United States Government Accountability Office

GAO Testimony 

Before the Subcommittee on Government 

Management, Organization and Procurement, 

Committee on Oversight and Government 

Reform, House of Representatives 

INSPECTORS GENERAL

Proposals to Strengthen 

Independence and 

Accountability 

Statement of Jeffrey C. Steinhoff 

Managing Director 

Financial Management and Assurance 

For Release on Delivery

Expected at 2:00 p.m. EST 

Wednesday, June 20, 2007 

 

GAO-07-1021T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

June 20, 2007

INSPECTORS GENERAL 

Proposals to Strengthen Independence 

Highlights of GAO-07-1021T, testimony and Accountability 

before the Subcommittee on Government 

Management, Organization and 

Procurement, Committee on Oversight 

and Government Reform, House of 

Representatives 

H.R. 928, Improving Government 

Accountability Act, contains 

proposals intended to enhance the 

independence of the inspectors 

general and to create a Council of

the Inspectors General on Integrity 

and Efficiency. This testimony

provides information and views 

about the specific proposals based

on GAO’s prior work. 

We believe that effective, ongoing 

coordination of the federal 

oversight efforts of GAO and the 

IGs is more critical than ever, due 

to the challenges and risks 

currently facing our nation

including our immediate and longterm fiscal challenges, increasing

demands being made for federal 

programs, and changing risk. Close 

strategic planning and ongoing 

coordination of audit efforts 

between GAO and the IGs would 

help to enhance the effectiveness 

and impact of work performed by

federal auditors. 

In May of this year the Comptroller 

General hosted a meeting with the 

IGs for the principal purpose of

improving the coordination of 

federal oversight between the IGs 

and GAO. Working together, and in

their respective areas, GAO and the

IGs can leverage each other’s work 

and provide valuable input on the 

broad range of high-risk programs 

and management challenges across 

government. 

IG independence is one of the most important elements of the overall 

effectiveness of the IG function. The IG Act, as amended, (IG Act) provides 

specific protections to IG independence that are necessary due in large part 

to the unusual reporting requirements of the IGs who are both subject to the 

general supervision and budget processes of the agencies they audit while at 

the same time being expected to provide independent reports of their work 

externally to the Congress. 

The IGs, in their statutory role of providing oversight of their agencies’ 

operations, represent a unique hybrid of external and internal reporting 

responsibilities. IG offices have characteristics of both external audit 

organizations and internal audit organizations by reporting the results 

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

head. A key provision of the IG Act regarding IG independence is for certain 

IGs to be appointed by the President with the advice and consent of the 

Senate. Other IGs established by amendments to the IG Act, are appointed 

by their agency heads. 

In May 2006, at the request of the Senate Committee on Homeland Security 

and Governmental Affairs, the Comptroller General convened a panel of 

recognized leaders in the federal government and in academia to discuss 

many of the same proposals that are in H.R. 928. Many of the provisions 

in H.R. 928, Improving Government Accountability Act, address IG 

independence. Today we are providing our views and the views of the panel 

on the following provisions: (1) providing IGs with specified terms of office 

and limiting IG removal for specified cause, (2) changes to how IGs submit 

their budget requests, (3) a statutorily established IG Council, (4) defining 

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

(5) providing additional investigative and law enforcement authorities. 

The majority of the panelists did not favor a term of office, but they did favor 

advanced notification to the Congress of the reasons for removal. Regarding

IG budgets, the panelists had mixed views about the IGs sending their 

budget requests directly to OMB and the Congress, but supported separate

budget line items for all IGs. In a prior report, GAO recommended 

establishing an IG Council in statute with a designated funding source and 

strongly supports the proposal in H.R. 928. In contrast, the panelists had 

mixed views about statutorily establishing a joint IG Council but did favor 

establishing a funding mechanism. While the panel did not address the 

proposal to formalize the Integrity Committee in statute, GAO strongly 

supports this provision and believes it is important that the independence 

and work of the Integrity Committee be preserved. We do not support the 

proposal to define IG offices as separate agencies, but do support the intent 

of the bill in addressing IG pay and personnel issues. Finally, the panel 

overwhelmingly supported the provisions in H.R. 928 related to IG 

investigative and law enforcement authorities. 

www.gao.gov/cgi-bin/getrpt?GAO-07-1021T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Jeanette 

Franzel, (202) 512-9471 or franzelj@gao.gov. 
Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today to discuss current legislative proposals 

intended to enhance the independence and operations of the inspectors 

general (IG) offices. The IG offices play a key role in federal agency

oversight. They were created to prevent and detect fraud, waste, abuse, 

and mismanagement in agencies’ programs and operations; conduct and 

supervise audits and investigations; and recommend policies to promote 

economy, efficiency, and effectiveness. In the past almost 3 decades since 

passage of the landmark IG Act of 1978, the IGs have played a very 

important role in enhancing government accountability and protecting the 

government against fraud, waste, abuse, and mismanagement. 

