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92–927

" COMMITTEE PRINT ! 108TH CONGRESS

1st Session 

WMCP: 

2004

108–12

SUBCOMMITTEE ON OVERSIGHT

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES

WRITTEN COMMENTS

ON

H.R. 3625, THE ‘‘DEPARTMENT OF THE 

TREASURY INSPECTOR GENERAL 

CONSOLIDATION ACT OF 2003’’

DECEMBER 19, 2003

Printed for the use of the Committee on Ways and Means


congress.#13
ii

COMMITTEE ON WAYS AND MEANS

BILL THOMAS, California, Chairman

PHILIP M. CRANE, Illinois 

E. CLAY SHAW, JR., Florida 

NANCY L. JOHNSON, Connecticut 

AMO HOUGHTON, New York 

WALLY HERGER, California 

JIM MCCRERY, Louisiana 

DAVE CAMP, Michigan 

JIM RAMSTAD, Minnesota 

JIM NUSSLE, Iowa 

SAM JOHNSON, Texas 

JENNIFER DUNN, Washington 

MAC COLLINS, Georgia 

ROB PORTMAN, Ohio 

PHIL ENGLISH, Pennsylvania 

J.D. HAYWORTH, Arizona 

JERRY WELLER, Illinois 

KENNY C. HULSHOF, Missouri 

SCOTT MCINNIS, Colorado 

RON LEWIS, Kentucky 

MARK FOLEY, Florida 

KEVIN BRADY, Texas 

PAUL RYAN, Wisconsin 

ERIC CANTOR, Virginia 

CHARLES B. RANGEL, New York 

FORTNEY PETE STARK, California 

ROBERT T. MATSUI, California 

SANDER M. LEVIN, Michigan 

BENJAMIN L. CARDIN, Maryland 

JIM MCDERMOTT, Washington 

GERALD D. KLECZKA, Wisconsin 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

MICHAEL R. MCNULTY, New York 

WILLIAM J. JEFFERSON, Louisiana 

JOHN S. TANNER, Tennessee 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

EARL POMEROY, North Dakota 

MAX SANDLIN, Texas 

STEPHANIE TUBBS JONES, Ohio 

Allison H. Giles, Chief of Staff 

Janice Mays, Minority Chief Counsel 

SUBCOMMITTEE ON OVERSIGHT

AMO HOUGHTON, New York, Chairman

ROB PORTMAN, Ohio 

JERRY WELLER, Illinois 

SCOTT MCINNIS, Colorado 

MARK FOLEY, Florida 

SAM JOHNSON, Texas 

PAUL RYAN, Wisconsin 

ERIC CANTOR, Virginia 

EARL POMEROY, North Dakota 

GERALD D. KLECZKA, Wisconsin 

MICHAEL R. MCNULTY, New York 

JOHN S. TANNER, Tennessee 

MAX SANDLIN, Texas

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records 

of the Committee on Ways and Means are also published in electronic form. The printed 

hearing record remains the official version. Because electronic submissions are used to 

prepare both printed and electronic versions of the hearing record, the process of converting 

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process 

is further refined. 

iii

C O N T E N T S 

Page

Advisory of Tuesday, November 25, 2003, announcing request for written 

comments on H.R. 3625, the ‘‘Department of the Treasury Inspector General Consolidation Act of 2003’’ ........................................................................... 1

U.S. General Accounting Office, Jeanette M. Franzel, Director, Financial 

Management and Assurance, letter and attachment ........................................ 2

Council for Citizens Against Government Waste, Thomas A. Schatz, letter ...... 16

(1)

ADVISORY

FROM THE COMMITTEE ON WAYS AND MEANS

SUBCOMMITTEE ON OVERSIGHT

FOR IMMEDIATE RELEASE CONTACT: (202) 225–7601

November 24, 2003

OV–8

Houghton Announces Request for

Written Comments on H.R. 3625, the

‘‘Department of the Treasury Inspector General

Consolidation Act of 2003’’

Congressman Amo Houghton (R–NY), Chairman, Subcommittee on Oversight of 

the Committee on Ways and Means, today announced that the Subcommittee is requesting written comments for the record from all parties interested in H.R. 3625, 

the ‘‘Department of the Treasury Inspector General Consolidation Act of 2003.’’ This 

bill, introduced by Representative Rob Portman (R–OH), will consolidate the two existing Inspector General offices at the Department of the U.S. Treasury—the Office 

of Inspector General of the Treasury (OIG) and the Office of the Treasury Inspector 

General for Tax Administration (TIGTA)—into a new office called the Office of the 

Treasury Inspector General (TIG). 

BACKGROUND:

In 1988, Congress created OIG. In 1998, Congress, as part of the Internal Revenue Service (IRS) Restructuring and Reform Act of 1998 (P.L. 105–206), created 

a second Inspector General at Treasury—the TIGTA. 

With the creation of the U.S. Department of Homeland Security (DHS) one year 

ago, there have been significant downsizes at the Treasury Department. The U.S. 

Customs Service, the U.S. Secret Service, the Federal Law Enforcement Training 

Center, and most of the Bureau of Alcohol, Tobacco and Firearms were moved to 

DHS and the U.S. Department of Justice (DOJ). As a result, a substantial portion 

of OIG’s budget and responsibilities also were transferred to DHS and DOJ. 

In order to maximize efficiencies and effectiveness, and to eliminate duplication, 

the President, in his fiscal year 2004 budget, recommended that OIG and TIGTA 

be merged into a new single entity, which would have the same powers and authorities as its predecessors have under current law. Treasury Secretary John W. Snow 

said in a recent letter to Representative Bill Thomas (R–CA), Chairman of the Committee on Ways and Means, the IRS now constitutes 87 percent of the remaining 

personnel resources at the Treasury. Having a separate Inspector General for the 

remaining 13 percent is no longer the correct structure for effective oversight of either the Department, or the IRS. . . . I strongly believe that this merger will result 

in better, more efficient oversight, not only for the IRS, but for the entire Department.’’

In announcing this request for comments, Chairman Houghton stated, ‘‘I have to 

believe that a single Inspector General at Treasury would give the Department the 

tools it needs to operate efficiently and effectively. I look forward to hearing from 

those who are interested in H.R. 3625.’’

2

1 U.S. General Accounting Office, Inspectors General: Enhancing Federal Accountability, GAO–

04–117T (Washington, D.C.: October 8, 2003). 2Public Law 100–504, 102 Stat. 2515 (1988). 

Rep. Portman added, ‘‘As the sponsor of the IRS Restructuring and Reform Act, 

I believe that the Department of the Treasury Inspector General Consolidation Act 

of 2003 will continue the comprehensive reform and oversight improvements at IRS 

that have occurred over the past 5 years.’’

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

Any person or organization wishing to submit written comments for the record 

should send it electronically to hearingclerks.waysandmeans@mail.house.gov, along 

with a fax copy to (202) 225–2610, by close of business Friday, December 19, 2003. 

Please Note: Due to the change in House mail policy, the U.S. Capitol Police will 

refuse sealed-package deliveries to all House Office Buildings. 

