leaders who held the rank of ambassador or served at the ambassador level.
Foreign Service staff on these inspections often move through the State IG
office on rotational assignments to serve again in Foreign Service
positions for the department after working for the State IG. For example,
9 of the 22 Foreign Service officials who were assigned to these 112
inspections as either staff or team leaders had transferred or returned to
management offices in the State Department by December 2005.
The State IG's use of career Foreign Service staff and others at the
ambassador level to lead inspections provides a potential impairment to
independence. In both our 1978 and 1982 reports we reported concerns about
the independence of inspection staff reassigned to and from management
offices within the department. In these prior reports, we stated that the
desire of State IG staff to receive favorable assignments after their
State IG tours could influence their objectivity. While they may offer
valuable insights from their experience in the department, we believe that
there is considerable risk that independence could be impaired, resulting
in a detrimental effect on the quality of State IG inspections and the
effectiveness of the State Department, and that it is important that
officials not sacrifice independence, in fact or appearance, for other
factors in the staffing and leadership of the IG's office. As an
alternative, such staff could provide the benefits of their experience and
expertise as team members rather than team leaders without impairing the
inspection team's independence.
IG Coordination with State Department Investigations
The IG Act established the State IG to conduct and supervise independent
audits and investigations that prevent and detect fraud, waste, abuse, and
mismanagement in the State Department.^30 The Bureau of Diplomatic
Security (DS)--as part of its worldwide responsibilities for law
enforcement and security operations--also performs investigations of
passport and visa fraud both externally and within the department.^31
Currently, there is no functional written agreement or other formal
mechanism in place between DS and the State IG to coordinate their
investigative activities.
DS assigns special agents to U.S. diplomatic missions overseas and to
field offices throughout the United States. The special agents conduct
passport and visa fraud investigations and are responsible for security at
285 diplomatic facilities around the world. This effort currently entails
a global force of approximately 32,000 special agents, security
specialists, and other professionals who make up the security and law
enforcement arm of the State Department. In fiscal year 2004, DS reported
that it opened 5,275 new criminal investigations and made 538 arrests for
passport fraud, 123 for visa fraud, and 54 for other offenses. For fiscal
year 2005, DS reported 1,150 arrests combined for passport and visa fraud.
Both the State IG and DS pursue allegations of passport and visa fraud by
State Department employees. State IG officials stated that they were aware
of DS investigations in these areas that were not coordinated with the
State IG. Without a formal agreement to outline the responsibilities of
both DS and the State IG regarding these investigations, there is
inadequate assurance that this work will be coordinated to avoid
duplication or that independent investigations of department personnel
will be performed. Also, because DS reports to the State Department's
Undersecretary for Management, DS investigations of department employees,
especially when management officials are the subjects of the allegations,
can result in management investigating itself.
^305 U.S.C. App. S 2.
^3122 U.S.C. S 4807.
In other agencies where significant law enforcement functions like those
at DS exist alongside their inspectors general, the division of
investigative functions between the agency and the IG is established
through written agreements. For example, the U.S. Postal Service has the
Postal IG established by the IG Act and the Chief Postal Inspector who is
head of the U.S. Postal Inspection Service with jurisdiction in criminal
matters affecting the integrity and security of the mail. Postal
inspectors investigate postal crimes and provide security for the
protection of postal employees at 37,000 postal facilities throughout the
country. In 2006, a memorandum was signed by the Chairman of the Board of
Governors and the Postmaster General announcing the completion of the
transfer of investigative jurisdiction for postal employees from the
Postal Inspection Service to the Office of Inspector General. The Postal
IG was recognized as having full responsibility for the investigation of
internal crimes, whereas the Postal Inspection Service is responsible for
security and the investigation of external crimes. This agreement also
included a shift of resources between both organizations to cover their
responsibilities.
