Regulatory Burden: Some Agencies' Claims Regarding Lack of Rulemaking
Discretion Have Merit (Letter Report, 01/08/99, GAO/GGD-99-20).
GAO recently reported what officials from 15 private sector companies
said were the most problematic federal regulations for their businesses.
(See GAO/GGD-97-2, Nov. 1996, and GAO/GGD-97-26R, Dec. 1996.) The 125
concerns cited by these officials included the perceived high cost of
regulatory compliance; excessive paperwork; unreasonable, unclear, and
inflexible requirements; and severe penalties for noncompliance. GAO
also obtained responses from the 19 federal agencies that issued the
regulations underlying the companies' concerns. This report examines
agency assertions that some of the 125 regulatory concerns were, at
least in part, attributable to the underlying statutes. For each of the
27 concerns that GAO focused on, this report determines (1) the amount
of discretion the underlying statutes gave the rulemaking agencies in
developing the regulatory requirements that the agencies had attributed
to the underlying statutes, (2) whether the regulatory requirements at
issue were within the authority granted by the underlying statutes, and
(3) whether the rulemaking agencies could have developed regulatory
approaches that would have been less burdensome to the regulated
entities while still meeting the underlying statutory requirements.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: GGD-99-20
TITLE: Regulatory Burden: Some Agencies' Claims Regarding Lack of
Rulemaking Discretion Have Merit
DATE: 01/08/99
SUBJECT: Federal regulations
Administrative law
Regulatory agencies
Corporations
Agency proceedings
Reporting requirements
IDENTIFIER: Corporate Average Fuel Economy Standards
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gg99020 REGULATORY BURDEN
Some Agencies' Claims Regarding Lack of Rulemaking Discretion Have
Merit
United States General Accounting Office
GAO Report to the Chairman, Subcommittee on Commercial and
Administrative Law,
Committee on the Judiciary, House of Representatives
January 1999
GAO/GGD-99-20
January 1999 GAO/GGD-99-20
United States General Accounting Office Washington, D. C. 20548
General Government Division
B-279405
Page 1 GAO/GGD-99-20 Regulatory Burden
GAO January 8, 1999 The Honorable George W. Gekas Chairman,
Subcommittee on Commercial and Administrative Law Committee on the
Judiciary House of Representatives
Dear Mr. Chairman: In November and December 1996, we reported what
officials from 15 private sector companies said were the federal
regulations that were most problematic for their businesses. 1 The
125 concerns that the officials identified focused on a variety of
regulatory issues, including the perceived high cost of
compliance; excessive paperwork; unreasonable, unclear, and
inflexible requirements; and severe penalties for noncompliance.
Our report also listed responses from the 19 federal agencies that
issued the regulations underlying the 125 company concerns. In
response to about one- quarter of the concerns, the agencies
indicated that the companies' concerns were, at least in part,
attributable to statutory requirements underlying their
regulations.
This report responds to your request that we examine the agencies'
assertions that some of the 125 regulatory concerns were, at least
in part, attributable to the underlying statutes. Our specific
objectives were to determine, for each of 27 such concerns that we
focused on in this report, (1) the amount of discretion the
underlying statutes gave the rulemaking agencies in developing the
regulatory requirements that the agencies had said were
attributable to the underlying statutes, 2 (2) whether the
regulatory requirements at issue were within the authority granted
by the underlying statutes, and (3) whether the rulemaking
agencies could have developed regulatory approaches that would
have been less burdensome to the regulated entities while still
meeting the underlying statutory requirements.
We concluded that the statutes underlying 13 of the 27 regulatory
concerns that we examined gave the rulemaking agencies no
discretion in establishing the regulatory requirements at issue.
In these cases, the
1 Regulatory Burden: Measurement Challenges and Concerns Raised by
Selected Companies (GAO/GGD-97-2, Nov. 18, 1996); and Regulatory
Burden (GAO/GGD-97-26R, Dec. 11, 1996). 2 In some of the concerns,
the statutory provisions were enforced through the use of policy
statements or directly through the statutes themselves. Therefore,
we interpreted regulatory requirements to include the various
approaches used by the agencies to enforce their statutory
requirements. Results in Brief
B-279405 Page 2 GAO/GGD-99-20 Regulatory Burden
underlying statutes specifically stated what the regulated
entities must do and, by inference, what the related regulations
must require. We concluded that the underlying statutes for 12 of
the 27 concerns gave the agencies some discretion in developing
the regulatory requirements at issue. In these cases, the agencies
often had no rulemaking discretion with regard to certain issues
but had some or broad discretion regarding other issues (e. g.,
the exact type and/ or frequency of the action required). We
concluded that the agencies had broad discretion in developing the
regulatory requirements at issue in the two remaining concerns.
We also concluded that the regulatory provisions the agencies
developed in relation to all of the 27 company concerns were
within the authorities granted by the underlying statutes. For
those concerns in which the underlying statutes gave the agencies
no discretion as to how the associated regulations could be
developed, those regulations were consistent with, and often
mirrored, the specific requirements in the statutes. For those
concerns in which the statutes gave the agencies some or broad
rulemaking discretion, the regulations did not appear to exceed
the discretion allowed in those statutes.
Finally, for the 13 concerns for which we concluded agencies had
no discretion, we also concluded that there were no less
burdensome regulatory approaches available to the agencies that
would have met the requirements of the statutes. We could not
determine whether less burdensome regulatory approaches were
available for the remaining 14 of the 27 concerns, for which the
statutes gave the agencies some or broad rulemaking discretion. To
make those determinations, we would have had to conduct a detailed
examination of the implementation of each of the regulatory
provisions that the agencies had said were attributable to the
underlying statutes and/ or the implications of alternative
approaches analyses that would have required time and resource
commitments that were beyond the scope of this review.
Although this review focused on only 27 regulatory concerns, we
believe that it can offer insights into some broader issues. For
example, the review suggests that regardless of how much or how
little rulemaking discretion the underlying statutes permit, the
entities being regulated may still consider the associated
regulations burdensome. Also, if an underlying statute is the
source of regulatory burden, that burden can be alleviated only by
changes in the statute. In such cases, regulatory reform
initiatives focused on the agencies (e. g., cost- benefit analysis
requirements) are unlikely to have much direct effect on the
regulatory burden that those agencies impose.
B-279405 Page 3 GAO/GGD-99-20 Regulatory Burden
Regulations generally start with an act of Congress and are the
means by which statutes are implemented and specific requirements
are established. The statutory basis for a regulation can vary in
terms of its specificity, from (1) very broad grants of authority
that state only the general intent of the legislation and leave
agencies with a great deal of discretion as to how that intent
should be implemented to (2) very specific requirements
delineating exactly what regulatory agencies should do and how
they should do it. For example, the Agricultural Adjustment Act
provides a broad grant of authority to the Secretary of
Agriculture, stating only that agricultural marketing should be
orderly but providing little guidance regarding which crops should
have marketing orders or how to apportion the market among
growers. On the other hand, the Department of Transportation (DOT)
has concluded that it has no discretion in setting the average
fuel economy standards (known as the Corporate Average Fuel
Economy or CAFE standards) for light trucks. DOT's 1998
appropriations act stated that ( n) one of the funds in this Act
shall be available to prepare, propose, or promulgate any
regulations (prescribing CAFE standards for automobiles) . . . in
any model year that differs from standards promulgated for such
automobiles prior to the enactment of this section. At the time
this appropriations act was enacted, DOT was preparing the CAFE
standard for model year 2000. Therefore, DOT concluded that it was
required to keep the same light truck CAFE standard for model year
2000 that applied to model year 1999 20.7 miles per gallon. 3
Some regulatory analysts believe that Congress too often writes
overly broad laws that provide too much discretion to regulatory
agencies. 4 Similarly, the perception by some Members of Congress
that federal agencies have promulgated regulations that go beyond
the intent of Congress helped lead to the establishment of
expedited congressional regulatory review procedures in the Small
Business Regulatory Enforcement Fairness Act (SBREFA) of 1996. 5
In a joint statement
3 DOT s 20. 7 mile per gallon CAFE standard for model year 1999
was a continuation of the standard for model years 1998 and 1997
because of similar language in DOT's 1997 and 1996 appropriation
acts. See Department of Transportation, National Highway Traffic
Safety Administration: Light Truck Average Fuel Economy Standard,
Model Year 2000 (GAO/OGC-98-42, Apr. 17, 1998).
4 See, for example, David Schoenbrod, Power Without
Responsibility: How Congress Abuses the People Through Delegation
(New Haven: Yale University Press, 1993). 5 Under SBREFA's
congressional review procedures, Congress can review rules before
they take effect and disapprove those it considers too burdensome,
excessive, inappropriate, duplicative, or otherwise objectionable.
The act requires agencies to submit a copy of each final rule to
both Houses of Congress and the Comptroller General before they
take effect. SBREFA also requires the Comptroller General to
provide a report on each major rule within 15 calendar days after
the rule is submitted. In the first 2 years of the act, we
received 8, 284 rules, of which 122 were major rules. For an
analysis of these rules, Background
Views Regarding Congressional Delegation of Authority
B-279405 Page 4 GAO/GGD-99-20 Regulatory Burden
intended to provide a legislative history of the SBREFA review
procedures, some Members said:
As the number and complexity of federal statutory programs has
increased over the last fifty years, Congress has come to depend
more and more upon Executive Branch agencies to fill out the
details of the programs it enacts . . . . As more and more of
Congress' legislative functions have been delegated to federal
regulatory agencies, many have complained that Congress has
effectively abdicated its constitutional role as the national
legislature in allowing federal agencies so much latitude in
implementing and interpreting congressional enactments . . . .
Because Congress is often unable to anticipate the numerous
situations to which the laws it passes must apply, Executive
Branch agencies sometimes develop regulatory schemes at odds with
congressional expectations . . . . Rules can be surprisingly
different from the expectations of Congress or the public.
Congressional review gives the public the opportunity to call the
attention of politically accountable, elected officials to
concerns about new agency rules.
Similar concerns about agencies' regulatory actions have led
Congress to establish analytical requirements that agencies must
comply with during the rulemaking process. For example, the
Regulatory Flexibility Act of 1980, as amended, requires agencies
to analyze the anticipated effects of rules they plan to propose
on small entities unless they certify that the rules will not have
a significant economic impact on a substantial number of small
entities. Title II of the Unfunded Mandates Reform Act of 1995
requires federal agencies (other than independent regulatory
agencies) 6 to prepare written statements for certain rules. Those
written statements must, among other things, contain a qualitative
and quantitative assessment of the anticipated costs and benefits
of the rules. 7 Various executive orders have imposed similar
analytical requirements on federal agencies. 8
In contrast, other regulatory analysts have concluded that
Congress has, at times, been overly restrictive in writing the
statutes underlying agencies' regulations. For example, in an
April 1998 policy statement, the Committee for Economic
Development (CED) pointed out that those
see Regulatory Reform: Major Rules Submitted for Congressional
Review During the First 2 Years (GAO/GGD-98-102R, Apr. 24, 1998).
6 Independent regulatory agencies include such agencies as the
Federal Communications Commission, the Securities and Exchange
Commission, and the Consumer Product Safety Commission. 7 For an
analysis of these requirements, see Unfunded Mandates: Reform Act
Has Had Little Effect on Agencies' Rulemaking Actions (GAO/GGD-98-
30, Feb. 4, 1998). 8 For example, Executive Order 12866 requires
nonindependent regulatory agencies to assess the costs and
benefits of economically significant proposed and final rules.
B-279405 Page 5 GAO/GGD-99-20 Regulatory Burden
statutes can, at times, be too narrow. 9 In particular, the policy
statement said that the traditional focus of regulatory reform on
improving the way federal agencies write regulations
ignores the fact that the key decisions occur when Congress writes
an Occupational Safety and Health Act or an amendment to the Food,
Drug, and Cosmetics Act or any other important regulatory law,
usually with hundreds of pages of detailed specifications. . . .
The way those statutes are written frequently precludes the
agencies from even considering the most cost- effective
approaches.
Therefore, CED concluded that the traditional focus of regulatory
reform should be shifted from regulatory agencies to Congress. CED
recommended, among other things, that each congressional committee
be required, when writing a regulatory statute, to articulate the
expected benefits and costs of the regulatory program in the
report accompanying the legislation. It also recommended that
Congress eliminate provisions in existing statutes that prevent or
limit regulatory agencies from considering costs or comparing
expected benefits with costs. 10
Several of our recent reports and testimonies have raised the
issue of whether regulatory burden was based on the underlying
statutes. As noted previously, in our 1996 reports on which this
review is based, the agencies responding to some of the companies'
concerns said that the specific requirements that the businesses
mentioned were statutorily driven. 11 We noted in our November
1996 report that we did not review the regulations and statutes
that the agencies cited to determine whether the underlying
statutes required the regulatory provisions that were of concern
to the companies. However, we said that if the statutes do not
require those regulatory provisions, the agencies have a
responsibility to address those concerns on their own and not
shift the responsibility to Congress. We also said that if
Congress believes an agency's regulation is inconsistent with the
intent of the underlying statute, Congress could amend the statute
to reflect current congressional intent and, in effect, require
the agency to amend its regulation.
9 Committee for Economic Development, Modernizing Government
Regulation: The Need for Action, April 1, 1998. 10 See also Murray
Weidenbaum, A New Approach to Regulatory Reform, Center for the
Study of American Business, Policy Study Number 147, August 1998.
11 In response to other company concerns, the agencies (1)
indicated that the companies mischaracterized, misstated, or
misinterpreted the regulations involved; or (2) agreed that
corrective actions were needed and said they were taking or had
taken such actions. Related Reports and
Testimonies
B-279405 Page 6 GAO/GGD-99-20 Regulatory Burden
In three reviews of agencies' implementation of the Paperwork
Reduction Act of 1995, we reported that agencies believed the
paperwork burden associated with their regulations had increased
since the act was passed because of congressionally imposed
requirements. 12 As a result of such requirements, we said that
some agencies believed that they were limited in the amount to
which they can reduce their paperwork burden. For example, the
Internal Revenue Service (IRS) said it could not reach the burden
reduction goals established in the Paperwork Reduction Act under
the current statutory framework and still carry out its mission.
We noted that we had not assessed the extent to which the
paperwork burden agencies impose is directly a consequence of
statutory requirements and, therefore, is out of the agencies'
control. However, we also noted that if agencies' paperwork
requirements are truly statutorily mandated, those agencies may
not be able to reduce their burden- hour estimates by the amounts
envisioned in the 1995 act without changes in the legislation
underlying those requirements.
In our 1997 review of four agencies' efforts to eliminate or
revise pages in the Code of Federal Regulations (CFR), we found
that two of the four agencies had added more pages to the CFR than
they deleted. 13 Agency officials said that statutory requirements
imposed by Congress often drive CFR page additions, and they
provided several examples of those statutory requirements.
However, we did not examine those statutes to determine the extent
to which they required the CFR page additions.
This review focuses on a subset of the 125 regulatory concerns
that companies cited in our 1996 reports the concerns that federal
agencies indicated were, at least in part, attributable to the
statutes underlying the relevant regulatory provisions. Our
objectives were to determine, for each such concern, (1) the
amount of discretion the underlying statutes gave the agencies in
developing the regulatory requirements, (2) whether the regulatory
requirements at issue were within the authority granted by the
underlying statutes, and (3) whether the rulemaking agencies could
have developed regulatory approaches that would have been less
burdensome to the regulated entities while still meeting the
underlying statutory requirements.
12 Paperwork Reduction: Burden Reduction Goal Unlikely To Be Met
(GAO/ T- GGD- RCED- 96- 186, June 5, 1996); Paperwork Reduction:
Governmentwide Goals Unlikely To Be Met (GAO/T-GGD-97-114, June 4,
1997); Paperwork Reduction Act: Implementation at IRS (GAO/GGD-99-
4, Nov. 16, 1998).
13 Regulatory Reform: Agencies' Efforts to Eliminate and Revise
Rules Yield Mixed Results (GAO/ GGD98- 3, Oct. 2, 1997).
Objectives, Scope, and
Methodology
B-279405 Page 7 GAO/GGD-99-20 Regulatory Burden
Appendix I provides a detailed discussion of our scope and
methodology. In brief, we identified the 27 company concerns that
we focused on in this review by (1) subdividing some concerns in
our December 1996 report to facilitate the analysis; and (2)
eliminating some of the concerns that were too broad or that
focused only on federal statutes, not agencies' regulatory
requirements. For example, in one concern company officials said
that the Comprehensive Environmental Response, Compensation, and
Liability Act (CERCLA) was expensive and exposed the company to
unforeseen liability, but the officials did not cite any EPA
regulations in their concern. The 27 concerns were raised by
officials from 10 of the 15 companies we visited during the
preparation of our 1996 reports, 7 of whom asked that we use
generic descriptors such as Bank A or a paper company to identify
them. A total of 11 federal departments and agencies issued the
regulations underlying the 27 company concerns at issue in the
report.
To address our first objective we reviewed the statutory
provisions underlying each of the concerns and coded the level of
discretion that we believed those provisions permitted the
agencies in developing the specific regulatory requirements at
issue in the concerns into one of three categories no discretion,
some discretion, or broad discretion. We coded statutory
provisions as allowing rulemaking agencies no discretion if they
delineated specific actions that regulated entities or the
agencies themselves must take and did not allow the agencies to
develop their own regulatory requirements. We coded statutory
provisions as allowing the agencies some discretion if they
delineated certain requirements that had to be included in the
regulations but gave the agencies at least some discretion
regarding other requirements (e. g., the timing or frequency of a
reporting requirement). We coded statutory provisions as allowing
the agencies broad discretion if they contained few specific
requirements or imposed few to no constraints on what the agencies
had to include in their regulations.
To address our second objective, we compared the relevant
statutory and regulatory provisions for each concern and decided
whether we believed the regulatory requirements at issue in the
concerns were within the authority granted by the underlying
statutes. 14 We coded the regulatory provisions as being within
the authority granted by the statutes if (1) the statutory
provision gave the agency no discretion in how the regulations
could be developed and the regulatory provision strictly adhered
to the statutory requirements; or (2) the statutory provision gave
the agency
14 If a court considering this matter determined that a regulation
exceeded the authority granted by the underlying statute, that
regulation could be invalidated.
B-279405 Page 8 GAO/GGD-99-20 Regulatory Burden
some or broad discretion, and the regulatory provision was
consistent with the requirements or the limitations in the
statute.
To address our third objective we examined our answers to the
previous objectives and decided whether we believed the rulemaking
agencies could have developed regulatory approaches that would
have been less burdensome to the regulated entities while still
meeting the underlying statutory requirements. If the underlying
statutes gave an agency no rulemaking discretion and the agency
adopted regulations that strictly adhered to the statutory
requirements, we concluded that the agency could not have
developed a less burdensome regulatory approach. If the underlying
statutes gave an agency some or broad rulemaking discretion, we
were not able to determine if the agencies could have developed a
less burdensome approach. To do this we would have needed detailed
information on how the agencies' regulations were being
implemented and how alternative approaches would be perceived by
the regulated entities in order to determine whether a less
burdensome approach was available. As is discussed in Appendices
III and IV, that information was not readily available.
Because this review is based on a subset of the company concerns
and agency responses originally presented in our 1996 reports, the
results of our analysis are not generalizable to other companies,
other regulatory issues, or even to all of the original 125
regulatory concerns. However, as we pointed out in our November
1996 report, the companies' comments were similar in many respects
to comments made by companies in some of our previous reports and
in the literature. 15 Therefore, we believe that the companies'
comments, the agencies' responses, and our analysis of the related
regulations and statutes are not atypical and can provide some
insights regarding the broader issues addressed in this report.
This report reflects the views of selected companies and
regulatory agencies gathered during our earlier effort but does
not reflect the views of other individuals and organizations that
may be affected by the regulations at issue (e. g., labor unions
or potential beneficiaries). We did not attempt to determine
whether the companies' or the agencies' views were correct with
regard to issues that were outside the scope of this review (e.
g., whether any of the agencies' actions were, in fact,
burdensome). Although we approached this review systematically,
our conclusions are ultimately matters of judgement, not
determinations that have a legally
15 See, for example, Workplace Regulation: Information on Selected
Employer and Union Experiences (GAO/HEHS-94-138, June 30, 1994).
B-279405 Page 9 GAO/GGD-99-20 Regulatory Burden
binding effect on the agencies issuing the rules or the regulated
community.
The report focuses primarily on the amount of discretion that the
relevant statutes gave rulemaking agencies in developing the
regulatory requirements at issue in the companies' concerns.
However, the report does not address the amount of discretion that
the agencies had in writing regulations outside of the specific
issues raised by the companies. Agencies may have broad discretion
in how regulations can be developed within a general area, but
little or no discretion with regard to particular issues within
those areas. Also, the report does not address enforcement issues.
As our 1996 reports indicated, agencies may have considerable
discretion in carrying out their enforcement authority, and the
use of that discretion can significantly affect the burden felt by
regulated entities. For example, several companies expressed
concerns about rigid and inflexible regulations and about certain
regulators' gotcha enforcement approach. In response to those
concerns, the agencies sometimes indicated that they reduced
penalties in response to good faith efforts to comply, were not
aggressively enforcing certain technical requirements, or were
changing their enforcement approaches.
We initially gathered the company concerns and agency responses
between June 1994 and September 1996. We conducted our work for
this review between February and October 1998 in the Washington,
D. C., headquarters offices of each of the 11 departments and
agencies that issued the regulations in accordance with generally
accepted government auditing standards. During the preparation of
this report, the agencies responsible for the regulations related
to the company concerns reviewed and commented on our observations
regarding each applicable concern. The agencies often offered
suggestions regarding how the statutes and regulations should be
characterized in the report, and we incorporated those suggestions
where appropriate. The agencies ultimately concurred with our
analysis in all 27 concerns. At the end of our review we sent a
draft of this report for comment to the Director of the Office of
Management and Budget (OMB). Executive Order 12866 states that
OMB's Office of Information and Regulatory Affairs (OIRA) is the
repository of expertise concerning regulatory issues, including
methodologies and procedures that affect more than one agency . .
. . OIRA is also responsible for reviewing significant regulations
before their publication as proposed and final rules and for
approving agencies' information collection requests under the
Paperwork Reduction Act. On December 10, 1998, we met with the
Acting Administrator of OIRA, who said he had no comments on the
report.
B-279405 Page 10 GAO/GGD-99-20 Regulatory Burden
As shown in figure 1, we concluded that the statutory provisions
underlying 13 of the 27 company concerns that we reviewed provided
the agencies with no discretion in how the relevant regulatory
provisions could be developed. We concluded that the statutory
provisions underlying 12 of the remaining 14 concerns permitted
the agencies some discretion in establishing regulatory
requirements, and the provisions related to 2 concerns allowed the
agencies broad rulemaking discretion.
Note 1: We reviewed twenty- seven concerns to determine the amount
of discretion allowed by the relevant statutory provisions.
Source: GAO analysis based on GAO/GGD-97-2 (Nov. 18, 1996); and
GAO/GGD-97-26R (Dec. 11, 1996).
Table 1 shows the number of concerns at each level of discretion
for each agency issuing the related regulations. Statutes Provided
A
Range of Rulemaking Discretion
Figure 1: Agencies Appeared to Have No Discretion in Developing
Rules Related to About Half of the Company Concerns
B-279405 Page 11 GAO/GGD-99-20 Regulatory Burden
Number of concerns by level of discretion
Agency No discretion Some
discretion Broad discretion Total number of
concerns
Board of Governors of the Federal Reserve System (FRB) 6 5 0 11
Environmental Protection Agency (EPA) 3 1 0 4 Federal Deposit
Insurance Corporation (FDIC) 1 3 0 4 Internal Revenue Service
(IRS) 2 1 0 3 Office of the Controller of the Currency (OCC) 0 2 1
3 Health Care Financing Administration (HCFA) 0 2 0 2 Housing and
Urban Development (HUD) 0 1 0 1 Occupational Safety and Health
Administration (OSHA) 1 0 0 1 Department of Transportation (DOT) 0
1 0 1 Equal Employment Opportunity Commission (EEOC) 0 0 1 1
Pension Benefit Guaranty Corporation (PBGC) 1 0 0 1
Total number of concerns 14 16 2 32
Note: The total number of concerns is greater than 27 because the
regulations relevant to 2 of the concerns were issued by 3
agencies, and the regulations underlying another concern were
issued by 2 agencies.
