Federal Rulemaking: Opportunities Remain for OMB to Improve the Transparency of Rulemaking Processes
Published: 2016-03-15T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Federal regulation is a basic tool of government. Agencies issue regulations to achieve public policy goals such as ensuring that workplaces, air travel, foods, and drugs are safe; that the nation's air, water, and land are not polluted; and that the appropriate amount of taxes is collected. Congresses and Presidents have acted to refine and reform the regulatory process during the last several decades. Among the goals of such initiatives are enhancing oversight of rulemaking by Congress and the President, promoting greater transparency and public participation in the process, and reducing regulatory burdens on affected parties.
Congress has often asked GAO to evaluate the implementation of procedural and analytical requirements that apply to the rulemaking process. The importance of improving the transparency of the rulemaking process emerged as a common theme throughout GAO's body of work. Based on that body of work, this testimony addresses (1) GAO's prior findings and OIRA's progress to date on recent GAO recommendations to improve the transparency of the regulatory review process, and (2) other challenges and opportunities GAO has identified for increasing the transparency and oversight of the rulemaking process.
GAO has made 25 prior related recommendations of which OMB has implemented 9 to date.
section_title: What GAO Found
paragraphs: GAO has consistently found opportunities to improve the transparency of regulatory processes coordinated through the Office of Management and Budget's (OMB) Office of Information and Regulatory Affairs (OIRA). Three GAO reports on OIRA's reviews of agencies' rules under Executive Order 12866 illustrate current and specific actions that would increase the transparency of that review process.
In a 2014 report on cost-benefit analysis, GAO found that OIRA's reviews resulted in changes. However, in 72 percent of the 109 rules GAO reviewed, there was no explanation for why the rule was designated as significant.
In a 2009 report on the development of rules, GAO found that documentation of OIRA's reviews could be improved. In reviews of 12 case studies, GAO found uneven attribution of changes made during the OIRA review period and differing interpretations regarding which changes required documentation.
In a 2003 report, GAO examined 85 rules from nine health, safety, or environmental agencies. GAO found that, while the OIRA review process had significantly affected 25 of those rules, some agencies' files did not provide clear and complete documentation of changes made during OIRA's review. However, a few agencies exhibited exemplary transparency practices.
Four GAO reports covering the topics of regulatory guidance, retrospective regulatory review processes, and exceptions for expediting the rulemaking process further illustrate opportunities for OMB to enhance transparency.
In a 2015 report on guidance development processes at four agencies GAO found that all four identified standard practices to follow when developing guidance. However, the four agencies addressed OMB's requirements on significant guidance to varying degrees.
In 2007 and 2014 reports on retrospective regulatory reviews, GAO found that, while such reviews often resulted in changes, OMB and agencies could improve the reporting of progress to enhance the transparency and usefulness of information provided to the public.
In a 2012 report on exceptions to proposed rules, GAO reviewed a generalizable sample of final rules published over an 8 year period. GAO found that, although agencies often requested comments on final major rules (rules with an annual impact of $100 million or more) issued without a prior notice of proposed rulemaking, the agencies did not always respond to comments received.
GAO made 25 recommendations to OMB to address the transparency issues identified in these seven reports. OMB has implemented 9 of the recommendations. GAO believes that the other 16 recommendations that have not been implemented still have merit and, if acted upon, would improve the transparency of federal rulemaking. In a step in that direction, the OIRA Administrator in 2015 noted that OIRA has worked with agencies to help them with their Executive Order disclosure requirements.

section_title: Letter
paragraphs: I am pleased to be here today to discuss the federal rulemaking process,  focusing in particular, at your request, on opportunities to improve the  transparency of the regulatory review process coordinated through the  Office of Management and Budget’s (OMB) Office of Information and  Regulatory Affairs (OIRA).
Federal regulation is a basic tool of government. Agencies issue  regulations to achieve public policy goals such as ensuring that  workplaces, air travel, food, and drugs are safe; that the nation’s air,  water, and land are not polluted; and that the appropriate amount of taxes  is collected. Given the sizable benefits and costs of these regulations,  Congresses and Presidents have taken a number of actions to refine and  reform the regulatory process during the past few decades. Among the  goals of such initiatives are enhancing oversight of rulemaking by  Congress and the President, promoting greater transparency and  participation in the process, and reducing regulatory burdens on affected  parties. OIRA is a key player in the regulatory process with its  responsibility for ensuring that regulations are consistent with applicable  law, the President’s priorities, and the principles set forth in executive  orders, among other things.
