Prior GAO Work Identified Benefits and Weaknesses of Rulemaking Procedures and Practices

Federal regulation, like taxing and spending, is one of the basic tools of  government used to implement public policy.  Agencies publish thousands  of regulations each year to achieve goals such as ensuring that workplaces,  air travel, and food are safe; that the nation’s air, water, and land are not  polluted; and that the appropriate amounts of taxes are collected.  Because  regulations affect so many aspects of citizens’ lives, it is crucial that  rulemaking procedures and practices be effective and transparent.  Over  the last decade, at the request of Congress, we have prepared over 60  reports and testimonies reviewing crosscutting aspects of those  rulemaking procedures and practices.
I would like to focus my remarks on topics or themes emerging from this  work that are most relevant to this subcommittee’s oversight agenda.   These include: (1) regulatory analysis and accountability requirements,  (2) presidential and congressional oversight of agency rulemaking, and (3) notice and comment rulemaking procedures under the Administrative  Procedure Act (APA).

		Regulatory Analysis and Accountability Requirements

Congress has frequently asked us to evaluate the effectiveness of  requirements that were initiated over the past 25 years to improve the  federal regulatory process.  Among the goals of these requirements are  reducing regulatory burdens, requiring more rigorous regulatory analysis,  and enhancing oversight of agencies’ rulemaking.  We have paid repeated  attention to agencies’ compliance with some of these requirements, such as  ones in the Paperwork Reduction Act (PRA), Regulatory Flexibility Act  (RFA),  Unfunded Mandates Reform Act (UMRA), Congressional Review  Act (CRA), and Executive Order 12866 on regulatory planning and review.
Our reviews identified at least four overall benefits associated with existing  regulatory analysis and accountability requirements:  Encouraging and facilitating greater public participation in  rulemaking—Some initiatives have encouraged and facilitated greater  public participation and consultation in rulemaking.  Opportunities for  the public to communicate with agencies by electronic means have  expanded and requirements imposed by some regulatory reform  initiatives encouraged additional consultation with the parties that  might be affected by rules under development by federal agencies.
Improving the transparency of the rulemaking process—The initiatives  implemented over the past 25 years have helped to make the rulemaking  process more open by facilitating public access to information,  providing more information about the potential effects of rules and  available alternatives, and requiring more documentation and  justification of agencies’ decisions.  Although we have often  recommended that more could be done to increase transparency, we  have also highlighted the valuable contribution made when agencies had  particularly clear and complete documentation supporting their  rulemaking.
Increasing the attention directed to rules and rulemaking—Our  reports have pointed out that oversight of agencies’ rulemaking from  various sources—including Congress, the administration, and GAO,  among others—can result in useful changes to rules.  Furthermore, we  noted that agencies’ awareness of this added scrutiny may provide an  important indirect effect, potentially leading to less costly, more  effective rules.
Increasing expectations regarding the analytical support for proposed  rules—The analytical requirements that have been added over the years  have raised the bar regarding the information and analysis needed to  support policy decisions underlying regulations.  Such requirements  have also prompted agencies to provide more data on the expected  benefits and costs of their rules and encouraged the identification and  consideration of available alternatives.
On the other hand, we also identified at least four recurring reasons why  the requirements imposed by such initiatives have not been more effective:  Lack of clarity and other weaknesses in key terms and definitions— Unclear terms and definitions can affect the applicability and  effectiveness of certain requirements.  For example, we have frequently  cited the need to clarify key terms in RFA.  RFA’s analytical  requirements, which are intended to help address concerns about the  impact of rules on small entities, do not apply if an agency head certifies  that a rule will not have a “significant economic impact on a substantial  number of small entities.”  However, RFA neither defines this key phrase  nor places clear responsibility on any party to define it consistently  across the government.  Not surprisingly, we found that agencies’  compliance with RFA varied widely from one agency to another and  agencies had different interpretations of RFA’s requirements.  In another  example, our review of agencies’ compliance with a requirement to  adjust civil monetary penalties for inflation under the Federal Civil Penalties Inflation Adjustment Act (Inflation Adjustment Act),  indicated that both a lack of clarity and apparent shortcomings in some  of the Act’s provisions appeared to have prevented agencies from  keeping their penalties in pace with inflation.  Although we  recommended changes to address these shortcomings, to date Congress  has not acted on our recommendations.
Limited scope and coverage of various requirements—Simply put,  some rulemaking requirements apply to few rules or require little new  analysis for the rules to which they apply.  For example, we pointed out  last year that the relatively small number of rules identified as  containing mandates under UMRA could be attributed in part to the 14  different exemptions, exclusions, and other restrictions on the  identification of regulatory mandates under the Act.  We also observed  unintended “domino” effects of making certain requirements contingent  on other requirements.  For example, some requirements only apply to  rules for which an agency published a notice of proposed rulemaking,  but, as I will discuss later, we found that agencies issue many final rules  without associated proposed rules.  In addition, the requirement for  “look back” reviews of existing regulations under section 610 of RFA  only applies if the agency determined that its rule would have a  significant economic impact on a substantial number of small entities.   When RFA was amended in 1996 by the Small Business Regulatory  Enforcement Fairness Act (SBREFA) to require additional actions,  such as preparing compliance guides and convening advocacy review  panels for certain rules, this appeared to prompt a reduction in the  number of rules that the Environmental Protection Agency identified as  affecting small entities (and would therefore trigger the new  requirements).
Uneven implementation of the initiatives’ requirements—Sometimes,  agencies’ implementation of various requirements serves to limit their  effectiveness.  For example, a recurring message in our reports over the  years is that some agencies’ economic analyses need improvement.  Our  reviews have found that economic assessments that analyze regulations  prospectively are often incomplete and inconsistent with general  economic principles.  Moreover, the assessments are not always useful  for comparisons across the government, because they are often based  on different assumptions for the same key economic variables.  In our  recent report on UMRA, we noted that parties from various sectors  expressed concerns about the accuracy and completeness of agencies’  cost estimates, and some also emphasized that more needed to be done  to address the benefits side of the equation.  Our reviews have found  that not all benefits are quantified and monetized by agencies, partly  because of the difficulty in estimation.  In our recent report on the  Paperwork Reduction Act, we noted that the Act requires chief  information officers (CIO) to review and certify information collections  to help minimize collection burdens, but our analysis of case studies  showed that CIOs provided these certifications despite often missing or  inadequate support from the program offices sponsoring the  collections.
A predominant focus on just one part of the regulatory process—More  analytical and procedural requirements have focused on agencies’  development of rules than on other phases of the regulatory process,  from the underlying statutory authorization, through effective  implementation and monitoring of compliance with regulations, to the  evaluation and revision of existing rules.  While rulemaking is clearly an  important point in the regulatory process, these other phases also help  determine the effectiveness of federal regulation.