Source: GAO analysis based on GAO/GGD-97-2 (Nov. 18, 1996); and
GAO/GGD-97-26R (Dec. 11, 1996).
For 13 of the 27 company concerns in this report, we concluded
that the relevant statutory provisions allowed the agencies no
discretion in how the related regulations could be developed. As
discussed previously, we considered statutory provisions as
allowing rulemaking agencies no discretion if they delineated the
specific actions that regulated entities or the agencies
themselves must take and did not allow the agencies to develop
their own regulatory requirements.
The following examples illustrate the types of statutory
provisions that we concluded did not allow agencies any discretion
in developing the relevant regulations. These and other examples
of statutory provisions that did not appear to allow the agencies
rulemaking discretion are discussed more fully in appendix II.
Table 1: Number of Concerns by Agency and Level of Discretion
Statutes Permitted No Rulemaking Discretion for About Half the
Concerns
B-279405 Page 12 GAO/GGD-99-20 Regulatory Burden
Officials from Multiplex Company, Inc. said increased premium
costs paid to PBGC to guarantee their employees' pensions is
costly for the company, rising from $2.60 per participant in 1982
to $19.00 per participant in 1994. PBGC officials said the
agency's insurance premiums are statutorily established in Section
4006 of the Employee Retirement Income Security Act (ERISA). We
concluded that ERISA (codified at 29 U. S. C. 1001 et seq.) gave
PBGC no discretion in setting the pension insurance rates at issue
in this concern. Under the statute, the $19.00 rate is the minimum
amount businesses with single- employer plans must pay for basic
benefits.
Multiplex Company, Inc. officials also said that IRS- required
nondiscrimination tests for 401( k) thrift savings plans were of
questionable value after IRS lowered the amount of money that
could be contributed to the plans, thereby making it less likely
that higher income employees would dominate the plan. IRS said
that both the test, known as the actual deferral percentage test,
and the limit on the amount that could be contributed to a 401( k)
plan were required by statute. We examined the relevant statutory
provisions and concluded that IRS had no discretion in how the
regulations could be developed. The deferral percentage test and
the deferral limit were both specifically established by statute.
A subsequently enacted statute that reduced the amount that could
be contributed to 401( k) plans did not eliminate the requirement
that companies perform this test.
An official from Bank A said that a FRB regulation on the
availability of funds and the collection of checks (Regulation CC)
requires information that is time consuming for banks to develop.
Officials from FRB said that the Expedited Funds Availability Act
requires depository institutions to provide written copies of
their funds availability policies to their customers. We examined
the act and concluded that it gave the agency no discretion in how
its regulations could be written. The statute specifically
requires depository institutions to provide their customers with
preprinted slips describing their policies regarding the amount of
time between when a deposit is made into a customer's account and
when funds can be withdrawn from that deposit.
A Metro Machine Corporation official said that EPA regulators
establish unrealistic requirements that are not attainable with
current treatment technology. For example, the official said that
federal water quality standards require that water the company
discharges be made cleaner than rainwater. In its response to this
concern, EPA said that under the Clean Water Act, it could not
consider available treatment technologies or the cost of treatment
in the development of water quality criteria for a particular
designated use. We agreed that EPA had no discretion under the act
regarding the role that cost or treatment technologies can play in
establishing federal water quality criteria.
B-279405 Page 13 GAO/GGD-99-20 Regulatory Burden
For 12 of the 27 company concerns, we concluded that the
underlying statutory provisions gave the agencies some discretion
in how the associated regulations could be developed. As discussed
previously, we considered rulemaking agencies to have some
discretion if the statutory provisions delineated certain
requirements that had to be included in the regulations but
allowed the agencies at least some flexibility regarding other
requirements.
The following examples illustrate the types of statutory
provisions that we concluded allowed agencies some discretion in
developing the relevant regulations. These and other examples of
statutory provisions that allowed some rulemaking discretion are
discussed more fully in appendix III.
An official from Bank A said that provisions of Regulation DD
under the Truth in Savings Act requires the bank to disclose
certain information to its customers in a single document. The
bank officials said that they had been disclosing this information
in a variety of brochures, but had to revise their brochures to
disclose this information in one document to comply with
Regulation DD. In response to this concern, officials at FRB said
that the Truth in Savings Act required all depository institutions
to disclose information about the rates paid and fees charged in a
uniform manner. We concluded that the Truth in Savings Act gave
FRB some discretion in how it could establish what became
Regulation DD. Although the act gave FRB no discretion regarding
the disclosures that must be required in Regulation DD, the act
gave FRB discretion to determine how these disclosures should be
made to bank customers. 16
Officials from the paper company said DOT regulations that
required hazardous materials ( hazmat) training and testing cost
the company $475,000 each year. According to DOT, the Hazardous
Materials Transportation Uniform Safety Act specifically required
the issuance of regulations requiring employers to provide hazmat
training to certain employees. We examined the training
requirements in the act and concluded that the act gave DOT no
rulemaking discretion in some areas and some discretion in other
areas. For example, the act said the Secretary of Transportation
shall prescribe by regulation requirements for training that a
hazmat employer must give hazmat employees of the employer on the
safe loading, unloading, handling, storing, and transporting of
hazardous material. The act also required the regulations to
establish the date by which the training shall be completed and to
16 As discussed in appendix III, FRB's regulations require only
that these disclosures be made in a clear and conspicuous manner,
not in a single document. Statutes Allowed Agencies
Some Rulemaking Discretion for 12 Concerns
B-279405 Page 14 GAO/GGD-99-20 Regulatory Burden
require employers to certify that their hazmat employees have
received training and been tested on at least one of nine specific
areas of responsibility that are delineated in the statute.
However, the statute also said that DOT's regulations may provide
for different training for different classes or categories of
hazardous material and hazmat employees. Because the statute gave
DOT the flexibility to tailor its regulatory requirements for
hazmat training to different classes of hazmat materials and
employees, we concluded that DOT had some rulemaking discretion.
17
Officials from the fish farm said that pesticide manufacturers
were either not renewing the aquatic use of certain pesticides or
were not seeking EPA approval of the products for use in
aquaculture because of the expense associated with the testing
requirements in EPA's reregistration program. EPA officials said
that the Federal Insecticide, Fungicide, and Rodenticide Act
(FIFRA) requires EPA to certify that all pesticides meet current
testing standards for safety. We concluded that these FIFRA
provisions gave EPA some discretion regarding the requirements
that manufacturers must satisfy in the pesticide reregistration
process. Section 4 of FIFRA specifically states that the
Administrator of EPA must reregister each registered pesticide
containing any active ingredient contained in any pesticide first
registered before November 1, 1984, and it prescribes in detail
the approach EPA is to use to reregister pesticides. However, the
statute gives the EPA administrator discretion in establishing the
data requirements that would be needed to support the
reregistration of the pesticides. These requirements can have a
direct impact on the expense incurred by manufacturers in the
reregistration process.
We concluded that the statutory provisions underlying 2 of the 27
concerns gave the agencies broad discretion in how regulatory
provisions could be developed. As noted previously, we coded
statutory provisions as allowing rulemaking agencies broad
discretion if the provisions contained few specific requirements
or imposed few to no constraints on what had to be included in
agencies' regulations.
In the first of the two concerns, Bank A officials said EEOC's
record retention standards were inconsistent with the way EEOC
pursued cases. In response to the Bank's concern, EEOC officials
said that its record retention requirements were tied to the
filing periods in each of the civil rights statutes. For example,
EEOC officials said that because an employee could file a
discrimination suit under the Equal Pay Act within either 2 or 3
years of the alleged discrimination, EEOC requires that
17 As discussed in appendix III, DOT's hazmat training regulations
reflect the statutory requirements and require some additional
information that the statute permits the agency to impose.
Statutes Allowed Agencies
Broad Rulemaking Discretion for Two Concerns
B-279405 Page 15 GAO/GGD-99-20 Regulatory Burden
related records be kept for 2 or 3 years. EEOC officials also said
that under all of the statutes, when a claim of discrimination is
pending, the employer must keep all relevant personnel records
until final disposition of the charge or action. We concluded that
the statutory provisions underlying EEOC's record retention
standards gave EEOC broad discretion in developing the standards
because those provisions (1) do not specify how long employers
must retain records and (2) give EEOC broad authority to establish
retention periods. For example, the Equal Pay Act states that
every employer must preserve records for such periods of time as
the Administrator of EEOC shall prescribe by regulation or order
as necessary or appropriate for the enforcement of the provisions
of this chapter or the regulations or orders thereunder. Title VII
of the Civil Rights Act of 1964, as amended, requires every
employer to make such reports from its personnel records as the
Commission shall prescribe by regulation or order . . . . 18
Therefore, we concluded that EEOC had broad discretion in
establishing record retention requirements.
In the second of the two concerns, Bank B officials said that some
banking regulations gave nonbanks (e. g., investment brokerage
firms) an unfair competitive edge in the marketplace. For example,
the officials said that one regulation required banks (but not
investment firms) to disclose the risks associated with certain
investment products. In their 1996 response to this concern, OCC
officials said that the examples of competitive inequality cited
by the bank officials are due to the fact that banks and nonbanks
operate under different statutory schemes. During this review they
explained that under these statutes, banks are subject to a
different regulatory scheme than nonbanks because they are
federally insured. Therefore, they said it is appropriate for
banking agencies to adopt additional disclosure requirements that
address the unique features of the banking industry. In 1994, OCC
and the other banking agencies issued an interagency policy
statement at their own initiative requiring the disclosures that
Bank B found burdensome under their general statutory authority to
issue rules and regulations. Because (1) the statutes give OCC and
the other banking agencies authority to take whatever actions they
believe are necessary to remedy or prevent unsafe and unsound
banking practices (see 12 U. S. C. 1818), and (2) the disclosures
required in the policy statement appear related to that end, we
believe that OCC had broad discretion to issue the policy
statement requiring the disclosures at issue in this concern.
18 As discussed in appendix IV, EEOC's record retention
requirements align fairly closely with the statutory time limits
for filing discrimination complaints.
B-279405 Page 16 GAO/GGD-99-20 Regulatory Burden
Appendix IV contains our detailed analysis of the statutory and
regulatory provisions relating to both of the concerns for which
we concluded the agencies had broad rulemaking discretion.
Our second objective was to determine whether the regulatory
requirements at issue in each of the 27 company concerns were
within the authority granted by the underlying statutes. We
concluded that the regulatory provisions related to all of the
concerns were within the authority granted by those statutes.
For the 13 concerns in which we concluded the underlying statutes
gave the agencies no rulemaking discretion, the language in the
agencies' regulations either mirrored the language in the statutes
or was substantively consistent with the statutory requirement.
Therefore, we concluded that the regulations were within the
authority granted by the statutes. For example, in relation to a
concern from Zaclon, Inc., regarding a permit application under
the Resource Conservation and Recovery Act (RCRA), we compared the
relevant RCRA statutory provisions with EPA's regulations and
found that the language in the regulations mirrored the language
in the statute. The RCRA provisions (codified at 42 U. S. C. 6925(
a)) required the EPA Administrator to promulgate regulations
requiring each person owning or operating an existing facility or
planning to construct a new facility for the treatment, storage,
or disposal of hazardous waste . . . to have a permit issued
pursuant to this section. EPA's RCRA regulations (40 C. F. R.
270.1( c)) directly quote the statute's requirements that a permit
is needed for the treatment, ' storage, ' and disposal' of any
hazardous waste' and goes on to require companies to obtain such
permits. Because the regulatory provisions reflected the specific
statutory requirements, we concluded that those provisions were
within the authority granted by the statutes.
We reached a similar conclusion with regard to a concern from
Multiplex Company, Inc., involving what it referred to as IRS'
nondiscrimination tests for companies' 401( k) thrift savings
plans. We compared the nondiscrimination test provisions in the
tax code with IRS' regulations and concluded that the regulations
essentially mirror the statutory provisions and add some
explanatory language. The statute (codified at 26 U. S. C. 401(
k)( 3)( A)( ii)) specifically requires the test and establishes
specific dollar amounts for deferral limits and detailed
procedures that companies must follow. For example, the statute
says that the actual deferral percentage for the group of eligible
highly compensated employees is not more than the actual deferral
percentage of all other eligible employees Agencies' Regulatory
Requirements Were Within Statutory Authority
B-279405 Page 17 GAO/GGD-99-20 Regulatory Burden
multiplied by 1.25. The related IRS regulations (26 C. F. R.
1.401( k)- 1( b) and 1.402( g)- 1) repeat these statutory
requirements word for word.
We concluded that the regulations underlying the 12 concerns for
which the agencies had some rulemaking discretion were within the
authority granted by the related statutes because they (1)
contained the elements required by those statutes and/ or (2) did
not exceed the authority granted or limits imposed by those
statutes. For example, we concluded that the Expedited Funds
Availability Act allowed FRB some discretion in developing the
regulation (Regulation CC) that established the periods during
which banks could hold funds before making them accessible to
depositors. Although the act gave FRB no discretion regarding the
maximum number of days banks could hold particular types of
deposits, it allowed FRB to establish hold periods that were less
than those maximums or to standardize those time periods.
Regulation CC established hold periods that were consistent with
the maximum periods specified in the statute. Therefore, we
concluded that the regulation was within the authority granted by
the statute.
For the two concerns in which we concluded that the underlying
statutes gave the agencies broad rulemaking discretion, the
statutes contained language that allowed agencies to develop the
rules they believed were necessary to carry out their statutory
missions. We viewed regulations that agencies developed to carry
out their statutory responsibilities as being within the authority
of those statutes. For example, we concluded that EEOC had broad
discretion under the various civil rights statutes to impose
record retention requirements. Therefore, we also concluded that
EEOC's practice of establishing requirements closely related to
the filing periods of each statute was within the authority
granted by those statutes.
Appendixes II, III, and IV describe our analyses of the relevant
regulations for all of the concerns that we categorized as
allowing no discretion, some discretion, and broad discretion,
respectively.
Our third objective was to determine whether the rulemaking
agencies could have developed regulatory approaches that would
have been less burdensome to the regulated entities while still
meeting the underlying statutory requirements. We concluded that
in relation to 13 of the 27 concerns, the agencies could not have
developed less burdensome regulatory approaches. For the remaining
14 concerns, we could not determine whether less burdensome
regulatory approaches were available to the agencies without
substantial additional information about how the Less Burdensome
Regulatory Approaches Were Not Available for About Half of the
Concerns
B-279405 Page 18 GAO/GGD-99-20 Regulatory Burden
current approaches were being implemented or how alternative
approaches would be perceived by regulated entities.
We believe that an agency cannot develop regulatory requirements
that are less burdensome to a regulated entity if (1) the statute
underlying the regulation gives the agency no discretion regarding
how regulatory provisions can be developed, and (2) the agency
develops regulations that are consistent with (and sometimes
mirror images of) the statutory requirements. Because 13 of the 27
concerns met these criteria, we concluded that the agencies
involved in the concerns could not have developed less burdensome
regulatory provisions. For example, in one of these concerns,
officials from a paper company said that EPA regulations under
title V of the Clean Air Act were problematic because they
regulated extremely low levels of emissions. We concluded that
under title V, EPA had no discretion regarding the development of
regulations on the emissions levels that trigger the permitting
requirements because the statute specifically requires any major
source of hazardous air pollutants to obtain a title V permit and
defines a major source as any source that emits 10 tons or more a
year of any hazardous air pollutant or 25 tons or more per year of
a combination of pollutants. EPA's regulations implementing title
V are similar to the statutory language and specifically refer to
the definition of major source in the United States Code.
Therefore, we concluded that there was no less burdensome
regulatory approach that the agency could have selected that would
have met the requirements of the statute. (See app. II for a
discussion of all of these concerns.)
For the remaining 14 concerns in which we concluded the underlying
statutes gave the agencies some or broad discretion, we could not
determine whether a less burdensome regulatory approach was
available. To make such a determination in each of these cases, we
would have had to do an in- depth review of how the current
regulations were being implemented at each agency or how
alternative approaches would be viewed by regulated entities. For
example, in one of the concerns, a Bank A official complained
about the time and effort required to complete call reports that
summarize bank operations. We concluded that the various statutes
that require or authorize the banking agencies to collect
information through the call reports gave the agencies some
discretion in drafting the relevant regulatory provisions.
However, we could not determine whether the banking agencies could
have developed less burdensome requirements without conducting a
detailed review of each of the nonstatutory data elements in the
call reports and their consistency with the requirements in the
statute. This type of detailed analysis would
B-279405 Page 19 GAO/GGD-99-20 Regulatory Burden
have required significant time and resource commitments that were
beyond the scope of this review. (See app. III and IV for a
discussion of all of these concerns.)
For 2 of these 14 concerns, the agencies appeared to have
discretion to develop alternative regulatory approaches that may
have addressed an aspect of the companies' original concerns.
However, we also concluded that the regulated entities might not
have viewed those alternatives as less burdensome than the
approach that the agencies took. For example, in one of the
concerns a Bank A official said that Regulation CC required the
development and maintenance of expensive and time- consuming
information about the current availability of funds. In response,
FRB officials indicated that Regulation CC's requirements were
based on the Expedited Funds Availability Act, which establishes
different minimum hold periods for different types of deposits (e.
g., deposits of local versus nonlocal checks). They said that to
ensure compliance with this act, banks must have a system for
tracking those deposits. We examined the act and concluded that it
allowed FRB some discretion to establish hold periods for various
types of deposits. For example, the act said that the hold period
for nonlocal checks could not be more than 5 days, but it allowed
FRB to establish hold periods that were less than the maximum
period. However, FRB's Regulation CC established a 5- day hold
period for nonlocal checks. To reduce Bank A's burden of having to
track holds on different types of deposits, FRB could have
established a standard hold period in Regulation CC for all types
of deposits e. g., 1 day for all types of deposits that was still
consistent with the statutory requirements. However, it is unclear
whether banks would welcome a standard 1- day hold requirement
because it would reduce the amount of time available to the banks
to determine whether sufficient funds existed to cover all
categories of checks.
In the other concern, we concluded that EEOC's practice of
establishing personnel record retention requirements related to
the length of the filing periods of the particular civil rights
statutes was within the broad rulemaking authorities granted by
those statutes. However, EEOC could also have used its discretion
to establish uniform record retention requirements (e. g., 5 or 10
years) for all of the statutes instead of the variable periods for
the different statutes. Although this approach could have helped
eliminate what the company viewed as an inconsistency between the
requirements and the way EEOC pursues cases, it is not clear
whether regulated entities would view a record retention
requirement that is longer than the current requirement as being
less burdensome.
B-279405 Page 20 GAO/GGD-99-20 Regulatory Burden
Our review focused on a limited set of issues. It did not attempt
to assess the amount of discretion that federal agencies had in
enforcing the requirements at issue in the companies' concerns or
whether those requirements were, in fact, burdensome. The review
focused on 27 regulatory concerns from 10 companies that the
agencies issuing the regulations indicated were based on the
underlying statutes. Therefore, the results of our review cannot
be viewed as being representative of all regulatory concerns, all
regulations or statutes, or even all of the concerns that the
companies mentioned during our initial 1996 study. In fact, it is
important to remember that for about three- fourths of the
companies' original 125 concerns, the responding agencies did not
indicate that the concerns were based on the statutory
requirements underlying their regulations.
On the other hand, although our review focused on 27 regulatory
concerns that the agencies said were, at least in part,
statutorily based, the companies in our 1996 study mentioned 6
other concerns that centered on the statutes themselves, not the
regulations. For example, officials from one company said that
compliance with the Comprehensive Environmental Response,
Compensation, and Liability Act (not EPA's CERCLA regulations) was
expensive and exposed the company to unforeseen liability. These
statute- directed concerns suggest that the companies understood
the degree to which their problems were traceable to the statutes.
Also, the comments that the companies made during our 1996 study
were similar in many respects to comments made by companies in
some of our previous reports and in the literature. Therefore, we
believe that the companies' comments are not atypical, and our
analysis of the regulations and statutes underlying those concerns
can offer some insights into how regulatory concerns arise and how
they can best be addressed.
For about half of the concerns that we reviewed, we concluded that
the statutory provisions underlying the regulations that companies
perceived as problematic gave the agencies no discretion in how
they could develop those regulations. Some of the statutory
provisions specifically delineated the actions regulated entities
had to take and therefore limited rulemaking agencies' discretion
regarding what their regulations could require. As a result, the
agencies often mirrored the language of the statutes in their
regulations. We therefore concluded that the agencies' regulations
were within the authority granted by the underlying statutes and
represented the least burdensome option permitted by those
statutes. Nevertheless, during our 1996 review the companies told
us that the requirements for these 27 concerns were burdensome.
Conclusions
B-279405 Page 21 GAO/GGD-99-20 Regulatory Burden
The statutes underlying other company concerns gave the agencies
some or broad discretion in developing associated regulatory
provisions. In these cases the agencies appeared to have developed
regulations that were within the authorities permitted by or the
limitations of the statutes. However, we could not determine
whether the agencies could have developed less burdensome
regulatory alternatives with regard to these concerns because to
do so would have required detailed information about how the
current requirements were being implemented and/ or how
alternative regulatory approaches would be perceived by regulated
entities. In two of these cases, we concluded that the agencies
could have developed alternative regulatory requirements that may
have addressed some aspects of the companies' concerns. However,
even in those cases, the regulated entities may not have perceived
these alternative actions as less burdensome than the actions the
agencies took.
Different perspectives exist regarding the amount of discretion
that Congress should give agencies to establish regulatory
requirements. Some observers believe that giving agencies broad
discretion to develop regulations represents an abrogation of
Congress' legislative responsibilities and is an open invitation
for agencies to impose burdensome requirements on the public. They
contend that Congress should closely direct agencies' regulatory
efforts through narrowly defined statutory requirements. However,
other observers believe that some statutory requirements may be to
blame for certain types of regulatory burden. In those cases in
which Congress has specifically required certain actions or
limited agencies' rulemaking discretion, the agencies are
precluded from considering the most cost- effective approaches.
Our review indicated that regardless of how much or how little
rulemaking discretion is permitted in the underlying statutes, the
associated regulations can still be regarded as burdensome by
regulated entities. For 13 of the 27 company concerns that we
examined, Congress gave the regulatory agencies no discretion in
how the relevant regulatory provisions could be developed.
Although the statutes specifically delineated the requirements
that should be imposed, the companies considered those
requirements to be burdensome. In the statutes underlying the
other 14 concerns, Congress gave the regulatory agencies some or
broad rulemaking discretion. Although the agencies' regulatory
requirements were within the authority granted by the relevant
statutes, the companies again viewed the requirements as
burdensome. Also, it is unclear whether alternative regulations
could be developed that would be perceived as less burdensome.
Statutory Discretion
Appears Unrelated to Regulatory Burden
B-279405 Page 22 GAO/GGD-99-20 Regulatory Burden
Efforts to reduce regulatory burden and reform the regulatory
process are often based on the belief that agencies' rulemaking
actions must be carefully limited. Several of the executive and
legislative branch regulatory reform efforts during the past 20
years have directed federal agencies to conduct cost- benefit or
regulatory flexibility analyses for certain regulations to ensure
that those rules impose as little burden as possible on the
regulated public. When the statutes directing or authorizing
agencies to develop regulations give those agencies discretion as
to the regulatory approach that they can take and the particular
requirements that can be imposed, analytical requirements imposed
on the agencies (e. g., cost- benefit analysis and regulatory
flexibility analysis) can help ensure that they consider all
available regulatory options and select the least burdensome
option.