The IG Act recognized IG independence as one of the most important 

elements of the overall effectiveness of the IG function. In fact, much of 

the IG Act, as amended (IG Act), provides specific protections to IG 

independence that are unprecedented for an audit and investigative

function located within the organization being reviewed. These 

protections were necessary due in large part to the unusual reporting 

requirements of the IGs who are both subject to the general supervision 

and budget processes of the agencies they audit while at the same time 

being expected to provide independent reports of their work externally to 

the Congress. Many of the provisions in the Improving Government 

Accountability Act, H.R. 928,1

 seek to further strengthen the independence 

of the IGs to help ensure their ability to effectively carry out their dual 

internal and external reporting roles. 

Today, I will discuss (1) the key principles of auditor independence, (2) 

the proposals in H.R. 928 regarding IG independence and operations and 

the establishment of a statutory council of IGs, and (3) additional matters 

concerning IG independence and the coordination of federal oversight 

from GAO’s recent IG work. 

My testimony today draws on provisions of the IG Act, professional 

auditing standards, prior GAO reports, and information reported by the 

IGs. In May 2006, the Comptroller General hosted a panel discussion on 

many of the issues to be discussed today. I will draw upon information 

gained from the panel to address several issues in H.R. 928. 

 1

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

Page 1 GAO-07-1021T 
Key to a consideration of H.R. 928 are the principles of auditor

independence and how they apply in the IG community. Independence is 

the cornerstone of professional auditing. Without independence, an

organization cannot do independent audits. Lacking this critical attribute, 

an organization’s work might be classified as studies, research reports, 

consulting reports, or reviews, but not independent audits. Government 

Auditing Standards2

 state, “In all matters relating to the audit work, the 

audit organization and the individual auditor, whether government or 

public, must be free from personal, external, and organizational 

impairments to independence, and must avoid the appearance of such 

impairments to independence. Auditors and audit organizations must 

maintain independence so that their opinions, findings, conclusions, 

judgments, and recommendations will be impartial and viewed as 

impartial by objective third parties with knowledge of the relevant 

information.” [emphasis added]. 

Auditor Independence 

• Personal independence applies to individual auditors at all levels of the

audit organization, including the head of the organization. Personal 

independence refers to the auditor’s ability to remain objective and 

maintain an independent attitude in all matters relating to the audit, as 

well as the auditor’s ability to be recognized by others as independent. The 

auditor needs an independent and objective state of mind that does not 

allow personal bias or the undue influence of others to override the 

auditor’s professional judgments. This attitude is also referred to as 

intellectual honesty. The auditor must also be free from direct financial or 

managerial involvement with the audited entity or other potential conflicts

of interest that might create the perception that the auditor is not 

independent. 

• External independence refers to both the auditor’s and the audit 

organization’s freedom to make independent and objective judgments free 

from external influences or pressures. Examples of impairments to 

external independence include restrictions on access to records, 

government officials, or other individuals needed to conduct the audit;

external interference over the assignment, appointment, compensation, or

promotion of audit personnel; restrictions on funds or other resources 

provided to the audit organization that adversely affect the audit 

organization’s ability to carry out its responsibilities; or external authority 

to overrule or to inappropriately influence the auditors’ judgment as to 

appropriate reporting content. 

 2

GAO, Government Auditing Standards, January 2007 Revision, GAO-07-162G, Sections

3.02 and 3.03 (Washington, D.C.: January 2007). 

Page 2 GAO-07-1021T 
• Organizational independence refers to the audit organization’s 

placement in relation to the activities being audited. Professional auditing

standards have different criteria for organizational independence for 

external and internal audit organizations. The IGs, in their statutory role of

providing oversight of their agencies’ operations, represent a unique 

hybrid of external and internal reporting responsibilities. 