		Oversight of Agency Rulemaking

Closely related to regulatory analysis and accountability requirements are  efforts to enhance the oversight of agencies’ rulemaking by Congress, the  President, and the judiciary.  In general, efforts to increase presidential  influence and authority over the regulatory process, primarily through the  mechanism of Office of Management and Budget (OMB) review of  agencies’ rulemaking, have become more significant and widely used over  the years.  However, our reviews suggest that mechanisms to increase  congressional influence, such as procedures for Congress to disapprove  proposed rules, appear to have been less able to influence changes in  agencies’ rules to date.  We have not done work that directly addresses  issues regarding judicial review of agencies’ rulemaking.
In our September 2003 report on OMB’s role in reviews of agencies’ rules,  we recounted the history of centralized review of agencies’ regulations  within the Executive Office of the President.  We noted the expansion of  OMB’s role in the rulemaking process over the past 30 years under various  executive orders.  Although not without controversy, this expansion of a  centralized regulatory review function has become well established.   OMB’s role in the rulemaking process has been further enhanced by  provisions in various statutes (such as the Information Quality Act, PRA,  and UMRA) that placed additional oversight responsibilities on OMB.  The  formal process by which OMB currently reviews agencies’ proposed and  final rules has essentially remained unchanged since Executive Order  12866 was issued in 1993, but we reported on several changes in OMB  policies in recent years that affected the process, such as increased  emphasis on economic analysis, stricter adherence to the 90-day time limit  for reviews of agencies’ draft rules, and improvements in the transparency  of the OMB review process (although some elements of the transparency of  that process are still unclear).  Based on our review of OMB and agency  dockets on 85 rules reviewed by OMB during a 1-year period, we also  showed that OMB’s reviews sometimes result in significant changes to  agencies’ draft rules.
The Congressional Review Act was enacted as part of SBREFA in 1996 to  better ensure that Congress has an opportunity to review, and possibly  reject, rules before they become effective.  CRA established expedited  procedures by which members of Congress may disapprove agencies’ rules  by introducing a resolution of disapproval that, if adopted by both Houses  of Congress and signed by the President, can nullify an agency’s rule.   However, this disapproval process has only been used once, in 2001, when  Congress disapproved the Department of Labor’s rule on ergonomics.   CRA also requires agencies to file final rules with both Congress and GAO  before the rules can become effective.  Our role under CRA is to provide  Congress with a report on each major rule (for example, those with a $100  million impact on the economy) that includes GAO’s assessment of the  issuing agency’s compliance with the procedural steps required by various  acts and executive orders governing the rulemaking process.  Although we  reported that agencies’ compliance with CRA requirements was  inconsistent during the first years after its enactment, compliance  improved.
Congress also passed the Truth in Regulating Act (TIRA) in 2000 to  provide a mechanism for it to obtain more information about certain rules.   TIRA contemplated a 3-year pilot project during which GAO would perform  independent evaluations of “economically significant” agency rules when  requested by a chairman or ranking member of a committee of jurisdiction  of either House of Congress.  However, during the 3-year period  contemplated for the pilot project, Congress did not enact any specific  appropriation to cover TIRA evaluations, as called for in the Act, and the  authority for the 3-year pilot project expired on January 15, 2004.   Therefore, we have no information on the potential effectiveness of this  mechanism.