However, when the statutes underlying those regulations give
agencies no discretion in how their regulations can be developed,
analytical requirements imposed on the agencies are unlikely to
have much direct effect on the regulatory burden that those
agencies impose. Agencies cannot adopt regulatory alternatives
that are outside the boundaries permitted in the underlying
statutes. If a statute underlying a regulation is the source of a
company's regulatory concern, that concern can be addressed only
by changes in the statute. Similarly, if Congress disapproves of a
regulation pursuant to its authority under SBREFA because of
requirements that are based on the underlying statute, sending the
regulation back to the issuing agency for further consideration
will not resolve the issue. If a statute established the
conditions that Congress finds objectionable, only Congress can
address the problem by changing that statute.
Nevertheless, analytical requirements imposed on agencies can
serve a useful purpose even when the underlying statutes give the
agencies no rulemaking discretion. For example, cost- benefit
analysis can highlight the potential advantages of alternative
regulatory approaches not permitted in the underlying statutes,
perhaps leading to eventual changes in those statutes and thereby
alleviating at least some of the burden felt by the regulated
entities.
We are sending copies of this report to the Ranking Minority
Member of the House Judiciary Committee's Subcommittee on
Commercial and Administrative Law; the Director of OMB; the
Secretaries of Health and Human Services, HUD, Department of
Labor, DOT, and the Treasury; the Comptroller of the Currency; the
Administrator of EPA; EEOC; FDIC; FRB; and PBGC. We will also make
copies available to others on request. Reduction of Statutorily
Based Burden Requires Statutory Changes
B-279405 Page 23 GAO/GGD-99-20 Regulatory Burden
Major contributors to this report are listed in appendix V. Please
contact me on (202) 512- 8676 if you or your staff have any
questions concerning this report.
Sincerely yours, L. Nye Stevens Director Federal Management and
Workforce Issues
Page 24 GAO/GGD-99-20 Regulatory Burden
Contents Letter 1 Appendix I Objectives, Scope, and Methodology
26 Appendix II Concerns for Which Agencies Appeared to Have No
Rulemaking Discretion
34 Appendix III Concerns for Which Agencies Appeared to Have Some
Rulemaking Discretion
58 Appendix IV Concerns for Which Agencies Appeared to Have Broad
Discretion
84 Appendix V Major Contributors to This Report
91
Contents Page 25 GAO/GGD-99-20 Regulatory Burden Abbreviations
ADA Americans with Disabilities Act of 1990 ADEA Age
Discrimination in Employment Act CAA Clean Air Act CED Committee
for Economic Development CERCLA Comprehensive Environmental
Response, Compensation, and Liability Act of 1980 CFR Code of
Federal Regulations DOT Department of Transportation EEOC Equal
Employment Opportunity Commission EPA Environmental Protection
Agency ERISA Employee Retirement Income Security Act of 1974 FDIC
Federal Deposit Insurance Corporation FDICIA Federal Deposit
Insurance Corporation Improvement Act FIFRA Federal Insecticide,
Fungicide, and Rodenticide Act FRB Federal Reserve Board HCFA
Health Care Financing Administration HUD Department of Housing and
Urban Development IRS Internal Revenue Service OCC Office of the
Comptroller of the Currency OIRA Office of Information and
Regulatory Affairs OMB Office of Management and Budget OSHA
Occupational Safety and Health Administration PBGC Pension Benefit
Guaranty Corporation RCRA Resource Conservation and Recovery Act
RESPA Real Estate Settlement Procedure Act SBREFA Small Business
Regulatory Enforcement Fairness Act
Appendix I Objectives, Scope, and Methodology
Page 26 GAO/GGD-99-20 Regulatory Burden
This review focuses on a subset of the 125 regulatory concerns
that companies cited in our 1996 reports the concerns that federal
agencies indicated were, at least in part, based on the statutes
underlying the relevant regulatory provisions. Our objectives were
to determine, for each such concern, (1) the amount of discretion
the underlying statutes gave the agencies in developing the
regulatory requirements that the agencies had said were
attributable to the underlying statutes, (2) whether the
regulatory requirements at issue were within the authority granted
by the underlying statutes, and (3) whether the rulemaking
agencies could have developed regulatory approaches that would
have been less burdensome to the regulated entities while still
meeting the underlying statutory requirements.
In 1996, the agencies indicated that 31 of the 125 company
concerns were, at least in part, statutorily based. However, we
eliminated eight of those concerns from this review because the
companies were not expressing concerns about federal agencies'
regulatory requirements. Two of the eight concerns were very
broad, asserting that frequent changes to the tax code are costly
and that doing business in multiple states was difficult because
of differences in state laws. The other six concerns involved
particular federal statutes but did not focus on agencies'
regulatory requirements. For example, in one of the six concerns
company officials said that compliance with the requirements in
the Comprehensive Environmental Response, Compensation, and
Liability Act (CERCLA) was expensive and exposed the company to
unforeseen liability. However, the officials did not cite any
particular Environmental Protection Agency (EPA) regulations in
their concern. Another of the six concerns focused on the
potential liability that officials from one company said its
managers faced with regard to certain environmental standards. In
its response to that concern, EPA indicated that criminal
penalties for the violation in question were established in a
particular statute rather than in EPA's regulations. We eliminated
this concern from our review because EPA is not responsible for
enforcing those provisions in criminal law, and the issues in the
concern were not associated with EPA regulations.
We eliminated another company's concern from this review because
the agency that had issued the underlying regulations no longer
contended that the concern was statutorily based. In its 1996
response to a concern that one company described as EPA's
antidegradation policy, EPA said that the company was actually
referring to the agency's antibacksliding requirements that were
statutorily mandated by the Clean Water Act. However, an EPA
official told us during this review that (1) the company concern
was, in fact, about antidegredation; and (2) the policy was
Identification of Statutorily
Based Regulatory Concerns
Appendix I Objectives, Scope, and Methodology
Page 27 GAO/GGD-99-20 Regulatory Burden
adopted by the State of Ohio, not EPA, and was not based on
federal environmental statutes. We therefore eliminated this
concern from our review.
We subdivided 4 of the remaining 22 concerns into 9 separate
concerns in order to facilitate our analysis. For example, one
such concern involved three separate provisions of Regulation DD,
which was issued by the Board of Governors of the Federal Reserve
System (FRB) to implement provisions of the Truth in Savings Act.
By dividing this concern into three separate concerns, we were
able to assess each of the provisions individually. One of the
other concerns that we subdivided focused on what one company
viewed as a disparity in federal regulations requirements between
banks and nonbanks (e. g., an investment brokerage firm) regarding
(1) flood insurance and (2) public disclosure requirements. We
subdivided this concern into two concerns to focus on the
requirements for flood insurance and disclosure requirements
separately.
After eliminating some company concerns and separating others into
multiple parts, what remained were 27 concerns about federal
regulations that the agencies indicated were, at least in part,
based on the underlying statutes. These 27 concerns were raised by
officials from 10 of the 15 companies we visited during the
preparation of our 1996 reports. In 1996, many of the companies
asked that their identities not be disclosed during our
discussions with regulators or in our reports. As a result, we
used generic descriptors in the 1996 reports to identify those
companies. We maintained the same policy in this report, using
generic descriptors for 7 of the 10 companies and identifying the
remaining 3 companies by name. Table I. 1 shows the name or
generic descriptor and the number of concerns analyzed in this
report for each of the 10 companies.
Appendix I Objectives, Scope, and Methodology
Page 28 GAO/GGD-99-20 Regulatory Burden
Company name or generic descriptor Description of company Number
of
concerns
Bank A A federally chartered community bank 8 Bank C A commercial
bank 5 Bank B A state- chartered community bank 3 Fish farm A
tropical fish farm 2 Hospital A teaching hospital 2 Paper company
A manufacturer of paper and allied products 2 Metro Machine
Corporation A ship repair and maintenance company
located in Norfolk, VA 2 Multiplex Company, Inc. A beverage
dispenser equipment
manufacturer headquartered in St. Louis, MO
2 Glass company A manufacturer of consumer glassware and
fiber optic systems 1 Zaclon, Inc. A chemical manufacturing
company located
in Cleveland, OH 1
Total number of concerns 28
Note: The total number of concerns is greater than 27 because 2
companies expressed 1 of the concerns.
Source: GAO analysis based on GAO/GGD-97-2 (Nov. 18, 1996); and
GAO/GGD-97-26R (Dec. 11, 1996).
A total of 11 federal departments and agencies issued the
regulations underlying the 27 company concerns at issue in this
report. Table I. 2 shows the number of those concerns that were
applicable to each of the 11 departments or agencies.
Department or agency name Number of concerns
Board of Governors of the Federal Reserve System (FRB) 11
Environmental Protection Agency (EPA) 4 Federal Deposit Insurance
Corporation (FDIC) 4 Internal Revenue Service (IRS) 3 Office of
the Comptroller of the Currency (OCC) 3 Health Care Financing
Administration (HCFA) 2 Department of Housing and Urban
Development (HUD) 1 Occupational Safety and Health Administration
(OSHA) 1 Department of Transportation (DOT) 1 Equal Employment
Opportunity Commission (EEOC) 1 Pension Benefit Guaranty
Corporation (PBGC) 1
Total number of concerns 32
Note: The total number of concerns is greater than 27 because the
regulations relevant to 2 of the concerns were issued by 3
agencies, and the regulations underlying another concern were
issued by 2 agencies.
Source: GAO analysis based on GAO/GGD-97-2 (Nov. 18, 1996); and
GAO/GGD-97-26R (Dec. 11, 1996).
Table I. 1: Companies and Number of Concerns Reported by Each
Company
Table I. 2: Number of Concerns Applicable to Each Department and
Agency
Appendix I Objectives, Scope, and Methodology
Page 29 GAO/GGD-99-20 Regulatory Burden
To address our first objective regarding the amount of discretion
the underlying statutes gave the agencies in developing regulatory
requirements, we first had to identify the regulatory provisions
at issue in the company concerns and the underlying statutory
requirements for those provisions. For most of the concerns,
either the company or the responding agency provided relevant
statutory and/ or regulatory citations. However, for other
concerns we had only limited information and had to contact the
relevant agencies for additional details. For example, in one
concern, Bank A said it was frustrating to spend the time and
resources comply with so many bank reporting requirements but did
not cite any specific relevant regulations or statutes. In its
response to this concern, FDIC said that some bank reporting
requirements were mandated by statute, but it did not provide any
examples of those requirements to support its statement. During
this review, we asked FDIC to identify the specific regulatory
reporting requirements that it considered to be statutorily
mandated and to provide the relevant statutory citations.
We then reviewed the statutory provisions underlying each of the
company concerns and coded the level of discretion that we
believed those provisions permitted the agencies in developing the
specific regulatory requirements at issue in the concerns into one
of three categories no discretion, some discretion, or broad
discretion. We coded statutory provisions as permitting no
discretion if they delineated specific actions that regulated
entities or the agencies themselves must take and did not allow
the agencies to develop the regulatory requirements at issue in
the concern. For example, using a hypothetical illustration
unrelated to any of the concerns in this report, assume that a
company raised a concern about what it viewed as a burdensome
recordkeeping requirement that EPA imposed regarding its recycling
efforts. If a statutory provision required companies with 100 or
more employees to provide recycling information to EPA on January
30 of each year delineating, for the previous calendar year and
for each company work site, (1) the specific materials that were
recycled, (2) the manner of recycling, and (3) the costs
associated with their recycling efforts, we would have coded the
provision as allowing EPA no rulemaking discretion.
We coded statutory provisions as allowing rulemaking agencies some
discretion if they delineated certain requirements that had to be
included in the agencies' regulations but gave the agencies at
least some discretion regarding other requirements. For example,
in the above illustration, if the statute gave EPA discretion
regarding the timing or the frequency with Amount of Discretion
Permitted by Statutes
Appendix I Objectives, Scope, and Methodology
Page 30 GAO/GGD-99-20 Regulatory Burden
which recycling information had to be provided by the companies,
but EPA still had no discretion regarding the content of the
reporting requirement, we would have coded the statutory provision
as allowing some rulemaking discretion.
We coded statutory provisions as allowing the rulemaking agencies
broad discretion if the provisions contained few specific
requirements or imposed few to no constraints on what the agencies
had to include in their regulations. In the hypothetical recycling
example, if the statutory provision only required EPA to
periodically report to Congress on businesses' recycling efforts,
we would have coded the provision as allowing EPA broad rulemaking
discretion. In this scenario, EPA could unilaterally decide what
information to collect, from which businesses to collect the
information, and the timing and frequency of companies' reporting
requirements.
To address our second objective, we compared the relevant
statutory and regulatory provisions for each concern and decided
whether we believed the regulatory requirements at issue in the
concerns were within the authority granted by the underlying
statutes. 1 We coded the regulatory provisions as being within the
authority granted by the statutes if (1) the statutory provisions
gave the agency no discretion in how the regulations could be
developed and the regulatory provision strictly adhered to the
statutory requirements; or (2) the statutory provisions gave the
agency some or broad discretion, and the regulatory language was
consistent with the requirements or the limitations in the
statutes. For example, if the relevant statutory provision in the
above recycling illustration allowed EPA to establish whatever
reporting requirements it deemed necessary to determine the status
of companies' recycling efforts, we would have considered almost
any regulatory reporting requirements that EPA established as
being within the authority granted by the statute. However, if the
statutory provision said EPA could collect information from
companies no more than twice annually but the regulation
established quarterly reporting requirements, we would have
considered the regulatory requirements outside of the authority
granted by the statute.
Our third objective was to determine whether the rulemaking
agencies could have developed regulatory approaches that would
have been less burdensome to the regulated entities while still
meeting the underlying statutory requirements. We considered
agencies to have been unable to
1 If a court considering this matter determined that a regulation
exceeded the authority granted by the underlying statute, that
regulation could be invalidated. Statutory Authority and
Less Burdensome Options
Appendix I Objectives, Scope, and Methodology
Page 31 GAO/GGD-99-20 Regulatory Burden
develop less burdensome regulatory approaches if the underlying
statutes gave the agencies no rulemaking discretion and the
agencies adopted regulations that strictly adhered to the
statutory requirements. If the underlying statutes gave the
agencies some or broad rulemaking discretion, we were not able to
determine if the agencies could have developed a less burdensome
approach. To do so, we would have needed detailed information on
how the agencies' regulations were being implemented and how
alternative approaches would be perceived by the regulated
entities in order to determine whether a less burdensome approach
was available. As discussed in Appendices III and IV, that
information was not readily available.
Because this review is based on a subset of the company concerns
and agency responses originally presented in our 1996 reports,
several of the limitations discussed in those reports are also
applicable to this report. As we noted in our November 1996
report, the companies from whom we initially gathered the concerns
were generally those that (1) were identified by interest groups,
identified by officials from the Small Business Administration, or
were in the literature; and (2) were willing to participate in our
review. Therefore, neither the companies' concerns nor the results
of our analysis are generalizable to other companies or to other
regulatory issues. The results of this analysis are not even
generalizable to all of the original 125 regulatory concerns
because this review focuses only on the subset of the concerns and
related regulations that the agencies indicated were, at least in
part, statutorily based. However, as we pointed out in our
November 1996 report, the companies' comments were similar in many
respects to comments made by companies in some of our previous
reports and in the literature. 2 Therefore, we believe that the
companies' comments, the agencies' responses, and our analysis of
the related regulations and statutes are not atypical and can
provide some insights regarding the broader issues addressed in
this report.
In preparing both of the 1996 reports and during this review, we
did not collect information from individuals and organizations
outside of the companies and federal agencies responsible for the
regulatory issues mentioned by the companies. For example, we did
not obtain information from labor unions or other employee
organizations about the regulations the companies mentioned.
Neither did we collect information from individuals and
organizations that were the potential beneficiaries of the
regulations cited by the companies as being problematic.
Collecting the
2 See, for example, Workplace Regulation: Information on Selected
Employer and Union Experiences (GAO/HEHS-94-138, June 30, 1994).
Review Limitations
Appendix I Objectives, Scope, and Methodology
Page 32 GAO/GGD-99-20 Regulatory Burden
views of all such organizations for all the regulations and
statutes cited in the 1996 reports and this report would have been
very time consuming, if not impossible. Therefore, as was the case
in the 1996 reports, this report does not reflect the full range
of opinions that may exist regarding the issues raised during the
reviews. However, this report reflects the views of the two
stakeholder groups in which we were most interested the elements
of the regulated community that raised these concerns and the
agencies that issued the underlying regulations.
Our approach in the 1996 reports was to present the views of both
the businesses and the agencies without attempting to resolve the
many differences in perspectives and interpretation that arose
between the two groups. We followed the same approach in this
review, and we did not attempt to determine whether the companies'
or the agencies' views were correct with regard to issues that
were outside of the scope of this review. For example, one company
said that certain IRS- required tests were of questionable value
to the agency in determining whether thrift savings plans were
being fairly administered. We focused our analysis on whether the
tests were (as IRS contended) statutorily required, not on whether
they were of value to IRS. Also, we did not attempt to determine
whether any of the agencies' actions were, in fact, burdensome.
The report focuses primarily on the amount of discretion that the
relevant statutes gave rulemaking agencies in developing the
regulatory requirements at issue in the companies' concerns.
However, the report does not address the amount of discretion that
the agencies had in writing regulations outside of the specific
issues raised by the companies. Agencies may have broad discretion
in how regulations can be developed within a general area, but
little or no discretion with regard to particular issues within
those areas. Also, the report does not address enforcement issues.
As our 1996 reports indicated, agencies may have considerable
discretion in carrying out their enforcement authority, and the
use of that discretion can significantly affect the burden felt by
regulated entities. For example, several companies expressed
concerns about rigid and inflexible regulations and about certain
regulators' gotcha enforcement approach. In response to those
concerns, the agencies sometimes indicated that they reduced
penalties in response to good faith efforts to comply, were not
aggressively enforcing certain technical requirements, or were
changing their enforcement approaches.
We approached our review objectives systematically. First, we
developed a coding scheme for each objective to ensure consistency
of analysis. Multiple staff members then analyzed the issues
related to each concern,
Appendix I Objectives, Scope, and Methodology
Page 33 GAO/GGD-99-20 Regulatory Burden
reviewed the statutory and regulatory requirements, and agreed on
how each concern should be coded. However, determining how much
discretion a statute gives a rulemaking agency, whether a
regulation is within the authority granted by the underlying
statute, and whether less burdensome regulatory approaches could
have been developed are ultimately matters of judgement.
Therefore, our conclusions should be viewed in that light, not as
determinations that have a legally binding effect on the agencies
issuing the rules or the regulated community.
We initially gathered the company concerns and agency responses
between June 1994 and September 1996. In this review, we analyzed
the statutory and regulatory provisions as they existed between
1994 and 1996. If a statutory or regulatory provision changed
after this period, we noted those changes in this report. We
conducted our work between February and October 1998 in the
Washington, D. C., headquarters offices of each of the previously
identified agencies in accordance with generally accepted
government auditing standards.
Appendix II Concerns for Which Agencies Appeared to Have No
Rulemaking Discretion
Page 34 GAO/GGD-99-20 Regulatory Burden
One of the objectives of our review was to determine, for each of
27 company concerns, the amount of discretion the underlying
statutes gave rulemaking agencies in drafting the regulatory
requirements that the agencies said were attributable to the
underlying statutes. The agencies that issued those requirements
indicated in two of our 1996 reports that the concerns could, at
least in part, be traced to statutory requirements underlying
their regulations. 1 In this review we concluded that the
statutory provisions underlying 13 of the 27 concerns gave the
rulemaking agencies no discretion in how the related regulatory
requirements could be drafted. We coded statutory provisions as
allowing agencies no discretion if they delineated specific
actions that regulated entities or the agencies themselves must
take and did not allow the agencies to develop their own
regulatory requirements.
This appendix provides our detailed analysis of each of these 13
company concerns. Specifically, for each such concern it provides
the following information: (1) the portion of the concern in our
1996 reports that the agency or agencies indicated was statutorily
based, (2) the portion of the agency response in our 1996 reports
that indicated the concern was statutorily based, (3) our analysis
of the amount of rulemaking discretion the relevant statutory
provisions gave the agencies (the first objective of our review),
(4) our analysis of whether the regulatory requirements at issue
in the concern were within the authority granted by the underlying
statutes (the second objective of our review), (5) our analysis of
whether the rulemaking agencies could have developed regulatory
approaches that would have been less burdensome to the regulated
entities while accomplishing the underlying statutory objectives
(the third objective of our review), and (6) the main purpose of
the underlying statutes (where such purpose statements were
available). Appendix I of this report contains a detailed
discussion of our scope and methodology.
A Metro Machine Corporation official said that EPA regulators
establish regulations that are not relevant to the industry and
establish unrealistic requirements that are not attainable or
verifiable with current treatment technology and measurement
systems. For example, the official said that federal water quality
standards require that the water the company discharges be made
cleaner than rainwater. The official also said that up to 90
percent of pollution reduction generally can be achieved with
1 Regulatory Burden: Measurement Challenges and Concerns Raised by
Selected Companies (GAO/GGD-97-2, Nov. 18, 1996); and Regulatory
Burden (GAO/GGD-97-26R, Dec. 11, 1996). Concern 1
Company Concern
Appendix II Concerns for Which Agencies Appeared to Have No
Rulemaking Discretion
Page 35 GAO/GGD-99-20 Regulatory Burden
reasonable costs, but the last 10 percent of pollution reduction
is very difficult or costly (sometimes up to double the cost)
because the needed technology is either not available or very
expensive.
EPA officials noted that Metro Machine Corporation is located in
Virginia and said that the State of Virginia establishes water
quality standards for state waters. They also said that the State
of Virginia is authorized to administer the National Pollutant
Discharge Elimination System (NPDES) program related to this
concern. Under the standard- setting process, EPA officials said
that states initially establish the designated use or water
quality goal for individual bodies of water to protect aquatic
life and human health. Once states make those designations, they
typically adopt EPA- developed water quality criteria to support
the designated use. EPA officials said the Clean Water Act
stipulates that EPA cannot consider available treatment
technologies or the cost of treatment in the development of water
quality criteria. EPA officials also noted that, in certain cases,
air pollution carried to earth by rainwater may cause surface
water to be harmful to aquatic life and/ or human health. Because
Virginia's water quality criteria are designed to protect aquatic
life and human health, the criteria may indeed be more restrictive
than for polluted rainwater in certain instances. However,
Virginia has the option of providing economic relief in its water
quality standards, where justified by the State and approved by
EPA, through modification of its goals for a water body or by
providing a water quality- based variance for specific discharges.
The issue that we focused on in this concern is EPA's assertion
that it cannot consider cost or available treatment technologies
when it establishes water quality criteria under the Clean Water
Act.
Although the State of Virginia had discretion in establishing the
designated use for the body of water at issue in the concern, we
believe EPA had no discretion to consider cost or available
treatment technologies in developing water quality criteria
pursuant to the Clean Water Act (codified at 33 U. S. C. Chapter
26). Under the statute (33 U. S. C. 1313( c)( 2)), water quality
standards consist of designated uses for the body of water
involved (e. g., public water supplies or recreation) and water
quality criteria. Water quality criteria provide technical
information on the effects of pollution on water quality and
frequently identify what maximum safe concentrations of pollutants
would be to protect particular designated uses. Agency Response
Amount of Discretion Permitted in the Statute in Drafting
Regulatory Requirements
Appendix II Concerns for Which Agencies Appeared to Have No
Rulemaking Discretion
Page 36 GAO/GGD-99-20 Regulatory Burden
The statute (33 U. S. C. 1314 (a)( 1)) also says that the EPA
Administrator must develop and publish criteria for water quality
accurately reflecting the latest scientific knowledge (A) on the
kind and extent of all identifiable effects on health and welfare
. . . ; (B) on the concentration and dispersal of pollutants, or
their byproducts . . . ; and (C) on the effects of pollutants on
biological community diversity, productivity, and stability . . .
. The statute also requires the Administrator to develop and
publish information on the factors necessary to restore and
maintain the chemical, physical, and biological integrity of
water.
The Clean Water Act sets forth EPA's responsibilities and the
factors that it must consider in the development of water quality
criteria. Because the consideration of costs and available
treatment technologies are not among those factors, we do not
believe that EPA could consider costs or technology limits in
developing water quality criteria pursuant to the act.