FORMATTING REQUIREMENTS:

Each statement presented for printing to the Committee by a witness, any written statement 

or exhibit submitted for the printed record or any written comments in response to a request 

for written comments must conform to the guidelines listed below. Any statement or exhibit not 

in compliance with these guidelines will not be printed, but will be maintained in the Committee 

files for review and use by the Committee. 

1. Due to the change in House mail policy, all statements and any accompanying exhibits for 

printing must be submitted electronically to hearingclerks.waysandmeans@mail.house.gov, along 

with a fax copy to (202) 225–2610, in Word Perfect or MS Word format and MUST NOT exceed 

a total of 10 pages including attachments. Witnesses are advised that the Committee will rely 

on electronic submissions for printing the official hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. Any statements must include a list of all clients, persons, or organizations on whose behalf 

the witness appears. A supplemental sheet must accompany each statement listing the name, 

company, address, telephone and fax numbers of each witness. 

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://waysandmeans.house.gov.

fU.S. General Accounting Office 

Washington, DC 20548

January 29, 2004

The Honorable Amo Houghton 

Chairman 

Subcommittee on Oversight 

Committee on Ways and Means 

House of Representatives

Dear Mr. Chairman:

This letter responds to your November 24, 2003, request for written comments on 

the bill, H.R. 3625, Department of the Treasury Inspector General Consolidation Act 

of 2003. As agreed with your staff, this letter addresses the feasibility of consolidating the two Offices of Inspectors General currently established under the Inspector General (IG) Act of 1978, as amended, at the Department of the Treasury, and 

other matters in the bill. In our October 8, 2003,1 testimony we stated that the 

original concerns that led to the creation of an additional IG office at the Department of the Treasury are no longer as compelling. 

The Treasury Department IG was established by the IG Act Amendments of 

1988.2 In 1978, Treasury had established an administrative IG, appointed by the 

Secretary of the Treasury. The 1988 amendments require that the President appoint 

the IG, subject to Senate confirmation. The duties of the former administrative IG 

office and the internal audit offices of the United States Customs Service, United 

States Secret Service, and the Bureau of Alcohol, Tobacco, and Firearms were transferred to the newly established statutory Treasury IG. The Internal Revenue Service 

(IRS) Office of the Chief Inspector, also known as the Inspection Service, which was 

established in 1951, continued to be responsible for carrying out internal audits and 

3

3Public Law 105–206, 112 Stat. 685,705 (1998). 

4Public Law 107–296, 116 Stat. 2135 (2002). 

investigations for the IRS. To clarify the role of the IG and the Chief Inspector, the 

IRS Commissioner and the Treasury IG entered into two memorandums of understanding. 

The Treasury IG for Tax Administration (TIGTA) was established by the Internal 

Revenue Service Restructuring and Reform Act of 1998,3 which amended the IG Act 

to include an additional IG at the Treasury Department to provide oversight of the 

IRS. The Office of the Chief Inspector and most of the Inspection Service staff were 

transferred to the newly established IG. The creation of TIGTA separate from the 

Treasury IG also addressed IRS officials’ concerns that if the duties of the Chief Inspector were transferred to the Treasury IG, the transferred resources would be 

used to investigate or audit other Treasury bureaus—such as the United States 

Customs Service, United States Secret Service, and the Bureau of Alcohol, Firearms, 

and Tobacco—to the detriment of critical IRS oversight. 

With passage of the Homeland Security Act of 2002,4 the United States Customs 

Service; United States Secret Service; Federal Law Enforcement Training Center; 

and most of the Bureau of Alcohol, Firearms, and Tobacco were transferred from 

the Department of the Treasury to the new Department of Homeland Security or 

the Department of Justice. Consequently, a substantial number of those areas traditionally audited and investigated by the Treasury IG are no longer a part of the 

Treasury Department, and resources in the Treasury IG Office have decreased accordingly. As a point of comparison, in fiscal year 2002 the Treasury IG had about 

87 staff, whereas TIGTA had about 940. This means that of the IGs appointed by 

the President, the Treasury IG now has one of the smallest offices while TIGTA is 

the third largest. 

Thus, prior concern that a single Treasury IG would use the combined oversight 

resources of the Treasury Department to investigate or audit other Treasury bureaus to the detriment of critical IRS oversight is no longer as compelling. We believe consolidation is appropriate given the relative activity levels of TIGTA and the 

Treasury IG, and the current scope and responsibility of the Department of the 

Treasury. 

Another area of the bill provides that any other audit or investigation of a matter 

must cease, or not be initiated if the Treasury IG notifies the affected Treasury organization that the matter is being audited or investigated by the IG. We believe 

that oversight organizations should exercise proper coordination of audits and investigations and that duplication of efforts should be avoided. However, we do not support this provision because the blanket prohibition of other audits and investigations would likely exclude proper audits and investigations of the same subject by 

other federal oversight organizations, as well as law enforcement agencies. 

Enclosed with this letter is our October 8, 2003, testimony entitled, Inspectors 

General: Enhancing Federal Accountability, which addresses this and other issues 

related to the IGs’ role in federal accountability. If you have questions or would like 

to discuss this letter, please contact me at (202) 512–9471, or by e-mail at 

franzelj@gao.gov, or Jackson Hufnagle, Assistant Director, at (202) 512–9470, or by 

e-mail at hufnaglej@gao.gov.

Sincerely yours, 

Jeanette M. Franzel 

Director, Financial Management and Assurance

Attachment

Mr. Chairman and Members of the Committee: 

I appreciate the opportunity to share my thoughts with you on the important role 

of the Inspectors General (IG), established in statute 25 years ago this month to 

provide independent oversight within federal agencies. More significant for this discussion than the anniversary of landmark legislation, however, are the new and continuing challenges we face in assuring open, honest, effective, and accountable government and the critical role of the IGs, in partnership with GAO and other performance and accountability organizations, in addressing these challenges. 

A quarter of a century ago, Congress established statutory IGs in response to serious and widespread internal control breakdowns in major government departments 

and agencies, questions about integrity and accountability in government as a 

whole, and failures of oversight in the federal government. The IGs established by 

4

the Inspector General Act of 1978 (IG Act) were charged with preventing and detecting fraud and abuse in their agencies’ programs and operations; conducting audits 

and investigations; and recommending policies to promote economy, efficiency, and 

effectiveness. The IG Act fortified the position of IG with provisions protecting independence, provided powers of investigation, and mandated reporting not just to the 

agency head but to Congress as well. (See app. I for a more detailed history of the 

IG Act.) 

In the years since passage of the IG Act, Congress has also enacted a series of 

laws to establish a foundation for efficient, effective, and accountable government. 

This body of legislation has given IGs new responsibilities and greater opportunities 

to play an increasing role in government oversight. Clearly, the IGs have made a 

significant difference in federal performance and accountability during the past 25 

years as indicated by their reports of billions of dollars in savings to the public and 

thousands of recommendations and civil and criminal referrals. They have earned 

a solid reputation for preventing and detecting fraud, waste, and abuse; promoting 

improvements in government operations; and providing helpful analyses on a host 

of governmentwide initiatives. It is safe to say that the federal government is a lot 

better off today because of the IGs’ efforts. 