In another example, the Internal Revenue Service Criminal Investigation
(IRS CI) and the Treasury Inspector General for Tax Administration (TIGTA)
have signed a memorandum of understanding that recognizes IRS CI's
responsibility to investigate criminal violations of the tax code while
TIGTA has the responsibility to protect the IRS against attempts to
corrupt or threaten IRS employees, and to investigate violations by IRS
employees. This agreement includes the coordination of investigative
activities between these offices and recognizes TIGTA as the final
authority to investigate IRS Criminal Investigation employees. Agreements
such as those crafted by the U.S. Postal Service and the IRS can serve as
models for a formal agreement between DS and the State IG.
Conclusions
The State IG relies heavily on inspections instead of audits for oversight
of high-risk areas and management challenges. Areas such as human
resources, counterterrorism, public diplomacy, and information security,
are almost exclusively covered through inspections. By design, inspections
are conducted under less in-depth requirements than audits performed under
Government Auditing Standards in terms of levels of evidence and
documentation to support findings and recommendations. Federal IGs use
inspections as an important oversight tool along with audits and
investigations, which are specifically required by the IG Act. However,
the State IG conducts a much greater proportion of inspections to audits
than the federal statutory IG community as a whole. Due to the risk and
significance of the high-risk areas being covered largely by inspections,
the State IG would benefit from reassessing risk and its heavy reliance on
inspections in those areas to determine whether the current mix of audits
and inspections provides the amount and type of oversight coverage needed.
Given the important role that inspections currently play in the State IG's
oversight of the department, assurance of inspection quality is also
important. The State IG is currently conducting its first internal review
of inspections, but the results are not yet reported and the review does
not include IT inspections.
Independence is a critical element to the quality and credibility of an
IG's work under the IG Act and is fundamental to Government Auditing
Standards and professional standards issued by the PCIE and ECIE. Based on
our current concerns and those from our past reports, we believe that the
State IG would benefit from additional policies and revised structures in
order to avoid situations that raise concerns about independence, such as
State Department management officials appointed to head the State IG
office in an acting IG capacity, and State Department career Foreign
Service staff and others who transfer from or return to department
management offices leading IG inspections. Such policies and structures
would be geared toward (1) providing for independent acting IG coverage in
the event of delays between IG appointments and (2) assuring that State IG
inspections are not led by career Foreign Service or other staff who move
to assignments within State Department management. With regard to
ambassadors, Foreign Service officers, and other rotational staff leading
inspections, approaches could range from the State IG limiting its
inspection activities to a level that is supportable without reliance on
staff that routinely rotate to management offices, to permanently
transferring or hiring additional staff, or FTEs, along with associated
resources for the State IG office to eliminate the need to rely on Foreign
Service and other rotational staff to conduct inspections. In addition,
the State IG's inspection teams could include experienced ambassadors and
Foreign Service officers at the ambassador level as team members rather
than team leaders to help mitigate concerns regarding the lack of an
appearance of independence caused by the State IG's current practice.
Finally, there is a need for a formal agreement between the State IG and
the State Department Bureau of Diplomatic Security to coordinate their
investigative activities to help ensure the independence of investigations
of the State Department's management staff and to prevent duplication.
Recommendations for Executive Action
To help ensure that the State IG provides the appropriate breadth and
depth of oversight of the State Department's high-risk areas and
management challenges, we recommend that the State IG reassess the proper
mix of audit and inspection coverage for those areas. This reassessment
should include input from key stakeholders in the State Department and the
Congress and also entail an analysis of an appropriate level of resources
needed to provide adequate IG coverage of high-risk and other areas in
light of the increasing level of funding provided to the State Department.
To provide for more complete internal quality reviews of inspections we
recommend that the State IG include inspections performed by the State
IG's Office of Information Technology in its internal quality review
process.