We believe that EPA's regulatory provisions delineating the
factors that states should consider in establishing water quality
standards (codified at 40 C. F. R. Part 131) are within the
authority granted by the Clean Water Act. According to those
regulations (40 C. F. R. 131.10( a)), in establishing such
standards, states must "take into consideration the use and value
of water for public water supplies, protection and propagation of
fish, shellfish, and wildlife, recreation in and on the water,
agricultural, industrial, and other purposes including
navigation." Subsection 131.10( b) of the regulation also says,
"the State shall take into consideration the water quality
standards of downstream waters" and shall ensure that the water
quality standards that will be established provide for the
attainment and maintenance of the standards for the downstream
waters. Also, 40 C. F. R. 131.11 (a)( 1) says that states must
adopt water quality standards that protect the designated use and
must be based on sound scientific rationale and must contain
sufficient parameters or constituents to protect the designated
use. Because these regulatory requirements essentially mirror or
are logically related to the requirements in the Clean Water Act
regarding the establishment of water quality standards, we believe
the requirements are within the authority granted by the Clean
Water Act.
We do not believe that EPA could have developed less burdensome
water quality criteria by taking cost or treatment technology into
account and still meet the requirements of the Clean Water Act.
The regulatory requirements regarding the establishment of water
quality standards either mirrored the statutory provisions or were
logically related to those provisions. Whether Regulatory
Provisions Are Within the Authority Granted by the Statute
Whether Less Burdensome Regulatory Approach Was Available
Appendix II Concerns for Which Agencies Appeared to Have No
Rulemaking Discretion
Page 37 GAO/GGD-99-20 Regulatory Burden
According to 33 U. S. C. 1251( a), the purpose of the Clean Water
Act is to restore and maintain the chemical, physical, and
biological integrity of the nation's waters.
Zaclon, Inc. officials said the company was appealing a fine for
failure to respond on time to an EPA letter asking them for
information related to the Resource Conservation and Recovery Act
(RCRA). They said EPA fined them without any follow- up or other
communication regarding the original request. The officials also
said they were disturbed that the fine was imposed on them because
of a procedural matter (failing to file information) rather than
something that had a real environmental impact.
EPA officials said the agency sent Zaclon, Inc. a certified
letter, which the company acknowledged receiving, notifying the
company of its responsibility to either file a RCRA permit
application for a hazardous waste pile at a facility that the
company had acquired, or submit a demonstration of equivalency
indicating that the waste pile had been clean closed. EPA
officials said that the agency initially proposed assessing a
penalty against the company of approximately $81,000. However,
after discussions with the company, EPA later reduced the penalty
to $37,600. EPA officials said the obligation to obtain either the
permit or demonstrate that the waste pile has been clean closed.
They also said this is not a procedural matter. They said this is
a substantive requirement to ensure that hazardous waste
management units are designed and operated to prevent releases of
hazardous waste. The officials also said that under RCRA,
companies have a positive obligation to comply even if EPA does
not issue any reminders of their responsibility.
The issues that we focused on in this concern are EPA's assertions
that RCRA requires the company to obtain a hazardous waste permit
and to comply with the statutory requirement in the absence of a
notice from EPA. 2
We believe that RCRA gave EPA no discretion in how it could draft
its regulations requiring a hazardous waste permit. The statute
(42 U. S. C. 6925( a)) says that the EPA Administrator must
promulgate regulations requiring each person owning or operating
an existing facility or planning
2 Another issue in this concern was the fine imposed by EPA on the
company for the company not obtaining the hazardous waste permit.
Because the agency response to this concern had not indicated that
the fine imposed on the company was established in the statute,
our analysis did not address this issue. Statutory Purpose
Concern 2 Company Concern
Agency Response Amount of Discretion Permitted in the Statute in
Drafting Regulatory Requirements
Appendix II Concerns for Which Agencies Appeared to Have No
Rulemaking Discretion
Page 38 GAO/GGD-99-20 Regulatory Burden
to construct a new facility for the treatment, storage, or
disposal of hazardous waste to have a permit. It also states that
the treatment, storage, or disposal of any such hazardous waste
and the construction of any new facility for the treatment,
storage, or disposal of hazardous waste is prohibited except in
accordance with such a permit. Therefore, EPA had no discretion in
drafting its regulations about requiring a permit for those
facilities in existence or under construction that treat, store,
or dispose of hazardous waste. Also, the statute does not indicate
that EPA is required to notify companies of their responsibility
to obtain a RCRA permit.
We believe that EPA's regulations requiring a RCRA permit are
within the authority granted the agency by the statute. The
regulations (40 C. F. R. 270.1( c)) require companies to obtain a
RCRA permit for the treatment, storage, or disposal of hazardous
wastes identified or listed in 40 C. F. R. 261. The regulation
also says that owners and operators of hazardous waste management
units must have permits during the active lives of the units,
including the closure period. Because these regulatory provisions
closely follow the statutory language in 42 U. S. C. 6925( a), we
believe that EPA's regulations are within the authority granted by
the statute.
We do not believe that EPA could have developed a less burdensome
regulatory approach for its RCRA permit process while still
meeting the underlying statutory requirements. RCRA gave the
agency no discretion in drafting the regulatory requirements at
issue in this concern, and those requirements closely followed the
requirements in the statute.
RCRA does not contain a statement of purpose. Officials from the
paper company said that regulations under Title V of the Clean Air
Act (CAA) are problematic because they regulate extremely low
levels of emissions. They said that they are required to get a
title V permit for methanol emissions that, at the company's fence
line, are no more concentrated than the methanol in a person's
breath.
According to EPA, the emission levels that trigger Title V
coverage are specified in CAA, ranging from 10 to 100 tons of
emissions per year depending on the pollutant and/ or the location
of the emissions' sources. Companies capable of emissions above
these levels are called "major" Whether Regulatory
Provisions Are Within the Authority Granted by the Statute
Whether Less Burdensome Regulatory Approach Was Available
Statutory Purpose Concern 3 Company Concern
Agency Response
Appendix II Concerns for Which Agencies Appeared to Have No
Rulemaking Discretion
Page 39 GAO/GGD-99-20 Regulatory Burden
sources under the act, triggering title V permitting requirements.
For hazardous air pollutants, EPA said that title V coverage is
triggered by annual emissions of 10 tons of a given pollutant or
25 tons or more of a combination of pollutants. EPA also said that
although specific information about the company was not provided,
a typical paper mill emits about 600 tons per year of hazardous
air pollutants other than methanol, including approximately 20 of
the 189 hazardous air pollutants listed in CAA.
The issue that we focused on in this concern is EPA's assertion
that Title V of CAA establishes the level of emissions of
hazardous air pollutants that subjects a company to permit
requirements.
We believe that CAA (codified at 42 U. S. C. 7401 et seq.) gave
EPA no discretion in developing its regulations regarding the
emissions levels that trigger title V permitting requirements
(codified at 42 U. S. C. 7661- 7661f) when those emissions are
above a certain level. 3 The act requires any major source of
hazardous air pollutants to obtain a title V permit, and defines a
major source in 42 U. S. C. 7412( a)( 1) as any stationary source
or group of stationary sources located within a contiguous area
and under common control that emits or has the potential to emit
considering controls, in the aggregate, 10 tons per year or more
of any hazardous air pollutant or 25 tons per year or more of any
combination of hazardous air pollutants. Methanol is specifically
listed in 42 U. S. C. 7412( b)( 1) as a hazardous air pollutant,
so a company would have to obtain a title V permit if it emitted
10 tons of methanol per year or more. However, a company could
also be required to obtain a permit if it emitted no methanol but
emitted 10 tons of any other hazardous air pollutant or 25 or more
tons of any combination of covered pollutants.
We believe that EPA's regulatory provisions regarding the
emissions levels that trigger the title V permitting requirements
are within the authority granted by CAA. The regulation (40 C. F.
R. 70.2) defines a major source that is required to have a permit
by specifically referencing the statutory definition of the term
in 42 U. S. C. 7412( a)( 1). By using the same definition of a
major source, EPA's regulations are consistent with CAA's
requirements regarding the emissions levels that trigger title V
permit
3 CAA provides that the EPA Administrator may consider a facility
to be a major source at levels less than 10 tons of any hazardous
air pollutant per year or 25 tons of any combination of hazardous
air pollutants per year "on the basis of the potency of the air
pollutant, persistence, potential for bioaccumulation, other
characteristics of the air pollutant, or other relevant factors."
Therefore, EPA has some discretion to require permits for
facilities that emit levels of hazardous air pollutants that are
lower than the level specified in the statute. Amount of
Discretion
Permitted in the Statute in Drafting Regulatory Requirements
Whether Regulatory Provisions Are Within the Authority Granted by
the Statute
Appendix II Concerns for Which Agencies Appeared to Have No
Rulemaking Discretion
Page 40 GAO/GGD-99-20 Regulatory Burden
requirements, and therefore they are within the authority granted
by the statute.
We do not believe that EPA could have developed a less burdensome
regulatory approach while still meeting the underlying
requirements of CAA. The act gave the agency no discretion in
drafting the regulatory requirements at issue in this concern, and
those requirements were consistent with the requirements in the
statute.
According to 42 U. S. C. 7401( c), a primary goal of CAA's air
pollution prevention and control program is to "encourage or
otherwise promote reasonable Federal, State, and local
governmental actions . . . for pollution prevention. Section 7401(
b) says that the purposes of the subchapter on Programs and
Activities are
(1) to protect and enhance the quality of the Nation's air
resources so as to promote the public health and welfare and the
productive capacity of its population; (2) to initiate and
accelerate a national research and development program to achieve
the prevention and control of air pollution; (3) to provide
technical and financial assistance to State and local governments
in connection with the development and execution of their air
pollution prevention and control programs; and (4) to encourage
and assist the development and operation of regional air pollution
prevention and control programs.
Fish farm officials said IRS rules on how to account for the
capital costs of company construction projects done by the firm's
employees are complex and costly. They said prior to a 1986 change
in the tax code, indirect costs (e. g., telephone costs associated
with the construction project) could be treated as a business
expense and therefore could be deducted from that year's taxes.
After 1986, IRS required that indirect costs be included as a
capital expense; therefore, they could be deducted only over a
long period of time. They said because of this change, the
company's deductions decreased and taxable income increased, and
they had to pay higher taxes.
IRS officials said the requirement to capitalize indirect costs
allocable to the production of self- constructed assets was
established by statute rather than by IRS regulations. They said
Congress enacted the uniform capitalization rules as a part of the
Tax Reform Act of 1986 for two reasons. First, Congress wanted to
provide a series of uniform rules of capitalization for
construction contractors, manufacturers, and taxpayers that
produce property for their own use. Second, Congress believed that
allowing the immediate deduction of indirect costs (1) resulted in
a mismatch of costs and the income produced by those expenses, (2)
Whether Less Burdensome
Regulatory Approach Was Available
Statutory Purpose Concern 4 Company Concern
Agency Response
Appendix II Concerns for Which Agencies Appeared to Have No
Rulemaking Discretion
Page 41 GAO/GGD-99-20 Regulatory Burden
permitted an unwarranted deferral of federal income tax, and (3)
resulted in differences in the tax treatment of costs between
purchased and selfconstructed assets. IRS officials said Congress
clearly intended that 26 U. S. C. 263A would result in a decrease
in the taxpayer's current deductions and a corresponding increase
in taxable income.
The issue that we focused on in this concern is IRS' assertion
that the requirement that taxpayers capitalize indirect costs of
construction projects was established by statute.
We believe that the tax code gave IRS no discretion as to how it
could write its regulations with regard to the capitalization of
indirect costs. According to 26 U. S. C. 263A( a), any allocable
costs (defined as a property's direct costs and a property's
proper share of indirect costs that are allocable to the property)
must be capitalized. However, if the property is inventory in the
hands of the taxpayer, the statute says that those costs must be
included in inventory costs.
We believe that IRS' regulatory provisions regarding the
capitalization of indirect costs are within the authority granted
by the statute. The provisions are substantively the same as the
statutory requirements and specifically reference several portions
of the statute. For example, 26 C. F. R. 1.263A- 2( a)( 3)( i)
says that "[ e] xcept as specifically provided in section 263A( f)
with respect to interest costs, producers must capitalize direct
and indirect costs properly allocable to property produced under
section 263A, without regard to whether those costs are incurred
before, during, or after the production period (as defined in
section 263A( f)( 4)( B))."
We do not believe that IRS could have developed a less burdensome
regulatory approach that would have met the requirements of the
underlying statute. The tax code gave IRS no discretion in how it
could draft the regulatory requirements at issue in this concern,
and IRS' regulations were consistent with (and specifically
referenced) the statutory requirements.
This section of the tax code does not contain a statement of
purpose. Amount of Discretion
Permitted by Statute in Drafting Regulatory Requirements
Whether Regulatory Provisions Are Within the Authority Granted by
the Statute
Whether Less Burdensome Regulatory Approach Was Available
Statutory Purpose
Appendix II Concerns for Which Agencies Appeared to Have No
Rulemaking Discretion
Page 42 GAO/GGD-99-20 Regulatory Burden
Officials from Multiplex Company, Inc., said that the IRS-
required nondiscrimination tests for 401( k) thrift savings plans
are of questionable value because IRS lowered the amount of money
that can be contributed to the plans, thereby making it less
likely that higher income employees will dominate the plans.
IRS officials said that the IRS- required nondiscrimination test
that Multiplex Company, Inc. officials mentioned appears to refer
to the actual deferral percentage test, which is required by
section 401( k)( 3) of the Internal Revenue Code. Similarly, they
said that the limit on deferrals under a 401( k) plan was imposed
by section 402( g) of the Internal Revenue Code. Therefore, they
said it is incorrect to claim that the IRS lowered the amount of
money that can be contributed.
The issues that we focused on in this concern are IRS' assertions
that the nondiscrimination tests used to determine the actual
deferral percentage for highly compensated employees and the
amount of money that can be contributed to 401( k) plans are
established by statute.
We believe that IRS had no discretion in drafting its regulations
requiring the test or setting the dollar amount of the deferral
limit because they were both specifically established by statute.
According to 26 U. S. C. 401( k)( 3)( A)( ii) the actual deferral
percentage (i. e., the amount that can be put into the thrift
savings plan) for eligible highly compensated employees must meet
one of the following tests:
( I) The actual deferral percentage for the group of eligible
highly compensated employees is not more than the actual deferral
percentage of all other eligible employees multiplied by 1.25.
( II) The excess of the actual deferral percentage for the group
of eligible highly compensated employees over that of all other
eligible employees is not more than 2 percentage points, and the
actual deferral percentage for the group of eligible highly
compensated employees is not more than the actual deferral
percentage of all other eligible employees multiplied by 2.
With regard to the amount that can be contributed and deferred
each year, 26 U. S. C. 402( g)( 1) states that the elective
deferrals of any individual for any taxable year shall be included
in such individual's gross income to the Concern 5
Company Concern Agency Response
Amount of Discretion Permitted by Statute in Drafting Regulatory
Requirements
Appendix II Concerns for Which Agencies Appeared to Have No
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extent the amount of such deferrals for the taxable year exceeds
$7,000. 4 Also, 26 U. S. C. 402( g)( 5) states that [ t] he
Secretary shall adjust the $7,000 amount under paragraph (1) at
the same time and in the same manner as under section 415( d);
except that any increase under this paragraph which is not a
multiple of $500 shall be rounded to the next lowest multiple of
$500.
We believe that IRS' regulatory provisions regarding the
nondiscrimination test referred to in the company's concern are
within the authority granted by the statute. IRS' implementing
regulations for this requirement (26 C. F. R. 1.401( k)- 1( b) and
1.402( g)- 1) essentially mirror the language of the statute with
some additional explanatory language. For example, 26 C. F. R. 1.
401( k)- 1( b)( 2)( i) contains almost identical language to that
in 26 U. S. C. 401( k)( 3)( A)( ii). It says that a cash or
deferred arrangement satisfies the regulation only if:
( A) [t] he actual deferral percentage for the group of eligible
highly compensated employees is not more than the actual deferral
percentage for the group of all other eligible employees
multiplied by 1. 25; or (B) [t] he excess of the actual deferral
percentage for the group of eligible highly compensated employees
over the actual deferral percentage for the group of all other
eligible employees is not more than two percentage points, and the
actual deferral percentage for the group of eligible highly
compensated employees is not more than the actual deferral
percentage for the group of all other eligible employees
multiplied by two.
The regulation is also similar to the statute with regard to the
limits on the amount that can be contributed to the plans. For
example, 26 C. F. R. 1.402( g)- 1( d) states that [ t] he
applicable limit for an individual's taxable year beginning in the
1987 calendar year is $7, 000. This amount is increased for the
taxable year beginning in 1988 and subsequent calendar years in
the same manner as the $90,000 amount is adjusted under section
415( d).
We do not believe that IRS could have developed a less burdensome
regulatory approach that would have satisfied the underlying
statutory requirements. The statute gave IRS no discretion in
drafting the regulatory requirements at issue in this concern, and
its regulations essentially mirror the language in the statute.
4 Although the company referred to an "approximately $9, 000 per
year" limit and 26 U. S. C. 402( g)( 1) establishes the limit as
$7, 000, 26 U. S. C. 402( g)( 5) allows for this amount to be
increased annually in accordance with 26 U. S. C. 415( d). Whether
Regulatory
Provisions Are Within the Authority Granted by the Statute
Whether Less Burdensome Regulatory Approach Was Available
Appendix II Concerns for Which Agencies Appeared to Have No
Rulemaking Discretion
Page 44 GAO/GGD-99-20 Regulatory Burden
This section of the tax code does not contain a statement of
purpose. Multiplex Company, Inc. officials said that increased
premium costs paid to PBGC to guarantee their employees' pensions
is costly for the company (over $2, 600 in 1994). They said the
mandated premium per participant increased from $2.60 in 1982 to
$19.00 in 1994.
PBGC officials said that the insurance premiums the agency charges
are statutorily established in Section 4006 of the Employee
Retirement Income Security Act (ERISA).
The issue that we focused on in this concern is PBGC's assertion
that the increase in pension insurance premiums that Multiplex
mentioned was statutorily driven.
We believe that ERISA (codified at 29 U. S. C. 1001 et seq.) gave
PBGC no discretion to set pension insurance premium rates below
$19 per participant in 1994. The statute establishes specific
premium rates for certain types of employer plans. For example, 29
U. S. C. 1306( a)( 3)( A) states that the annual premium rate
payable to PBGC in the case of a single- employer plan for basic
benefits for plan years beginning after December 31, 1990, at an
amount equal to the sum of $19 plus the additional premium (if
any) determined under subparagraph (E) for each individual who is
a participant in such plan during the plan year. The statute
allows PBGC to raise the premium rate for particular plans under
certain circumstances. However, the $19 rate is the minimum amount
businesses with single- employer plans must pay for basic
benefits.
We believe that PBGC's regulatory provisions concerning premium
rates are within the authority granted by the statute. According
to 29 C. F. R. 4006.3, 5 . . . the premium paid for basic benefits
guaranteed under section 4022( a) of ERISA shall equal the flat-
rate premium under paragraph (a) of this section plus, in the case
of a single- employer plan, the variable- rate premium under
paragraph (b) of this section. In paragraph (a) the flatrate
premium is calculated as . . . equal to the number of participants
in the plan on the last day of the plan year preceding the premium
payment year, multiplied by-- (1) $19 for a single- employer plan
. . . .
5 In the 1994 and 1995 editions of the Code of Federal Regulations
this section is found at 26 C. F. R. 2610. Statutory Purpose
Concern 6 Company Concern
Agency Response Amount of Discretion Permitted by Statute in
Drafting Regulatory Requirements
Whether Regulatory Provisions Are Within the Authority Granted by
the Statute
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Rulemaking Discretion
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We do not believe that PBGC could have developed less burdensome
premium rates while still meeting the requirements of ERISA. The
statute gave the agency no discretion in drafting the regulatory
requirements at issue in this concern, and the regulations mirror
the statutory requirements.
According to 29 U. S. C. 1001 (a), [t] he Congress finds that the
growth in size, scope, and numbers of employee benefit plans in
recent years has been rapid and substantial; that the operational
scope and economic impact of such plans is increasingly
interstate; that the continued well- being and security of
millions of employees and their dependents are directly affected
by these plans; that they are affected with a national public
interest; that they have become an important factor affecting the
stability of employment and the successful development of
industrial relations; that they have become an important factor in
commerce; . . . that owing to the lack of employee information and
adequate safeguards concerning their operation, it is desirable in
the interests of employees and their beneficiaries, and to provide
for the general welfare and the free flow of commerce, that
disclosure be made and safeguards be provided with respect to the
establishment, operation, and administration of such plans; that
they substantially affect the revenues of the United States
because they are afforded preferential [f] ederal tax treatment; .
. . and that it is therefore desirable in the interests of
employees and their beneficiaries, for the protection of the
revenue of the United States, and to provide for the free flow of
commerce, that minimum standards be provided assuring the
equitable character of such plans and their financial soundness.
Also, 29 U. S. C. 1001( b) states that [ i] t is hereby declared
to be the policy of this chapter to protect interstate commerce
and the interests of participants in employee benefit plans and
their beneficiaries, by requiring the disclosure and reporting to
participants and beneficiaries of financial and other information
with respect thereto, by establishing standards of conduct,
responsibility, and obligation for fiduciaries of employee benefit
plans, and by providing for appropriate remedies, sanctions, and
ready access to the [f] ederal courts.
Finally, 29 U. S. C. 1001( c) says that [ i] t is further declared
to be the policy of this chapter to protect interstate commerce,
the [f] ederal taxing power, and the interests of participants in
private pension plans and their beneficiaries by improving the
equitable character and the soundness of such plans by requiring
them to vest the accrued benefits of employees with significant
periods of service, to meet minimum standards of funding, and by
requiring plan termination insurance.
An official from Metro Machine Corporation said that OSHA should
differentiate between corporate negligence and employee
responsibility in assessing workplace safety. He said OSHA
currently holds companies, not Whether Less Burdensome
Regulatory Approach Was Available
Statutory Purpose Concern 7 Company Concern
Appendix II Concerns for Which Agencies Appeared to Have No
Rulemaking Discretion
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individual employees, accountable for violations caused by
employee negligence or willful removal of company- installed
safety devices.
OSHA officials said that Section 5 of the Occupational Safety and
Health Act of 1970 places specific responsibilities for workplace
safety and health on both employers and employees. Although the
act gives OSHA the authority to enforce safety and health
standards and issue citations to employers for violations of the
act, the officials said the act does not authorize OSHA to
penalize individual employees for misconduct related to safety or
health standards. They noted that in Atlantic & Gulf Stevedores v.
OSHRC, 534 F. 2d 541, 555 (3rd Cir., 1976), the Court found that
the Occupational Safety and Health Act does not confer upon the
Secretary of Labor the power to sanction employees who disregard
safety standards because the act's enforcement scheme is directed
only against employers. Therefore, OSHA officials said its
enforcement policy of holding companies liable for safety and
health violations is wholly consistent with the intent of the act.
However, OSHA officials also noted that since the early 1980s
OSHA's policy has been to excuse the employer from a violation
when an OSHA compliance officer determines that employees are
systematically refusing to comply with safety and health standards
and rules. To be excused from the violation, they said the
employer would have to demonstrate that (1) his or her employees
had received appropriate training and the necessary equipment, (2)
the employer had communicated and enforced the work rules designed
to prevent employee misconduct, (3) the employees failed to
observe work rules that led to the violation, and (4) the employer
had taken reasonable steps to discover the violation.
The issue that we focused on in this concern is OSHA's assertion
that the Occupational Safety and Health Act does not allow it to
hold individual employees accountable for violations of health and
safety rules.