Notwithstanding the accomplishments of the past, we now face continuing challenges that demand even more from government performance and accountability 

professionals. For example, our nation is fighting international terrorism while 

much of the critical government infrastructure that we are trying to protect dates 

back to the 1950s. At the same time, this nation is facing a large and growing structural deficit due primarily to known demographic trends and rising health care 

costs. Recent corporate failures have shaken public confidence in financial reporting 

and accountability in the private sector. In response, Congress passed the SarbanesOxley Act of 2002, which has significant new requirements for publicly traded companies and their auditors. Federal auditors can learn important lessons from the accountability breakdowns in the private sector and the resulting legislation passed 

by Congress. 

We have achieved many important successes in working across organizational 

lines with the IGs and state and local government auditors. An important recent 

effort in building closer ties in the government accountability community has been 

the domestic working group, which I established in 2001 to bring together key staff 

from GAO, the IGs, and state and local audit organizations to explore issues of mutual interest and concern. The annual roundtable discussions and interim activities 

of the domestic working group help to focus attention on key issues and shared challenges facing the government audit community and allow participants to compare 

notes on methods, tools, benchmarking results, and best practices. In the early 

1970s, GAO organized the intergovernmental audit forums in cooperation with federal, state, and local audit organizations. These forums provided the means through 

which new intergovernmental audit relationships were developed and improved the 

usefulness of auditing at each level of government. Some IGs have become active 

participants with GAO at the forums to provide a means for exchanging views, solving common problems, and promoting the acceptance and implementation of government auditing standards. Other IGs, however, have not been very involved in these 

forums and, in my view, this needs to change. 

In addition, we have had the active participation of many IGs and state and local 

government auditors on the Comptroller General’s Advisory Council on Government 

Auditing Standards. The Council provides advice and guidance on revisions to the 

Comptroller General’s Government Auditing Standards, commonly known as the 

‘‘Yellow Book,’’ which is used by government auditors at the federal, state, and local 

levels, as well as contracted independent public accountants (IPA), in the audits of 

government programs and activities. It is time, however, for IGs and other members 

of the federal accountability community to build on past successes by putting additional focus and efforts on reaching across institutional lines and forming new alliances to address the complex challenges facing our government and our nation. 

My statement today will focus on five main points:

• opportunities for increasing the effectiveness of the federal performance and accountability community through an enhanced strategic partnership between the 

IGs and GAO, 

• coordination of the IG and GAO roles in agency financial statement audits and 

the audit of the U.S. government’s consolidated financial statements, 

• the IG role in federal financial management advisory committees, 

• structural streamlining within the IG community to increase resource efficiencies, and 

5

1These councils were established by Executive Order and are described later in this testimony. 2 U.S. General Accounting Office, High Risk Series: An Update, GAO–03–119 (Washington, 

D.C.: January 2003). 

• matters for congressional consideration to enhance federal performance and accountability.

The Need for an Enhanced Strategic Partnership between the IGs and GAO 

One of the challenges facing the federal performance and accountability community today is the need to meet increasing demands and challenges with our current 

resources. Key to this challenge is determining how GAO and the IGs can best complement each other and coordinate their efforts. The IG Act requires that the IGs 

coordinate with GAO to avoid duplicating efforts. In practice, GAO has largely devoted its efforts to program evaluations and policy analyses that look at programs 

and functions across government, and with a longer-term perspective; at the same 

time, the IGs have been on the front line of combating fraud, waste, and abuse within each agency, and their work has generally concentrated on issues of immediate 

concern with more of their resources going into uncovering inappropriate activities 

and expenditures through an emphasis on investigations. GAO and the IGs are, in 

many respects, natural partners. We both report our findings, conclusions, and recommendations to Congress. As I mentioned earlier, we share common professional 

audit standards through the Yellow Book, and I am proud to say that several current IGs and many of their staff are GAO alumni, including the Honorable Gaston 

Gianni, the IG of the Federal Deposit Insurance Corporation and Vice-Chair of the 

President’s Council on Integrity and Efficiency, and Barry Snyder, the IG of the 

Federal Reserve Board and Vice-Chair of the Executive Council on Integrity and Efficiency, who are on the panel following me today. 

While GAO and the IGs make up the federal performance and accountability community, the division of responsibilities between them has not generally included, nor 

does the IG Act include, strategic planning and allocation of work across government programs based on risk and the relative competitive advantages of each organization. Traditionally, GAO and IG coordination has been applied on an ad-hoc, 

job-by-job or issue-by-issue basis. We now have both the need and the opportunity 

to enhance the effectiveness of federal oversight through more strategic and ongoing 

coordination of efforts between GAO and the IGs in the following areas:

• addressing major management challenges and program risks, 

• monitoring the top challenges the government faces, such as implementation of 

the President’s Management Agenda, and 

• conducting the audit of the government’s consolidated financial statements.

Later in this testimony, I am suggesting that Congress consider establishing, 

through statute, assignment of responsibility to a select group of designated federal 

accountability and performance professionals to engage in a formal, periodic strategic planning and ongoing engagement coordination process to focus federal audit 

efforts across the federal government. This process would be in addition to, and 

would not replace, the current coordination of information sharing and technical cooperation being implemented by the domestic working group, the audit forums, and 

the President’s Council on Integrity and Efficiency (PCIE) and the Executive Council on Integrity and Efficiency (ECIE).1

Major Management Challenges and Program Risks 

GAO’s latest high-risk report,2 released in January 2003, highlights areas across 

government that are at risk either due to their high vulnerability to waste, fraud, 

abuse, and mismanagement, or as major challenges associated with the economy, efficiency, and effectiveness of federal programs, policies, processes, functions, or activities. Many of the high-risk areas we identified involve essential government 

services, such as Medicare and mail delivery, that directly affect the well-being of 

the American people. Although some agencies have made strong efforts to address 

the deficiencies cited in the high-risk reports—and some of the programs included 

on GAO’s initial high-risk list in 1990 have improved enough to warrant removal—

we continue to identify many other areas of high risk. Greater strategic coordination 

between GAO and the IGs on a plan for monitoring and evaluating high-risk issues 

and keeping the pressure high to reduce the risk of these programs is not only desirable, it is essential if we are to reduce the risk of key government programs. 

At the request of Congress, the IGs annually report issues similar to those in 

GAO’s high-risk report identifying the ‘‘Top Management Challenges’’ facing their 

agencies. In fiscal year 2002, the IGs ranked information technology, financial manVerDate jul 14 2003 19:21 Jun 20, 2004 Jkt 092927 PO 00000 Frm 00009 Fmt 6633 Sfmt 6621 E:\HR\OC\92927.XXX 92927
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3The Federal Emergency Management Agency (FEMA), one of 24 agencies named in the CFO 

Act, was transferred to the new Department of Homeland Security (DHS), effective March 1, 

2003. With the transfer, FEMA will no longer be required to prepare audited stand-alone financial statements under the CFO Act. Consideration is now being given to making DHS a CFO 

Act agency, which would bring the number of CFO Act agencies back up to 24. 

agement, and human capital management among the most important challenges 

confronting their agencies governmentwide; other priorities included performance 

management, public health and safety, and grants management. Each of these areas 

closely corresponds to an area on GAO’s high-risk list. 

