United States General Accounting Office /3, 

Testimony 

For Release 

on Delivery 

Expected at 

1O:OO a.m. EDT 

Tuesday 

May 17, 1988 

Inspector General Act Amendments of 1988 

Statement of 

Milton J. Socolar 

Special Assistant to the Comptroller General 

Before the 

Subcommittee on Legislation and National 

Security of the House Committee on 

Government Operations 

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GAO/T-AFMD-88-11 GAO Form 160 (12/87) 
Mr. Chairman and Members of the Committee: 

We appreciate the opportunity to be here today to discuss 

H.R. 4054, the Inspector General.Act Amendments of 1988. -We 

would first like to comment on the effectiveness of the 

Inspector General Act of 1978 in preventing and detecting fraud, 

waste, and abuse and in improving federal agency operations. 

Next, we would like to discuss H.R. 4054's provisions for 

establishing statutory inspectors general (IGs) at several 

agencies and extending protections and requirements for certain 

other audit and investigation units in the federal government, as 

Well. as offering our views on certain other provisions in H.R. 

4054. 

EFFECTIVENESS OF THE INSPECTOR GENERAL ACT OF 1978 

Under the Inspector General Act of 1978 and other 

legislation, statutory inspectors general have been established 

in 19 departments and agencies. These statutory IGs have been 

established through a bipartisan effort that has improved the 

effectiveness of the federal government. Their establishment 

was designed to combat fraud, waste, and abuse, and to correct 

numerous organizational and procedural deficiencies in the 

federal audit and investigative community. These deficiencies 

included 

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-- the lack of effective central leadership among multiple 

audit and investigative units operating within an agency, 

-- auditors and investigators reporting to officials who 

were responsible for the functions under review and 

investigators being restricted from looking into certain 

areas of suspected irregularities, 

-- audit recommendations frequently being ignored by agency 

officials, 

-- audit and investigative units being severely limited due 

to inadequate resources, and 

-- the lack of procedures to ensure that the agency head and 

the Congress were informed of serious problems 

discovered in the agency. 

We strongly supported passage of the Inspector General Act 

of 1978 and other such legislation because its purpose was to 

correct many of these deficiencies and to help ensure that highlevel attention was given to promoting economy, efficiency, and 

effectiveness in federal programs and operations. We also 

believed such legislation would help ensure that both the 

Congress and agency heads would receive independent assessments 

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of federal programs and operations for which they are 

accountable or have oversight responsibility. 

GAO reviews of IG activities over the past several years 

indicate that the establishment of statutory IGs has been a key 

factor in strengthening federal internal audit and investigative 

activities and improving operations within the federal 

government. The statutory IGs have reported to the Congress that 

they have had substantial success in helping bring about 

improvements in the federal government. 

ESTABLISHING INSPECTORS GENERAL AT SEVERAL AGENCIES 

H.R. 4054 would, among other things, amend the Inspector 

General Act of 1978 by establishing offices of inspectors general 

in the departments of Justice and the Treasury and in the Federal 

Emergency Management Agency (FEMA). 

Justice and Treasury 

The departments of Justice and the Treasury are the only two 

remaining federal departments without a statutory IG. In 1986, 

we issued reports recommending that the Congress amend the 

Inspector General Act of 1978 to establish statutory IGs at 

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Justice and the Treasury.1 We also testified to that effect in 

1986 before this Subcommittee and in 1987 before the Senate 

Committee on Governmental Affairs.2 Our views on establishing 

statutory IGs at Justice and Treasury are essentially unchanged. 

During our 1986 study, Justice had numerous internal audit 

and investigative units fragmented among its various bureaus and 

offices. In addition to lacking central coordination, we found 

that most of these audit and investigative units were not 

organizationally independent. Also, the organization and 

operation of these units could affect the impartiality of their 

staffs because auditors and investigators sometimes reviewed 

areas or investigated persons in the unit to which they were 

assigned. In addition, there was no assurance that the Attorney 

General or the Congress were advised of the results of the work 

of many of these units. 

1Justice Department: 

Inspector General 

An Assessment of the Need for a Statutory 

(GAO/APMD db - - 8 , February 24, 198b) . 

Treasury Department: An Assessment of the Need for a Statutory 

Inspector General (GAO/AFMD-86-3, August 21, 1986). 

2Statement of Charles A. Bowsher, Comptroller General of the 

United States, Before the Subcommittee on Legislation and 

National Security of the House Committee on Government 

Operations, on H. R. 3077, The Inspector General Act Amendments 

of 1985, June 26, 1986. 

Need for Statutory Inspectors General at Certain Federal 

Agencies (GAO/T-AFMD-87-2, February 19, 1987) . 

The Inspector General Act Amendments of 1987 (GAO/T-AFMD-87-14, 

May 12, 19877 . 

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Treasury also has numerous internal audit and investigative 

units located throughout the department and its various bureaus. 