		Rulemaking Procedures under the Administrative Procedure Act

Some of our reviews have touched on agencies’ compliance with APA.  APA  established the most long-standing and broadly applicable federal  requirements for informal rulemaking, also known as notice and comment  rulemaking.  Among other things, APA generally requires that agencies  publish a notice of proposed rulemaking (NPRM) in the Federal Register.   After giving interested persons an opportunity to comment on the proposed  rule, and after considering the public comments, the agency may then  publish the final rule.  However, APA provides exceptions to these  requirements, including cases when, for “good cause,” an agency finds that  notice and comment procedures are “impracticable, unnecessary, or  contrary to the public interest,” and interpretive rules.  When agencies use  the “good cause” exception, APA requires that they explicitly say so and  provide a rationale for the exception’s use when the rule is published in the  Federal Register.  An agency’s claim of an exception to notice and  comment procedures is subject to judicial review.  The legislative history of  APA, and associated case law, generally reinforce the view that the “good  cause” exception should be narrowly construed.  In addition, the  Administrative Conference of the United States (ACUS) encouraged  agencies to use notice and comment procedures where not strictly required  by APA and recommended that Congress eliminate or narrow several of the  exceptions in APA.
In various reports over the years, we noted that agencies had not issued  NPRMs before publishing certain final rules.  When we reported on this  issue in 1998, we estimated that about half of all final actions published in  1997 had been issued without an associated NPRM.  Although many of  those final actions without proposed rules were minor actions, 11 of the 61  major rules (for example, those with an impact of $100 million or more) did  not have NPRMs.  While we have not studied this issue in depth since  1998, we continued to find the prevalence of final rules without proposed  rules during our reviews.  For example, during our review of the  identification of federal mandates under UMRA in 2001 and 2002, we found  that 28 of the 65 major rules that imposed new requirements on nonfederal  parties did not have NPRMs.
We have also reported that agencies’ explanations for use of APA’s “good  cause” exception were sometimes unclear, for example, simply stating that  notice and comment would delay rules that were, in some general way, in  the public interest.  We noted that, when agencies publish final rules  without NPRMs, the public’s ability to participate in the rulemaking  process is limited.  Also, several regulatory reform requirements that  Congress has enacted during the past 25 years—such as RFA’s and UMRA’s  analytical requirements—use as their trigger the publication of an NPRM.   Therefore, it is important that agencies clearly explain why notice and  comment procedures are not followed.
At the same time, the number of final rules without proposed rules appears  to reflect, at least in part, agencies’ acceptance of procedures for  noncontroversial and expedited rulemaking actions known as “direct final”  and “interim final” rulemaking that were previously recommended by  ACUS.  Although we observed some differences in how agencies  implement direct final rulemaking, it generally involves publication of a  rule with a statement that the rule will be effective on a particular date  unless an adverse comment is received within a specified period of time  (such as 30 days).  For example, the Federal Aviation Administration (FAA)  has used direct final rulemaking procedures nearly 40 times this year to  modify the legal descriptions of controlled airspace at various airports  across the country.  FAA issued these modifications as direct final rules  because it anticipated no adverse or negative comments.  FAA also noted  that these regulations only involve an established body of technical  regulations for which frequent and routine amendments are necessary to  keep them operationally current.  If an adverse comment is received on a  direct final rule, the agency withdraws the direct final rule and may publish  the rule as a proposed rule under normal notice and comment procedures.   For interim rulemaking, an agency issues a final rule without an NPRM that  is generally effective immediately, but with a postpromulgation opportunity  for the public to comment.  Public comments may persuade the agency to  later revise the interim rule.  Although neither direct nor interim final  rulemaking are specifically mentioned in APA, both may be viewed as an  application of the “good cause” exception in APA.
Direct and interim final rules appear to account for hundreds of the final  regulatory actions published each year.  In our report on final rules without  proposed rules, we identified 718 interim and direct final regulatory actions  published by agencies during 1997.  A quick search of recent Federal  Register notices showed that agencies published over 550 notices in 2004  for which the subject rulemaking action was identified as a direct final,  interim final, or interim rule.  Through October 21 of this year, agencies had  published nearly 400 such notices.  Direct final rules accounted for almost  60 percent of these notices.

	Some Issues and Emerging Trends Merit Attention

The findings and emerging issues reported in our body of work on federal  rulemaking suggest a few areas on which the subcommittee might consider  taking legislative action or sponsor further study:  generally reexamine rulemaking structures and processes, including the   address previously identified weaknesses of existing statutory   promote additional improvements in the transparency of agencies’   open a broader examination of how developments in information  technology might affect the notice and comment rulemaking process.