We believe that the Occupational Safety and Health Act (codified
at 29 U. S. C. 651 et seq.) gave OSHA no discretion in how it
could write its regulations holding companies responsible for
health and safety violations. Several sections of the act
specifically mention holding employers accountable for violations,
but none of those sections say that employees should be held
accountable. For example, 29 U. S. C. 658( a) says that [ i] f,
upon inspection or investigation, the Secretary . . . believes
that an employer has violated a requirement of section 654 of this
title, of any standard, rule or order promulgated pursuant to
section 655 of this title, or of any regulations prescribed
pursuant to this chapter, he shall with Agency Response
Amount of Discretion Permitted by Statute in Drafting Regulatory
Requirements
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Rulemaking Discretion
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reasonable promptness issue a citation to the employer. Another
section of the act (29 U. S. C. 659) says that [ i] f, after an
inspection or investigation, the Secretary issues a citation . . .
he shall . . . notify the employer . . . of the penalty . . . .
The act goes on to say that the citation and the assessment shall
be deemed a final order . . . [i] f the Secretary has reason to
believe that an employer has failed to correct a violation for
which a citation has been issued . . . .
We believe that OSHA's regulations holding employers and not
employees accountable for safety violations are within the
authority granted by the Occupational Safety and Health Act. The
regulations, like the statute, specifically hold employers
accountable for violations of the act. For example, 29 C. F. R.
1903.14 states that
[t] he Area Director shall review the inspection report of the
Compliance Safety and Health Officer. If, on the basis of the
report the Area Director believes that the employer has violated a
requirement of section 5 of the [a] ct, of any standard, rule or
order promulgated pursuant to section 6 of the [a] ct, or of any
substantive rule published in this chapter . . . he shall issue to
the employer either a citation or a notice of de minimis
violations. . . .
We do not believe that OSHA could have developed a less burdensome
regulatory approach while still meeting the requirements of the
Occupational Safety and Health Act. The statute gave OSHA no
discretion in drafting the regulatory requirements at issue in
this concern, and the agency's regulations were consistent with
the statutory requirements.
As stated in 29 U. S. C. 651( b), the purpose of the Occupational
Safety and Health Act is to ensure so far as possible every
working man and woman in the nation safe and healthful working
conditions and to preserve human resources. The statute delineates
13 actions intended to achieve this goal, including (1)
encouraging employers and employees in their efforts to reduce the
number of occupational safety and health hazards at their places
of employment, and to stimulate employers and employees to
institute new and perfect existing programs for providing safe and
healthful working conditions; (2) providing that employers and
employees have separate but dependent responsibilities and rights
with respect to achieving safe and healthful working conditions;
and (3) authorizing the Secretary of Labor to set mandatory
occupational safety and health standards applicable to businesses
affecting interstate commerce.
An official from Bank A said that the regulation on the
Availability of Funds and Collection of Checks (Regulation CC)
requires the development Whether Regulatory
Provisions Are Within the Authority Granted by the Statute
Whether Less Burdensome Regulatory Approach Was Available
Statutory Purpose Concern 8 Company Concern
Appendix II Concerns for Which Agencies Appeared to Have No
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and maintenance of expensive and time- consuming information on
the current availability of funds. The official said that to
provide this information to clients as the regulation requires,
the bank must regularly review, update, and reprint brochures with
this information.
Officials at FRB said that Regulation CC implements the Expedited
Funds Availability Act (12 U. S. C. 4001- 4010), which limits the
length of time depository institutions may place holds on deposits
to transaction accounts. They said the act and the regulation also
require depository institutions to provide to their customers
written copies of their availability policies and written notices
when certain types of extended holds are placed on deposits. In
addition to providing general policy disclosure notices to
customers, depository institutions also incur the ongoing costs of
providing exceptions to hold notices and change- in- policy
notices, as well as costs related to employee training. FRB
officials said that because the disclosure provisions in
Regulation CC are required by the Expedited Funds Availability
Act, statutory amendments would be necessary to relieve any of the
burdens on depository institutions associated with those
provisions.
The issue that we focused on in this concern is FRB's assertion
that the Expedited Funds Availability Act requires banks to
maintain and disclose specific information about their funds
availability policies.
We believe that the Expedited Funds Availability Act gave FRB no
discretion in how it could write its regulations requiring
depository institutions to disclose their funds availability
policies. The statute (12 U. S. C. 4004) requires depository
institutions to disclose to their customers, on preprinted deposit
slips, their policies regarding the withdrawal of deposits. The
statute also requires these disclosures to be provided before an
account is opened, whenever there is a policy change within the
institution, if the customer requests a copy of the policy, and
when deposits are accepted at automated teller machines.
We believe that Regulation CC's provisions requiring the
disclosure of bank policies on funds availability (codified at 12
C. F. R. Part 229, Subpart B) are within the authority granted by
the Expedited Funds Availability Act. The regulation's
requirements essentially repeat the requirements in the statute.
For example, 12 C. F. R. 229.17 states that before an account is
opened, a bank shall provide a potential customer with its funds
availability policy. Section 229.18 states that disclosure notices
shall be on all preprinted deposit slips and posted at all
locations where the bank accepts deposits, including automated
teller machines. The regulation also Agency Response
Amount of Discretion Permitted by Statute in Drafting Regulatory
Requirements
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the Statute
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requires disclosure information to be provided upon customer
request and sent to customers at least 30 days before a change in
the bank's policy on funds availability is implemented.
We do not believe that FRB could have developed a less burdensome
regulatory approach that would have satisfied the requirements of
the Expedited Funds Availability Act. The act gave the agency no
discretion in drafting the regulatory requirements at issue in
this concern, and those requirements essentially repeat the
requirements in the act.
Neither the Expedited Funds Availability Act nor in the
Competitive Equality Banking Act, of which this act was a part,
contain a statement of purpose.
Bank B officials said that Regulation DD, which implements the
Truth in Savings Act, should be simplified by reducing the number
of times that banks are required to disclose transaction
information.
Officials at FRB said that the Truth in Savings Act requires
institutions to provide information about rates paid and fees
charged for consumer deposit accounts (a) upon request, (b) before
an account is opened, (c) before terms previously disclosed are
adversely changed, (d) if periodic statements are sent, and (e)
before automatically renewable (" rollover") time accounts mature.
They also said that promoting certain account terms in
advertisements triggers the duty to disclose additional account
terms.
In adopting Regulation DD, FRB officials said the agency sought to
facilitate compliance with the disclosure requirements in several
respects. For example, they said change- in- term notices are not
required when institutions lower rates for variable- rate accounts
or for changes in check printing charges, which are often under
the control of third- party vendors. Similarly, information
regularly provided to consumers about their certificates of
deposit or passbook savings accounts does not trigger the periodic
statement disclosure requirements. Finally, although institutions
are required to provide account- opening disclosures to all
maturing rollover certificates of deposit, Regulation DD provides
flexibility in the timing and content of these disclosures.
However, because the number and timing of these disclosure
provisions of Regulation DD are required by the Truth in Savings
Act, the officials said that statutory amendments Whether Less
Burdensome
Regulatory Approach Was Available
Statutory Purpose Concern 9 Company Concern
Agency Response
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would be needed to further relieve the burdens associated with
those provisions.
The issue that we focused on in this concern is FRB's assertion
that the Truth in Savings Act requires banks to disclose
information about interest rates and fees to their customers
repeatedly.
We believe that the Truth in Savings Act (codified at 12 U. S. C.
4301 et seq.) gave FRB no discretion in drafting Regulation DD's
requirements for repeated disclosures of depository institutions'
terms and conditions. Various provisions in the act require
disclosures at various points in time. For example, 12 U. S. C.
4302( a) requires, with certain exceptions, that each institution
disclose such information as annual percentage yields and minimum
account balances. The institution must also provide a statement
that an interest penalty is required for early withdrawal in
conjunction with each advertisement, announcement, or solicitation
that includes a reference to a specific rate of interest payable.
According to 12 U. S. C. 4305( a), a schedule of fees, charges,
interest rates, and terms and conditions applicable to each class
of accounts offered by a depository institution must be (1) made
available to any person upon request, (2) provided to any
potential customer before an account is opened or a service is
rendered, and (3) provided to depositors at least 30 days before
the date of maturity of any time deposits that are renewable at
maturity without notice from the depositor.
Before any change is made in any term or condition that is to be
disclosed in the required schedule that may reduce the yield or
adversely affect any account holder, 12 U. S. C. 4305( c) requires
institutions to notify customers and provide them with a
description of the change by mail at least 30 days before the
change takes effect. According to 12 U. S. C. 4307, each
depository institution must include on or with each periodic
statement provided to each account holder a clear and conspicuous
disclosure of the annual percentage yield earned, the amount of
interest earned, the amount of any fees or charges imposed, and
the number of days in the reporting period.
We believe that the requirements in Regulation DD regarding
repeated disclosures (codified at 12 C. F. R. Part 230) are within
the authority granted to FRB by the Truth in Savings Act. Many of
the regulatory requirements mirror the requirements in the
statute. For example, according to 12 C. F. R. 230.4, depository
institutions must provide account disclosures to a consumer (a)
upon request; or (b) before an account is opened or a service is
provided, whichever is earlier. According to 12 C. F. R. 230.5,
institutions Amount of Discretion
Permitted by Statute in Drafting Regulatory Requirements
Whether Regulatory Provisions Are Within the Authority Granted by
the Statute
Appendix II Concerns for Which Agencies Appeared to Have No
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must give at least 30 calendar days' advance notice to affected
consumers of any change in a term required to be disclosed if the
change may reduce the annual percentage yield or adversely affect
the consumer. Also, institutions must provide disclosure for time
accounts with maturity longer than 1 month that renew
automatically. According to 12 C. F. R. 230.6, institutions must
include disclosures in the periodic statements mailed or delivered
to consumers.
We do not believe that FRB could have developed a less burdensome
regulatory approach that would have satisfied the requirements of
the Truth in Savings Act. The act gave the agency no discretion in
drafting the regulatory requirements at issue in this concern, and
Regulation DD's requirements were consistent with the statutory
requirements.
According to 12 U. S. C. 4301( b), the purpose of the Truth in
Savings Act is to require the clear and uniform disclosure of (1)
the rates of interest which are payable on deposit accounts by
depository institutions; and (2) the fees that are assessable
against deposit accounts, so that consumers can make a meaningful
comparison between the competing claims of depository institutions
with regard to deposit accounts.
Bank B officials said that Regulation Z (which implements the
Truth in Lending Act) requires the bank to disclose the same
information regarding bank practices (e. g., interest rates and
loan terms) several times during a single transaction (e. g., when
taking out a loan or opening an account). They recommended that
Regulation Z be simplified to permit banks to disclose information
only once during the transaction, or to give them the latitude to
ask customers how often they need the disclosure information
during a transaction.
Officials at FRB said that the Truth in Lending Act and Regulation
Z require creditors to provide increasing levels of detail about
the potential cost of a transaction as the consumer progresses
through the creditshopping process. For example, promoting certain
terms in advertisements triggers the duty to state additional
credit terms; but these disclosures are limited to key terms, such
as annual fees for a credit card plan or repayment terms for an
installment loan. When consumers apply for a line of credit or
certain variable- rate loans secured by their homes, general
disclosures about the loan terms are provided that assist
consumers in deciding whether to obtain the credit. Disclosures
can also be required during the term of a loan, such as when the
lender implements Whether Less Burdensome
Regulatory Approach Was Available
Statutory Purpose Concern 10 Company Concern
Agency Response
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an adverse change to previously disclosed account terms in a
revolving credit line or other "open- end" credit plan.
Transaction- specific disclosures are given before the consumer
becomes obligated for the credit. FRB officials also said that the
timing of the disclosures is mandated by the Truth in Lending Act
itself and not by Regulation Z. Amendments to the Truth in Lending
Act would be required for changes in when and how often a lender
must provide most of these disclosures.
The issue that we focused on in this concern is FRB's assertion
that the Truth in Lending Act establishes the frequency with which
banks must disclose certain types of information to customers.
We believe the Truth in Lending Act (codified at 15 U. S. C. 1601
et seq.) gave FRB no discretion in drafting the regulatory
requirements governing when banks are required to make certain
disclosures. The act's requirements in this area are very
specific. For example, 15 U. S. C. 1637( a) states that before
opening an account under an open- end consumer credit plan, the
creditor must disclose to the person getting the credit such items
as the conditions under which a finance charge may be imposed and
the method for determining the balance upon which to impose the
finance charge. Also, 15 U. S. C. 1637( b) states that at the end
of each billing cycle for an open- end consumer credit plan for
which there is an outstanding balance in that account or with
respect to which a finance charge is imposed, the creditor must
transmit a statement containing several specific items (as
applicable). For example, the statute says the statement should
contain the outstanding balance in the account at the beginning
and end of the period and the total amount credited to the account
during the period. Finally, according to 15 U. S. C. 1637( c),
certain information must be disclosed on an application for a
credit card or charge card. For example, the application must
disclose the annual percentage rates, annual and other fees, any
grace period, and method by which the credit balance is
calculated.
We believe that the requirements in Regulation Z are within the
authority granted by the Truth in Lending Act. The regulatory
requirements closely parallel the requirements in the statute. For
example, 12 C. F. R. 226.5( b)( 1) and (2) state that for open-
end credit, the creditor must furnish initial disclosures before
the first transaction is made under the plan and periodically
provide a statement for each billing cycle at the end of which an
account has a debit or credit balance of more than $1 or on which
a finance charge has been imposed. Section 226.5a of the
regulation says that the credit and charge card issuer must
provide the disclosures Amount of Discretion
Permitted by Statute in Drafting Regulatory Requirements
Whether Regulatory Provisions Are Within the Authority Granted by
the Statute
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specified on or with a solicitation or an application to open a
credit or charge card account.
We do not believe that FRB could have developed a less burdensome
regulatory approach that would have met the requirements of the
Truth in Lending Act. The act gave the agency no discretion in
drafting the regulatory requirements at issue in this concern, and
the agency's regulatory requirements were consistent with the
statutory requirements.
The Truth in Lending Act is a subchapter within the Consumer
Credit Protection Act. The subchapter (15 U. S. C. 1601( a)) says
that the purpose of the Truth in Lending Act is to ensure a
meaningful disclosure of credit terms so that the consumer will be
able to compare more readily the various credit terms available to
him and avoid the uninformed use of credit and to protect the
consumer against inaccurate and unfair credit billing and credit
card practices.
A Bank C official said that Regulation DD reduces the bank's
flexibility in providing services to customers. The official said
that the bank cannot customize accounts for customers, put
customers on analyzed accounts, 6 or do bonus programs because of
the expensive and complex computer system changes that would be
needed to comply with the regulation.
Officials of FRB said the agency made a concerted effort during
the development of Regulation DD to provide flexibility to
institutions in order to minimize compliance costs and maximize
the development of new products. However, the Truth in Savings Act
requires disclosure of the fees that may be assessed against a
consumer's account. The officials said if an institution chooses
to offer different fees or other terms to different consumers, the
disclosures must reflect the terms agreed to by the parties.
The issue that we focused on in this concern is FRB's assertion
that the Truth in Savings Act requires the disclosure of potential
fees and other terms, which may have the effect of reducing a
bank's flexibility in providing services to its customers.
6 According to an official at FRB, an analyzed account usually
refers to the bundling of individual accounts to determine, on the
basis of the total of the balances of all the accounts in one bank
(rather than on the basis of each of the accounts), what fees must
be paid on the accounts or how much interest the accounts will
earn. Whether Less Burdensome
Approach Was Available Statutory Purpose
Concern 11 Company Concern
Agency Response Amount of Discretion Permitted by Statute in
Drafting Regulatory Requirements
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Rulemaking Discretion
Page 54 GAO/GGD-99-20 Regulatory Burden
We believe the Truth in Savings Act gave FRB no discretion in how
it could draft Regulation DD's disclosure requirements. According
to 12 U. S. C. 4303( a) through (c), each institution must
maintain a schedule of fees, charges, interest rates, and terms
and conditions applicable to each class of accounts offered by the
institution. The statute specifies the items that must be on the
schedule. For example, the statute says that the schedule must
contain (1) descriptions and amounts of all fees and service
charges and the conditions under which those fees would be
applicable; (2) all minimum balance requirements that would affect
fees, charges, and penalties; (3) any minimum amount required to
open the account; and (4) information on interest rates, such as
any annual rate of simple interest and the frequency with which
the interest would be compounded and credited. Although the
statute does not specifically address whether banks must maintain
similar schedules of disclosures about customized and analyzed
accounts or bonus programs, it appears that disclosures would be
required for these accounts or programs under the general heading
of terms and conditions.
We believe the referenced provisions of Regulation DD are within
the rulemaking authority granted by the Truth in Savings Act
because they are similar to the requirements in the act. For
example 12 C. F. R. 230.4( a) and (b) state that a financial
institution must provide account disclosures to a consumer before
an account is opened, before a service is provided, or upon
request. The regulation also states that the disclosures shall
include rate information, compounding and crediting information,
balance information, fees, transaction limitations, features of
time accounts, and bonuses.
We do not believe that FRB could have developed a less burdensome
regulatory approach that would have satisfied the requirements of
the Truth in Savings Act. The act gave the agency no discretion in
drafting the regulatory requirements at issue in this concern, and
the agency's regulatory requirements were consistent with the
statutory requirements.
According to 12 U. S. C. 4301( b), the purpose of the Truth in
Savings Act is to require the clear and uniform disclosure of (1)
the rates of interest which are payable on deposit accounts by
depository institutions; and (2) the fees that are assessable
against deposit accounts, so that consumers can make a meaningful
comparison between the competing claims of depository institutions
with regard to deposit accounts. Whether Regulatory
Provisions Are Within the Authority Granted by the Statute
Whether Less Burdensome Regulatory Approach Was Available
Statutory Purpose Concern 12
Appendix II Concerns for Which Agencies Appeared to Have No
Rulemaking Discretion
Page 55 GAO/GGD-99-20 Regulatory Burden
A Bank C official said that Regulation DD requires as part of its
redisclosure rules that the bank provide customers with a written
description of all the bank's services and fees each time the
customer opens, changes, or reopens an account-- even if the
customer had previously received the same information.
Officials at FRB said that the Truth in Savings Act requires
financial institutions to provide complete account disclosures
when an account is opened, and it also requires institutions to
provide consumers with a notice of any change in terms. They said
disclosures are required if an account is "re- opened" only if the
institution deemed the account closed at some point in time.
The issue that we focused on in this concern is FRB's assertion
that the Truth in Savings Act establishes when a bank must
disclose information on the terms of their accounts to customers.
We believe that the Truth in Savings Act gave FRB no discretion in
how it could draft Regulation DD regarding disclosures when an
account is opened or when there are changes to the account.
According to 12 U. S. C. 4305( a)( 2), institutions are required
to provide complete account disclosures when an account is opened
or when a service is rendered. According to 12 U. S. C. 4305( c),
all account holders who may be affected by changes in terms or
conditions or adversely affected by changes must be notified and
provided with a description of the changes by mail at least 30
days before the changes take effect.
We believe that FRB's disclosure requirements in Regulation DD are
within the authority granted by the Truth in Savings Act. The
regulatory requirements parallel the statutory requirements in
many respects. For example, according to 12 C. F. R. 230.4( a), a
depository institution must provide account disclosures to a
consumer before an account is opened or a service is rendered,
whichever is earlier. The regulation states that an institution is
considered to have provided a service when a fee required to be
disclosed is assessed. Also, 12 C. F. R. 230.5( a) states that
institutions are to provide consumers with advance notice of any
change in terms if the change may reduce the annual percentage
yield or adversely affect the consumer. No notice is required for
variable rate changes, check printing fees, or short- term time
accounts. The notice of change shall include the effective date of
the change and shall be mailed or delivered at least 30 calendar
days before the effective date of the change. Company Concern
Agency Response Amount of Discretion Permitted by Statute in
Drafting Regulatory Requirements
Whether Regulatory Provisions Are Within the Authority Granted by
the Statute
Appendix II Concerns for Which Agencies Appeared to Have No
Rulemaking Discretion
Page 56 GAO/GGD-99-20 Regulatory Burden
We do not believe that FRB could have developed a less burdensome
regulatory approach that would have satisfied the requirements of
the Truth in Savings Act. The act gave the agency no discretion in
drafting the regulatory requirements at issue in this concern, and
those requirements are consistent with the statutory requirements.
According to 12 U. S. C. 4301( b), the purpose of the Truth in
Savings Act is to require the clear and uniform disclosure of the
rates of interest and the fees that can be assessed against
deposit accounts so that consumers can make a meaningful
comparison between the competing claims of depository institutions
with regard to deposit accounts.
A Bank C official said that regulations requiring federally
insured institutions to require flood insurance for properties
located in floodplains are not applicable to nonbanking
organizations such as the Money Store, where the public can apply
for loans without having to acquire flood insurance.
Officials at FRB and FDIC said the Flood Disaster Protection Act
of 1973 created a significant disparity between the treatment of
mortgage companies or other nondepository lenders and depository
institutions with respect to flood insurance purchase
requirements. The act also directed federal banking agencies to
adopt regulations applicable to depository institutions to require
the purchase of flood insurance for any improved property used to
secure a loan if the property was located in a flood hazard area.
No similar requirements were placed on mortgage banks.
The issue that we focused on in this concern is FDIC's assertion
that the Flood Disaster Protection Act created the disparity
between depository and nondepository institutions with respect to
flood insurance requirements.
We believe the Flood Disaster Protection Act gave FRB and FDIC no
discretion in writing their regulations in this area. The statute
(particularly 42 U. S. C. 4121( a)( 13) and 42 U. S. C. 4012a( b)(
1)) requires that regulated lending institutions not make real
estate loans in an area having special flood hazards unless the
building or property is covered by flood insurance. Also, 42 U. S.
C. 4012a( b)( 1) requires regulated lending institutions not to
make, increase, extend, or renew any loan secured by improved real
estate or a mobile home located, or to be located, in an area
having special flood hazards and in which flood insurance has been
made Whether Less Burdensome
Regulatory Approach Was Available
Statutory Purpose Concern 13 Company Concern
Agency Response Amount of Discretion Permitted by Statute in
Drafting Regulatory Requirements
Appendix II Concerns for Which Agencies Appeared to Have No
Rulemaking Discretion
Page 57 GAO/GGD-99-20 Regulatory Burden
available under the National Flood Insurance Act of 1968, unless
the building or mobile home and any personal property securing the
loan is covered for the term of the loan by flood insurance. A
regulated lending institution is defined in 42 U. S. C. 4121( a)(
13) in such a way that nondepository lenders such as the Money
Store would not be subject to the requirements of 42 U. S. C.
4012a( b)( 1).
We believe that FRB's and FDIC's regulatory requirements regarding
flood insurance are within the authority granted by the Flood
Disaster Protection Act of 1973 because those requirements are, in
essence, the same as the statutory requirements. According to 12
C. F. R. 208.23( c), a state member bank may not make, increase,
extend, or renew any designated loan unless the building securing
the loan is covered by flood insurance for the term of the loan.
We do not believe that FRB and FDIC could have developed a less
burdensome regulatory approach while still meeting the underlying
statutory requirements of the Flood Disaster Protection Act of
1973. The statute gave the agencies no discretion in drafting the
regulatory requirements at issue in this concern, and those
requirements were consistent with the statutory requirements.
According to 42 U. S. C. 4002( b), the purpose of the Flood
Disaster Protection Act of 1973 is to (1) substantially increase
the limits of coverage authorized under the national flood
insurance program; (2) provide for the expeditious identification
of, and the dissemination of information concerning, flood- prone
areas; (3) require states or local communities, as a condition of
future federal financial assistance, to participate in the flood
insurance program and to adopt adequate flood plan ordinances with
effective enforcement provisions consistent with federal standards
to reduce or avoid future flood losses; and (4) require the
purchase of flood insurance by property owners who are being
assisted by federal programs or by federally supervised,
regulated, or insured agencies or institutions in the acquisition
or improvement of land or facilities located, or to be located, in
identified areas having special flood hazards. Whether Regulatory
Provisions Are Within the Authority Granted by the Statute
Whether Less Burdensome Approach Was Available
Statutory Purpose
Appendix III Concerns for Which Agencies Appeared to Have Some
Rulemaking Discretion
Page 58 GAO/GGD-99-20 Regulatory Burden
One of the objectives of our review was to determine, for each of
27 company concerns, the amount of discretion the underlying
statutes gave rulemaking agencies in drafting the regulatory
requirements that the agencies said were attributable to the
underlying statutes. The agencies that issued those requirements
indicated in two of our 1996 reports that the concerns could, at
least in part, be traced to statutory requirements underlying
their regulations. 1 In this review we concluded that the
statutory provisions underlying 12 of the 27 concerns gave the
rulemaking agencies some discretion in how the related regulatory
requirements could be drafted. We coded statutory provisions as
allowing agencies some discretion if they delineated certain
requirements regarding how the agencies' regulations could be
drafted but gave the agencies at least some flexibility regarding
other requirements.