Although both GAO and the IGs have efforts in place to identify major risks and 

challenges within government, there is no mechanism in place to carry out an integrated, strategic planning process as a means through which these issues will be 

monitored and evaluated in the future through combined and coordinated GAO and 

IG oversight. 

President’s Management Agenda 

The administration has signaled its commitment to government transformation 

with the President’s Management Agenda (PMA), which targets 14 of the most glaring problem areas in government for immediate action. Five areas—strategic human 

capital, budget and performance integration, improved financial performance, expanded electronic government, and competitive sourcing—are governmentwide in 

scope, while 9 are agency specific. Each area has the potential for dramatic improvement and concrete results. The areas also reflect many of the concerns raised by 

both GAO’s high-risk report and the IGs’ top management challenge lists. So far, 

however, progress on PMA has been uneven. To achieve consistent progress, sustained attention from Congress, the administration, and the agencies is needed. I 

believe that GAO and the IGs can make important contributions, using our combined experience, to help monitor the implementation of this important initiative. 

Key policymakers increasingly need to think beyond quick fixes and carefully consider what the proper role of the federal government should be in the 21st century. 

Members of Congress and agency heads can start by undertaking a top-to-bottom 

review of federal programs and policies to determine which should remain priorities, 

which should be overhauled, and which have outlived their usefulness or are just 

no longer affordable given more pressing demands. Everything that forms the government’s base must be on the table, including tax, spending, and regulatory policies. Policymakers will need to distinguish ‘‘wants,’’ which are optional, from 

‘‘needs,’’ which can be urgent. They need to make hard choices that take into account what the American people will support and what the federal government can 

afford and sustain over time. To make informed decisions, Congress and agency 

heads will require hard facts and professional analyses that are objective, fact 

based, timely, accurate, nonpartisan, fair, and balanced. GAO and the IGs are important sources of such objective information and analyses. 

With our respective areas of expertise in long-term challenges and agency-specific 

issues, GAO and the IGs can provide useful insights and constructive recommendations on programs that may warrant additional resources, consolidation, revision, or 

even elimination. Closer periodic strategic planning and ongoing engagement coordination between GAO and the IGs would help to ensure continued effective oversight 

of these key issues facing government. 

Audit of the U.S. Government’s Consolidated Financial Statements 

GAO and the IGs are already partners in one of the most far-reaching financial 

management initiatives in government—the yearly audits of the federal government’s consolidated financial statements. Under the Chief Financial Officers (CFO) 

Act of 1990 as expanded by the Government Management Reform Act of 1994, the 

IGs at the 24 agencies 3 named in the CFO Act are responsible for the audits of 

their agencies’ financial statements. In meeting these responsibilities, most IGs 

have contracted with IPAs to conduct the audits either entirely or in part. GAO is 

responsible for the U.S. government’s consolidated financial statements audit, which 

by necessity is based largely on the results of the IGs’ agency-level audits. 

Since 1997, GAO has been unable to give an opinion on the consolidated financial 

statements, in large part because of continuing financial management problems at 

several agencies that also have resulted in disclaimers of opinion by some IGs on 

their agency financial statements—most notably the Department of Defense (DOD). 

In recent years, we have seen progress in the results of the audits of the CFO Act 

agency financial statements with more and more IGs and their contracted IPAs 

moving from issuing a disclaimer of opinion to issuing an unqualified (‘‘clean’’) opinion on their respective agency financial statements. In fact, 21 of the 24 CFO Act 

7

agencies received an unqualified opinion on their fiscal year 2002 financial statements, up from only 6 agencies for fiscal year 1996. We anticipate that if sufficient 

progress continues to be made, there is a chance that we may be able to render a 

qualified opinion on the consolidated balance sheet in a few years as a first step 

toward rendering an opinion on the full set of financial statements. 

Our reviews of the work done by other IGs and IPAs on agency-level financial 

statement audits during the last 2 years identified opportunities for improvement 

in sampling, audit documentation, audit testing, analytical procedures, and auditing 

liabilities. The varying quality of the audit work has been of concern to us because 

of our need to use the work of the agency auditors to support expressing an opinion 

on the U.S. government’s consolidated financial statements—an opinion for which, 

in the final analysis, GAO is solely responsible and accountable. 

Earlier involvement and access by GAO in the agency-level financial statement 

audits would help to strengthen the IG and IPA audit process and bolster our ability 

to use their work in rendering an opinion. At a minimum, GAO needs to (1) be involved up front in the planning phase of each agency-level audit; (2) have unrestricted access to IG and IPA audit documentation and personnel throughout the 

performance of the audit; (3) receive assurances that each agency-level audit is 

planned, performed, and reported in conformity with the Financial Audit Manual 

(FAM) developed jointly and adopted by GAO and the PCIE; and (4) be notified in 

advance of any planned deviation from the FAM’s requirements that could affect 

GAO’s ability to use the agency auditors’ work. 

At one agency (Department of Energy), for the selected areas we reviewed, we 

found that the audit work was performed in conformity with the FAM and that we 

would have been able to use the work without having to perform additional audit 

procedures. The IG has an oversight team composed of senior level-staff who perform moderate-level quality control reviews of the contracted IPA’s work throughout 

the audit process. The oversight team evaluates its IPA in areas such as audit planning and execution, audit documentation, and staff qualifications. These types of 

practices could be shared and expanded upon across the IG community. As an initial 

step to make the IG and IPA audit process stronger and enhance GAO’s ability to 

use their work in rendering an opinion, we are considering holding a forum with 

the IGs and the IPAs to share information—based on GAO’s review of the IG and 

IPA work—regarding best practices and areas to focus on that need additional audit 

work, and to establish a framework for enhanced coordination of the financial statement audit work. 

Changes to enhance the agency financial statement audit process are especially 

important given the planned acceleration of reporting deadlines for agency audits. 

Although some agencies accelerated their reports for fiscal year 2002, starting with 

fiscal year 2004, the Office of Management and Budget (OMB) has required that 

agencies issue their audited financial statements no later than 45 days after the end 

of the fiscal year, with the consolidated financial statements to be issued 30 days 

later. In past years, when the reporting deadlines were 4 and 5 months after the 

end of the fiscal year, agencies made extraordinary efforts in which they spent considerable resources on extensive ad hoc procedures and made adjustments of billions 

of dollars to produce financial statements months after the fiscal year had ended. 

Given the accelerated reporting dates, such extraordinary approaches will no longer 

be an option. Over the next few years, as the government addresses the impediments to receiving an opinion on its consolidated financial statements, and we move 

closer to being able to render an opinion on the consolidated financial statements, 

GAO will need to invest more resources in assuring that the work of the IGs and 

IPAs on the agency-level financial statement audits can be used by GAO to support 

the audit of the consolidated financial statements. This resource investment is necessary if GAO is to be able to render an opinion on the consolidated financial statements. 