		Generally Reexamine Rulemaking Structures and Processes, Including the APA

As we have noted in several products this year, we believe that it is  appropriate and necessary to begin taking a broad reexamination of what  the federal government does and how it does it, especially given the fiscal  challenges facing the country.  Although the federal rulemaking process  does not have much direct impact on the federal budget—given that most  costs of regulation fall on regulated parties and their customers or clients— we have testified that it nevertheless should be part of that reexamination.   We recognize that a successful reexamination of the base of the federal  government will entail multiple approaches over a period of years.  No  single approach or reform can address all of the questions and program  areas that need to be revisited.  However, as we have previously stated,  federal regulation is a critical tool of government, and regulatory programs  play a key part in how the federal government addresses many of the  country’s needs.  This subcommittee has already begun such a  reexamination through its current oversight agenda, and ACUS, if funded,  might well play a valuable role in carrying out the detailed research that  will be needed.
One emerging trend that any such reexamination should take into account  is the evolution of the markets and industries that federal agencies  regulate.  Changes in the regulatory environment, especially the growing  influence of the global economy, have implications for federal rulemaking  procedures and practices.  For example, agency officials pointed out to us  in 1999 the growing importance of international standards and standard- setting bodies, alongside the role of international agreements, in producing  certification standards of interest and importance to American businesses.   More recently, international developments regarding global harmonization  of regulatory standards, chemical risk-assessment requirements, Internet  governance issues, and compliance with capital standards and  requirements for financial institutions have attracted attention in the  regulatory arena.
More specifically, Congress might want to revisit APA in view of changes in  agencies’ practices over time, such as greater use of interim and direct final  rulemaking for certain regulations.  For example, we observed that some  agencies differed in their policies and practices regarding direct final  rulemaking.  Whether there should be one standard approach to such  rulemaking by federal agencies is an open question.  In addition, although  direct final rulemaking had been viewed by ACUS as permissible under the  APA, ACUS nevertheless suggested that Congress may wish to expressly  authorize the process to alleviate any uncertainty and reduce the potential  for litigation.  With regard to interim final rulemaking, ACUS had similarly  recommended that, when APA is reviewed, Congress amend the Act to  mandate use of postpromulgation comment procedures for rules issued  under the “good cause” exception.

		Address Previously Identified Weaknesses of Existing Statutory Requirements

Our prior reviews have identified many opportunities to revisit and refine  existing regulatory requirements.  Although progress has been made to  implement recommendations we raised in past reports, there are still  unresolved issues.  We still believe, for example, that the promise of RFA  may never be realized until key terms and definitions, such as “substantial  number of small entities,” are clarified and/or an entity with the authority  and responsibility to do so is established.  Similarly, we believe that civil  penalties are an important element of regulatory enforcement and  deterrence, but we found that agencies are unable to fully adjust their  penalties for inflation under the provisions of current law.  Congressional  action is needed to address these issues.

		Promote Additional Improvements in the Transparency of Agencies’ Rulemaking Actions

As pointed out earlier, we have identified many positive developments  regarding the transparency of the regulatory process, but more could be  done.  For example, additional attention could be paid to agencies’  explanations for statements or certifications that certain requirements do  not apply.  This is another area that might merit additional study of  available options.  Some uses of exemptions, such as agencies’ claims that  a rule does not contain a federal mandate as defined by UMRA or that a  proposed rule has no federalism impacts, do not require the agency to  provide any more support than the certification itself.  Other uses, such as  claims of “good cause” to publish final rules without proposed rules,  require agencies to provide a clear statement and explanation (although  even here we noted that sometimes agencies’ explanations were vague).   This raises the question of whether there should be a more demanding  requirement for agencies to essentially “show their work” behind such  certifications, and, if so, what form such requirements might take.

		Open a Broader Examination of How Developments in Information Technology Might Affect the Rulemaking Process

One emerging trend we have observed in our work is the expanded role of  technology-based innovations in enhancing the regulatory process.  Agencies’ use of the Internet and other technologies to enhance the  regulatory process has rapidly increased in importance.  In about 5 years,  we have gone from reporting on and encouraging the early development of  some innovative technologies in support of rulemaking to reporting on the  implementation of governmentwide e-government initiatives, such as  Regulations.gov and the centralized electronic docket for executive branch  agencies.  The increased use of technology-based innovations may  provide opportunities to transform the rulemaking process, not simply to  replace “paper” processes with electronic versions.  Continued study is  therefore warranted of how such initiatives can open additional  opportunities for public participation in and access to information about  federal rulemaking, as well as how information technology can be used to  improve the federal government’s ability to analyze public comments.
Mr. Chairman, this concludes my prepared statement.  Once again, I  appreciate the opportunity to testify on these important issues.  I would be  pleased to address any questions you or other members of the committee  might have at this time.
If additional information is needed regarding this testimony, please contact  J. Christopher Mihm, Managing Director, Strategic Issues, at (202) 512-6806  or mihmj@gao.gov.