External audit organizations are organizationally independent under 

professional auditing standards when they are organizationally placed 

outside of the entity under audit. In government, this is achieved when the

audit organization is in a different level of government (for example, 

federal auditors auditing a state government program) or different branch 

of government within the same level of government (for example, 

legislative auditors, such as GAO, auditing an executive branch program). 

External auditors also report externally, meaning that their audit reports 

are disseminated to and used by third parties. 

Internal audit organizations are defined as being organizationally 

independent under professional auditing standards if the head of the audit 

organization (1) is accountable to the head or deputy head of the 

government entity or to those charged with governance, (2) reports the 

audit results both to the head or deputy head of the government entity and 

to those charged with governance, (3) is located organizationally outside 

the staff or line-management function of the unit under audit, (4) has 

access to those charged with governance, and (5) is sufficiently removed 

from political pressures to conduct audits and report findings, opinions, 

and conclusions objectively without fear of political reprisal. Under 

internal auditing standards,3

 internal auditors are generally limited to 

reporting internally to the organization that they audit, except when 

certain conditions are met. 

The IG offices, having been created to perform a unique role in overseeing

federal agency operations, have characteristics of both external audit 

organizations and internal audit organizations. For example, the IGs have

external reporting requirements consistent with the reporting

requirements for external auditors while at the same time being part of 

their respective agencies. IGs also have a dual reporting responsibility to 

 3

The Institute of Internal Auditors, Professional Practices Framework, International

Standards for the Professional Practice of Internal Auditing (Altamonte Springs, Florida:

March 2007). 

Page 3 GAO-07-1021T 
the Congress and the agency head. The IG Act also contains many unique 

provisions to provide for independence under this model. 

Under the IG Act, the IGs (1) may perform any audit or investigation 

without interference from the agency head and others except under 

specific conditions, (2) report to and receive general supervision only from 

the heads or deputy heads of their agencies and no other agency officials, 

and (3) have direct and immediate access to their agency heads. The IGs’ 

external reporting requirements in the IG Act include reporting the results 

of their work in semiannual reports to the Congress. Under the IG Act, the 

IGs are to report their findings without alteration by their respective 

agencies, and these reports are to be made available to the general public.

The IG Act also directs the IGs to keep the agency head and the Congress 

fully and currently informed by these semiannual reports, and otherwise, 

of any fraud and other serious problems, abuses, and deficiencies relating 

to the administration of programs and operations administered or financed 

by their agencies. Also, the IGs are required to report particularly serious 

or flagrant problems, abuses, or deficiencies immediately to their agency 

heads, who are required to transmit the IG’s report to the Congress within 

7 calendar days. Finally, depending on the IG’s appointment process, 

either the President or the agency head must provide the Congress 

notification as to the reasons for the removal of any IG. 

A key provision in the IG Act regarding IG independence is for certain IGs 

to be appointed by the President with the advice and consent of the 

Senate. This appointment is required to be without regard to political 

affiliation and is to be based solely on an assessment of a candidate’s 

integrity and demonstrated ability. These presidentially appointed IGs can 

only be removed from office by the President, who must communicate the 

reasons for removal to both houses of the Congress. Government auditing 

standards recognize this external appointment/removal of the IG as a key 

independence consideration for IGs as external audit organizations. 

Organizational independence differs between the offices of presidentially

appointed IGs and agency-appointed IGs. In 1988, the IG Act was amended 

to establish additional IG offices in designated federal entities (DFE) 

named in the legislation. Generally, these IGs have the same authorities 

and responsibilities as those IGs established by the original 1978 Act, but 

they have a clear distinction in their appointment—they are appointed and 

removed by their entity heads rather than by the President and are not 

subject to Senate confirmation. In addition, the DFE IGs do not have the 

requirement that their appointment is to be without regard to political 

Page 4 GAO-07-1021T 
affiliation and based solely on integrity and demonstrated ability. The DFE

IGs, while they are covered by many of the same provisions of the IG Act 

as the IGs appointed by the President with Senate confirmation, are more 

closely aligned to independence standards for internal auditors rather than 

external auditors. At the same time, Government Auditing Standards 

recognize that additional statutory safeguards exist for DFE IG 

independence for reporting externally. These safeguards include 

establishment by statute, communication of the reasons for removal of the 

head of an audit organization to the cognizant legislative oversight body, 

statutory protections that prevent the audited entity from interfering with 

an audit, statutory requirements for the audit organization to report to a 

legislative body on a recurring basis, and statutory access to records and 

documents related to agency programs. 