To help ensure the independence of the IG office, we recommend that the
State IG work with the Secretary of State to take the following actions:
o Develop a succession planning policy for the appointment of
individuals to head the State IG office in an acting IG capacity
that is consistent with the IG Act regarding State IG appointment
and provides for independent coverage in the event of delays
between IG appointments. The policy should prohibit career Foreign
Service officers from heading the State IG office in an acting IG
capacity and specify within the IG's own succession order that
acting IG vacancies are to be filled by eligible personnel without
State Department management careers.
o Develop options to ensure that State IG inspections are not led
by career Foreign Service officials or other staff who rotate to
assignments within State Department management. Approaches could
range from the State IG limiting its inspection activities to a
level that is supportable without reliance on staff who routinely
rotate to management offices, to permanently transferring or
hiring additional staff, or FTEs, along with associated resources
for the State IG office to eliminate the need to rely on Foreign
Service and other rotational staff to lead inspections.
In order to provide for independent investigations of State
Department management and to prevent duplicative investigations,
we recommend that the State IG work with the Bureau of Diplomatic
Security, the Office of Management, and the Secretary of State to
develop a formal written agreement that delineates the areas of
responsibility for State Department investigations. Such an
agreement would, for example, address the coordination of
investigative activities to help ensure the independence of
internal departmental investigations and preclude the duplication
of efforts.
Agency Comments and Our Response
In comments on a draft of this report the State IG provided
additional clarifying information and acknowledged that our review
helped identify areas for improvement. With respect to our five
recommendations in the draft report, the State IG agreed with two
recommendations, partially agreed with one, and disagreed with two
others. We are reaffirming our recommendations and provide our
reasons below.
With respect to the two recommendations for which there is
agreement, the State IG agreed with our recommendations to (1)
include all IG inspections, including inspections performed by the
Office of Information Technology, in the internal quality review
process and (2) work with DS and others to develop a written
agreement delineating the areas of responsibility for department
investigations.
The State IG disagreed with our recommendation to reassess the mix
of audit and inspection coverage stating that "simply reassessing
the mix of audit and inspection coverage will accomplish little if
there are not more auditors and more resources available to
perform audits." Our recommendation provides the IG with a way to
define the appropriate level of oversight of the department,
reallocate current resources as appropriate, and justify any
additional resources that may be necessary. This reassessment is
especially important given the increased appropriations provided
to the State Department and in light of the fact that the current
mix of audits and inspections has evolved over a number of years
when State Department management personnel served as acting IGs.
By achieving a proper mix of audits and inspections the State IG
can help maximize the use of the department's resources through
more effective oversight. In addition, the State IG's comments do
not recognize the potential for reallocating inspection staff to
an audit role. Under Government Auditing Standards, the current
inspection staff may also conduct performance audits in order to
provide both a forward-looking analysis and a review of historical
performance. Redesigning some inspections as performance audits to
be performed by the current inspection staff could meet the needs
of management for inspection results at the department's bureaus
and posts and also provide the level of objectivity and evidence
needed to assess high-risk areas and management challenges. Thus,
for all the above stated reasons we continue to recommend that the
State IG reassess the mix of audit and inspection coverage.
The State IG does not disagree with our concerns about Foreign
Service officers temporarily heading the IG office in an acting
capacity, but believes that the recommendation goes too far by
limiting the pool of eligible candidates to personnel without
State Department management careers. We disagree with the IG's
comments due to the importance of independence which is the most
critical element for IG effectiveness and success. To preserve IG
independence, the IG Act requires that the IG not report to or be
subject to supervision by any other officer other than the
Secretary, or if delegated, the Deputy Secretary. Appointing
career department managers as acting State IGs would effectively
have the IG office subject to supervision by a management official
other than the Secretary or Deputy Secretary. Therefore, we
continue to recommend that the State IG exclude from consideration
in the succession planning of his office department officials with
management careers due to possible conflicts of interest and
resulting independence issues. As alternatives, the State IG could
consider PCIE recommendations for personnel to fill future acting
IG positions, as well as IG staff with proven ability from other
agencies. In addition, we have revised the recommendation in our
report to clarify that the intended action is directed to the
succession planning activities of the State IG's office in order
to avoid any unintended conflict with the Vacancies Act,^32 which
gives the President wide authority to appoint personnel to acting
positions throughout the executive branch of the federal
government.