Related GAO Products

Electronic Rulemaking: Progress Made in Developing Centralized E- Rulemaking System.  GAO-05-777.  Washington, D.C.: September 9, 2005.
Regulatory Reform: Prior Reviews of Federal Regulatory Process  Initiatives Reveal Opportunities for Improvements.  GAO-05-939T.  Washington, D.C.: July 27, 2005.
Economic Performance: Highlights of a Workshop on Economic  Performance Measures. GAO-05-796SP.  Washington, D.C.: July 2005.
Paperwork Reduction Act: New Approach May Be Needed to Reduce  Government Burden on Public. GAO-05-424. Washington, D.C.: May 20,  2005.
Unfunded Mandates: Views Vary About Reform Act’s Strengths,  Weaknesses, and Options for Improvement. GAO-05-454.  Washington,  D.C.: March 31, 2005. 21st Century Challenges: Reexamining the Base of the Federal  Government. GAO-05-325SP.  Washington, D.C.: February 2005.
Electronic Government: Federal Agencies Have Made Progress  Implementing the E-Government Act of 2002. GAO-05-12. Washington,  D.C.: December 10, 2004.
Unfunded Mandates: Analysis of Reform Act Coverage. GAO-04-637.  Washington, D.C.: May 12, 2004.
Paperwork Reduction Act: Agencies’ Paperwork Burden Estimates Due to  Federal Actions Continue to Increase. GAO-04-676T. Washington, D.C.:  April 20, 2004.
Rulemaking: OMB’s Role in Reviews of Agencies’ Draft Rules and the  Transparency of Those Reviews. GAO-03-929.  Washington, D.C.:  September 22, 2003.
Electronic Rulemaking: Efforts to Facilitate Public Participation Can Be  Improved. GAO-03-901. Washington, D.C.: September 17, 2003.
Civil Penalties: Agencies Unable to Fully Adjust Penalties for Inflation  Under Current Law. GAO-03-409. Washington, D.C.: March 14, 2003.
Regulatory Flexibility Act: Clarification of Key Terms Still Needed. GAO- 02-491T. Washington, D.C.: March 6, 2002.
Regulatory Reform: Compliance Guide Requirement Has Had Little  Effect on Agency Practices. GAO-02-172. Washington, D.C.: December 28,  2001.
Federal Rulemaking: Procedural and Analytical Requirements at OSHA  and Other Agencies. GAO-01-852T. Washington, D.C.: June 14, 2001.
Regulatory Flexibility Act: Key Terms Still Need to Be Clarified.  GAO-01- 669T.  Washington, D.C.: April 24, 2001.
Regulatory Reform: Implementation of Selected Agencies’ Civil Penalties  Relief Policies for Small Entities. GAO-01-280. Washington, D.C.: February  20, 2001.
Regulatory Management: Communication About Technology-Based  Innovations Can Be Improved.  GAO-01-232.  Washington, D.C.: February  12, 2001.
Regulatory Flexibility Act: Implementation in EPA Program Offices and  Proposed Lead Rule. GAO/GGD-00-193. Washington, D.C.: September 20,  2000.
Electronic Government: Government Paperwork Elimination Act  Presents Challenges for Agencies. GAO/AIMD-00-282. Washington, D.C.:  September 15, 2000.
Regulatory Reform: Procedural and Analytical Requirements in Federal  Rulemaking. GAO/T-GGD/OGC-00-157. Washington, D.C.: June 8, 2000.
Certification Requirements: New Guidance Should Encourage  Transparency in Agency Decisionmaking. GAO/GGD-99-170.  Washington,  D.C.: September 24, 1999.
Federalism: Previous Initiatives Have Little Effect on Agency  Rulemaking. GAO/T-GGD-99-131. Washington, D.C.: June 30, 1999.
Regulatory Accounting: Analysis of OMB’s Reports on the Costs and  Benefits of Federal Regulation. GAO/GGD-99-59. Washington, D.C.: April  20, 1999.
Regulatory Flexibility Act: Agencies’ Interpretations of Review  Requirements Vary. GAO/GGD-99-55. Washington, D.C.: April 2, 1999.
Regulatory Burden: Some Agencies’ Claims Regarding Lack of  Rulemaking Discretion Have Merit. GAO/GGD-99-20. Washington, D.C.:  January 8, 1999.
Federal Rulemaking: Agencies Often Published Final Actions Without  Proposed Rules. GAO/GGD-98-126. Washington, D.C.: August 31, 1998.
Regulatory Management: Implementation of Selected OMB  Responsibilities Under the Paperwork Reduction Act. GAO/GGD-98-120.  Washington, D.C.: July 9, 1998.
Regulatory Reform: Agencies Could Improve Development,  Documentation, and Clarity of Regulatory Economic Analyses.  GAO/RCED-98-142. Washington, D.C.: May 26, 1998.
Regulatory Reform: Implementation of Small Business Advocacy Review  Panel Requirements. GAO/GGD-98-36. Washington, D.C.: March 18, 1998.
Congressional Review Act: Implementation and Coordination. GAO-T- OGC-98-38. Washington, D.C.: March 10, 1998.
Regulatory Reform: Agencies’ Section 610 Review Notices Often Did Not  Meet Statutory Requirements. GAO/T-GGD-98-64. Washington, D.C.:  February 12, 1998.
Unfunded Mandates: Reform Act Has Had Little Effect on Agencies’  Rulemaking Actions. GAO/GGD-98-30. Washington, D.C.: February 4, 1998.
Regulatory Reform: Changes Made to Agencies’ Rules Are Not Always  Clearly Documented. GAO/GGD-98-31. Washington, D.C.: January 8, 1998.
Regulatory Reform: Agencies’ Efforts to Eliminate and Revise Rules Yield  Mixed Results. GAO/GGD-98-3. Washington, D.C.: October 2, 1997.
Regulatory Reform: Implementation of the Regulatory Review Executive  Order. GAO-T-GGD-96-185. Washington, D.C.: September 25, 1996.
Regulatory Flexibility Act: Status of Agencies’ Compliance. GAO/GGD-94- 105. Washington, D.C.: April 27, 1994.