We believe that the differences in the appointment and removal processes 

between presidentially appointed IGs and those appointed by the agency 

head do result in a clear difference in the organizational independence 

structures of the IGs. Those offices with IGs appointed by the President 

are more closely aligned with the independence standards for external 

audit organizations, while those offices with IGs appointed by the agency 

head are more closely aligned with the independence standards for 

internal audit organizations. However, as I mentioned earlier, the IGs 

represent a unique hybrid of external auditing and internal auditing in their 

oversight roles for the federal agencies. 

In May 2006, at the request of the Senate Committee on Homeland Security

and Governmental Affairs, the Comptroller General convened a panel of

recognized leaders of the federal audit and investigative community to 

discuss many of the same proposals that are in H.R. 928, Improving 

Government Accountability Act. We drew the panel from the current IG 

leadership, former IGs, knowledgeable former and current federal 

managers, representatives of academia and research institutions, a former 

member of the Congress, and congressional staff, including the 

congressional staff person closely involved in the development of the 1978 

Act. Among other issues, the panel members discussed terms of office and 

removal for cause, submission of IG budgets, a proposed IG Council, and

investigative and law enforcement authorities for agency-appointed IGs. 

The panel members did not discuss the proposal in H.R. 928 calling for 

establishing IG offices as separate agencies for purposes related to 

Provisions of H.R. 928 

Page 5 GAO-07-1021T 
personnel matters. In September 2006 we issued the results of the panel 

discussion.4

I would now like to highlight the overall perspectives of the panel in the 

context of H.R. 928. 

Depending on the nature of their appointment, IGs serve at the pleasure of

either the President or their agency head. The IGs appointed by the 

President with Senate confirmation may be removed only by the President, 

while the IGs appointed by their agency heads may be removed or 

transferred from their office only by the agency head. However, in both 

types of removal, the reasons must be communicated to the Congress after 

the action has taken place. 

H.R. 928 includes a provision to specify a 7-year term of office for each IG 

with more than one term possible. In addition, the bill provides a removalfor-cause provision whereby an IG may be removed from office prior to

the expiration of his or her term only on the basis of permanent 

incapacity, inefficiency, neglect of duty, malfeasance, conviction of a 

felony, or conduct involving moral turpitude. 

The majority of the panel participants did not favor statutorily establishing 

a fixed term of office for IGs. The reasons included the panelists’ belief 

that the proposal could disrupt current agency/IG relationships and that 

agency flexibility is needed to remove a poor-performing IG if necessary. 

On the other hand, a statutory term of office and removal for specified 

causes was viewed positively by some panelists as a means of enhancing 

independence by relieving some of the immediate pressure surrounding 

removal. The panel members did generally support a statutory requirement 

to notify the Congress in writing in advance of removing an IG, with an 

explanation of the reason for removal. The participants cautioned that this 

procedure should consist only of notification, without building in 

additional steps or actions in the removal process. 

The IG Act Amendments of 1988 require the President’s budget to include 

a separate appropriation account for each of those IGs who are appointed 

by the President or otherwise specified by the act. In this context, IG 

budget requests are generally part of each agency’s budget process and are 

Terms of office and removal for 

cause 

IG budget submission 

 4

GAO, Highlights of the Comptroller General’s Panel on Federal Oversight and the 

Inspectors General, GAO-06-931SP (Washington, D.C.: Sept. 11, 2006).

Page 6 GAO-07-1021T 
submitted as a separate budget line item to the Office of Management and 

Budget (OMB) and the Congress as a part of each agency’s overall budget. 

In contrast, most IGs appointed by their agency heads do not have a 

separate appropriation account. 

H.R. 928 would give the IGs an opportunity to justify their funding requests 

directly to OMB and the Congress in addition to being a part of their 

agencies’ budget processes. In those cases where the IGs make their 

budget requests directly to OMB and the Congress, H.R. 928 would also 

require a comparison of the budget requests submitted by the IGs to the 

funds requested by the agency heads for their IGs included in the Budget 

of the United States Government. The panel members had mixed views 

about whether IGs should submit their budget requests directly to OMB 

and the Congress. The panel believed that the current system of separate 

budget line items for the presidential IGs works well and that all IGs 

should have separate budget line items. This is an issue the Congress 

would need to consider in the context of the broader budget and 

appropriations process. 