Another matter of concern regarding the audit of the U.S. government’s consolidated financial statements involves the approaches used by the IGs and IPAs for 

reporting on internal control at the agency level. Our position is that an opinion on 

internal control is important in the government environment and that the public 

should be able to expect audit assurance on the adequacy of internal control over 

financial reporting. We believe that auditor opinions on internal control are a critical component of monitoring the effectiveness of an entity’s risk management and 

accountability systems. We also believe that auditor opinions on internal control are 

appropriate and necessary for major public entities such as the CFO Act agencies 

currently included in the U.S. government’s consolidated financial statements. 

As does GAO in connection with our own audits, several agency auditors are voluntarily providing opinions on the agencies’ internal control; but most do not. When 

an auditor renders an opinion on internal control, the auditor is providing reasonVerDate jul 14 2003 19:21 Jun 20, 2004 Jkt 092927 PO 00000 Frm 00011 Fmt 6633 Sfmt 6621 E:\HR\OC\92927.XXX 92927
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4The three agencies receiving opinions on internal control for fiscal year 2002 are the Social 

Security Administration, General Services Administration, and Nuclear Regulatory Commission. 5Pub. L. No. 107–204, 116 Stat. 745 (2002). 

6 U.S. General Accounting Office, Department of Homeland Security: Challenges and Steps in 

Establishing Sound Financial Management, GAO–03–1134T (Washington, D.C.: Sept. 10, 2003). 

able assurance that the entity has maintained effective internal control over financial reporting (including safeguarding of assets) and compliance such that material 

misstatements, losses, or noncompliance that are material to the financial statements would be detected in a timely fashion. For fiscal year 2002, however, only 

3 of the 24 CFO Act agencies received opinions on internal control from their auditors.4 The remaining 21 reported on internal control, but provided no opinion on the 

effectiveness of the agency’s internal control. As we move closer to being able to 

issue an opinion on the consolidated financial statements, a disparity in reporting 

on internal control would hinder our ability to provide an opinion on internal control 

for the consolidated audit. Current agency-level reporting on internal control would 

fall short of what the public should be able to expect from an audit, and, moreover, 

what is now legally required from the auditors of publicly traded companies. 

Congress has prescribed auditor opinions on internal controls for publicly traded 

corporations under the Sarbanes-Oxley Act of 2002.5 A final rule issued by the Securities and Exchange Commission in June 2003 and effective August 2003 provides 

guidance for implementation of section 404 of the act, which contains requirements 

for management and auditor reporting on internal controls. The final rule requires 

companies to obtain a report in which a registered public accounting firm expresses 

an opinion, or states that an opinion cannot be expressed, concerning management’s 

assessment of the effectiveness of internal controls over financial reporting. 

As you know, Mr. Chairman, we provided testimony before this Subcommittee 

several weeks ago on the challenges of establishing sound financial management 

within DHS.6 In that testimony, we supported provisions of H.R. 2886 that would 

require DHS to obtain an audit opinion on its internal controls. During the testimony, we also supported provisions of H.R. 2886 that would require the Chief Financial Officers Council and the PCIE to jointly study the potential costs and benefits of requiring CFO Act agencies to obtain audit opinions of their internal controls 

over financial reporting. In addition, the current version of H.R. 2886 would require 

GAO to perform an analysis of the information provided in the report and report 

the findings to the House Committee on Government Reform and the Senate Committee on Governmental Affairs. We believe that the study and related analysis are 

important first steps in to resolving the issues associated with the current reporting 

on internal control. 

Ultimately, we are hopeful that federal performance and accountability professionals will not settle for anything less than opinion-level work on internal control 

at the CFO Act agency level and on the governmentwide audit. Increased planning 

and coordination will be needed among GAO, IGs, and IPAs to determine the appropriate timing for requiring an opinion on controls at the agency level. The specific 

timing will depend on the current state of the agency’s control efforts so that an 

audit opinion on internal control would add value and mitigate risk in a cost beneficial manner. 

A practical issue that should also be dealt with is the adequacy of resources to 

provide for the agency financial statement audits. Over the years, a number of IGs 

have told us that the cost of agency financial audits has taken resources away from 

their traditional work. In the private sector, the cost of an annual financial audit 

is a routine business expense borne by the entity being audited, and the cost of the 

audit represents a very small percentage of total expenditures for the audited entity. We support enacting legislation that would make agencies responsible for paying 

the cost of their financial statement audits. We also believe that an arrangement 

in which the agencies pay for their own audits provides them with positive incentives for taking actions—such as streamlining systems and cleaning up their financial records prior to the audit—in order to reduce the costs of the audit and avoid 

the ‘‘heroic’’ audit efforts that we have seen in the past at some agencies. 

Under the arrangement in which agencies pay the cost of their own audits, we 

believe the IG should continue in the current role of selecting and overseeing audits 

in those cases in which the IG does not perform the audit but hires an IPA to conduct the audit. This would leverage the IGs’ expertise to help assure the quality of 

the audits. We also advocate an approach whereby the IGs would be required to consult with the Comptroller General during the IPA selection process to obtain input 

from the results of GAO’s reviews of the IPAs’ previous work and the potential impact on the consolidated audit. 

9

7Financial Management Advisory Committees for Federal Agencies: Suggested Practices, 

March 2003, prepared by KPMG, LLP. 8 Agencies that currently have audit committees or financial management advisory committees 

include the National Science Foundation, Federal Deposit Insurance Corporation, and the Architect of the Capitol. 9 U.S. General Accounting Office, Inspectors General: Office Consolidation and Related Issues, 

GAO–02–575 (Washington, D.C.: August 2002). 

The IG Role in Federal Financial Management Advisory Committees 

We envision an important role for the IGs in audit or financial management advisory committees established at the federal agency level for the purpose of overseeing 

an agency’s financial management, audits, and performance. 

In the government arena, some state and local governments and federal government corporations, as well as several federal agencies, have adopted an audit committee, or ‘‘financial management advisory committee,’’ approach to governance. In 

the federal government, such audit committees or advisory committees are intended 

to protect the public interest by promoting and facilitating effective accountability 

and financial management by providing independent, objective, and experienced advice and counsel, including oversight of audit and internal control issues. Responsibilities of the committees would likely include communicating with the auditors 

about the audit and any related issues. The work of the IGs logically provides much 

of the basis for financial management advisory committees in overseeing agencies’ 

financial management, audits, and internal control. The work of the IGs would also 

be critical for the financial management advisory committees in their general governance roles. Specific roles and responsibilities of the committees will most likely 

vary by agency. A recently published guide, Financial Management Advisory Committees for Federal Agencies,7 provides a helpful road map of suggested practices 

for federal agency financial management advisory committees. 