Appendix I

E-Rulemaking officials and the e-Rulemaking Initiative Executive Committee  considered three alternative designs and chose to implement a centralized e- Rulemaking system based on cost savings, risks, and security.  Officials  relied on an analysis of the three alternatives using two cost and risk  assessment models and a comparison of the alternatives to industry best  practices.  Prior to completing this analysis, officials estimated the  centralized approach would save about $94 million over 3 years.  They said  when they developed this estimate, there was a lack of published  information about costs related to paper or electronic rulemaking systems.  They used their professional judgment and information about costs for  developing and operating EPA’s paper and electronic systems, among other  things, to develop the estimate.
EPA’s basis for selecting a  with other agencies and  agency views of that  collaboration, and   whether EPA used key  management practices   when developing the  system.
E-Rulemaking officials extensively collaborated with rulemaking agencies  and most officials at the agencies we contacted thought the collaboration  was effective.  E-Rulemaking officials created a governance structure that  included an executive committee, advisory board, and individual work  groups that discussed how to develop the e-Rulemaking system.  We  contacted 14 of the 27 agencies serving on the advisory board and most felt  their suggestions affected the system development process.  Agency officials  offered several examples to support their views, such as how their  recommendations for changes to the system’s design were incorporated.

	Highlights

The daunting challenges that face  the nation in the 21 century  establish the need for the  transformation of government and  demand fundamental changes in  how federal agencies should meet  these challenges by becoming  flatter, more results-oriented,  externally focused, partnership- oriented, and employee-enabling  organizations.
This testimony addresses how the  long-term fiscal imbalance facing  the United States, along with other  significant trends and challenges,  establish the case for change and  the need to reexamine the base of  the federal government; how  federal agencies can transform into  high-performing organizations; and  how multiple approaches and  selected initiatives can support the  reexamination and transformation  of the government and federal  agencies to meet these 21 century  challenges.
Long-term fiscal challenges and other significant trends and challenges  facing the United States provide the impetus for reexamining the base of the  federal government.  Our nation is on an imprudent and unsustainable fiscal  path driven by known demographic trends and rising health care costs, and  relatively low revenues as a percentage of the economy.  Unless we take  effective and timely action, we will face large and growing structural deficit  shortfalls, eroding our ability to address the current and emerging needs  competing for a share of a shrinking budget pie.  At the same time,  policymakers will need to confront a host of emerging forces and trends,  such as changing security threats, increasing global interconnectedness, and  a changing economy.  To effectively address these challenges and trends,  government cannot accept all of its existing programs, policies, functions,  and activities as “givens.” Reexamining the base of all major existing federal  spending and tax programs, policies, functions, and activities offers  compelling opportunities to redress our current and projected fiscal  imbalances while better positioning government to meet the new challenges  and opportunities of this new century.
In response, agencies need to change their cultures and create the capacity  to become high-performing organizations, by implementing a more results- oriented and performance-based approach to how they do business.  To  successfully transform, agencies must fundamentally reexamine their  business processes, outmoded organizational structures, management  approaches, and, in some cases, missions.  GAO has hosted several forums  to explore the change management practices that federal agencies can adopt  to create high-performing organizations.   For example, participants at a  GAO forum broadly agreed on the key characteristics and capabilities of  high-performing organizations, which can be grouped into four themes:  a clear, well-articulated, and compelling mission;  focus on needs of clients and customers;    strategic management of people; and  strategic use of partnerships. www.gao.gov/cgi-bin/getrpt?GAO-05-830T.
To view the full product, including the scope  and methodology, click on the link above.  For more information, contact J. Christopher  Mihm at (202) 512-6806 or mihmj@gao.gov.
A successful reexamination of the base of the federal government will entail  multiple approaches over a period of years.  The reauthorization,  appropriations, oversight, and budget processes should be used to review  existing programs and policies.  However, no single approach or institutional  reform can address the myriad of questions and program areas that need to  be revisited. GAO has recommended certain other initiatives to assist in the  needed transformations.  These include (1) development of a  governmentwide strategic plan and key national indicators to assess the  government’s performance, position, and progress; (2) implementing a  framework for federal human capital reform; and (3) proposing specific  transformational leadership models, such as creating a Chief Operating  Officer/Chief Management Official with a term appointment at select  agencies.

	Highlights

		What GAO Recommends

			GAO recommends that OMB and the agencies take steps to improve review processes and compliance with the act. Also, the Congress may wish to consider mandating pilot projects to target some collections for rigorous analysis that includes public outreach. In commenting on a draft of this report, OMB and the agencies agreed with parts of the report and disagreed with others.