Congress has often asked us to evaluate the implementation of  procedural and analytical requirements that apply to the rulemaking  process. Drawing on that body of work, my remarks today highlight  seven relevant reports regarding (1) our prior findings and OIRA’s  progress to date on recent recommendations to improve the transparency  of the regulatory review process under Executive Order 12866, and (2)  other challenges and opportunities our work has identified for increasing  the transparency and oversight of the rulemaking process. We have  consistently found opportunities to improve the transparency of regulatory  processes coordinated through OMB. We made a total of 25  recommendations to OMB on these particular topics of which OMB has  implemented 9 to date. The importance of increasing the transparency of  the rulemaking process is a common theme throughout our body of work  on federal regulation.
My testimony today is based on work that we have issued on the  rulemaking process prepared at the request of Congress. We used  multiple methodologies to develop the findings, conclusions, and  recommendations for these issued products. We conducted our work for  these reports in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives. A more detailed  discussion of prior reports’ objectives, scope, and methodology, including  our assessment of data reliability, is available in the reports cited in the  related products list at the end of this statement.
subsections: section_title: Aspects of the OIRA Regulatory Review Process Could Be More Transparent
paragraphs: Our reports on cost-benefit analysis in the rulemaking process, rule  development and regulatory reviews, and OMB’s role in reviews of  agencies’ rules under Executive Order 12866 illustrate specific actions  that, if taken, would increase the transparency of the rulemaking process.
subsections: section_title: Cost-benefit Analysis
paragraphs: In our 2014 report on cost-benefit analysis in agencies’ rulemaking  processes, we found that OIRA’s reviews of agencies’ rules sometimes  resulted in changes, but also concluded that the transparency of the  review process could be improved. We found that in the majority of the  109 significant rules that we reviewed, the rulemaking process was not as  transparent as it could be. For example, in 72 percent of these rules,  there was no explanation for why the rule was designated as significant,  thus triggering additional oversight required by Executive Order 12866.  We made two recommendations based on our review of the cost benefit  analyses included in selected rules. We recommended that (1) OMB work  with agencies to clearly communicate the reasons for designating a  regulation as a significant regulatory action, and explain its reason for any  changes to an agency’s initial assessment of a regulation’s significance;  and (2) OMB encourage agencies to clearly state in the preamble of  significant regulations the section of Executive Order 12866’s definition of  a significant regulatory action that applies to the regulation. While OMB  staff did not state whether they agreed or disagreed with the  recommendations, they took action in 2015 to implement the first  recommendation.
section_title: Rules Development and Regulatory Reviews
paragraphs: In our 2009 report on the regulatory review process, we found that OIRA’s  reviews of agencies’ draft rules often resulted in changes. Of the 12  case-study rules subject to OIRA review that we examined, 10 reviews  resulted in changes, about half of which included changes to the  regulatory text. Agencies used various methods to document OIRA’s  reviews which generally met disclosure requirements. However, we  found that the transparency of this documentation could be improved. In  particular, there was uneven attribution of changes made during the OIRA  review period and differing interpretations regarding which changes were  “substantive” and thus required documentation. Both of these issues had  been identified in our earlier work. We made four recommendations that  OMB provide guidance to agencies to improve transparency and  documentation of the OIRA review process, specifically that OIRA (1)  define what types of changes made as a result of the review process are  substantive and need to be publicly identified; (2) direct agencies to  clearly state in final rules whether they made substantive changes as a  result of OIRA reviews; (3) standardize how agencies label  documentation of these changes in public rulemaking dockets; and (4)  instruct agencies to clearly attribute those changes made at the  suggestion or recommendation of OIRA. While OMB staff generally  agreed with these four recommendations, to date, they have not  implemented them.
section_title: OMB’s Role in Reviews of Agencies’ Draft Rules
paragraphs: In 2003, we examined 85 rules from nine health, safety, or environmental  agencies and found that the OIRA review process had significantly  affected 25 of those 85 rules. OIRA’s suggestions appeared to have at  least some effect on almost all of the 25 rules’ potential costs and benefits  or the agencies’ estimates of those costs and benefits. The agencies’  docket files did not always provide clear and complete documentation of  the changes made during OIRA’s review or at OIRA’s suggestion, as  required by the executive order, even though a few agencies exhibited  exemplary transparency practices. We made eight recommendations in  2003 targeting aspects of the OIRA review process that remained unclear  and where improvements could allow the public to better understand the  effects of OIRA’s review, including that the Director of OMB:  1.  instruct agencies to document the changes made to rules submitted  for OIRA review in public rulemaking dockets and within a reasonable  time after the rules have been published;  2.  define the types of substantive changes made during the review  process that agencies should disclose;  3.  disclose the reasons for withdrawal of a rule from OIRA review;  4.  reexamine OIRA policy that only documents exchanged by agencies  with OIRA branch chiefs and above during the review process need to  be disclosed;  5.  differentiate in OIRA’s database which rules were substantively  changed at OIRA’s suggestion or recommendation and which were  changed in other ways and for other reasons;  6.  define transparency requirements to also include the informal review  period when OIRA says it can have its most important impact on  agencies’ rules;  7.  encourage agencies to use best practice methods of documentation  that clearly describe changes; and  8.  disclose in OIRA’s logs of meetings with outside parties which  regulatory action was being discussed and the affiliation of the  meeting participants.
