Federal Spending Accountability: Preserving Capabilities of Recovery Operations Center Could Help Sustain Oversight of Federal Expenditures
Released: 2015-09-14T00:00:00


Highlights: section_title: Why GAO Did This Study
paragraphs: Improper payments government-wide increased approximately $19 billion in fiscal year 2014, resulting in an estimated total of $124.7 billion. The DATA Act authorized Treasury to establish a data-analysis center or expand an existing service.

Congress included a provision in the DATA Act for GAO to review the implementation of the statute. This report addresses (1) the value of the ROC's capabilities provided to the oversight community; (2) Treasury's plans for transferring assets from the ROC, and (3) the potential effect, if any, of Treasury's plans on the ROC's users.

GAO reviewed documentation on the ROC's assets, a transition plan developed by the ROC, and its performance data from fiscal year 2012 through March 2015. On the basis of factors such as frequency of requests for assistance and agency size, GAO interviewed various ROC users about their views. GAO also interviewed Treasury and CIGIE officials to obtain their perspectives on the ROC's capabilities and its future status.

section_title: What GAO Found
paragraphs: The Recovery Accountability and Transparency Board's (Recovery Board) Recovery Operations Center (ROC) provided significant analytical services primarily to Offices of the Inspector General (OIG) to support antifraud and other activities. Congress initially established the Recovery Board to oversee funds appropriated by the American Recovery and Reinvestment Act of 2009. Subsequently, it expanded the Recovery Board's mandate to include oversight of other federal spending, and most recently through the Digital Accountability and Transparency Act of 2014 (DATA Act) authorized the Department of the Treasury (Treasury) to transfer ROC assets to Treasury by September 30, 2015, when the Recovery Board closes. On the basis of the ROC's client-service performance data that GAO reviewed, the center researched roughly 1.7 million entities associated with $36.4 billion in federal funds in fiscal years 2012 and 2013. The ROC developed specialized data-analytic capabilities that, among other things,

helped OIGs identify high-risk entities and target audit and investigative resources to those entities;

identified organizations with previous fraudulent activities that nevertheless received contracts during Hurricane Sandy; and

identified entities involved in activities such as collaborating to commit fraud, and visually depicted relationships among these entities for juries.

Treasury does not plan to transfer the ROC's assets, such as hardware and software, citing cost, lack of investigative authority, and other reasons. However, Treasury could transfer additional information to its Do Not Pay Center Business Center (DNP), which assists agencies in preventing improper payments. For instance, transferring documentation of data-sharing agreements, which can be difficult and time-consuming to establish, could serve as a template for DNP efforts to expand the number of data sets it uses to identify improper payments. Although cost and other challenges may limit the viability of transferring certain of the ROC's assets to Treasury, other assets—especially those that could serve as templates for negotiating access to and procuring additional data—may assist DNP as it expands its services and capabilities.

Because Treasury does not plan to transfer the ROC's assets, the ROC's users will need to consider alternatives when the Recovery Board closes. Specifically, officials from some large OIGs that have used the ROC told GAO they intend to develop their own analytical capabilities. However, officials from some small- and medium-sized OIGs said they do not have the resources to develop independent data analytics or pay for a similar service, thus foregoing the ROC's capabilities. The Council of the Inspectors General for Integrity and Efficiency (CIGIE) could reconstitute some of the ROC's analytic capabilities and has explored options to do so. However, CIGIE officials stated that CIGIE does not currently have the resources to accomplish this reconstitution. A legislative proposal that articulates for Congress the relative costs and benefits of developing an entity with a mission and capabilities similar to the ROC could be an appropriate first step in preserving the essence of the center's proven value to its users. CIGIE officials stated that they have not developed such a proposal absent congressional direction, but noted that they support Congress's expressed interest in preserving and expanding analytic resources for the oversight community.

section_title: What GAO Recommends
paragraphs: If Congress wants to maintain the ROC's analytic capabilities, it should consider directing CIGIE to develop a proposal to that effect to help ensure federal spending accountability. GAO also recommends that Treasury consider transferring additional information to enhance Treasury's DNP. Treasury concurred with GAO's recommendation, and CIGIE is supportive of assuming additional analytical functions for the OIG community with additional funding.

section_title: Letter
paragraphs: Improper payments government-wide totaled an estimated $124.7 billion  in fiscal year 2014, a significant increase of approximately $19 billion, or  about 18 percent, from the prior year’s estimate of $105.8 billion. One  component of a strategy to reduce improper payments is implementing  effective detection techniques to quickly identify and recover improper  payments. Legislation, guidance by the Office of Management and  Budget (OMB), and leading practices identified in GAO’s Framework for  Managing Fraud Risks in Federal Programs have increasingly focused on  the need for program managers to take a strategic approach to managing  improper payments and risks, including fraud.