Standards: The information collection— Is necessary for the proper performance of agency functions.
Avoids unnecessary duplication.
Reduces burden on the public, including small entities.
Uses language that is understandable to respondents.
Will be compatible with respondents’ recordkeeping practices.
Indicates period for which records must be retained.
Gives required information (e.g., whether response is mandatory).
Was developed by an office with necessary plan and resources.
Uses appropriate statistical survey methodology (if applicable). www.gao.gov/cgi-bin/getrpt?GAO-05-424.
Makes appropriate use of information technology.
To view the full product, including the scope  and methodology, click on the link above.  For more information, contact Linda Koontz at  (202) 512-6240 or koontzl@gao.gov.
The total is not always 12 because not all certifications applied to all collections.

	Highlights

		Highlights of GAO-05-454, a report to the Chairman, Subcommittee on Oversight of Government Management, the Federal Workforce and the District of Columbia, Committee on Homeland Security and Governmental Affairs, U.S. Senate

The Unfunded Mandates Reform  Act of 1995 (UMRA) was enacted to address concerns about federal  statutes and regulations that  require nonfederal parties to  expend resources to achieve  legislative goals without being  provided federal funding to cover  the costs. UMRA generates  information about the nature and  size of potential federal mandates  on nonfederal entities to assist  Congress and agency decision  makers in their consideration of  proposed legislation and  regulations. However, it does not  preclude the implementation of  such mandates.
The parties GAO contacted provided a significant number of comments  about UMRA, specifically, and federal mandates, generally. Their views often  varied across and within the five sectors we identified (academic/think tank,  public interest advocacy, business, federal agencies, and state and local  governments). Overall, the numerous strengths, weaknesses and options for  improvement identified during the review fell into several broad themes,  including UMRA-specific issues such as coverage and enforcement, among  others, and more general issues about the design, funding, and evaluation of  federal mandates. First, UMRA coverage was, by far, the most frequently  cited issue by parties from the various sectors. Parties across most sectors  that provided comments said UMRA’s numerous definitions, exclusions, and  exceptions leave out many federal actions that may significantly impact  nonfederal entities and should be revisited. Among the most commonly  suggested options were to expand UMRA’s coverage to include a broader set  of actions by limiting the various exclusions and exceptions and lowering  the cost thresholds, which would make more federal actions mandates under UMRA. However, a few parties, primarily from the public interest advocacy  sector, viewed UMRA’s narrow coverage as a strength that should be  maintained.
At various times in its 10-year  history, Congress has considered  legislation to amend various  aspects of the act to address  ongoing questions about its  effectiveness. Most recently, GAO  was asked to consult with a diverse  group of parties familiar with the  act and to report their views on  (1) the significant strengths and  weaknesses of UMRA as the  framework for addressing mandate  issues and (2) potential options for  reinforcing the strengths or  addressing the weaknesses. To  address these objectives, we  obtained information from  52 organizations and individuals  reflecting a diverse range of  viewpoints. GAO analyzed the  information acquired and organized  it into broad themes for analytical  and reporting purposes.
Second, parties from various sectors also raised a number of issues about  federal mandates in general. In particular, they had strong views about the  need for better evaluation and research of federal mandates and more  complete estimates of both the direct and indirect costs of mandates on  nonfederal entities. The most frequently suggested option to address these  issues was more post-implementation evaluation of existing mandates or  “look backs.” Such evaluations of the actual performance of mandates could  enable policymakers to better understand mandates’ benefits, impacts and  costs among other issues. In turn, developing such evaluation information  could lead to the adjustment of existing mandate programs in terms of  design and/or funding , perhaps resulting in more effective or efficient  programs.
GAO makes no recommendations  in this report.  www.gao.gov/cgi-bin/getrpt?GAO-05-454.
To view the full product, including the scope  and methodology, click on the link above.  For more information, contact Orice M.  Williams at (202) 512-5837, or  williamso@gao.gov.
Going forward, the issue of unfunded mandates raises broader questions  about assigning fiscal responsibilities within our federal system. Federal and  state governments face serious fiscal challenges both in the short and longer  term. As GAO reported in its February 2005 report entitled 21st Century  Challenges: Reexamining the Base of the Federal Government   (GAO-05-325SP), the long-term fiscal challenges facing the federal budget  and numerous other geopolitical changes challenging the continued  relevance of existing programs and priorities warrant a national debate to  review what the government does, how it does business and how it finances  its priorities. Such a reexamination includes considering how responsibilities  for financing public services are allocated and shared across the many  nonfederal entities in the U.S. system as well.
Highlights of GAO-03-409, a report to the  Senate Committee on Governmental  Affairs and the House Committee on  Government Reform  Civil penalties are an important  element of regulatory enforcement,  allowing agencies to punish  violators appropriately and to serve  as a deterrent to future violations.  In 1996, Congress enacted the  Inflation Adjustment Act to require  agencies to adjust certain penalties  for inflation.  GAO assessed federal  agencies’ compliance with the act  and whether provisions in the act  have prevented agencies from  keeping their penalties in pace with  inflation.
Congress may wish to consider  amending the act to (1) require or  permit agencies to adjust their  penalties for lost inflation; (2)  make the calculation and rounding  procedures more consistent with  changes in inflation; (3) permit  agencies with exempt penalties to  adjust them for inflation; and (4)  give some agency the responsibility  to monitor compliance and provide  guidance.
As of June 2002, 16 of 80 federal agencies with civil penalties covered by the  Inflation Adjustment Act had not made the required initial adjustments to  their penalties.  Nineteen other agencies had not made required subsequent  adjustments, and several other agencies had made incorrect adjustments.  The act does not give any agency the authority to monitor compliance or to  provide guidance to agencies.  More important, several provisions of the act  have prevented some agencies from fully adjusting their penalties for  inflation.  One provision limited the agencies’ first adjustments to 10 percent  of the penalty amounts, even if the penalties were decades old and hundreds  of percent behind inflation.  The resultant “inflation gap” can never be  corrected under the statute and grows with each subsequent adjustment.  (The figure below illustrates the effect of the cap on one agency’s $1,000  penalty set in 1958.)  Also, the act’s calculation and rounding procedures  require agencies to lose a year of inflation each time they adjust their  penalties, and can prevent some agencies from making adjustments until  inflation increases by 45 percent or more (i.e., 15 years or more at recent  rates of inflation).  Finally, the act exempts penalties under certain statutes  from its requirements entirely. Consequently, more than 100 exempted  penalties have declined in value by 50 percent or more since Congress last  set them.