OMB staff disagreed with the first seven of these eight recommendations  but did implement the eighth.
section_title: Additional Opportunities Exist to Enhance Transparency and Congressional Oversight of Federal Regulations and the Rulemaking Process
paragraphs: Improvements made to the transparency of the regulatory process benefit  the public and aid congressional oversight. Four relevant reports covering  the topics of regulatory guidance, retrospective regulatory review  processes, and exceptions for expediting the rulemaking process  illustrate additional opportunities to enhance transparency of federal  regulations. OMB plays an important role in these activities through  oversight and by providing guidance to regulatory agencies about how to  comply with various requirements.
subsections: section_title: Regulatory Guidance
paragraphs: Regulatory guidance, while not legally binding, provides agencies with  flexibility to interpret their regulations, clarify policies, and address new  issues more quickly than may be possible using rulemaking. However,  concerns have been raised about the level of oversight for agencies’  guidance, whether agencies seek feedback from affected parties on  guidance, and how to ensure that agencies do not issue guidance when  they should undertake rulemaking. Given both the importance of  guidance and the concerns about its use, in 2007 OMB recognized the  need for good guidance practices. OMB established review processes for  the guidance documents with the broadest and most substantial impact.
In 2015, we reviewed guidance development processes at four  departments—Agriculture (USDA), Education (Education), Health and  Human Services (HHS), and Labor (DOL)—and 25 of their components.  All four departments identified standard practices to follow when  developing guidance and addressed OMB’s requirements for significant  guidance to varying degrees. Education and USDA had written  departmental procedures for approval of significant guidance as required  by OMB. DOL’s procedures were not available to staff and required  updating. HHS had no written procedures. Ensuring these procedures are  available could better ensure that components consistently follow OMB’s  requirements.
section_title: Retrospective Review
paragraphs: We have long advocated the potential usefulness to Congress, agencies,  and the public of conducting retrospective regulatory analyses.  Retrospective analysis can help agencies evaluate how well existing  regulations work in practice and determine whether they should be  modified or repealed. In 2007, we found that agencies had conducted  more retrospective reviews of the costs and benefits of existing regulation  than was readily apparent, especially to the public. We made seven  recommendations to improve the effectiveness and transparency of  retrospective regulatory review. These included that OMB develop  guidance to regulatory agencies to consider or incorporate into their  policies, procedures, or agency guidance that govern regulatory review  activities the following elements:  1.  consideration of whether and how they will measure the performance  2.  prioritization of review activities based upon defined selection criteria;  3.  specific review factors to be applied to the conduct of agencies’  analyses that include, but are not limited to, public input;  4.  minimum standards for documenting and reporting all completed  review results and, for reviews that included analysis, making the  analysis publicly available;  5.  mechanisms to assess their current means of communicating review  results to the public and identifying steps that could improve this  communication; and  6.  steps to promote sustained management attention and support to help  ensure progress in institutionalizing agency regulatory review  initiatives.
We also recommended that OMB  7.  work with regulatory agencies to identify opportunities for Congress to  revise the timing and scope of existing regulatory review requirements  and/or consolidate existing requirements.
In 2011 and 2012, the administration issued new directives to agencies  on how they should plan and conduct analyses of existing regulations that  addressed each of our seven recommendations.
In a 2014 report on reexamining regulations, we found that agencies often  changed regulations in response to completed retrospective analyses, but  could improve the reporting of progress and strengthen links between  those analyses and the agencies’ performance goals. We also  concluded that OMB could do more to enhance the transparency and  usefulness of the information provided to the public. Although we found  that agencies posted their retrospective review plans online, obtaining a  comprehensive picture of the agencies’ progress was difficult because  results were spread across multiple web sites. In addition, consistently  providing links or citations to the supporting analyses and data, and  including more detail on the methodologies and key assumptions used to  estimate savings, would help Congress and the public to better  understand the basis for projected results. We made three  recommendations to OMB to (1) improve reporting on the outcomes of  retrospective regulatory reviews, (2) improve how these reviews can be  used to help agencies achieve their priority goals, and (3) ensure that  OIRA, as part of its oversight role, monitors the extent to which agencies  have implemented guidance on retrospective regulatory review  requirements and confirm that agencies have identified how they will  assess the performance of regulations in the future. Staff from OIRA  generally agreed with the three recommendations, and the OIRA  Administrator indicated last year that his agency was taking actions to  address them.
section_title: Exceptions to Proposed Rules
paragraphs: The Administrative Procedure Act (APA), which spells out the basic  rulemaking process, generally requires agencies to publish a notice of  proposed rulemaking (NPRM) in the Federal Register and solicit public  comments before finalizing regulations. However, the APA and other  statutes permit exceptions to proposed rules to expedite rulemaking in  certain circumstances, such as for an emergency or other “good cause”  or when issuing rules about an agency’s organization or management. In  2012, we reviewed a generalizable random sample of 1,338 final rules  published over 8 years (from 2003 through 2010) to provide information  on the frequency, reasons for, and potential effects of agencies issuing  final rules without NPRMs. We found that agencies frequently used  available exceptions to issue final rules without prior NPRMs.