In accordance with Executive Order No. 12805 issued in 1992, the IGs 

meet and coordinate as two groups. The IGs appointed by the President 

and confirmed by the Senate are members of the President’s Council on 

Integrity and Efficiency (PCIE), and the IGs appointed by their agency 

heads are members of the Executive Council on Integrity and Efficiency 

(ECIE). Both the PCIE and ECIE are chaired by the OMB Deputy Director 

for Management. 

H.R. 928 provides for a combined IG Council with duties and functions 

similar to the current PCIE and ECIE, including (1) identifying, reviewing,

and discussing areas of weakness and vulnerability in federal programs 

and operations with respect to fraud, waste, and abuse; (2) developing 

plans for coordinated governmentwide activities that address these 

problems and promote economy and efficiency in federal programs and 

operations; and (3) developing policies and professional training to 

maintain a corps of well-trained and highly skilled IG personnel. The bill

also provides for a separate appropriation account for the IG Council. 

In a prior report5

 we recommended establishing an IG Council in statute 

with a designated funding source. We believe that by providing a statutory 

IG Council 

 5

GAO, Inspectors General: Enhancing Federal Accountability, GAO-04-117T (Washington,

D.C.: Oct. 8, 2003). 

Page 7 GAO-07-1021T 
basis for the council’s roles and responsibilities, the permanence of the 

council could be established and the ability to take on more sensitive 

issues could be strengthened. In contrast, the participants in our May 2006 

panel discussion had mixed views about statutorily establishing a joint IG 

Council but did favor establishing a funding mechanism. 

H.R. 928 also provides for an Integrity Committee of the IG Council to 

review and investigate allegations of IG misconduct. The Integrity 

Committee’s function would be similar to that of the current Integrity 

Committee of the PCIE and ECIE, which is charged with receiving, 

reviewing, and referring for investigation, where appropriate, allegations 

of wrongdoing against IGs and members of the IG’s senior staff operating

with the IG’s knowledge. Currently, the Integrity Committee receives its 

authority under Executive Order 12993, signed in 1996, and is chaired by a 

representative of the FBI. Other members of the committee are the Special 

Counsel of the Office of Special Counsel, the Director of the Office of 

Government Ethics, and three IGs representing the PCIE and the ECIE. 

Cases investigated by members of the Integrity Committee may be 

forwarded to the PCIE and ECIE Chairperson for further action. 

We believe that H.R. 928 would provide the IG councils—formed currently 

through executive order—with needed statutory permanence, and we 

continue to support formalizing a combined council in statute, along with 

the Integrity Committee. We also strongly support the concept behind the 

Integrity Committee. We believe it is imperative that the independence of

the Integrity Committee be preserved and view this legislation as being 

directed to ensure permanence of this important function and not to 

change the basic underpinnings. 

In order to better attract and retain highly qualified IG employees, H.R. 928 

would provide the IGs with personnel authority separate and apart from 

that of their agencies. To accomplish this, the bill would consider each IG 

office to be a separate agency for purposes of implementing certain 

provisions in Title 5 of the United State Code dealing with employment, 

retention, separation, and retirement. 

We have concerns about this proposal. First, we are concerned about the 

inherent inefficiencies in enforcing a splitting of administrative processes

currently often being shared by agencies and their IGs. Secondly, in 

providing such authorities to the IGs, there could be a great disparity in 

how this would be implemented by each IG office. The IG community has 

suggested that, as an alternative, the IGs could seek legislative 

authorization to apply to the Office of Personnel Management (OPM) for 

IG offices as separate agencies 

Page 8 GAO-07-1021T 
certain personnel authorities. We believe that if implementation is 

properly coordinated through the PCIE and ECIE, the IGs’ proposal 

represents a good alternative and would address the intent of H.R. 928. 

H.R. 928 also covers all provisions in Title 5 relating to the Senior 

Executive Service including receiving pay increases and bonuses. Issues 

over IG pay and bonuses have arisen over the past few years due to recent 

requirements6

 that rates of pay for the federal Senior Executive Service 

(SES) be based on performance evaluations as part of a certified 

performance management system. IGs who are subject to these 

requirements must therefore receive performance evaluations in order to 

qualify for an increase to their pay. The IGs are provided general 

supervision by their agency heads in accordance with the IG Act. 