		The Department of Justice, the Department of the Treasury, and the Office of Management and Budget did not comment on the first three matters for congressional consideration. The agencies suggested changes to the fourth matter, but we did not make those changes.

www.gao.gov/cgi-bin/getrpt?GAO-03-409.
To view the full report, including the scope  and methodology, click on the link above.  For more information, contact Victor  Rezendes (202) 512-6806 or  rezendesv@gao.gov.
This is a work of the U.S. government and is not subject to copyright protection in the  United States. It may be reproduced and distributed in its entirety without further  permission from GAO. However, because this work may contain copyrighted images or  other material, permission from the copyright holder may be necessary if you wish to  reproduce this material separately.

Summary:
Why GAO Did This Study

Federal regulation is one of the basic tools of government used to implement public policy. Agencies publish thousands of regulations each year to achieve goals such as ensuring that workplaces, air travel, and food are safe; that the nation's air, water, and land are not polluted; and that the appropriate amount of taxes are collected. Because regulations affect so many aspects of citizens' lives, it is crucial that rulemaking procedures and practices be effective and transparent. GAO, at the request of Congress, has prepared over 60 reports and testimonies during the past decade that review aspects of federal rulemaking procedures and practices. This testimony summarizes some of the general findings and themes that have emerged from GAO's body of work on federal regulatory processes and procedures, including areas on which Congress might consider taking legislative action or sponsoring further study. GAO's prior reports and testimonies contain a variety of recommendations to improve various aspects of rulemaking procedures and practices.

What GAO Found

GAO's prior evaluations highlighted both benefits and weaknesses of rulemaking procedures and practices in areas such as (1) regulatory analysis and accountability requirements, (2) presidential and congressional oversight of agency rulemaking, and (3) notice and comment rulemaking procedures under the Administrative Procedure Act (APA). GAO's reviews identified at least four overall benefits associated with existing regulatory analysis and accountability requirements: encouraging and facilitating greater public participation in rulemaking; improving the transparency of the rulemaking process; increasing the attention directed to rules; and increasing expectations regarding the analytical support for proposed rules. On the other hand, GAO identified at least four recurring reasons why such requirements have not been more effective: unclear key terms and definitions; limited scope and coverage; uneven implementation by agencies; and a predominant focus on just one part of the regulatory process. With regard to executive branch and congressional oversight of agencies' rulemaking, GAO has noted that efforts to increase presidential influence and authority over the regulatory process, through mechanisms such as the Office of Management and Budget's reviews of agencies' rulemaking, have become more significant over the years. However, mechanisms intended to increase congressional influence, such as procedures for disapproval of regulations under the Congressional Review Act, appear to have been less able to influence changes in agencies' rules to date. GAO's reviews of agencies' compliance with rulemaking requirements under APA pointed out that agencies often did not published notices of proposed rulemaking (to solicit public comments) before issuing final rules, including some major rules with an impact of $100 million or more on the economy. APA provides exceptions to notice and comment requirements for "good cause" and other reasons, but GAO noted that agencies' explanations for use of such exceptions were sometimes unclear. Also, several analytical requirements for proposed rules do not apply if an agency does not publish a proposed rule. However, some of the growth in final rules without proposed rules appeared to reflect increased use of "direct final" and "interim final" procedures intended for noncontroversial and expedited rulemaking. The findings and emerging issues reported in GAO's body of regulatory work suggested four areas on which Congress might consider taking action or studying further: (1) generally reexamining rulemaking structures and processes, (2) addressing previously identified weaknesses of existing statutory requirements, (3) promoting additional improvements in the transparency of agencies' rulemaking actions, and (4) opening a broader examination of how developments in information technology might affect the notice and comment rulemaking process.