The Digital Accountability and Transparency Act of 2014 (DATA Act)  provides discretionary authority to the Department of the Treasury  (Treasury) to establish a data-analysis center or expand an existing  service to provide data, analytic tools, and data-management techniques  to support the prevention and reduction of improper payments by federal  agencies to improve the efficiency and transparency of federal spending.  If Treasury elected to exercise this discretionary authority to establish a  data-analysis center or expand an existing service, assets of the  Recovery Accountability and Transparency Board’s (Recovery Board)  Recovery Operations Center (ROC) identified by Treasury and relating to  the detection of fraud and abuse in the use of federal funds could be  transferred to Treasury. The ROC is a central data-analytics service to  support fraud detection and prevention and to assist the oversight  community in its efforts to prevent fraud, waste, and abuse. Originally  created in October 2009 by the Recovery Board, the ROC will close when  the Recovery Board’s authority expires on September 30, 2015.  Treasury would need to transfer relevant assets prior to the shutdown of  the Recovery Board.

The DATA Act requires GAO to issue reports assessing and comparing  the quality of data submitted under the DATA Act as well as agency  implementation and use of data standards. In July 2015, we testified on  initial implementation of the DATA Act, including the status of the ROC,  and the assets of the ROC eligible for transfer to Treasury under the  DATA Act. This report expands on information presented in the July  2015 testimony by addressing (1) the analytic value of the ROC’s  capabilities to the oversight community, (2) Treasury’s plans, if any, for  transferring assets from the ROC, and (3) the potential effect, if any,  Treasury’s plans will have on the ROC’s user community, especially  Offices of Inspector General (OIG).

To accomplish our objectives, we reviewed transition-plan documents that  included milestones, and guidelines provided by the Recovery Board. We  also reviewed documentation provided by the Recovery Board on its  resources, including hardware, software contracts, data sets, and human  capital as well as performance information from fiscal year 2012 through  March 2015. We developed criteria to select ROC users to interview  based on a range of agency sizes and a range of frequency and  consistency with which the organizations used the ROC. On the basis of  our criteria, we interviewed officials representing the OIGs of the  Department of Homeland Security, the Appalachian Regional  Commission, the Environmental Protection Agency, the Department of  Housing and Urban Development, the Export-Import Bank, the National  Science Foundation, the United States Postal Service, and the  Department of Justice, as well as officials from the National Intellectual  Property Rights Coordination Center. We also interviewed Treasury  officials involved in the potential transition of the ROC, officials from the  Council of the Inspectors General on Integrity and Efficiency (CIGIE), and  Recovery Board officials for their observations on the potential transition.

We conducted this performance audit from April 2015 to September 2015  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, conclusions, and recommendations 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 explanation of our objectives, scope, and methodology can  be found in Appendix I.
subsections: section_title: Background
paragraphs: The American Recovery and Reinvestment Act of 2009 (Recovery Act)  created the Recovery Board composed of Inspectors General to promote  accountability by overseeing recovery-related funds. The board was to do  so, in part, by providing the public with easily accessible information. The  Recovery Act appropriated $84 million for the Recovery Board to carry  out its duties and set a termination date of September 30, 2013, for its  oversight activities. The act provided the Recovery Board with the  following specific powers and functions: audit and review spending on its own or in collaboration with federal  OIGs;  issue subpoenas to carry out audit and review responsibilities; refer instances of fraud, waste, and mismanagement to federal OIGs; hold public hearings and compel testimony through subpoenas; enter into contracts with public agencies and private entities;  review whether there are sufficient and qualified personnel overseeing  Recovery Act funds; and make recommendations to federal agencies on measures to prevent  fraud, waste, and mismanagement of Recovery Act funds.

To fulfill its mandate under the Recovery Act, the Recovery Board utilized  data analytics to carry out its oversight responsibilities and increase  accountability. Data analytics is a term typically used to describe a variety  of techniques that can be used to analyze and interpret data to, among  other things, help identify and reduce fraud, waste, and abuse.  Specifically, predictive analytic technologies can be used to identify  potential fraud and errors before payments are made, while other  techniques, such as data mining and data matching of multiple  databases, can identify fraud or improper payments that have already  been awarded, thus assisting agencies in recovering these dollars. In  October 2009, the Recovery Board established the ROC to analyze the  use of Recovery Act funds by employing data analytics, specifically to  provide predictive analysis capability to help oversight entities focus limited  government oversight resources, based on risk indicators such as  programs previously identified as high-risk, high-dollar-value projects,  past criminal history of key parties involved in a project, and tips from  citizens; and  in-depth fraud analysis capability using public information to identify  relationships between individuals and legal entities.

The ROC served as a centralized independent repository of tools,  methods, and expertise for identifying and mitigating fraud, waste, and  mismanagement of Recovery Act funds and the associated parties  through the use of such predictive and other analytic technologies. The  Recovery Board’s assets supporting the ROC include human capital,  hardware, data sets, and software. (See fig. 1 for a description of the  ROC’s assets.)