The concept of financial management advisory committees is very similar to the 

audit committee structure being used in the private sector. To help facilitate the 

audit process and promote disclosure and transparency, the governing boards of 

publicly traded companies use audit committees. Audit committees generally oversee 

the independent audit of the organization’s financial statements and address financial management, reporting, and internal control issues. The Sarbanes-Oxley Act 

has requirements for the audit committees of publicly traded companies and their 

auditors regarding communications and resolution of significant audit matters. 

We strongly support the implementation of financial management advisory committees for selected federal agencies, based on risk and value added. Some agencies,8 including GAO, which has had such a committee in place since 1995, have already implemented such an approach, even though the committees have not been 

mandated or established by statute. As these committees are implemented or required in government, we would advocate amending the IG Act to emphasize the 

IGs’ unique role in reporting the results of their work to the advisory committees 

while maintaining their independence and dual reporting authority to Congress. 

Structural Streamlining to Increase Resource Efficiencies 

One of the issues facing the IG community as well as others in the performance 

and accountability community is how to use limited resources to the best effect. In 

fiscal year 2002, the 57 IG offices operated with total fiscal year budgets of about 

$1.6 billion and about 11,000 staff. (See app. II for more detail on IG budgets and 

staffs.) Most IGs for cabinet departments and major agencies are appointed by the 

President and confirmed by the Senate; however, IGs for some agencies are appointed by the agency head, and these IGs generally have smaller budgets and 

fewer staff than IGs appointed by the President. While agency-appointed IGs make 

up about half of all IG offices, the total of their fiscal year 2002 budgets was $162.2 

million, a little more than 10 percent of all IG budgets. Of these IGs, the offices 

at the U.S. Postal Service (USPS), Amtrak, National Science Foundation (NSF), and 

Federal Reserve Board (FRB) are exceptions and have budgets that are comparable 

in size to those of presidentially appointed IGs. The remaining 24 agency-appointed 

IGs have a total of 191 staff and have budgets that make up about 2 percent of all 

IG budgets. Importantly, 16 of the 28 agency-appointed IGs have fewer than 10 

staff. 

Potential IG Office Consolidations 

Last year we reported the views of the IGs, as well as our own, on the possible 

benefits of consolidating the smallest IG offices with the offices of IGs appointed by 

the President.9 We also considered the conversion of agency-appointed IGs to presidential appointment where their budgets were comparable to the presidentially apVerDate jul 14 2003 19:21 Jun 20, 2004 Jkt 092927 PO 00000 Frm 00013 Fmt 6633 Sfmt 6621 E:\HR\OC\92927.XXX 92927
10

pointed IG offices. The August 2002 report contains several matters for congressional consideration to address issues of IG conversion and consolidation. We are reaffirming these views, which are included at the end of my statement. 

We believe that if properly structured and implemented, the conversion or consolidation of IG offices could increase the overall independence, efficiency, and effectiveness of the IG community. Consolidation could provide for a more effective and efficient allocation of IG resources across government to address high-risk and priority 

areas. It would not only achieve potential economies of scale but also provide a critical mass of skills, particularly given advancing technology and the ever-increasing 

need for technical staff with specialized skills. This point is especially appropriate 

to the 12 IG offices with five or fewer staff. IG staff now in smaller offices would, 

in a large, consolidated IG office, have immediate access to a broader range of resources to use in dealing with issues requiring technical expertise or areas of critical 

need. 

Consolidation would also strengthen the ability of IGs to improve the allocation 

of human capital and scarce financial resources within their offices and to attract 

and retain a work force with talents, multidisciplinary knowledge, and up-to-date 

skills to ensure that each IG office is equipped to achieve its mission. Consolidation 

would also increase the ability of larger IG offices to provide methods and systems 

of quality control in the smaller agencies. 

We also recognize that there are potential risks resulting from consolidation that 

would have to be mitigated through proactive and targeted actions in order for the 

benefits of consolidation to be realized without adversely affecting the audit coverage of small agencies. For example, the potential lack of day-to-day contact between the IG and officials at smaller agencies as a result of consolidation could be 

mitigated by posting IG staff at the agency to keep both the IG and the agency head 

informed and to coordinate necessary meetings. In preparation for consolidation, 

staff in the smaller IG offices could be consulted in planning oversight procedures 

and audit coverage for their agencies. There may be fewer audits or even less coverage of those issues currently audited by the IGs at smaller agencies, but coverage 

by a consolidated IG could address areas of higher risk, value, and priority, resulting in potentially more efficient and effective use of IG resources across the government. 

Results of the survey conducted for our August 2002 report indicate a clear delineation between the responses of the presidentially appointed IGs and the responses 

of the agency-appointed IGs. The presidentially appointed IGs generally indicated 

that agency-appointed IG independence, quality, and use of resources could be 

strengthened by conversion and consolidation. The agency-appointed IGs indicated 

that there would either be no impact or that these elements could be weakened. The 

difference in views is not surprising given the difference in the potential impact of 

consolidation on the interests of the two groups of IGs. We believe that this difference in perspective, more than any other factor, helps to explain the significant 

divergence in the responses to the survey. 

There are already some examples where consolidation of IG offices and oversight 

is working. The Department of State IG provides, through statute, oversight of the 

Broadcasting Board of Governors and the International Broadcasting Bureau. The 

IG at the Agency for International Development is authorized by specific statutes 

to provide oversight of the Overseas Private Investment Corporation, the InterAmerican Foundation, and the African Development Foundation. 

In terms of budget size, the agency-appointed IGs at the USPS, Amtrak, NSF, and 

FRB are comparable to the offices of IGs appointed by the President. Moreover, in 

the case of the Postal IG, the office is the fourth largest of all the IGs. (See app. 

II.) On that basis, these IGs could be considered for conversion to appointment by 

the President with Senate confirmation. While the Amtrak IG could be converted 

because of comparable budget size, oversight of Amtrak is closely related to the 

work of the Department of Transportation IG. Moreover, the Transportation IG currently provides some oversight of Amtrak programs. Therefore, the consolidation of 

the Amtrak IG with the Transportation IG could be considered, rather than conversion. 

Consideration has been given in the Fiscal Year 2004 Budget of the U.S. Government to the consolidation of the two IG offices at the Department of the Treasury, 

unique in the federal government. The original statutory IG for the Department of 

the Treasury was established by the IG Act amendments of 1988. The Treasury IG 

for Tax Administration was established in 1998 as part of an Internal Revenue 

Service (IRS) reorganization because the former IRS Inspection Service was not perceived as being sufficiently independent from management. Consequently, the IRS 

Office of the Chief Inspector, along with most of the Inspection Service staff, was 

transferred to the new IG office to ensure independent reviews. 

11

The separate office of Treasury IG for Tax Administration was created because 

IRS officials were concerned that if the resources of the IRS Inspection Service were 

transferred to the original Treasury IG office, they would be used to investigate or 

audit other Treasury bureaus to the detriment of critical IRS oversight. With the 

passage of the Homeland Security Act of 2002, and the transfer of Treasury’s United 

States Customs Service and United States Secret Service to the new Department 

of Homeland Security, the original concerns about competition for resources within 

the department should no longer be as compelling. 