However, independence issues arise if the agency head is evaluating IG 

performance when that evaluation is used as a basis for an increase in the

IG’s pay or for providing a bonus. As a result, some IGs have effectively 

had their pay capped without the ability to receive pay increases or 

bonuses. 

The majority of panel participants believed that the pay structure for IGs 

needs to be addressed. The discussion emphasized the importance of 

providing comparable compensation for IGs as appropriate, while 

maintaining the IGs’ independence in reporting the results of their work, 

and providing them with performance evaluations that could be used to 

justify higher pay. However, responses to IGs’ receiving performance 

bonuses were mixed, mainly due to uncertainty about the overall 

framework that would be used to evaluate performance and make 

decisions about bonuses. We believe that an independent framework 

could be established through the PCIE and ECIE, in cooperation with 

OPM, to conduct performance evaluations of the IGs. 

The IG Act has been amended by subsequent legislation to provide IGs 

appointed by the President with law enforcement powers to make arrests, 

obtain and execute search warrants, and carry firearms. The IGs appointed 

by their agency heads were not included under this amendment but may 

obtain law enforcement authority by applying to the Attorney General for 

deputation on a case-by-case basis. In addition, the Program Fraud Civil 

IG investigative and law 

enforcement authorities 

 6

National Defense Authorization Act, Pub. L. No. 108-136, 117 Stat. 1392, 1638 (Nov. 24, 

2003). 

Page 9 GAO-07-1021T 
Remedies Act of 19867

 provides agencies with IGs appointed by the 

President with the authority to investigate and report false claims and 

recoup losses resulting from fraud below $150,000. The agencies with IGs 

appointed by their agency heads do not have this authority. Also, the IG 

Act provides all IGs with the authority to subpoena any information, 

documents, reports, answers, records, accounts, papers, and other data 

and documentary evidence necessary to perform the functions of the IG 

Act. This subpoena authority does not specifically address electronically

stored information or other forms of data. 

H.R. 928 would allow IGs appointed by their agency heads to apply to the 

Attorney General for full law enforcement authority instead of having to

renew their authority on a case-by-case basis or through a blanket 

authority that must be renewed after an established period of time. The 

bill would also provide the designated federal entities with IGs appointed 

by their agency heads the authority under the Program Fraud Civil 

Remedies Act to address and prosecute false claims and recoup losses 

resulting from fraud. In addition, the bill would provide the authority for 

all IGs to require, by subpoena, information and data in any medium, 

including electronically stored information as well as any “tangible thing.” 

Panel participants overwhelmingly supported the provisions to (1) allow 

IGs appointed by their agency heads to apply to the Attorney General for 

full law enforcement authority instead of having to renew their authority 

on a case-by-case basis or through a blanket authority, (2) provide 

designated federal entities with IGs by their agency heads the authority 

under the Program Fraud Civil Remedies Act to investigate and report 

false claims and recoup losses resulting from fraud, and (3) define IG 

subpoena power to include any medium of information and data. 

In May of this year the Comptroller General hosted a meeting with the IGs 

for the principal purpose of improving the coordination of federal 

oversight between the IGs and GAO. We believe that effective, ongoing

coordination of the federal audit and oversight efforts of GAO and the IGs 

is more critical than ever, due to the challenges and risks currently facing 

our nation, including our immediate and long-term fiscal challenges, 

increasing demands being made for federal programs, and changing risks.

Closer strategic planning and ongoing coordination of audit efforts 

GAO and IG Coordination 

 7

31 U.S.C. §§ 3801-3812. 

Page 10 GAO-07-1021T 
between GAO and the IGs would help to enhance the effectiveness and 

impact of work performed by federal auditors. Working together and in 

our respective areas of expertise, GAO and the IGs can leverage each 

other’s work and provide valuable input on the broad range of high-risk 

programs and management challenges across government that need 

significant attention and reform. 