The State IG acknowledged that ambassadors who serve as team
leaders for inspections raise a concern about the appearance of
independence. The State IG also believes that this concern is
significantly outweighed by the overriding need for people with
the experience and expertise of ambassadors to lead inspections.
We disagree with putting independence second to experience and
expertise and believe that the State IG can achieve both
objectives with the proper staffing and structuring of its
inspections. Our position remains that the State IG's inspection
teams should not be led by career Foreign Service officers and
ambassadors, but could include experienced ambassadors and staff
at the ambassador level as team members rather than team leaders
to help mitigate concerns about the appearance of independence
caused by the State IG's current practice. Therefore, we continue
to recommend that the State IG work with the Secretary of State to
develop options to ensure that the IG's inspections are not led by
career Foreign Service officials, including ambassadors or other
staff who rotate from State Department management.
^325 U.S.C. SS 3345-3349(d).
As agreed with your office, unless you publicly announce the
contents of this report earlier, we will not distribute it until
30 days from its date. At that time we will send copies of the
report to the Secretary of State, the State Department IG, the
State Department Undersecretary for Management, the State
Department Assistant Secretary for Diplomatic Security, the OMB
Deputy Director for Management, the Chairman and Ranking Member of
the Senate Committee on Foreign Relations, other congressional
committees, and interested parties. This report will also be
available at no charge on the GAO Web site at
http://www.gao.gov . If you have any questions or would like
to discuss this report please contact me at (202) 512-9471 or by
e-mail at franzelj@gao.gov . Major contributors to this report
are listed in appendix IV.
Jeanette M. Franzel
Director Financial
Management and Assurance
Appendix I: A Comparison of Fiscal Year 2001 Budgetary Resources
for Selected Inspectors General and Agencies
Dollars in millions
IG budgetary resources
IG total Agency total as a percentage of
Federal departments and budgetary budgetary agency budgetary
Rank agencies resources resources resources
1 Nuclear Regulatory 7 546 1.28
Commission
2 Small Business 15 2,580 0.58
Administration
3 Environmental 56 11,577 0.48
Protection Agency
4 Corporation for 6 1,265 0.47
National and Community
Service
5 Agency for 35 9,269^a 0.38
International
Development
6 Treasury Inspector 127 39,937 0.32
General for Tax
Administration
7 Department of Commerce 21 8,632 0.24
8 Department of State 29 13,679^b 0.21
9 Department of Justice 60 31,780 0.19
10 Department of the 31 19,871 0.16
Interior
11 General Services 36 23,115 0.16
Administration
12 National Aeronautics 24 15.807 0.15
and Space
Administration
13 Tennessee Valley 8^c 7,016 0.11
Authority (TVA)
14 Department of Energy 34 30,638 0.11
15 Department of Housing 95 83,063 0.11
and Urban Development
16 Department of Labor 69 65,489 0.11
17 Department of Veterans 50 57,391 0.09
Affairs
18 Federal Deposit 43 47,967 0.09
Insurance Corporation
19 Department of 78 106,365 0.07
Agriculture
20 Railroad Retirement 6^d 9,201 0.07
Board
21 Department of Education 37 55,858 0.07
22 Department of 55 85,399 0.06
Transportation
23 Department of Health 231^e 555,621 0.04
and Human Services
24 Department of 156 453,875 0.03
Defense--Military
25 Office of Personnel 12 126,224 0.01
Management
26 Social Security 70 498,918 0.01
Administration
27 Department of the 35 366,620^f 0.01
Treasury
28 Department of Homeland n.a. n.a. n.a.
Security^g
29 Central Intelligence n.a. n.a. n.a.
Agency^g
Source: GAO analysis of OMB data.