We also found that agencies, though not required, often requested  comments on major final rules issued without an NPRM. However, they  did not always respond to the comments received. This is a missed  opportunity because we found that agencies often made changes to  improve the rules when they did respond to public comments. To better  balance the benefits of expedited rulemaking procedures with the benefits  of public comments, and to improve the quality and transparency of  rulemaking records, we recommended that OMB issue guidance to  encourage agencies to respond to comments on final major rules issued  without a prior notice of proposed rulemaking. OMB stated that it did not  believe it necessary to issue guidance at that time and has not, to date,  taken any action to implement our recommendation. We continue to  believe that the recommendation has merit and urge OMB to reconsider  its prior position.
In summary, OIRA to date has implemented 9 of the 25 recommendations  we made to improve transparency and effectiveness of the Executive  Order review process and other aspects of federal rulemaking. We  believe that the other 16 related recommendations cited in this statement  that have not been implemented still have merit and, if acted upon, would  improve the transparency of federal rulemaking. In a step in that direction,  the OIRA Administrator in 2015 noted that OIRA has worked with  agencies to help them with their Executive Order disclosure requirements.
Chairman Meadows, Ranking Member Connolly, and Members of the  Subcommittee, this concludes my prepared statement. Once again, I  appreciate the opportunity to testify on these important issues. I would be  pleased to address any questions you or other members of the  subcommittee might have at this time.
section_title: GAO Contact and Staff Acknowledgments
paragraphs: If you or your staff have any questions about this testimony, please  contact Michelle Sager, Director, Strategic Issues, at (202) 512-6806 or  sagerm@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this  statement. GAO staff who made key contributions to this testimony are  Tim Bober, Tara Carter, Andrea Levine, and Joseph Santiago.
section_title: Related GAO Products
paragraphs: Regulatory Guidance Processes: Selected Departments Could  Strengthen Internal Control and Dissemination Practices. GAO-15-368.  Washington, D.C.: April 16, 2015.
Federal Rulemaking: Agencies Included Key Elements of Cost-Benefit  Analysis, but Explanations of Regulations’ Significance Could Be More  Transparent. GAO-14-714. Washington, D.C.: September 11, 2014.
Reexamining Regulations: Agencies Often Made Regulatory Changes,  but Could Strengthen Linkages to Performance Goals. GAO-14-268.  Washington, D.C.: April 11, 2014.
Federal Rulemaking: Regulatory Review Processes Could Be Enhanced.  GAO-14-423T. Washington, D.C.: March 11, 2014.
Federal Rulemaking: Agencies Could Take Additional Steps to Respond  to Public Comments. GAO-13-21. Washington, D.C.: December 20, 2012.
Federal Rulemaking: Improvements Needed to Monitoring and Evaluation  of Rules Development as Well as to the Transparency of OMB Regulatory  Reviews. GAO-09-205. Washington, D.C.: April 20, 2009.
Reexamining Regulations: Opportunities Exist to Improve Effectiveness  and Transparency of Retrospective Reviews. GAO-07-791. Washington,  D.C.: July 16, 2007.
Federal Rulemaking: Past Reviews and Emerging Trends Suggest Issues  That Merit Congressional Attention. GAO-06-228T. Washington, D.C.:  November 1, 2005.
Rulemaking: OMB’s Role in Reviews of Agencies’ Draft Rules and the  Transparency of Those Reviews. GAO-03-929. Washington, D.C.:  September 22, 2003.
Regulatory Reform: Procedural and Analytical Requirements in Federal  Rulemaking. GAO/T-GGD/OGC-00-157. Washington, D.C.: June 8, 2000.
Regulatory Reform: Changes Made to Agencies’ Rules Are Not Always  Clearly Documented. GAO/GGD-98-31. Washington, D.C.: January 8,  1998.
Regulatory Reform: Agencies’ Efforts to Eliminate and Revise Rules Yield  Mixed Results. GAO/GGD-98-3. Washington, D.C.: October 2, 1997.
Regulatory Reform: Implementation of the Regulatory Review Executive  Order. GAO/T-GGD-96-185. Washington, D.C.: September 25, 1996.
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