Treasury has a nonstatutory IG who reports directly to the 

secretary: however, the IG has audit and investigative 

responsibility over less than 20 percent of the Treasury budget 

and has limited or no ability to audit the programs and 

operations of Treasury's four law enforcement bureaus. Those 

bureaus are audited and investigated by internal affairs and 

inspection staffs located within those bureaus. Generally, it 

has been bureau management's decision as to which audits and 

internal investigations are reported outside each bureau to 

higher levels. As a result, there is no assurance that the 

Secretary of the Treasury or other Treasury management is 

informed of all audit and investigative issues which could have a 

departmentwide impact. In addition, Treasury is not required to 

routinely inform the Congress about the department's audit and 

investigative activities. 

The structure of internal audit and investigative units 

within Justice and Treasury does not provide the central 

leadership that exists in those same activities at departments 

and agencies with statutory IGs. We believe that the structure 

and management of the audit and investigative units at these two 

agencies lack organizational independence and that this may 

inhibit the units from making objective assessments and from 

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reporting to the Attorney General and the Secretary of the 

Treasury, as well as to the Congress, on audit and investigative 

results and activities. 

Both the Department of Justice and the Department of the 

Treasury have opposed the establishment of statutory IGs. 

The Department of Justice has contended that its inclusion 

under the IG act would 

-- superimpose an IG over the present authority of the 

Attorney General, 

-- allow an independent IG to interfere with or jeopardize 

ongoing external investigations and prosecutions, and 

-- require the IG to disclose sensitive or classified 

information. 

The Department of the Treasury has contended that its 

inclusion under the IG act would 

-- subject its decisions involving economic, tax, and 

monetary policy to IG review, thus dampening the free 

exchange of ideas necessary for developing economic 

policy and 

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-- provide the IG with the statutory authority to interfere 

with any ongoing investigation being conducted in 

Treasury's law enforcement bureaus. 

The issues raised by Justice and the Treasury are not new. 

Many of these same issues have been addressed each time the 

Congress has passed legislation establishing IGs at other federal 

departments and agencies. For example, concerns about sensitive 

or classified information were raised when the Congress 

considered establishing IGs at the departments of Defense and 

State. 

Our work with the IGs has not disclosed, nor are we aware 

of, any instances where any of the statutory IGs have experienced 

the types of potential problems cited by Justice and the 

Treasury. IGs have also testified to this effect: for example, 

the IGs at the departments of Defense and State recently 

testified that they have not experienced any problems in access 

to, or handling of, sensitive or classified information. 

Federal Emergency Management Agency 

We also continue to support establishing a statutory IG at 

FEMA. During 1985, we found that the nonstatutory IG 

experienced an impairment to his independence when he was asked 

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to transfer to another position after conducting sensitive 

investigations involving high-level FEMA officialsWe also found that important and vulnerable FEMA programs 

and activities, such as procurement and the management of flood 

and crime insurance, had received little or no internal audit 

coveraqe. According to PEMA audit officials, this lack of 

coverage was largely the result of inadequate staffing levels in 

the IG's office. 

We believe that establishing a statutory IG in FEMA will 

help resolve these problems. The Office of Management and Budget 

has also testified that it supports the establishment of a 

statutory IG at FEMA. 

Proposals for Statutory IGs at NRC and OPM 

Other legislation has recently been introduced in the 

Senate and the House calling for the establishment of statutory 

IGs at the Nuclear Regulatory Commission (NRC) and the Office of 

PerSOnnel Management (OPM). We support the establishment of 

statutory IGs at both of those agencies. 

As early as 1981, we supported the need for a statutory IG 

at NRC to ensure that the Congress and the commissioners receive 

objective information on problems within NRC and to enhance 

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public trust in the regulation of commercial nuclear power. We 

have also supported the establishment of a statutory IG at OPM to 

strengthen the IG's independence and improve congressional 

oversight, and to ensure the highest level of audit and 

investigative coverage over the retirement and disability trust 

fund and the recent proliferation of insurance carriers. 

EXTENDING PROTECTIONS AND REQUIREMENTS 

AT OTHER AGENCIES 

H.R. 4054 also would extend inspector general protections 

and requirements to audit and investigative units in a number of 

executive agencies that are not currently covered by such 

provisions. We issued reports in 1984 and 1986 to this 

Subcommittee, and testified before this Subcommittee in 1986 and 

before the Senate Committee on Governmental Affairs in 1987 on 

the need for this type of action. 

Our views on the need for this type of action are 

unchanged. While we have not reviewed in detail the needs and 

problems of every federal audit and investigative entity, and 

while there may be some such entities that could be considered 

too small to require such requirements as subpoena powerr we 

nevertheless continue to believe that the general concept of 

extending the protections and requirements enjoyed by the 

inspectors general to the audit and investigative units covered 

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by H.R. 4054 is a good one, and one which we strongly support. 

OTHER PROVISIONS IN H.R. 4054 

I would like to briefly provide our views on one other 

section in H.R. 4054. Section 4 of the bill includes provisions 

to promote the uniformity and the reliability of IG reports. We 

fully agree that the information reported to the Congress by the 

IGs should be uniform and consistent. To that end, we support 

the definitions contained in section 4, particularly those 

pertaining to what constitutes "audit determination" and "audit 

resolution." 

This concludes my statement, Mr. Chairman. We will be 

pleased to respond to any questions you may have. 

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