This appendix provides our detailed analysis of each of these 12
company concerns. Specifically, for each such concern it provides
the following information: (1) the portion of the concern in our
1996 reports that the agency or agencies indicated was statutorily
based, (2) the portion of the agency response in our 1996 reports
that indicated the concern was statutorily based, (3) our analysis
of the amount of rulemaking discretion the relevant statutory
provisions gave the agencies (the first objective of this review),
(4) our analysis of whether the regulatory requirements at issue
in the concern were within the authority granted by the underlying
statutes (the second objective of our review), (5) our analysis of
whether the rulemaking agencies could have developed regulatory
approaches that would have been less burdensome to the regulated
entities while meeting the underlying statutory requirements (the
third objective of our review), and (6) the main purpose of the
underlying statutes (where such purpose statements were
available). Appendix I of this report contains a detailed
discussion of our scope and methodology.
Officials from the paper company said DOT's required hazardous
materials (hazmat) training is expensive. Under the regulations
that took effect in January 1994, they said employees who deal
with hazardous materials must be trained and tested, and this
training costs the company $475,000 per year.
DOT officials said the Hazardous Materials Transportation Uniform
Safety Act, implemented in 1990, specifically required the
issuance of regulations
1 GAO/GGD-97-2 (Nov. 18, 1996); and GAO/GGD-97-26R (Dec. 11,
1996). Concern 1
Company Concern Agency Response
Appendix III Concerns for Which Agencies Appeared to Have Some
Rulemaking Discretion
Page 59 GAO/GGD-99-20 Regulatory Burden
requiring that hazmat employers provide training to their hazmat
employees. 2 They said DOT's Hazardous Materials Regulations were
revised May 15, 1992, to reflect those statutory requirements.
The issue that we focused on in this concern is DOT's assertion
that the Hazardous Materials Transportation Safety Act requires
employers to provide certain employees with hazmat training.
We believe that the Hazardous Materials Transportation Uniform
Safety Act (now codified at 49 U. S. C. 5101 et seq.) gave DOT
some discretion regarding how its regulations on hazmat training
could be drafted. The statute said that the Secretary of
Transportation shall prescribe by regulation requirements for
training that a hazmat employer must give hazmat employees of the
employer on the safe loading, unloading, handling, storing, and
transporting of hazardous material. . . The statute also said the
regulation must establish the date by which the training shall be
completed, and to require employers to certify that their
hazardous materials employees have received training and been
tested on at least one of nine specific areas of responsibility
that are delineated in the statute. Therefore, DOT had no
discretion regarding whether to issue regulations requiring hazmat
training or how it could draft those regulations with regard to
the provisions described in the statute. However, we believe that
DOT had some discretion in how it could draft other regulatory
requirements. For example, the statute said that DOT's regulations
may provide for different training for different classes or
categories of hazardous material and hazmat employees. It also
said that the Secretary of Transportation may require by
regulation documentation to support employers' training
certifications.
We believe that DOT's regulatory provisions requiring hazardous
material training (49 C. F. R. 172.700- 172.704) are within the
authority granted by the Hazardous Materials Transportation
Uniform Safety Act. DOT's regulations contain the requirements
that were specifically delineated in the statute. For example, the
statute required the regulation to establish the date by which the
hazardous materials training shall be completed, and the
regulation (49 C. F. R. 172.704 (c)( ii)) says that employees must
complete the training within 90 days after beginning employment or
a change in job function. In other areas, the regulatory
provisions appear to fall within the discretion afforded DOT by
the statute. For example, the statute said that the Secretary of
Transportation may require by
2 In 1994, the Hazardous Materials Transportation Uniform Safety
Act was recodified as the Federal Hazardous Materials
Transportation Law. Amount of Discretion
Permitted by Statute in Drafting Regulatory Requirements
Whether Regulatory Provisions Are Within the Authority Granted by
Statute
Appendix III Concerns for Which Agencies Appeared to Have Some
Rulemaking Discretion
Page 60 GAO/GGD-99-20 Regulatory Burden
regulation documentation to support employers' training
certifications, and the regulation (49 C. F. R. 172.704 (d))
requires such documentation.
We could not determine whether DOT could have developed an
alternative approach to hazmat training that would have been less
burdensome to regulated entities while still accomplishing the
requirements of the Hazardous Materials Transportation Uniform
Safety Act. To make that determination we would have had to
conduct a detailed examination of DOT's training requirements that
were not statutorily mandated and determine whether the Department
could have eliminated them or used an alternative approach that
regulated entities would have perceived as less burdensome. For
example, we would have had to examine DOT's regulatory requirement
that employers provide documentation to support training
certifications and determine whether DOT could have eliminated or
amended that requirement and still met the requirements of the
underlying statute. Such an examination of each nonstatutory
requirement would have demanded extensive time and resource
commitments that were beyond the scope of this assignment.
According to 49 U. S. C. 5101, [ t] he purpose of this chapter is
to provide adequate protection against the risks to life and
property inherent in the transportation of hazardous material in
commerce by improving the regulatory and enforcement authority of
the Secretary of Transportation.
According to hospital officials, it is very difficult to keep pace
with frequently changing Medicare and Medicaid billing rules.
Although the hospital's computer programmers have spent many hours
trying to keep their automated patient billing system up to date,
the hospital officials said it is like chasing a moving target.
According to HCFA officials, in a number of situations, the
changes to hospital billing procedures are due to enhancements or
changes made by Congress.
The issue that we focused on in this concern is HCFA's assertion
that changes to Medicare and Medicaid billing rules are, at times,
congressionally driven.
HCFA officials said that the general mechanisms the government
uses to pay for medical services are spelled out in the Code of
Federal Regulations but are operationalized through the billing
instructions published in Whether Less Burdensome
Regulatory Approach Was Available
Statutory Purpose Concern 2 Company Concern
Agency Response Amount of Discretion Permitted by Statute in
Drafting Regulatory Requirements
Appendix III Concerns for Which Agencies Appeared to Have Some
Rulemaking Discretion
Page 61 GAO/GGD-99-20 Regulatory Burden
numerous HCFA manuals. Although these billing rules do not appear
in the Code of Federal Regulations and therefore do not have the
force and effect of law, we considered them to be regulatory
requirements in this report. HCFA's Medicare Hospital Manual
contains billing procedures that hospitals must follow when
submitting bills to fiscal intermediaries (insurance companies
with which HCFA contracts for hospital bill processing and
payment). Although other HCFA publications may indirectly affect
the billing procedures at issue in the hospital's concern (e. g.,
changes to HCFA's Medicare Part A Intermediary Manual that
describe the procedures that intermediaries must follow when
processing bills from hospitals), we focused our review on the
changes to the billing procedures in HCFA's Medicare Hospital
Manual.
We believe that HCFA had some discretion in deciding whether to
make specific changes to its billing rules. In general, HCFA has
authority to require that certain types of information be
submitted and to change those information requirements. For
example, one provision of the Social Security Act (codified at 42
U. S. C. 1395g) says
[t] he Secretary [of the Department of Health and Human Services]
shall periodically determine the amount which should be paid under
this part to each provider of services . . . except that no such
payments shall be made to any provider unless it has furnished
such information as the Secretary may request in order to
determine the amounts due such provider under this part for the
period with respect to which the amounts are being paid or any
prior period. (Emphasis added.)
To determine the extent to which specific changes to HCFA's
Medicare Hospital Manual were driven by statutory requirements, we
reviewed the 13 changes that HCFA made to the manual in 1995 (the
year prior to our 1996 reports on which this review is based). We
concluded that 5 of these 13 changes were directly traceable to
statutory requirements that gave the agency no rulemaking
discretion. For example, one of the changes to the manual
implemented a new subsection to the Social Security Act that
delineated procedures to be used in calculating payment for
surgical dressings. The statute said that
[ p] ayment under this subsection for surgical dressings . . .
shall be made in a lump sum amount for the purchase of the item in
an amount equal to 80 percent of the lesser of (A) the actual
charge for the item; or (B) a payment amount determined in
accordance with the methodology described in subparagraphs (B) and
(C) of subsection (a)( 2) (except that in applying such
methodology, the national limited payment amount referred to in
such subparagraphs shall be initially computed based on local
payment amounts using average reasonable charges for the 12- month
period ending December 31, 1992, increased by the covered item
updates described in such subsection for 1993 and 1994.
Appendix III Concerns for Which Agencies Appeared to Have Some
Rulemaking Discretion
Page 62 GAO/GGD-99-20 Regulatory Burden
Because the statute specified that payment must be made for
surgical dressings, the amount of those payments, and how those
charges should be paid, we concluded that HCFA did not have
discretion with regard to making changes to its billing
instructions in this area.
The other eight changes to the Medicare Hospital Manual appeared
to be clarifications and technical corrections to HCFA's billing
procedures, and HCFA appeared to rely on its general authority to
require such information as the Secretary may request in making
these changes. In these cases, we believe that HCFA had
considerable discretion in deciding whether to make the changes.
For example, two of the changes affected billing requirements for
inpatient hospital stays. One of the changes added a new
requirement that bills be submitted in the sequence in which
services were furnished. The other change clarified the previous
change, noting that if the new policy disadvantaged (i. e., raised
the liability of) the hospital, the beneficiary, or a secondary
insurer, the hospital should notify its intermediary to arrange
reprocessing of all affected claims.
We believe that the changes that HCFA made to the Medicare
Hospital Manual's billing procedures were within the authority
granted by the underlying statutes. In those cases in which HCFA
had no discretion to make statutorily directed changes, the
changes were consistent with (and, in some cases, identical to)
the statutory requirements. Therefore, we concluded that those
changes were within the authority granted by the statutes. For
example, in the above illustration involving surgical dressings,
HCFA changed the Medicare Hospital Manual to provide instructions
for billing and payment that mirrored the requirements in the new
subsection of the Social Security Act. In those cases in which
HCFA appeared to make the changes at its own initiative, the
agency relied on its authority to periodically determine the
amount which should be paid and to collect such information as the
Secretary may request. The statute also authorizes the Secretary
to prescribe such regulations as may be necessary to carry out the
administration of the insurance programs . . . . We believe that
the changes that HCFA initiated to the billing procedures were
within the authority provided to the agency in the statute.
We could not determine whether HCFA could have made changes to its
Medicare Hospital Manual that would have been perceived as less
burdensome to the hospitals while still meeting the requirements
of the underlying statutes. To do so we would have had to initiate
a separate review of each change for which HCFA had at least some
rulemaking discretion and determine whether the agency needed to
make the change and, if so, whether another approach would have
been less burdensome. Whether Regulatory
Provisions Are Within the Authority Granted by the Statute
Whether Less Burdensome Regulatory Approach Was Available
Appendix III Concerns for Which Agencies Appeared to Have Some
Rulemaking Discretion
Page 63 GAO/GGD-99-20 Regulatory Burden
Those reviews would have required extensive time and resource
commitments that were beyond the scope of this review.
The Social Security Act contains no specific statement of purpose.
However, 42 U. S. C. 1395c states that
[t] he insurance program for which entitlement is established by
sections 426 and 426- 1 of this title provides basic protection
against the costs of hospital, related post- hospital, home health
services, and hospice care in accordance with this part for (1)
individuals who are age 65 or over and are eligible for retirement
benefits under subchapter II of this chapter, (2) individuals
under age 65 who have been entitled for not less than 24 months to
benefits under subchapter II of this chapter, and (3) certain
individuals who did not meet the conditions specified in either
clause (1) or (2) but who are medically determined to have end
stage renal disease.
Officials from the hospital said the annual Medicare cost report
is extremely difficult to prepare. They said the report's
information requirements place a considerable recordkeeping burden
on the hospital's health care providers. For example, they said
each housekeeping supervisor must spend 2 to 3 hours each month
preparing the necessary paperwork that will feed into this annual
report, and some staff members must devote all of their time to
compiling the required information.
HCFA officials said section 1886( f)( 1) of the Social Security
Act requires the Secretary of Health and Human Services to
maintain a system of cost reporting for prospective payment system
hospitals. They also said that under sections 1815( a) and 1861(
v)( 1)( A) of the act, providers of service participating in the
Medicare program must submit annual information to achieve
settlement of costs for health care services rendered to Medicare
beneficiaries.
The issue that we focused on in this concern is HCFA's assertion
that the Social Security Act requires the information in the
annual Medicare cost report.
We believe that the Social Security Act gave HCFA some discretion
in how its regulations in this area could be drafted. The act
contains several provisions that require the Department of Health
and Human Services or HCFA to collect information from hospitals
in order to determine the amount of reimbursements that hospitals
are due for patient care. Therefore, the agency had no discretion
in whether to require a system for reporting cost information by
hospitals. However, the Social Security Act Statutory Purpose
Concern 3 Company Concern
Agency Response Amount of Discretion Permitted by Statute in
Drafting Regulatory Requirements
Appendix III Concerns for Which Agencies Appeared to Have Some
Rulemaking Discretion
Page 64 GAO/GGD-99-20 Regulatory Burden
gave HCFA discretion in determining the specific information
required in the reports. For example, section 1815( a) of the act
(codified at 42 U. S. C. 1395g) states that the Secretary shall
periodically determine the amount which should be paid under this
part to each provider of services with respect to the services
furnished by it . . . . This section goes on to say that no such
payments shall be made to any provider unless it has furnished
such information as the Secretary may request (emphasis added) in
order to determine the amounts due such provider. Section 1861 of
the act (codified at 42 U. S. C. 1395x) states that [ t] he
reasonable cost of any services shall be the cost actually
incurred . . . and shall be determined in accordance with
regulations establishing the method or methods to be used, and the
items to be included, in determining such costs . . . . The
section goes on to delineate certain factors the Secretary must
take into account in prescribing the regulations, such as
considering both direct and indirect costs and using principles
generally applied by national organizations.
We believe that HCFA's regulatory provisions for cost reports
(codified at 42 C. F. R. Parts 412 and 413) are within the
authority granted by the Social Security Act. According to 42 C.
F. R. 412.52, [ a] ll hospitals participating in the prospective
payment systems must meet the recordkeeping and cost reporting
requirements of [paragraph] 413.20 and [paragraph] 413.24 of this
chapter. According to 42 C. F. R. 413.24( a), [ p] roviders
receiving payment on the basis of reimbursable cost must provide
adequate cost data. This must be based on their financial and
statistical records which must be capable of verification by
qualified auditors. Similarly, section 413.24( c) states that [ a]
dequate cost information must be obtained from the provider's
records to support payments made for services furnished to
beneficiaries. Other portions of 42 C. F. R. 413 delineate the
periods covered by the reports and the frequency with which they
must be submitted. All of these regulatory requirements appear to
fall within the rulemaking authority granted to HCFA by the Social
Security Act.
We could not determine whether HCFA could have developed cost
reporting requirements that would have been perceived as less
burdensome to hospitals while still meeting the requirements of
the Social Security Act. To do so we would have had to initiate a
separate review of the Medicare cost reports and how HCFA uses the
information that it collects a review that would have required
extensive time and resource commitments that were beyond the scope
of this review.
The Social Security Act does not contain a statement of purpose
regarding the cost reporting requirements. However, section 1811
of the act Whether Regulatory
Provisions Are Within the Authority Granted by Statute
Whether Less Burdensome Regulatory Approach Was Available
Statutory Purpose
Appendix III Concerns for Which Agencies Appeared to Have Some
Rulemaking Discretion
Page 65 GAO/GGD-99-20 Regulatory Burden
(codified at 42 U. S. C. 1395c) states that the purpose of the
hospital insurance program is to provide basic protection against
the costs of hospital, related post- hospital, home health
services, and hospice care . . . for covered individuals.
An official from Bank A said the regulation on the Availability of
Funds and Collection of Checks (Regulation CC) requires the
development and maintenance of expensive and time- consuming
information on the current availability of funds.
Officials at FRB said that Regulation CC implements the Expedited
Funds Availability Act (codified at 12 U. S. C. 4001- 4010), which
places limits on the length of time depository institutions may
place holds on deposits to transaction accounts. To ensure
compliance with the act and the regulation, they said a depository
institution must have the capacity to assign and track the
availability of each check it accepts for deposit. The costs of
developing and maintaining such a system likely vary with the
complexity of the depository institution's availability policy.
Because the availability provisions of Regulation CC are required
by the act, FRB officials said that statutory amendments would be
necessary in order to relieve any of the burdens on depository
institutions associated with those provisions.
The issue that we focused on in this concern is FRB's assertion
that the Expedited Funds Availability Act limits the amount of
time that banks can hold deposits, thereby requiring banks to keep
track of the availability of funds they accept for deposit.
We believe that the Expedited Funds Availability Act gave FRB some
discretion in how it could draft its regulations on funds
availability. According to 12 U. S. C. 4002, depository
institutions must make funds from different types of deposits
available for withdrawal within specified periods of time ranging
from 1 day to several days. For example, 12 U. S. C. 4002( b)( 2)
says that funds must be available for withdrawal not more than 5
business days after the deposit of a check drawn on a nonlocal
bank. Therefore, FRB had no rulemaking discretion in establishing
the maximum lengths of time banks can hold funds before making
them available to the depositor. However, the statute gives the
agency discretion to require shorter holds on funds than the
maximums established in the act as long as that period of time is
within the time in which a bank can reasonably expect to learn of
nonpayment on most items for each category of check. Concern 4
Company Concern Agency Response
Amount of Discretion Permitted by Statute in Drafting Regulatory
Requirements
Appendix III Concerns for Which Agencies Appeared to Have Some
Rulemaking Discretion
Page 66 GAO/GGD-99-20 Regulatory Burden
Although the act established varying maximum hold periods for
different types of deposits, there is no statutory (or regulatory)
provision requiring banks to develop and maintain a system for
tracking the availability of deposits. However, in practice, banks
need to develop tracking systems to enable themselves to comply
with the act and the relevant regulation. FRB officials said that
the bank could avoid the need for such a system by providing
immediate availability for all deposits.
We believe that Regulation CC's requirements for expedited funds
availability are within the authority granted the agency by the
Expedited Funds Availability Act. Subsections 10, 12, and 13 of 12
C. F. R. 229 require that funds be available for withdrawal not
later than specified periods of time ranging from 1 to several
days. The time periods established in the regulations are
consistent with the time periods in the statute for the different
types of deposits.
As discussed earlier, FRB had some discretion to write regulations
requiring banks to hold deposits for less than the maximum time
allowed in the statute. Therefore, FRB could have standardized the
hold periods at less than the maximum period. Standardizing the
hold periods could have been perceived as less burdensome to banks
because it would have eliminated the need for banks to have
tracking systems for different categories of deposits (e. g.,
deposits of local checks, government checks, or out- of- state
checks). FRB's discretion, however, is limited in that FRB can
shorten a hold period only if banks would have a reasonable period
of time to learn of the return of checks subject to the shorter
hold. Standardization of hold periods across all categories of
checks would require that all hold periods be set to the minimum
period established by the act (1 day). In today's check system,
one day would not allow banks to learn of the return of most
dishonored checks. Therefore, FRB does not appear to have the
discretion to standardize the hold period for all categories of
checks. Even if the hold periods were standardized for only some
categories of checks, imposing shorter hold periods could also
increase a bank's risk of fraud on those checks. Banks may not
have viewed such an approach as less burdensome. Ultimately, we
could not determine whether FRB could have developed less
burdensome regulatory approaches because to do so would have
required extensive time and resource commitments (e. g., surveying
the banks on whether standardized minimums would have been less
burdensome) that were beyond the scope of this review.
The Expedited Funds Availability Act does not contain a statement
of purpose. Whether Regulatory
Provisions Are Within the Authority Granted by Statute
Whether Less Burdensome Regulatory Approach Was Available
Statutory Purpose
Appendix III Concerns for Which Agencies Appeared to Have Some
Rulemaking Discretion
Page 67 GAO/GGD-99-20 Regulatory Burden
An official from Bank A said the Truth in Savings Act's
(Regulation DD) requirements have not provided substantive
benefits to either the bank or its customers. The official also
said that before the act was passed, the bank provided savings
account information to customers in several different documents.
However, under the act this information must be consolidated into
one document.
Officials at FRB said Congress enacted the Truth in Savings Act in
1991 to enhance consumer shopping among deposit accounts. Its
purpose is to require all depository institutions to disclose
information about the rates paid and fees charged in a uniform
manner. They said FRB's Regulation DD requires institutions to
disclose terms in a uniform way but allows flexibility in the
format of the disclosures. For example, disclosures may be
provided in a single document or in several documents, and they
may be combined with other contractual provisions or disclosures
required by federal or state law.
The issue we focused on in this concern is FRB's assertion that
the Truth in Savings Act requires banks to provide disclosure
statements to customers in a uniform manner.
We believe that the disclosure requirements in the Truth in
Savings Act (codified at 12 U. S. C 4301 et seq.) gave FRB some
discretion regarding how its regulations in this area could be
drafted. Although the statute gave the agency no discretion
regarding much of the information that had to be disclosed about
customers' savings accounts, we believe the agency had some
discretion with regard to certain types of information and the
format of the disclosures.
The Truth in Savings Act's disclosure requirements were intended
to allow consumers to make meaningful comparisons between the
competing claims of depository institutions with regard to deposit
accounts. The act describes in great detail the specific elements
that such institutions must disclose to their customers. For
example, 12 U. S. C. 4303( a) states that each banking institution
must maintain a schedule of fees, charges, interest rates, and
terms and conditions applicable to each class of accounts offered
by the institution. According to 12 U. S. C. 4303( b), the
schedule for any account must contain (1) a description of all
fees, periodic service charges, and penalties that may be charged
or assessed against the account, the amount of any fees, charges,
or penalties and the conditions under which any amount will be
assessed; (2) all minimum Statutory Purpose Concern 5
Company Concern Agency Response
Amount of Discretion Permitted by Statute in Drafting Regulatory
Requirements
Appendix III Concerns for Which Agencies Appeared to Have Some
Rulemaking Discretion
Page 68 GAO/GGD-99-20 Regulatory Burden
balance requirements that affect fees, charges, and penalties,
including a clear description of how the minimum balance is
calculated; and (3) any minimum amount required with respect to
the initial deposit in order to open the account. Section 4303( c)
states that the information on interest rates in the schedules
must include 10 specific items, including any annual percentage
yield and the effective period of the annual yield, the annual
rate of simple interest, the frequency with which interest will be
compounded and credited, a clear description of the method used to
determine the balance on which interest is paid, any minimum
balance that must be maintained to earn the rates and obtain the
yields disclosed and how such a minimum balance is calculated, and
a description of any minimum time requirements to obtain the yield
advertised.
On the other hand, the Truth in Savings Act also gives FRB
rulemaking discretion in some areas, particularly with regard to
certain types of information and accounts and in the format of the
required disclosures. For example, 12 U. S. C. 4303( d) states
that the schedule required under subsection (a) shall include such
other disclosures as the Board may determine to be necessary
(emphasis added) to allow consumers to understand and compare
accounts . . . . Section 4304 of title 12 permits FRB to make such
modifications as may be necessary in the disclosure requirements
relating to annual percentage yield for certain types of accounts.
Section 4303( e) states that the schedules required in section
4303( a) must be presented in a format designed to allow consumers
to readily understand the terms of the accounts offered, but it
does not specify the particular format that must be used. Section
4308 of title 12 requires FRB to issue regulations on the
disclosure requirements and requires the agency to publish model
forms and clauses to facilitate compliance. However, the section
goes on to say that depository institutions are not required to
use any such model form or clause, and the institutions must be
considered in compliance with the disclosure requirements if they
use an alternative format that does not affect the substance,
clarity, or meaningful sequence of the disclosure.