IG Councils 

The PCIE is an interagency council comprising principally the presidentially appointed and Senate-confirmed IGs. It was established by Executive Order No. 12301 

in 1981 to coordinate and enhance the work of the IGs. In 1992, Executive Order 

No. 12805 created the ECIE, which comprises primarily statutory IGs appointed by 

the heads of designated federal entities as defined in the IG Act. The Deputy Director for Management in OMB serves as the chair of both organizations. These IG 

councils have been effective in coordinating the activities of the IGs in their efforts 

to prevent and detect fraud, waste, and abuse throughout the federal government 

and in reporting these results to both the President and Congress. 

The IG councils have provided a valuable forum for auditor coordination. However, we believe that the current environment demands a more formal, action-oriented, and strategic approach for coordination among federal audit organizations 

and that the IG councils could be strengthened in a number of ways. First, by providing a statutory basis for their roles and responsibilities, the permanence of the 

councils could be established and their ability to take on more sensitive issues 

strengthened. In addition, the strategic focus of the councils could be clearly established. As such, the councils would also be key in the overall strategic planning 

process for federal audit oversight that I described earlier in this statement. 

Matters for Congressional Consideration 

As I stated at the beginning of my testimony, IGs have made a significant difference in federal performance and accountability during the last quarter century. 

The 25th anniversary of the landmark legislation establishing the IGs is an opportune time to reflect on the IGs’ success while also considering ways to enhance coordination and utilization of resources across the federal performance and accountability community. 

In order to enhance the effectiveness and impact of the federal accountability community, Congress may want to consider establishing, through statute, assignment 

of responsibility to a selected group of designated federal accountability officials, 

such as representatives from GAO, the PCIE, and the ECIE, to develop and implement a periodic, formal strategic planning and ongoing engagement coordination 

process for focusing GAO and IG work will be focused to provide oversight to highrisk areas and significant management challenges across government, while 

leveraging each other’s work and minimizing duplication. 

In order to resolve resource issues and provide positive incentives to agencies to 

take prudent actions to reduce overall audit costs, Congress may want to consider 

enacting legislation that makes agencies responsible for paying the cost of their financial statement audits. 

In order to achieve potential efficiencies and increased effectiveness across the federal IG community, Congress may also want to consider whether to proceed with 

a restructuring of the IG community, which could include the following:

• amending the IG Act to elevate the IGs at USPS, NSF, and FRB to presidential 

status, • amending the IG Act to consolidate agency-appointed IGs with presidentially 

appointed IGs based on related agency missions or where potential benefits to 

IG effectiveness can be shown, and • establishing an IG council by statute that includes stated roles and responsibilities and designated funding sources.

Mr. Chairman, that concludes my prepared statement. I would be happy to respond to any questions you or Members of the Subcommittee might have. 

Appendix I: The Inspector General Act 

The Inspector General Act of 1978 was enacted following a series of events that 

emphasized the need for more-independent and coordinated audits and investigations in federal departments and agencies. First, in 1974, the Secretary of Agriculture abolished the department’s administratively established IG office, demonstrating the impermanent nature of a nonstatutory IG. Later, in 1974 and 1975, 

a study by the Intergovernmental Relations and Human Resources Subcommittee 

12

10The IG Act, as amended, does allow the heads of the Departments of Defense, Justice, and 

the Treasury to prohibit their IGs from initiating or carrying out audits and investigations in 

certain circumstances. 11The act defines the term ‘‘designated federal entities’’ by listing the entities covered.

of the House Government Operations Committee disclosed inadequacies in the internal audit and investigative procedures in the Department of Health, Education, and 

Welfare, now the Department of Health and Human Services. The need to deal more 

effectively with the danger of loss from fraud and abuse in the department’s programs led to the establishment of the first statutory IG in 1976. The Congress also 

established an IG in the Department of Energy when that department was created 

in 1977. 

In 1977, the House Intergovernmental and Human Resources Subcommittee 

began a comprehensive inquiry to determine whether other federal departments and 

agencies had a similar need for statutory IGs. The Subcommittee’s study revealed 

serious deficiencies in a number of department and agency audit and investigative 

efforts, including the following:

• No central leadership of auditors and investigators existed. 

• Auditors and investigators exhibited a lack of independence by reporting to officials who had responsibility for programs that were being audited. 

• No procedures had been established to ensure that the Congress was informed 

of serious problems. 

• No program existed to look for possible fraud or abuse.

As an initial effort to correct these deficiencies, the IG Act of 1978 established 12 

additional statutory OIGs to be patterned after the one at the Department of 

Health, Education, and Welfare. The act consolidated the audit and investigative responsibilities of each department and agency under the direction of one senior official—the Inspector General—who reports to the head of the agency or, if delegated, 

the official next in rank below the agency head. The President appoints the IGs, by 

and with the consent of the Senate, without regard to political affiliation and solely 

on the basis of integrity and demonstrated ability in accounting, financial analysis, 

law, management analysis, public administration, or investigations. 

The IGs are responsible for (1) conducting and supervising audits and investigations, (2) providing leadership and coordination and recommending policies to promote economy, efficiency, and effectiveness, and (3) detecting fraud and abuse in 

their agencies’ programs and operations. In addition, the IG Act requires IGs to prepare semiannual reports which summarize the activities of the IG during the preceding 6-month period. The reports are forwarded to the department or agency 

head, who is responsible for transmitting them to the appropriate congressional 

committees. 

The act states that neither the agency head nor the official next in rank shall prevent or prohibit 10 the IG from initiating, carrying out, or completing any audit or 

investigation, or from issuing any subpoena during the course of any audit or investigation. This enhances the independence of auditors and investigators by ensuring 

that they are free to carry out their work unobstructed by agency officials. The act 

further enhances independence by requiring IGs to comply with the Comptroller 

General’s Government Auditing Standards. One of these standards requires auditors 

and audit organizations to be personally and organizationally independent and to 

maintain the appearance of independence so that opinions, conclusions, judgments, 

and recommendations will be impartial and will be viewed as such by knowledgeable third parties. 

Between the enactment of the IG Act in 1978 and 1988, the Congress passed legislation to establish statutory IGs, who are appointed by the President with Senate 

confirmation, in 8 additional departments and agencies. In 1988, the Congress enacted the Inspector General Act Amendments of 1988 and the Government Printing 

Office (GPO) Inspector General Act of 1988 (Titles I and II, Public Law 100–504) 

to establish additional presidentially appointed IGs in 5 departments and agencies 

and 34 IGs appointed by their agency heads (33 in designated federal entities and 

1 in GPO) 11 in order to strengthen the capability of the existing internal audit offices and improve audit oversight. Both GAO and the President’s Council on Integrity and Efficiency (PCIE) had previously reported that the existing internal audit 

offices lacked independence, adequate coverage of important programs, and permanent investigative staff. 