We will continue in our coordination with the IGs to help achieve our 

mutual goals of providing the oversight needed to help ensure that the 

federal government is transparent, economical, efficient, effective, ethical, 

and equitable. Significant coordination has been and is occurring between 

GAO and the IGs on agency-specific issues and cross-cutting issues. The 

Comptroller General in testifying8

 on the 25th anniversary of the IG Act, 

suggested, in light of this increased need for a well-coordinated federal

audit community, the creation of a more formal mechanism going forward 

for a governmentwide council. In addition, panel participants recognized a 

critical need for a governmentwide council to address broad 

accountability issues among GAO, the IGs, and OMB. The structure of this

council could be similar in concept to the Joint Financial Management 

Improvement Program (JFMIP), whose principals9

 meet at their discretion 

to discuss issues of mutual concern to promote governmentwide financial 

management. An accountability council could share knowledge and 

coordinate activities to enhance the overall effectiveness of government 

oversight and to preclude duplicate actions. 

A good example of a strong formalized partnership between the GAO and 

the IGs is in the area of financial auditing. Under the Chief Financial 

Officers Act of 1990, as amended, the IGs at the 24 agencies covered by the 

act are responsible for the audits of their agencies’ financial statements. In 

meeting these responsibilities, most IGs have contracted with independent

public accountants to conduct the audits either entirely or in part. In some 

cases, GAO conducts the audits. GAO is responsible for the U.S. 

government’s consolidated financial statement audit, which is based 

largely on the results of the agency-level audits. GAO and the IGs have 

agreed on a common audit methodology, the GAO-PCIE Financial Audit 

Manual, which is used by all auditors of federal financial statements, 

 8

GAO, Inspectors General: Enhancing Federal Accountability, GAO-04-117T (Washington,

D.C.: Oct. 8, 2003). 

9

The Comptroller General, the Director of OMB, the Secretary of the Treasury, and the 

Director of the Office of Personnel Management 

Page 11 GAO-07-1021T 
whether the IG, an independent public accounting firm, or GAO. In 

addition, we have established formal ongoing coordination and 

information-sharing throughout the audit process so that both the IGs and 

GAO can successfully fulfill their respective responsibilities in an effective 

and efficient manner. 

In closing, under the landmark IG Act, the IGs have continued to be an

essential component of the government accountability framework and the 

contributions of the IGs have been most noteworthy. IG independence is 

critical to the effectiveness of the IG offices in carrying out their unique 

roles of overseeing federal agencies. Independence not only depends on 

organizational characteristics, but also on the personal independence of

the individual appointed to the office and this individual’s freedom from 

external factors that can impair independence. The IG must maintain this 

independence while reporting to two organizations—its agency and the 

Congress. This task requires an IG to maintain a prudent balance between

loyalty to the agency and responsibility for conducting objective and 

independent audits and investigations as required by the IG Act. We 

believe that a number of the provisions in H.R. 928 would help to enhance 

IG independence and effectiveness, and we would be pleased to assist the 

Subcommittee as it considers this legislation. 

This completes my formal statement. Mr. Chairman, I would be pleased to 

answer any questions that you or the Subcommittee members may have at 

this time. 

Page 12 GAO-07-1021T 
Page 13 GAO-07-1021T 

Enclosure I: Inspectors General Appointed by 

the President 

Fiscal Year 2006 Appropriated Budgets and Actual FTEs

Federal departments and agencies Budgets FTEs

1 Department of Health and Human Services $ 222,000,000 1,445

2 Department of Defense 206,772,130 1,370

3 Treasury IG for Tax Administration 131,953,140 838

4 Department of Housing and Urban Development 104,940,000 646

5 Social Security Administration 91,476,000 608

6 Department of Homeland Security 82,187,000 520

7 Department of Agriculture 80,336,000 598

8 Department of Labor 71,445,000 450

9 Department of Veterans Affairs 70,174,000 464

10 Department of Justice 68,000,000 411

11 Department of Transportation 61,874,000 419

12 Environmental Protection Agency 50,241,000 337

13 Department of Education 48,510,000 288

14 General Services Administration 42,900,000 293

15 Department of Energy 41,580,000 262

16 Department of the Interior 38,541,000 261

17 Agency for International Development 36,640,000 172

18 National Aeronautics and Space Administration 32,400,000 203

19 Department of State 30,945,000 186

20 Federal Deposit Insurance Corporation 30,690,000 125

21 Department of Commerce 22,467,000 122

22 Small Business Administration 20,361,080 95

23 Office of Personnel Management 18,216,000 131

24 Department of the Treasury 16,830,000 116

25 Tennessee Valley Authority 14,700,000 90

26 Nuclear Regulatory Commission 8,308,000 49

27 Railroad Retirement Board 7,124,000 53

28 Corporation for National and Community Service 5,940,000 23

29 Export-Import Bank 1,000,000 0

30 Central Intelligence Agency na na

Totals $1,658,550,350 10,575

Source: PCIE and ECIE. 