We believe that the disclosure provisions in Regulation DD (12 C.
F. R. Part 230) are within the authority granted by the Truth in
Savings Act. The regulation's requirements regarding the content
of account disclosures mirror, in many respects, the requirements
in the statute. For example, 12 C. F. R. 230.4( b) states that
account disclosures must (as applicable) include certain elements,
including rate information (e. g., the annual percentage yield and
the interest rate); balance information (e. g., minimum balance
requirements); and the amount of any fees. All of these elements
were required in the statute. Although Regulation DD also requires
other Whether Regulatory
Provisions Are Within the Authority Granted by Statute
Appendix III Concerns for Which Agencies Appeared to Have Some
Rulemaking Discretion
Page 69 GAO/GGD-99-20 Regulatory Burden
disclosures that are not expressly listed in the statute (e. g.,
any limitations on the number or dollar amount of withdrawals or
deposits), these requirements appear to fall within FRB's
authority in 12 U. S. C. 4303( d) to require such disclosures in
the regulations as the Board may determine to be necessary.
Regulation DD also states (12 C. F. R. 230.3) that depository
institutions must make the required disclosures clearly and
conspicuously in writing and in a form the consumer may keep. It
also says that disclosures for each account may be presented
separately or combined with disclosures for the institution's
other accounts . . . . Appendix B to Part 230 states that
institutions may modify model disclosure clauses as long as they
do not delete required information or rearrange the format in a
way that affects the substance or clarity of the disclosures.
Because the regulation gives discretion to depository institutions
and mirrors the statute's requirements in this area, we believe
the regulation is within the authority granted by the statute.
With regard to the elements that the Truth in Savings Act required
institutions to disclose, we do not believe that FRB could have
developed regulations that would have been less burdensome to
financial institutions. For example, the act specifically required
the disclosure of information on annual yields and interest rates,
so Regulation DD had to contain those elements. However, we could
not determine whether FRB could have refrained from requiring
other information that is not expressly listed in the statute. To
do so would have required us to determine if the information was,
in fact, necessary to allow consumers to understand and compare
accounts. Making that determination would have required an
extensive analysis of consumer understanding and behavior that was
beyond the scope of this review.
With regard to the format of the disclosures, we believe that FRB
could not have chosen a less burdensome approach than the one
taken in Regulation DD. The agency did not require that banks
disclose the information in a single document, and (as the statute
required them to do) it allowed financial institutions to vary
from the model clauses and sample forms as long as those variances
did not affect the substance of the disclosures.
According to 12 U. S. C. 4301( b), the purpose of the Truth in
Savings Act is to require the clear and uniform disclosure of (1)
the rates of interest that are payable on deposit accounts by
depository institutions; and (2) the fees that are assessable
against deposit accounts, so that consumers can make Whether Less
Burdensome
Regulatory Approach Was Available
Statutory Purpose
Appendix III Concerns for Which Agencies Appeared to Have Some
Rulemaking Discretion
Page 70 GAO/GGD-99-20 Regulatory Burden
a meaningful comparison between the competing claims of depository
institutions with regard to deposit accounts.
A Bank C official said that Regulation DD requires that every fee
charged to a customer's account must be separately described on
the customer's statement.
Officials at FRB said that the Truth in Savings Act requires
institutions that provide periodic statements to consumers to
disclose the annual percentage yield earned, any fees imposed, and
certain other information on the statements. In adopting the final
version of Regulation DD, the officials said that the Board
considered concerns raised by commenters on the proposed
regulation and implemented several changes to help minimize costs,
particularly those associated with periodic statements. For
example, information sent in connection with time accounts and
passbook savings accounts is exempt from the periodic statement
rules.
The issue that we focused on in this concern is FRB's assertion
that the Truth in Savings Act establishes the disclosures that
must be made to customers on their statements. We believe that the
Truth in Savings Act gave FRB some discretion in how these
regulatory provisions could be drafted. According to 12 U. S. C.
4307, each depository institution must include on or with each
periodic statement to each account holder a clear and conspicuous
disclosure of the following information for each account: (1) the
annual percentage yield earned, (2) the amount of interest earned,
(3) the amount of any fees or charges imposed, and (4) the number
of days in the reporting period. Only separate description of fees
on customers' accounts with periodic statements would appear to
meet the statutory requirement that institutions include a clear
and conspicuous disclosure of any fee imposed. However, 12 U. S.
C. 4308( a)( 3) states that FRB's regulations
may contain such classifications, differentiations, or other
provisions, and may provide for such adjustments and exceptions
for any class of accounts as, in the judgement of the Board, are
necessary or proper to carry out the purposes of this chapter, to
prevent circumvention or evasion of the requirements of this
chapter, or to facilitate compliance with the requirements of this
chapter.
Therefore, the statute allowed FRB to write regulations excluding
certain types of accounts from the fee disclosure requirements if
the Board believed such exclusions were necessary or proper.
Concern 6
Company Concern Agency Response
Amount of Discretion Permitted by Statute in Drafting Regulatory
Requirements
Appendix III Concerns for Which Agencies Appeared to Have Some
Rulemaking Discretion
Page 71 GAO/GGD-99-20 Regulatory Burden
We believe that this provision of Regulation DD is within the
authority granted by the Truth in Savings Act because its
requirements either mirror those in the act or are within the
rulemaking discretion provided to the agency by the act. According
to 12 C. F. R. 230.6, the periodic statement to consumers must
include the annual percentage yield earned, the amount of
interest, any fees imposed, and the length of the statement
period. When FRB promulgated the final rule in September 1992, the
agency said it had exercised its exception authority in the act to
exclude specific types of accounts (i. e., time accounts and
passbook savings accounts) from the periodic statement
requirements of the final rule. FRB said it believed exempting
these accounts from the disclosure requirements was appropriate
because it would encourage institutions to continue providing
certain information to customers.
We could not determine whether FRB could have developed a less
burdensome regulatory approach that would have satisfied the
requirements of the Truth in Savings Act. To do so we would need
to know whether it was necessary or proper for FRB to exclude
other types of accounts from the periodic statement requirements.
Making that determination would have required extensive time and
resource commitments that were beyond the scope of this review.
According to 12 U. S. C. 4301( b), the purpose of the Truth in
Savings Act is to require the clear and uniform disclosure of (1)
the rates of interest which are payable on deposit accounts by
depository institutions; and (2) the fees that are assessable
against deposit accounts, so that consumers can make a meaningful
comparison between the competing claims of depository institutions
with regard to deposit accounts.
Bank A officials said bank regulators should require only reports
that the regulators will use. They said it is very frustrating to
spend the time and resources needed to complete required reports
and not know if the regulators actually use them.
Officials from FDIC said that some bank reporting requirements are
specifically mandated by statute. However, they also recognized
that some of these requirements might be unduly burdensome for
banks compared to the value of the information to FDIC as it seeks
to discharge its responsibilities as an insurer and bank
supervisor. In such situations, the officials said that FDIC makes
recommendations for legislative changes to Whether Regulatory
Provisions Are Within the Authority Granted by the Statute
Whether Less Burdensome Regulatory Approach Was Available
Statutory Purpose Concern 7 Company Concern
Agency Response
Appendix III Concerns for Which Agencies Appeared to Have Some
Rulemaking Discretion
Page 72 GAO/GGD-99-20 Regulatory Burden
eliminate burdensome reporting requirements. They also said banks
are urged to express their opinions on specific reports they
consider unused.
The issue that we focused on in this concern is FDIC's assertion
that some bank reporting requirements are specifically required by
statute. We did not examine whether the reports are actually used
by bank regulators. 3
We believe that FDIC had some discretion in developing regulations
governing bank reporting requirements. Some of the relevant
statutes did not give FDIC rulemaking discretion, but other
statutes gave the agency at least some discretion to impose
reporting requirements.
FDIC officials said that as of March 31, 1998, the agency had 58
active information collections that had been approved by the
Office of Management and Budget (OMB) under the Paperwork
Reduction Act. 4 Of these, the officials said that 54 were
statutorily mandated. We reviewed the statutory provisions
underlying many of the 54 information collections and concluded
that some of those provisions gave FDIC no discretion in drafting
its regulations. 5 For example, 12 U. S. C. 1972( 2)( G)( i)
requires certain bank executive officers and principal
shareholders to submit a written report to the board of directors
for any year during which they have an outstanding extension of
credit. The statute describes in detail the information required
in this report. Therefore, FDIC had no discretion in drafting its
regulations regarding whether the report was required, what
information the report must contain, or the timing of the report.
However, other statutory provisions gave FDIC considerable
discretion in establishing reporting requirements. For example, 12
U. S. C. 1817( i) requires insurance of trust funds, and it
permits FDIC's Board of Directors to prescribe such regulations as
may be necessary (emphasis added) to clarify the insurance
coverage under this subsection and to prescribe the manner of
reporting and depositing such trust funds.
3 In our December 1996 report (GAO/GGD-97-26R), two other banking
agencies responded to this concern about the usefulness of bank
reports. Officials from FRB said there was an interagency effort
to review the content of reports to determine the ongoing need for
the data. Similarly, officials at the Office of the Comptroller of
the Currency said they were taking steps to eliminate duplicative
or unhelpful reports, if the required reports were not used.
4 Under the Paperwork Reduction Act, agencies must obtain OMB
approval before collecting or sponsoring the collection of
information from nonfederal entities. FDIC officials said that
they could not determine what information collection requirements
were in place at the time that we did our earlier review in 1995.
5 We did not review the statutory provisions underlying all 54 of
the collections because of time and resource constraints and
because doing so would not have altered our conclusion that FDIC
had some rulemaking discretion. Amount of Discretion
Permitted by Statute in Drafting Regulatory Requirements
Appendix III Concerns for Which Agencies Appeared to Have Some
Rulemaking Discretion
Page 73 GAO/GGD-99-20 Regulatory Burden
We reviewed the relevant regulatory provisions for many of the
information collections that FDIC said were statutorily mandated
and concluded that of those we reviewed, the regulatory provisions
were within the authority granted by the statutes. In those cases
in which the underlying statutes gave the agency discretion to
develop regulations, any regulations in this area that the agency
developed would be within the authority granted by the statute.
For example, in the above illustration in which the statute gave
FDIC the authority to prescribe the manner of reporting on trust
funds, any regulations specifying the reporting requirements would
be within the authority of the statute. In those cases that we
reviewed in which the underlying statute gave the agency no
discretion, the regulatory language closely mirrored the language
in the corresponding statute or specifically referenced the
statutory requirements. For example, in the above illustration
concerning reports from banks' executive officers and principal
shareholders, the language in FDIC's regulations is essentially
the same as the language in 12 U. S. C. 1972( 2)( G)( i).
We could not determine whether FDIC could have eliminated or
developed less burdensome regulatory approaches without doing an
in- depth analysis of each of the agency's nonstatutory reporting
requirements and how FDIC uses the information collected. Such an
analysis would have required extensive time and resource
commitments that were beyond the scope of this assignment.
The statutes underlying the 54 information collections that FDIC
said were statutorily mandated often did not contain statements of
purpose.
A Bank C official said that the Real Estate Settlement Procedures
Act (RESPA or Regulation X), which is administered by HUD,
requires extensive disclosure documents that are not easily
understood by customers or relevant to their concerns. For
example, the bank official said the loan package for a no- fee,
no- point home equity loan contains about 10 pages of federally
required paperwork, only 2 pages of which (dealing with the
settlement statement of the loan) directly affect and are of
interest to the customer. The official said the other eight pages
consist of forms that are of little concern to the customer, such
as the Servicing Disclosure Statement and the Controlled Business
Arrangement Disclosure. Whether Regulatory
Provisions Are Within the Authority Granted by Statute
Whether Less Burdensome Regulatory Approach Was Available
Statutory Purpose Concern 8 Company Concern
Appendix III Concerns for Which Agencies Appeared to Have Some
Rulemaking Discretion
Page 74 GAO/GGD-99-20 Regulatory Burden
HUD officials said that Congress established the RESPA disclosure
requirements (12 U. S. C. 2601 et seq.) to which the bank official
referred. They said those requirements consist of a Good Faith
Estimate of Settlement Costs; an information booklet delivered to
all home purchasers; and, in the case of first lien loans, a
disclosure of the lender's mortgage servicing practices. In the
event the lender is referring the borrower to one or more of its
affiliated companies to provide settlement services, they said
RESPA requires disclosure of their relationship and that the
borrower has the option to choose other providers (except for
appraisers, credit reporting agencies, and lender's counsel). At
settlement, they said the statute requires the settlement agent to
provide the borrower with a standardized accounting of the
transaction, familiarly known as the HUD- 1 or HUD- 1A.
The issue that we focused on in this concern is HUD's assertion
that RESPA establishes the disclosure requirements that the bank
official found burdensome.
We believe that RESPA gave HUD some discretion in drafting
regulations regarding the disclosure requirements at issue in this
concern. The documents that lenders are required to disclose and
many of the specific elements in those documents are explicitly
required in the statute. For example, 12 U. S. C. 2605 says that
the lender of a federally related mortgage loan must disclose to
the applicant whether the servicing of the loan may be assigned,
sold, or transferred to any other person at any time while the
loan is outstanding. Also, 12 U. S. C. 2603( a) states that HUD
must develop and prescribe a standard real estate settlement form
(with regional variations, as necessary) for use in all
transactions in the United States that involve federally related
mortgaged loans. The statute also says that the form must clearly
itemize all charges imposed upon the borrower and the seller in
connection with the settlement; and it must indicate whether any
title insurance premium included in such charges covers or insures
the lender's, borrower's, or both parties' interest in the
property.
Another provision of RESPA (12 U. S. C. 2604) requires HUD to
prepare and distribute informational booklets and also requires
lenders to provide a copy of the booklet to each person from whom
they receive, or for whom they prepare, a written application to
finance a mortgage for a residential property. The statute says
that the booklet must be delivered or placed in the mail not later
than 3 business days after the lender receives the application.
Therefore, HUD had no discretion with regard to these
requirements. Agency Response
Amount of Discretion Permitted by Statute in Drafting Regulatory
Requirements
Appendix III Concerns for Which Agencies Appeared to Have Some
Rulemaking Discretion
Page 75 GAO/GGD-99-20 Regulatory Burden
However, other parts of RESPA gave HUD discretion in how it could
write its regulations. For example, 12 U. S. C. 2604 says that the
above- mentioned informational booklets shall be in such form and
detail as the Secretary may prescribe . . . . Therefore, HUD had
considerable discretion regarding the format in which the
information had to be presented and had the authority to require
additional information in the booklet beyond what was stipulated
in the statute.
We believe that the HUD regulatory provisions related to the
abovementioned RESPA disclosure requirements are within the
authority granted to the agency by the statute. Several of these
regulatory provisions paraphrase the wording in the associated
statutory requirements. For example, the language in 24 C. F. R.
3500.6( a) and (1) mirrors the language in RESPA regarding the
lender's responsibility to provide the information booklet and
when the booklet must be provided. Also, 24 C. F. R. 3500.7( a)
mirrors the language in the statute regarding the lender's
responsibility to provide good faith estimates. Other regulatory
provisions do not mirror the statutory language but appear to be
substantively the same as the statutory provisions. For example,
24 C. F. R. 3500.21( b)( 1) says that lenders must disclose to
each person who applies for a loan whether the servicing of the
loan may be assigned, sold, or transferred to any other person at
any time while the loan is outstanding. Section 3500.8( a) of the
regulation says that unless specifically exempted, the HUD- 1 or
HUD- 1A settlement statement must be used in every settlement
involving federally related mortgage loans in which there is a
borrower. Section 3500.15( b) states that affiliated business
arrangements are not violations of 12 U. S. C. 2607 as long as
certain conditions are met. The conditions set out in the
regulation are substantively the same as those in 12 U. S. C.
2607( c); affiliated business arrangements or agreements are not
prohibited as long as (A) the person making the referral has
provided a written disclosure on the existence of such an
arrangement to the person referred, (B) such person is not
required to use any particular provider of settlement services,
and (C) the only thing of value that is received from the
arrangement (other than payments, such as fees or salaries) is a
return on the ownership interest or franchise relationship.
We could not determine whether HUD could have developed less
burdensome disclosure requirements while still meeting the
underlying requirements of RESPA. To make that determination we
would have had to conduct a detailed examination of HUD's
disclosure requirements that were not statutorily mandated and
determine whether HUD could have eliminated them or used an
alternative approach that regulated entities would have perceived
as less burdensome. Such an examination of each Whether Regulatory
Provisions Are Within the Authority Granted by Statute
Whether Less Burdensome Regulatory Approach Was Available
Appendix III Concerns for Which Agencies Appeared to Have Some
Rulemaking Discretion
Page 76 GAO/GGD-99-20 Regulatory Burden
nonstatutory requirement would have demanded extensive time and
resource commitments that were beyond the scope of this
assignment.
According to 12 U. S. C. 2601, the purpose of RESPA is to (1)
simplify and improve the disclosures applicable to the
transactions under these acts including the timing of the
disclosures; and (2) provide a single format for the disclosures
that will satisfy the requirements of each of the acts with
respect to the transactions.
An official from Bank A said that FDIC requires banks to complete
call reports, a quarterly statistical summary of bank operations,
that are very detailed (28 pages for the bank) and require a
significant amount of time for bank employees to complete. She
said one employee spends 1 week during each quarter preparing the
report.
FDIC officials said that Section 7( a) of the Federal Deposit
Insurance Act requires each FDIC- insured depository institution
to submit quarterly reports of condition, also known as call
reports, to the appropriate federal banking agency. The officials
said that bank call reports generally consist of a balance sheet;
an income statement; a statement of changes in equity capital; and
supporting schedules that provide additional information on
specific categories of assets and liabilities, off- balance sheet
items, past due and nonaccrual assets, loan charge- offs and
recoveries, and risk- based capital. FDIC officials said that the
call report also includes the information used by FDIC to
calculate each institution's premiums for deposit insurance. An
individual bank files one of four versions of the call report,
depending upon whether it has foreign offices and on its size in
total assets. The officials said the call report for banks with
foreign offices is the most detailed, and the report for small
banks is the least detailed.
Officials from OCC and FRB also commented on this concern. They
said that 12 U. S. C. 161( a) and 12 U. S. C. 324 require all
banks to file call reports. They said call reports provide
financial information for public disclosure, and regulators use
them to evaluate the safety and soundness of the banking system.
The officials said the reports enable them to make a proper
assessment of a bank's condition and are a critical element of the
supervisory process. Statutory Purpose
Concern 9 Company Concern
Agency Response
Appendix III Concerns for Which Agencies Appeared to Have Some
Rulemaking Discretion
Page 77 GAO/GGD-99-20 Regulatory Burden
The issue that we focused on in this concern is the agencies'
assertion that the call reports at issue in the concern are
statutorily required.
We believe that the various statutes that require or authorize the
banking agencies to collect information through the call reports
gave the agencies some discretion in drafting the relevant
regulatory provisions. Some of the provisions in the relevant
statutes, such as in the Federal Deposit Insurance Act and the
Federal Deposit Insurance Corporation Improvement Act of 1991, are
very specific and therefore gave the banking agencies no
discretion in how the regulatory provisions could be drafted. For
example, 12 U. S. C. 1817( a) requires each institution to submit
reports of conditions four times each year, stipulates that the
reports include the total amount of the institution's liability
for deposits, and specifies that time and savings deposits and
demand deposits be listed separately.
Other provisions in the statutes gave the banking agencies at
least some rulemaking discretion. For example, 12 U. S. C. 1817(
a) requires financial institutions to submit call reports four
times each year and specifies that two of those reports must be
submitted between January and June and two between July and
December. However, the statute allows the banking agencies to
determine exactly when these reports must be filed. Also, 12 U. S.
C. 161( a) says that financial institutions must file call reports
with OCC in accordance with the Federal Deposit Insurance Act
(codified at 12 U. S. C. 1811 et seq.). That act (12 U. S. C.
1817( a)( 1)), in turn, says that certain banks (e. g., insured
state nonmember banks) must submit those reports in such form and
containing such information as FDIC may require. Therefore,
although the relevant statutes require call reports to include
some specific types of information, the statutes also give
agencies the flexibility to require other information that they
deem necessary and to specify the format of the reports.
We believe that the regulatory provisions implementing these
statutory requirements (codified at 12 C. F. R. 304.4( a)) are
within the authority granted by the relevant statutes. The
regulation (1) requires that the call reports be prepared in
accordance with instructions from the Federal Financial
Institutions Examination Council; (2) lists a number of items that
must be reported in, or taken into account during the preparation
of, the call reports; and (3) requires that the reports be
submitted on March 31, June 30, September 30, and December 31 of
each year. These provisions are consistent with specific
requirements in the statute (e. g., that the reports be submitted
four times each year) or fall within the general rulemaking
authority granted by the statutes. Amount of Discretion
Permitted by Statute in Drafting Regulatory Requirements
Whether Regulatory Provisions Are Within the Authority Granted by
Statute
Appendix III Concerns for Which Agencies Appeared to Have Some
Rulemaking Discretion
Page 78 GAO/GGD-99-20 Regulatory Burden
We could not determine whether FDIC, OCC, and FRB could have
developed less burdensome call report requirements while still
meeting the requirements of the relevant statutes. In order to
make such a determination, we would need to do a detailed review
of each of the nonstatutory data elements of the call reports.
This type of detailed analysis would require significant time and
resource commitments that were beyond the scope of this review.
The Federal Deposit Insurance Act and the Federal Deposit
Insurance Corporation Improvement Act of 1991 do not contain
statements of purpose.
An official from Bank A said that the information requirements for
the call report keep changing, which she said makes it difficult
for the bank to plan ahead.
Officials from OCC, FDIC, and FRB said the events that make call
report changes necessary include changes in statutes, regulations,
accounting rules, technology, and the nature of the business of
banking. They said existing items are deleted when they are no
longer considered sufficiently useful.
The issue that we focused on in this concern is the agencies'
assertion that changes in the call report requirements are, at
times, required by changes in statutes.
We believe that the relevant statutes gave OCC, FDIC, and FRB some
discretion in how frequently they have made changes to the
regulations requiring information in the call reports. In general,
the banking agencies are required to review and make changes to
the information required in the call reports that they believe are
necessary. According to 12 U. S. C. 4805( c), each federal banking
agency must review the information required by the schedules
supplementing the core information on the call reports and
eliminate requirements that are not warranted for reasons of
safety and soundness or other public purposes.
However, to determine the extent to which specific changes to the
reporting requirements were driven by statutory changes, we
reviewed the annual Revisions to the Reports of Condition and
Income for 1993, 1994, and 1995 the 3- year period immediately
prior to our 1996 study. During that period, the agencies added,
deleted, or modified a total of 280 items Whether Less Burdensome
Regulatory Approach Was Available
Statutory Purpose Concern 10 Company Concern
Agency Response Amount of Discretion Permitted by Statute in
Drafting Regulatory Requirements
Appendix III Concerns for Which Agencies Appeared to Have Some
Rulemaking Discretion
Page 79 GAO/GGD-99-20 Regulatory Burden
from the call report requirements. Of these 280 changes, OCC
officials said that 44 (16 percent) were driven by statutory
requirements in the Federal Deposit Insurance Corporation
Improvement Act of 1991 (FDICIA). We reviewed the statutory
provisions in FDICIA that OCC officials said mandated the 44
changes to the call report requirements to determine how much
discretion the statute permitted the banking agencies to make
those changes. We concluded that the agencies had some discretion
in what they could require with regard to 37 of the 44 changes.
The statute often required agencies to collect general types of
information, but left to the agencies' discretion the specific
information that banks were required to submit and/ or whether the
information had to be in the call reports. For example, 1 of the
changes that OCC officials said resulted in the addition of 30
items to the call reports in 1993 involved the collection of
information on loans to small businesses and small farms. Section
122 of FDICIA states that the agency must annually collect
information on small business and small farm lending in the call
reports and provides suggestions of the type of information that
may be collected. Therefore, the statute gave the banking agencies
no discretion about collecting this information and specifically
required that the call reports serve as the reporting mechanism.