Notes: The agencies presented are those with presidentially
appointed inspectors general (IG).
aTotal budgetary resources appearing in Agency for International
Development's FY 2001 Performance and Accountability Report.
bState Department budget does not include amounts for the
Broadcasting Board of Governors.
cAmount for TVA IG is from fiscal year 2002 PCIE profile data.
dAmount for Railroad Retirement Board IG is from fiscal year 2002
PCIE profile data.
eIncludes budget authority to combat Medicare fraud.
fTreasury's total budget authority excludes amounts for IRS.
gInformation not available.
Appendix II: A Comparison of Fiscal Year 2005 Budgetary Resources
for Selected Inspectors General and Agencies
Dollars in millions
IG budgetary resources
IG total Agency total as a percentage of
Federal departments and budgetary budgetary agency budgetary
Rank agencies resources resources resources
1 Nuclear Regulatory 9 723 1.24
Commission
2 Corporation for 9 1,190 0.76
National and Community
Service
3 Environmental 64 13,153 0.49
Protection Agency
4 Agency for 49 14,822^a 0.33
International
Development
5 Small Business 14 4,855 0.29
Administration
6 Department of Justice 80 31,073 0.26
7 Department of Commerce 22 10,179 0.22
8 Treasury Inspector 131 66,338 0.20
General for Tax
Administration
9 General Services 46 26,378 0.17
Administration
10 National Aeronautics 31 19,045 0.16
and Space
Administration
11 Department of Interior 42 26,890 0.16
12 Department of State 32 22,371^b 0.14
13 Department of Housing 103 83,359 0.12
and Urban Development
14 Department of Energy 42 34,728 0.12
15 Tennessee Valley 9^c 8,027 0.11
Authority (TVA)
16 Department of Homeland 117 121,830 0.10
Security
17 Department of Labor 69 72,893 0.09
18 Department of Veterans 74 83,656 0.09
Affairs
19 Railroad Retirement 7^d 10,849 0.06
Board
20 Department of 84 135,903 0.06
Agriculture
21 Department of Education 48 84,359 0.06
22 Federal Deposit 28 50,612 0.06
Insurance Corporation
23 Department of 65 117,707 0.06
Transportation
24 Department of Health 437^e 789,041 0.06
and Human Services
25 Department of 205 716,702 0.03
Defense--Military
26 Social Security 91 605,134 0.02
Administration
27 Office of Personnel 18 160,759 0.01
Management
28 Department of the 20 329,345^f 0.01
Treasury
29 Central Intelligence n.a. n.a. n.a.
Agency^g
Source: GAO analysis of OMB data.
Notes: The agencies presented are those with presidentially
appointed inspectors general (IG).
aTotal budgetary resources appearing in Agency for International
Development's FY 2005 Performance and Accountability Report.
bState Department budget does not include amounts for the
Broadcasting Board of Governors.
cAmount for TVA IG is from fiscal year 2005 PCIE profile data.
dAmount for Railroad Retirement Board IG is from fiscal year 2005
PCIE profile data.
eIncludes budget authority to combat Medicare fraud.
fTreasury's total budget authority excludes amount for IRS.
gInformation not available.
Appendix III: Comments from the Inspector General, Department
of State
Appendix IV: GAO Contact and Staff Acknowledgments
GAO Contact
Jeanette M. Franzel, (202) 512-9471 or franzelj@gao.gov
Acknowledgments
Financial Management and Assurance
Jackson W. Hufnagle, Assistant Director Clarence A. Whitt,
Analyst-in-Charge
Office of the General Counsel
Francis Dymond, Assistant General Counsel Jacquelyn Hamilton,
Deputy Assistant General Counsel Amy Bowser, Attorney
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(194564)
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Highlights of [33]GAO-07-138 , a report to the Chairman and Ranking
Member, Committee on Foreign Affairs, and the Honorable F. James
Sensenbrenner, Jr., House of Representatives.