na - Information not available. 
Page 14 GAO-07-1021T 

Enclosure II: Inspectors General Appointed 

by Agency Heads 

Fiscal Year 2006 Appropriated Budgets and Actual FTEs

Federal departments and agencies Budgets FTEs

1 United States Postal Service $158,000,000 916

2 Special IG for Iraq Reconstruction 34,000,000 115

3 Amtrak 16,984,000 87

4 National Science Foundation 11,500,000 62

5 Federal Reserve Board 5,118,740 33

6 Government Printing Office 4,950,200 23

7 Pension Benefit Guaranty Corporation 4,038,990 21

8 Peace Corps 3,064,000 19

9 Federal Communications Commission 2,597,903 20

10 Securities and Exchange Commission 2,507,300 10

11 Legal Services Corporation 2,507,000 18

12 Library of Congress 2,457,000 17

13 National Archives and Records Administration 2,200,000 16

14 Smithsonian Institution 1,938,932 14

15 Equal Employment Opportunity Commission 1,810,307 11

16 National Credit Union Administration 1,764,926 8

17 Election Assistance Commission 1,600,000 1

18 National Labor Relation Board 1,080,327 7

19 Farm Credit Administration 998,248 5

20 Federal Housing Finance Board 959,271 4

21 Federal Trade Commission 917,500 5

22 Corporation for Public Broadcasting 834,264 9

23 Commodity Futures Trading Commission 795,000 4

24 Federal Election Commission 691,584 5

25 National Endowment for the Humanities 589,600 5

26 U.S. International Trade Commission 521,205 1

27 Appalachian Regional Commission 476,000 3

28 Federal Maritime Commission 469,885 2

29 National Endowment for the Arts 402,000 3

30 Federal Labor Relations Authority 284,487 1

31 Consumer Product Safety Commission 241,270 2

32 Denali Commission naa 1

33 U.S. Capitol Police nabnab

34 Office of Director of National Intelligence nabnab

Totals $266,299,939 1,448

Source: PCIE and ECIE. 
na - Information not available. 

a

IG budget is not determined separately from the agency’s budget. 

b

IG offices established in 2006.

Page 15 GAO-07-1021T 
Page 16 GAO-07-1021T 

Related GAO Products 

Inspectors General: Activities of the Department of State Office of 

Inspector General. GAO-07-138. Washington, D.C.: March 23, 2007. 

Highlights of the Comptroller General’s Panel on Federal Oversight and 

the Inspectors General. GAO-06-931SP. Washington, D.C.: September 11, 

2006. 

United Nations: Funding Arrangements Impede Independence of 

Internal Auditors. GAO-06-575. Washington, D.C.: April 25, 2002. 

Activities of the Treasury Inspector General for Tax Administration. 

GAO-05-999R. Washington, D.C.: September 27, 2005. 

Activities of the Amtrak Inspector General. GAO-05-306R. Washington, 

D.C.: March 4, 2005. 

Kennedy Center: Stronger Oversight of Fire Safety Issues, Construction 

Projects, and Financial Management Needed. GAO-05-334. Washington,

D.C.: April 22, 2005. 

Inspectors General: Enhancing Federal Accountability. GAO-04-117T. 

Washington, D.C.: October 8, 2003. 

Department of Health and Human Services: Review of the Management 

of Inspector General Operations. GAO-03-685. Washington, D.C.: June 10,

2003. 

Inspectors General: Office Consolidation and Related Issues. GAO-02-

575. Washington, D.C.: August 15, 2002. 

Inspectors General: Comparison of Ways Law Enforcement Authority Is 

Granted. GAO-02-437. Washington, D.C.: May 22, 2002 

Inspectors General: Department of Defense IG Peer Reviews. GAO-02-

253R. Washington, D.C.: December 21, 2001. 

HUD Inspector General: Actions Needed to Strengthen Management and 

Oversight of Operation Safe Home. GAO-01-794. Washington, D.C.: June 

29, 2001. 

U.S. Export-Import Bank: Views on Inspector General Oversight. 

GAO-01-1038R. Washington, D.C.: September 6, 200l. 

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