13

Appendix II: Inspector General Budgets and Staffing

Table 1: Inspectors General Appointed by the President Fiscal Year 2002 

Budgets and Full-Time Equivalents (FTEs) 

Federal Departments/Agencies Budgets FTEs 

1 Department of Health and Human Services a $227,000,000 1,569

2 Department of Defense 151,000,000 1,215

3 Treasury IG for Tax Administration 130,000,000 943

4 Department of Housing and Urban Development 95,000,000 648

5 Social Security Administration 75,000,000 564

6 Department of Agriculture 75,000,000 642

7 Department of Labor 67,000,000 426

8 Department of Justice 65,000,000 329

9 Department of Veterans Affairs 57,000,000 393

10 Department of Transportation 50,000,000 454

11 Department of Homeland Security 47,000,000 336

12 Environmental Protection Agency 46,000,000 444

13 Department of Education 39,000,000 276

14 Department of the Interior 37,000,000 251

15 General Services Administration 36,000,000 273

16 Department of Energy 32,000,000 250

17 Agency for International Development 32,000,000 166

18 Federal Deposit Insurance Corporation 32,000,000 201

19 Department of State 29,000,000 234

20 National Aeronautics and Space Administration 24,000,000 200

21 Department of Commerce 21,000,000 136

22 Small Business Administration 12,000,000 108

23 Department of the Treasury 12,000,000 87

24 Office of Personnel Management 11,000,000 89

25 Tennessee Valley Authority 7,000,000 87

26 Nuclear Regulatory Commission 6,000,000 41

27 Railroad Retirement Board 6,000,000 51

28 Corporation for National and Community Service 5,000,000 16

29 Central Intelligence Agency b na na

Totals 1,426,000,000 10,429

Source: Budget authority and FTEs from Fiscal Year 2004 Budget of the U.S. Government. 

a Includes budget authority to combat health care fraud. 

b Budget and FTE information not available. 

14

Table 2: Inspectors General Appointed by Agency Heads Fiscal Year 2002 

Budgets and Full-Time Equivalents (FTEs) 

Federal Agencies Budgets FTEs 

1 U.S. Postal Service $117,324,000 713

2 Amtrak 8,706,539 64

3 National Science Foundation 6,760,000 50

4 Federal Reserve Board 3,878,000 29

5 Government Printing Office 3,400,000 24

6 Legal Services Corporation 2,500,000 15

7 Peace Corps 2,006,000 16

8 Smithsonian Institution 1,800,000 17

9 Federal Communications Commission 1,569,000 10

10 National Archives and Records Administration 1,375,000 13

11 Securities and Exchange Commission 1,372,559 8

12 National Credit Union Administration 1,338,135 7

13 Pension Benefit Guaranty Corporation 1,300,000 11

14 Equal Employment Opportunity Commission 1,106,119 10

15 Federal Housing Finance Board 858,237 3

16 Farm Credit Administration 829,621 5

17 Commodity Futures Trading Commission 735,800 4

18 Corporation for Public Broadcasting 735,000 9

19 National Labor Relations Board 711,900 6

20 Federal Trade Commission 710,000 5

21 National Endowment for the Humanities 497,000 5

22 Appalachian Regional Commission 466,000 3

23 Federal Maritime Commission 441,034 3

24 Consumer Product Safety Commission 407,000 3

25 Federal Election Commission 392,600 4

26 National Endowment for the Arts 392,577 4

27 International Trade Commission 389,500 4

28 Federal Labor Relations Authority 222,500 2

Total $162,224,121 1,047

Source: As reported by the ECIE. 

15

Table 3: Inspectors General Appointed by the President with Four 

Comparable Agency Appointed IGs Fiscal Year 2002 Budgets 

Department/Agency IGs Budgets 

1 Department of Health and Human Services a $227,000,000

2 Department of Defense 151,000,000

3 Treasury’s IG for Tax Administration 130,000,000

4 U.S. Postal Service b 117,324,000

5 Department of Housing and Urban Development 95,000,000

6 Department of Agriculture 75,000,000

7 Social Security Administration 75,000,000

8 Department of Labor 67,000,000

9 Department of Justice 65,000,000

10 Department of Veterans Affairs 57,000,000

11 Department of Transportation 50,000,000

12 Department of Homeland Security 47,000,000

13 Environmental Protection Agency 46,000,000

14 Department of Education 39,000,000

15 Department of the Interior 37,000,000

16 General Services Administration 36,000,000

17 Department of Energy 32,000,000

18 Agency for International Development 32,000,000

19 Federal Deposit Insurance Corporation 32,000,000

20 Department of State 29,000,000

21 National Aeronautics and Space Administration 24,000,000

22 Department of Commerce 21,000,000

23 Department of the Treasury 12,000,000

24 Small Business Administration 12,000,000

25 Office of Personnel Management 11,000,000

26 Amtrak b 8,706,539

27 Tennessee Valley Authority 7,000,000

28 National Science Foundation b 6,760,000

29 Nuclear Regulatory Commission 6,000,000

30 Railroad Retirement Board 6,000,000

31 Corporation for National and Community Service 5,000,000

32 Federal Reserve Board b 3,878,000

33 Central Intelligence Agency c na

Total $1,562,668,539

Source: Budget authority from Fiscal Year 2004 Budget of the U.S. Government. 

Note: The four comparable agency appointed IGs are in bold. 

a Includes budget authority to combat health care fraud. 

b Information supplied by the ECIE. 

c Budget information not available. 

f16

Council for Citizens Against Government Waste 

Washington, DC 20036

March 12, 2004

The Honorable Amory Houghton, Jr. 

Chairman, Subcommittee on Oversight 

Committee on Ways and Means 

1136 Longworth House Office Building 

Washington, D.C. 20515

Dear Chairman Houghton:

On behalf of the more than one million members and supporters of the Council 

for Citizens Against Government Waste, I am writing to support your efforts to consolidate the two existing Inspector General offices at the Department of the U.S. 

Treasury—the Office of Inspector General of the Treasury (OIG) and the Office of 

the Treasury Inspector General for Tax Administration (TIGTA)—into a new office 

called the Office of the Treasury Inspector General (TIG). 

H.R. 3625, the Department of the Treasury Inspector General Consolidation Act 

of 2003, is a sound and practical way to save taxpayer dollars and to create a more 

cost-effective department. With the creation of the U.S. Department of Homeland 

Security (DHS), the Treasury Department has been downsized because several of its 

agencies were moved into DHS or the Department of Justice (DOJ). Naturally, a 

large portion of Treasury’s OIG’s responsibilities and budget were also transferred 

to DHS and DOJ. 

Treasury Secretary John W. Snow has said that the Internal Revenue Service now 

constitutes approximately 87 percent of the remaining personnel at the Department 

and having a separate IG for the remaining 13 percent is no longer the proper arrangement for effective oversight. The President recommended, in both his fiscal 

year 2004 and 2005 budgets, that the OIG and the TIGTA be combined into a single 

new office with the same powers and authorities that existed before the split. The 

Administration believes that the merger will result in better and more efficient 

oversight for the entire department. We agree. 

Please let us know whatever CCAGW can do to make sure H.R. 3625 becomes law 

so this consolidation can occur. It’s the right thing to do, for the Treasury Department and taxpayers.

Sincerely, 

Thomas A. Schatz 

President

Æ