March 2007
INSPECTORS GENERAL
Activities of the Department of State Office of Inspector General
GAO was asked to review the Department of State Office of Inspector
General (State IG) including its (1) organization, budget levels, and
accomplishments; (2) audit and inspection coverage of the department; (3)
role of inspections in the oversight of the department; (4) quality
assurance process including assurance of independence; and (5)
coordination of State IG investigations with the State Department's Bureau
of Diplomatic Security. GAO obtained information from State IG reports,
interviews, and documentation for a sample of inspections.
[34]What GAO Recommends
GAO is making five recommendations for the State IG to (1) reassess the
proper mix of audits and inspections to ensure appropriate oversight, (2)
include reviews of information technology inspections in its internal
quality review process, (3) develop a succession planning policy that
specifies appropriate personnel to serve in an acting IG capacity, (4)
provide staffing alternatives for identifying those who lead inspections,
and (5) develop a formal agreement to coordinate internal department
investigations with the Bureau of Diplomatic Security.
In comments on a draft of the report, the State IG agreed with two
recommendations, partially agreed with one, and disagreed with two.
The State IG provides oversight of the State Department, the Broadcasting
Board of Governors, and the foreign affairs community, including the
approximately 260 bureaus and posts around the world, through financial
and performance audits, inspections, and investigations. Over fiscal years
2001 through 2005, in terms of constant dollars, the State IG's budget has
increased by 1 percent while the State Department's overall budget has
increased by 50 percent. This represents a relative decrease when
comparing State IG with other agencies' ratios of IG budget to total
agency budget.
The State IG provides oversight coverage of the areas designated as
high-risk by GAO and management challenges identified by the IG, with a
heavy emphasis on inspections. The State IG covers the high-risk areas of
human resources, counterterrorism, public diplomacy, and information
security, almost exclusively through inspections. In fiscal year 2005, the
State IG's ratio of inspections to audits was over two to one, while the
federal statutory IGs had a combined ratio of one inspection to every ten
audits.
There are fundamental differences between inspections and audits. By
design, audits performed under Government Auditing Standards are subject
to more in-depth requirements for the levels of evidence and the
documentation supporting the findings than are inspections performed under
inspection standards. Due to the significance of the high-risk areas
covered largely by inspections, the State IG would benefit by reassessing
the mix of audit and inspection coverage of those areas.
The State IG's audit and investigative functions both had recent peer
reviews of quality assurance that resulted in "clean opinions." There is
no requirement for a peer review of inspections; however, during our audit
the State IG began an internal quality review process for inspections but
did not include reviews of information technology inspections.
Independence is critical to the quality and credibility of all the work of
the State IG. Two areas of continuing concern that we have with the
independence of the State IG involve (1) the temporary appointment of
State Department management personnel to head the State IG office in an
acting IG capacity and who subsequently return to management positions,
and (2) the rotation of Foreign Service staff to lead IG inspections,
including many who, along with other IG staff, move to positions in
department management offices. Such staffing arrangements represent
potential impairments to independence and the appearance of independence
under professional standards applicable to the IGs.
Both the State IG and the State Department's Bureau of Diplomatic Security
pursue allegations of fraud by department employees. There is no
functional written agreement in place to help ensure the independence of
internal departmental investigations and preclude the duplication of
efforts.
References
Visible links
19. http://www.gao.gov/cgi-bin/getrpt?GAO-06-115
20. http://www.gao.gov/cgi-bin/getrpt?GAO-03-119
21. http://www.gao.gov/cgi-bin/getrpt?GAO-05-207
22. http://www.gao.gov/cgi-bin/getrpt?GAO-05-207
23. http://www.gao.gov/cgi-bin/getrpt?GAO-03-119
33. http://www.gao.gov/cgi-bin/getrpt?GAO-07-138
*** End of document. ***