However, the statute gave the agencies discretion regarding the
specific information that banks had to report. In the remaining 7
of the 44 changes, we believe the banking agencies had no
discretion with regard to changing the call report requirements.
For example, in one of the seven changes, the statute required the
agencies to collect information on all assets and liabilities in
all banking reports. Therefore, the information had to be
collected and had to be in all banking reports, including the call
reports.
We believe the banking agencies' actions to change the call
reports' requirements were within the authority granted by the
statutes. All of the changes that the agencies made to the call
report requirements appeared to be either specifically required by
FDICIA or were within the discretion that the statutes gave the
agencies to make such changes.
We could not determine whether FDIC, OCC, or FRB could have
avoided making changes to the call report requirements while still
meeting the requirements of the underlying statutes. In order to
make such a determination, we would need to do a detailed review
of each change to the call reports that was not specifically
required by statute. This type of detailed analysis would require
significant time and resource commitments that were beyond the
scope of this review. Whether Regulatory
Provisions Are Within Authority Granted by Statute
Whether Less Burdensome Regulatory Approach Was Available
Appendix III Concerns for Which Agencies Appeared to Have Some
Rulemaking Discretion
Page 80 GAO/GGD-99-20 Regulatory Burden
FDICIA does not contain a statement of purpose. The officials from
Bank A and the glass company raised concerns about staying current
with and understanding the changing and increasingly complex
regulatory requirements related to ERISA.
IRS officials said the companies' concerns fail to distinguish
between the complexity of and burden that results from the
statutes governing retirement plans and the effect of regulations
promulgated by IRS and the Department of the Treasury. The
officials said the relevant statutes have been amended frequently
since ERISA was enacted, and have become increasingly complex.
They said the companies' concerns about the complexity of the
statutes governing retirement plans are properly addressed to
Congress, not IRS or other administrative agencies.
The issue that we focused on in this concern is IRS' assertion
that the complexity and frequent changes in ERISA regulations are
traceable to changes in the statute.
We believe that IRS had some discretion with regard to how ERISA
regulations could be drafted and how frequently those regulatory
requirements could be changed. To determine the extent to which
specific changes to ERISA regulatory requirements were driven by
statutory changes, we asked IRS to identify all of the changes it
had made in the relevant regulations between January 1994 and
December 1995 the 2- year period prior to the issuance of our
December 1996 report. 6 IRS officials identified 37 such
regulatory changes, 24 of which were based on amendments made to
ERISA by 4 different statutes. For example, the Tax Reform Act of
1986 amended ERISA provisions (codified at 26 U. S. C. 414( r))
relating to pension plans of employers operating separate lines of
business. Subparagraph (2) of 26 U. S. C. 414( r) states that an
employer should be treated as operating separate lines of business
if, among other things, it meets guidelines prescribed by the
Secretary or the employer receives a determination from the
Secretary that such line of business may be treated as separate.
Therefore, we believe that IRS had discretion in how it drafted
regulations implementing these amendments. IRS made 15 changes to
regulatory provisions in 26 C. F. R. 1.410 and 1.414 to interpret
the separate line of business provisions.
6 We focused on published changes to the CFR, not revenue rulings
or notices that also affect companies' ERISA responsibilities.
Statutory Purpose
Concern 11 Company Concern
Agency Response Amount of Discretion Permitted by Statute in
Drafting Regulatory Requirements
Appendix III Concerns for Which Agencies Appeared to Have Some
Rulemaking Discretion
Page 81 GAO/GGD-99-20 Regulatory Burden
Also, statutory provisions in the Omnibus Budget Reconciliation
Act of 1993 changed the compensation limit of an employee in a
qualified trust and amended the formula for increasing the cost-
of- living adjustment. The provision (codified at 26 U. S. C. 401(
a)( 17)) imposed a $150,000 limit on the amount of annual
compensation of each employee in a qualified trust. It also
required the Secretary of the Treasury to annually adjust the
$150,000 limit for increases in the cost- of- living at the same
time and in the same manner as adjustments are made pursuant to
another subsection. However, the provision stipulated that a
different base period be used and that any increase that is not a
multiple of $10,000 must be rounded to the next lowest multiple of
$10,000. We concluded that IRS had no discretion in how it drafted
its implementing regulations for these provisions. IRS drafted a
regulatory provision that reflects the statutorily prescribed
adjustment process and the statutory change in the $150,000 limit.
We believe that IRS' ERISA regulations are within the authority
granted by statute. The regulations did not appear to exceed the
amount of rulemaking authority provided by the statutes. In each
instance in which the relevant statutory provision gave IRS
latitude in how its regulation could be written, the regulations
appeared substantively consistent with the statutory intent and
within the agency's authority. In each instance in which the
relevant statutory provision gave IRS no discretion in how its
regulations could be changed, the regulations mirrored the
statutory provisions. For example, the IRS regulation on the ERISA
annual compensation limit (26 C. F. R. 1.401( a)( 17)- 1) states
that the annual compensation limit is $150,000 and that the limit
is adjusted for changes in the cost of living at the same time and
in the same manner as in another subsection. The regulation also
mirrors the statutory requirements regarding the base period to be
used to calculate the annual adjustments and the rounding of
adjustments to the nearest $10,000.
We could not determine whether IRS could have developed less
burdensome regulations that would have met the requirements of the
underlying statutes. To do so we would have had to initiate a
separate analysis of each provision for which IRS had rulemaking
discretion analyses that would have required extensive time and
resource commitments that were beyond the scope of this
assignment.
Many of the statutes amending ERISA did not contain a statement of
purpose. Whether Regulatory
Provisions Are Within the Authority Granted by Statute
Whether Less Burdensome Regulatory Approach Was Available
Statutory Purpose
Appendix III Concerns for Which Agencies Appeared to Have Some
Rulemaking Discretion
Page 82 GAO/GGD-99-20 Regulatory Burden
Officials from the fish farm said that pesticide manufacturers
were either not renewing the aquatic use of certain pesticides or
were not seeking EPA approval of the products for use in
aquaculture because of the expense associated with EPA's
reregistration program.
EPA officials said that the Federal Insecticide, Fungicide, and
Rodenticide Act (FIFRA) (codified at 7 U. S. C. 136 et seq.)
requires EPA to determine that the use of pesticides does not
cause unreasonable adverse effects on humans or the environment.
In 1988, Congress required (FIFRA section 4, 7 U. S. C. 136a- 1)
EPA to certify that all pesticides meet current testing standards
for safety, including products that were first approved many years
ago. These older pesticides were originally approved when the data
requirements were less stringent and the associated costs of
testing for safety were substantially less than they are today.
Since much of the data on older pesticides may not meet current
standards, the cost of conducting studies to support approval for
use today may be substantial.
The issue that we focused on in this concern is EPA's assertion
that the cost associated with the requirement that pesticide
manufacturers reregister pesticides is traceable to FIFRA.
Although the requirement in question has a direct effect only on
manufacturers of covered pesticides, the fish farm is affected
secondarily by the decision of manufacturers to not seek
reregistration of the pesticides because of the cost of
reregistration.
We believe that FIFRA gave EPA some discretion regarding the
requirements that manufacturers must satisfy in the pesticide
reregistration process. In some areas, EPA appears to have had
little discretion. For example, 7 U. S. C. 136a- 1 states that the
Administrator of EPA must reregister each registered pesticide
containing any active ingredient contained in any pesticide first
registered before November 1, 1984. This section describes in some
detail the approach EPA is to use in the reregistration process.
For example, the statute requires the reregistration to be carried
out in five separate phases and requires those seeking
reregistration of a covered pesticide to submit a summary of each
study the registrant considers adequate to meet the requirements
of the statute, as well as the data underlying each such study.
However, the statute gives the Administrator discretion regarding
the specific data that manufacturers must submit. The statute (7
U. S. C. 136a- 1( d)( 3)) requires each registrant to submit all
data required by regulations issued by the Administrator under
section 136a of this title . . . . Section 136a requires Concern
12
Company Concern Agency Response
Amount of Discretion Permitted in the Statute in Drafting
Regulatory Requirements
Appendix III Concerns for Which Agencies Appeared to Have Some
Rulemaking Discretion
Page 83 GAO/GGD-99-20 Regulatory Burden
the Administrator to publish guidelines specifying the kinds of
information that will be required to support the registration of a
pesticide. Although the statute provides general standards that
the Administrator must consider when establishing data
requirements for minor uses (e. g., considering the impact of the
cost of meeting the requirements on the incentives for any
potential registrant to undertake the development of the required
data), the Administrator appears to have considerable discretion
in establishing registration (and therefore reregistration) data
requirements. These requirements can have a direct impact on the
expense incurred by manufacturers in the reregistration process.
An EPA official said there are no EPA regulations requiring
reregistration of pesticides first registered before November 1,
1984. He said that the statute was so specific in delineating this
requirement that they did not believe it was necessary to draft
regulations that would mirror the statutory language. However, 40
C. F. R. Part 152 delineates the regulatory requirements for
registration of pesticides under section 3 of FIFRA, including the
data requirements that are referenced in the reregistration
requirements of section 4 of the statute. 7 Because FIFRA gave the
EPA Administrator considerable discretion in establishing those
data requirements, we concluded that the data requirements in the
regulation pertinent to the reregistration process are within the
authority granted by the statute.
We could not determine whether EPA could have developed less
burdensome data requirements that would have accomplished the
underlying requirements of FIFRA. To do so, we would have had to
examine each data requirement and determine whether the
information was necessary to prevent unreasonable adverse effects
on the environment. Conducting such an analysis would have
required extensive time and resource commitments that were beyond
the scope of this assignment.
FIFRA does not contain a statement of purpose. 7 The regulation
(40 C. F. R. 152. 1) says that Part 152 sets forth procedures,
requirements and criteria concerning the registration and
reregistration of pesticide products under FIFRA sec. 3 . . . .
(Emphasis added.) However, the reregistration requirements are in
section 4 of FIFRA, not section 3. Whether Regulatory
Provisions Are Within the Authority Granted by the Statute
Whether Less Burdensome Regulatory Approach Was Available
Statutory Purpose
Appendix IV Concerns For Which Agencies Appeared to Have Broad
Rulemaking Discretion
Page 84 GAO/GGD-99-20 Regulatory Burden
One of the objectives of our review was to determine, for each of
27 company concerns, the amount of discretion the underlying
statutes gave rulemaking agencies in drafting the regulatory
requirements that the agencies said were attributable to the
underlying statutes. The agencies that issued those requirements
indicated in two of our 1996 reports that the concerns could, at
least in part, be traced to statutory requirements underlying
their regulations. 1 In this review we concluded that the
statutory provisions underlying 2 of the 27 concerns gave the
rulemaking agencies broad discretion in how the related regulatory
requirements could be drafted. We coded statutory provisions as
allowing agencies broad discretion if the provisions contained few
specific requirements or imposed few to no constraints on whether,
and if so how, an agency's regulations could be drafted.
This appendix provides our detailed analysis of these two company
concerns. Specifically, for each such concern it provides the
following information: (1) the portion of the concern in our 1996
reports that the agency or agencies indicated was statutorily
based, (2) the portion of the agency response in our 1996 reports
that indicated the concern was statutorily based, (3) our analysis
of the amount of rulemaking discretion the relevant statutory
provisions gave the agencies (the first objective of our review),
(4) our analysis of whether the regulatory requirements at issue
in the concern were within the authority granted by the underlying
statutes (the second objective of our review), (5) our analysis of
whether the rulemaking agencies could have developed regulatory
approaches that would have been less burdensome to the regulated
entities while accomplishing the underlying statutory objectives
(the third objective of our review), and (6) the main purpose of
the underlying statutes (where such purpose statements were
available). Appendix I of this report contains a detailed
discussion of our scope and methodology.
An official from Bank A said EEOC's record retention standard is
inconsistent with how EEOC pursues cases. He said EEOC requires
the retention of personnel files for former employees for only 1
year after employees leave a company. The bank official said that
if the bank had followed the EEOC guidelines and kept employees'
files for only 1 year, it would have had a "major problem" on the
several occasions when EEOC staff questioned bank officials about
employees who had left several years ago.
1 GAO/GGD-97-2 (Nov. 18, 1996); and GAO/GGD-97-26R (Dec. 11,
1996). Concern 1
Company Concern
Appendix IV Concerns for Which Agencies Appeared to Have Broad
Discretion
Page 85 GAO/GGD-99-20 Regulatory Burden
According to EEOC, the specific record retention standards in its
regulations are tied to the periods in each statute during which
discrimination complaints can be filed. For example, Title VII of
the Civil Rights Act of 1964 and the Americans with Disabilities
Act (ADA) recordkeeping regulations (29 C. F. R. 1602. 14) require
that personnel records be kept for 1 year because charges can be
filed up to 300 days after the alleged discrimination. Similarly,
the Age Discrimination in Employment Act (ADEA) requires that
employers retain employment records for a period of 1 year from
the effective date of the personnel actions to which they relate
because ADEA charges can be filed up to 300 days after the alleged
age discrimination. However, ADEA recordkeeping regulations (29 C.
F. R. 1627.3) also require employers to keep basic payroll
information for 3 years because the Commission can investigate
suspected age discrimination based on an untimely charge or even
absent a charge. Finally, Equal Pay Act lawsuits must be filed
within either 2 or 3 years of the alleged discrimination, so the
related regulations (29 C. F. R. 1620.32) contain 2 and 3 year
record retention periods.
EEOC officials said that under all of the statutes, when a claim
of discrimination is pending, the employer is required to preserve
all relevant personnel records until final disposition of the
charge or action. If the bank has complied with these
requirements, destruction of records in the normal course of
business when there is no pending charge of discrimination would
not violate the law or give rise to an adverse inference.
The issue that we focused on in this concern is EEOC's assertion
that its record retention requirements are tied to the filing
periods in various civil rights statutes.
We believe that the statutes underlying EEOC's record retention
requirements give the agency broad discretion in drafting the
regulations concerning those requirements. The statutory
provisions do not specify how long employers must retain records
and give EEOC broad authority to establish retention periods. For
example, Title VII of the Civil Rights Act of 1964 (42 U. S. C.
2000e- 8( c)) requires every employer, employment agency, and
labor organization subject to this subchapter to ( 1) make and
keep such records relevant to the determinations of whether
unlawful employment practices have been or are being committed,
(2) preserve such records for such periods, and (3) make such
reports therefrom as the Commission shall prescribe by regulation
or order . . . . (Emphasis added.) ADA (42 U. S. C. 12117( a)),
ADEA (29 U. S. C. 626( a)), and the Equal Pay Act (29 U. S. C.
211( c)) give similarly broad discretion to the Agency Response
Amount of Discretion Permitted by Statute in Drafting Regulatory
Requirements
Appendix IV Concerns for Which Agencies Appeared to Have Broad
Discretion
Page 86 GAO/GGD-99-20 Regulatory Burden
Commission to impose recordkeeping requirements. For example,
according to the Equal Pay Act,
every employer subject to any provision of this chapter or of any
order issued under this chapter shall make, keep, and preserve
such records of the persons employed by him and of the wages,
hours, and other conditions and practices of employment maintained
by him, and shall preserve such records for such periods of time,
and shall make such reports therefrom to the Administrator as he
shall prescribe by regulation or order as necessary or appropriate
for the enforcement of the provisions of this chapter or the
regulations or orders thereunder. (Emphasis added.)
We believe that EEOC's regulatory recordkeeping requirements are
within the broad authority granted by the relevant statutes. For
example, EEOC's recordkeeping regulations for Title VII of the
Civil Rights Act of 1964 and ADA (29 C. F. R. 1602.14) state that
[ a] ny personnel or employment record made or kept by an
employer... shall be preserved by the employer for a period of one
year from the date of the making of the record or the personnel
action involved, whichever occurs later. . . [w] here a charge of
discrimination has been filed, or an action brought by the
Commission or the Attorney General, against an employer under
title VII or the ADA, the respondent employer shall preserve all
personnel records relevant to the charge or action until final
disposition of the charge or the action.
Because the civil rights statutes do not specify how long
employers must retain records, and because those statutes permit
EEOC to require that records be kept for such periods as the
Commission may prescribe, we believe that EEOC's recordkeeping
requirements fall within the broad discretion permitted in the
statutes.
We could not determine whether EEOC could have developed
recordkeeping requirements that would have been less burdensome to
regulated entities than those that it developed while still
accomplishing the underlying statutory objectives. In a sense,
EEOC's recordkeeping requirements appear to be the least
burdensome approach in that they closely relate to the filing
periods in the antidiscrimination laws that EEOC cited. For
example, under Title VII, ADA, and ADEA employees have up to 300
days to file a discrimination charge. The relevant record
retention regulation states that records must be retained for 365
days. Filing periods under the Equal Pay Act range from 2 to 3
years, and the record retention requirements in EEOC's regulations
mirror those periods.
EEOC could have used its rulemaking discretion to establish
uniform record retention requirements (e. g., 5 or 10 years) for
all of the statutes instead of the variable periods for the
different statutes. This approach could have helped eliminate what
the company viewed as an inconsistency Whether Regulatory
Provisions Are Within the Authority Granted by the Statute
Whether Less Burdensome Regulatory Approach Was Available
Appendix IV Concerns for Which Agencies Appeared to Have Broad
Discretion
Page 87 GAO/GGD-99-20 Regulatory Burden
between the requirements and the way EEOC pursues cases. However,
it is not clear whether regulated entities would view a record
retention requirement that is longer than the current requirement
as being less burdensome. To determine how regulated entities
would have viewed such a requirement (and therefore whether EEOC
could have developed a less burdensome regulatory approach), we
would have had to conduct an in depth review of those entities'
views regarding record retention. Such a review would have
required time and resource commitments that were beyond the scope
of this assignment.
According to 42 U. S. C. 12101( b), the purpose of ADA is (1) to
provide a clear and comprehensive national mandate for the
elimination of discrimination against individuals with
disabilities; (2) to provide clear, strong, consistent,
enforceable standards addressing discrimination against
individuals with disabilities; (3) to ensure that the [f] ederal
[g] overnment plays a central role in enforcing the standards
established in this chapter on behalf of individuals with
disabilities; and (4) to invoke the sweep of congressional
authority, including the power to enforce the fourteenth amendment
and to regulate commerce, in order to address the major areas of
discrimination faced day- to- day by people with disabilities.
According to 29 U. S. C. 621, the purpose of ADEA is to promote
employment of older persons based on their ability rather than
age; to prohibit arbitrary age discrimination in employment; to
help employers and workers find ways of meeting problems arising
from the impact of age on employment.
Although it is not codified, section 2 of the Equal Pay Act is a
declaration of purpose and states:
[t] he Congress hereby finds that the existence in industries
engaged in commerce or in the production of goods for commerce of
wage differentials based on sex( 1) depresses wages and living
standards for employees necessary for their health and efficiency;
(2) prevents the maximum utilization of the available labor
resources; (3) tends to cause labor disputes, thereby burdening,
affecting, and obstructing commerce; (4) burdens commerce and the
free flow of goods in commerce; and (5) constitutes an unfair
method of competition.
Title VII of the Civil Rights Act of 1964 contained no statement
of purpose. Bank B officials said some bank regulations give
nonbanks (e. g., investment brokerage firms) an unfair competitive
edge in the marketplace. For example, they said one regulation
requires banks to Statutory Purpose
Concern 2 Company Concern
Appendix IV Concerns for Which Agencies Appeared to Have Broad
Discretion
Page 88 GAO/GGD-99-20 Regulatory Burden
disclose the risks faced by consumers with certain investment
products, although investment firms are not required to make
similar disclosures. In a recent 60 second media advertisement for
Bank B, the bank officials said about a quarter of the airtime
they bought had to be spent publicizing regulatory issues (e. g.,
rates and term disclosures). They said a nonbank could have spent
the same advertising time simply selling its products and
services.
In our December 1996 report, OCC officials said that the examples
of competitive inequality cited by Bank B are due to the fact that
banks and nonbanks operate under different statutory schemes.
During this review, OCC officials said banks operate as federally
insured financial institutions and nonbanks do not. Therefore,
they said it is appropriate for banking agencies to adopt
additional disclosure requirements that address the unique
features of the banking industry.
OCC officials noted that the different disclosures provided by
banks stem not from a regulation but from a policy statement,
issued jointly by OCC and the other banking agencies in 1994, that
provides guidance to the industry concerning practices that are
consistent with safe and sound banking practices. Issuing the
policy statement was an exercise of the authority of the OCC and
other banking agencies to determine what constitutes safe and
sound banking practices pursuant to 12 U. S. C. 1818. OCC
officials also said that because banks offer both insured and
uninsured investment products, it is important that banks inform
consumers whether a given product is insured. Failure to do so
could constitute an unsafe and unsound banking practice, resulting
in liability to the bank or, at a minimum, damage to the bank's
reputation. OCC officials noted that OCC and other banking
agencies issued the policy statement in question to alert banks
about the potential problems in this area and to suggest practices
including providing the disclosures noted by Bank B officials that
can help banks avoid these problems.
OCC officials concluded that it is appropriate to continue
tailoring the disclosures provided to purchasers of investment
products according to whether there is a significant risk of
confusion over whether a product is insured. Agency Response
Appendix IV Concerns for Which Agencies Appeared to Have Broad
Discretion
Page 89 GAO/GGD-99-20 Regulatory Burden
The issue that we focused on in this concern is OCC's assertion
that differences in statutory schemes between banks and nonbanks
require differences in their disclosure requirements.
We believe that the statutes underlying the interagency policy
statement gave the banking agencies broad discretion in developing
the disclosure requirements. OCC officials indicated that the
banking agencies issued the policy statement under their authority
in 12 U. S. C. 1818 to determine whether a given practice is
consistent with safe and sound banking. Given the scope of this
authority and because the disclosure requirements in the policy
statement appear related to the agency's authority, we concluded
that the statutes gave OCC and the other the banking agencies
broad discretion to issue the policy statement requiring the
disclosures at issue in this concern. Also, because OCC's and the
other banking agencies' statutory authority does not extend to
nonbanks, the policy statement does not apply to those
institutions.
We believe that the interagency policy statement requiring certain
types of disclosures for nondeposit investment products is within
the broad rulemaking authority granted to OCC and the other
banking agencies by the underlying statutes. For example, the
policy statement requires, among other things, that insured
depository institutions disclose that certain products (1) are not
insured by FDIC; (2) are not a deposit or other obligation of, or
guaranteed by, the depository institution; and (3) are subject to
investment risk, including possible loss of the principal amount
invested. The policy statement also says that the disclosures
should be provided to customers during any sales presentation and
in advertisements and other promotional materials. Because the
underlying statutes give OCC and the other banking agencies the
authority to take the actions that they believe are necessary to
remedy or prevent unsafe and unsound banking practices, we believe
the policy statement is within OCC's statutory authority.
We could not determine whether OCC and the other banking agencies
could have developed disclosure requirements that would have been
less burdensome to regulated entities while still accomplishing
the underlying purpose of the statutes. To do so we would have had
to conduct a detailed review of each disclosure requirement and
determine how important it was to consumers in understanding which
products are insured and which are not. Such a review would
require significant time and resource commitments that were beyond
the scope of this review. Amount of Discretion
Permitted by Statute in Drafting Regulatory Requirements
Whether Regulatory Provisions Are Within the Authority Granted by
the Statute
Whether Less Burdensome Regulatory Approach Was Available
Appendix IV Concerns for Which Agencies Appeared to Have Broad
Discretion
Page 90 GAO/GGD-99-20 Regulatory Burden
The above- cited statutory provisions do not contain a statement
of purpose. Statutory Purpose
Appendix V Major Contributors to This Report
Page 91 GAO/GGD-99-20 Regulatory Burden
Curtis Copeland, Assistant Director Ellen Wineholt, Evaluator- in-
Charge Theresa Roberson, Senior Evaluator Thomas M. Beall,
Technical Analyst Kiki Theodoropoulos, Communications Analyst
Alan N. Belkin, Assistant General Counsel James M. Rebbe, Senior
Attorney General Government
Division Office of the General Counsel
Page 92 GAO/GGD-99-20 Regulatory Burden
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