Subsequent legislation expanded the Recovery Board’s mandate to  include oversight of other federal spending, including those funds  appropriated for purposes related to the effects of Hurricane Sandy. In  addition to expanding its authority, the legislation extended the  termination date of the Recovery Board from September 30, 2013, to  September 30, 2015. Figure 2 illustrates the timeline of legislation  authorizing the Recovery Board and any corresponding appropriations.

section_title: The ROC Has Provided Valuable Analytic Capabilities to the Oversight Community
paragraphs: As we reported in our July 2015 testimony describing the progress made  in the initial implementation of the DATA Act, the ROC has provided  significant analytical services to its clients, including many OIGs, in  support of their antifraud and other activities. Specifically, on the basis of  the ROC’s client-service performance data that we reviewed, as part of  the ROC’s analysis supporting investigations and audits, the ROC  researched roughly 1.7 million entities associated with $36.4 billion in  federal funds during fiscal years 2013 and 2014 at the request of various  OIGs and other entities. As described below, examples of such  research include Appalachian Regional Commission OIG audits of high- risk grantees and Department of Homeland Security OIG oversight of  debris-removal contracts following Hurricane Sandy. The largest single  user of ROC assistance over this time was the Appalachian Regional  Commission OIG in fiscal year 2012 and the Department of Homeland  Security OIG in fiscal years 2013 and 2014 (see fig. 3).

The ROC developed specialized data-analytic capabilities to better  ensure federal spending accountability. Since January 2012—after the  Recovery Board’s mandate was expanded to address federal funds  beyond those authorized by the Recovery Act—over 50 federal OIGs and  agencies have asked for assistance from the center. Two major tools the  ROC used on behalf of the OIGs included (1) link analysis and (2)  unstructured text mining:  Link analysis assists analysts in making connections by visually  representing investigative findings. Link-analysis charts visually depict  how individuals and companies are connected, what awards an entity has  received, and how these actors may be linked to any derogatory  information obtained from multiple data sets. Such tools, when combined  with enhanced Geographic Information System capabilities, enable ROC  analysts to conduct geospatial analysis by displaying data from multiple  data sets on maps to help them make linkages and discover potential  problems. (See figs. 4 and 5 for an example of link analysis and two  visualizations of the data.) Although link analysis can be applied to a wide  range of subjects, the ROC often applied this tool to issues that involved  law-enforcement-sensitive data that the Recovery Board had authority to  handle.

The figure below shows an example of a request made by a federal  agency to investigate Subject Company 1 as a delinquent federal debtor.  Analysis by the ROC included checking entities identified against relevant  events and associations, which include debarments, criminal history, and  other factors. The initial review of Subject Company 1 determined that it  was the recipient of an award under the Recovery Act totaling $6.4 million  from a federal government agency. Further review of this company  determined that it was not registered in the System for Award  Management and had not previously received any federal awards. ROC  analysts identified a news article that explained that this company had  been created as a joint venture between Subject Company 2 and an  individual, Subject 1. Analysis of Subject Company 2 revealed that four of  its employees were previously indicted for fraud in 2006 and three of  them were placed on the Excluded Parties List System, debarring them  from receiving federal contracts.

As part of the same analysis as in figure 4, the ROC determined Subject  1 was listed as the Registered Agent of 42 companies with vague names  in a variety of industries. Geospatial analysis, represented in figure 5  below, determined that 15 of the companies were registered at the  individual’s home address in Florida. The other 27 companies were  registered in Gary, Indiana, at the same address as Subject Company 1.

Geospatial analysis identified the address as a vacant lot in an industrial  area.

In another example, the Environmental Protection Agency OIG used the  ROC’s data visualizations of a link analysis that identifies relationships  among entities involved in activities such as collaborating to commit  fraud. An Environmental Protection Agency OIG official said that the  visualization of these relationships made it easier for juries to understand  how entities had collaborated in wrongdoing.

The ROC’s unstructured/structured text mining tools were developed to  proactively identify high-risk entities. This tool uses key words or phrases  to rapidly filter through thousands of documents and pinpoint high-risk  areas to uncover trends and conduct predictive analysis across agencies,  programs, and states and to identify and assign weights to risk factors or  concepts.

The Appalachian Regional Commission OIG used the results of the  ROC’s unstructured text-mining analyses to identify the highest-risk  grantees for review by analyzing text from A-133 Single Audit data to  search for indications of risk, such as when a material finding was  identified in the audit. A Single Audit includes an audit and an  opinion on compliance with legal, regulatory, and contractual  requirements for major programs as well as the auditor’s schedule of  findings and questioned costs. The unstructured text tool could be  directed to identify entities such as grantees that had previous  negative audit findings and that therefore could represent a higher risk  for using grant funding. This approach allowed the Appalachian  Regional Commission OIG to better identify grantees subject to risk  and facilitate the establishment of risk based priorities to allocate audit  and investigative resources. According to a commission OIG official,  this allowed the OIG to establish risk-based priorities to allocate audit  and investigative resources.

In addition to these examples, OIGs highlighted using the ROC’s analytic  capabilities to identify fraud, waste, and abuse in federal spending in the  following ways:  In fiscal year 2013, the Department of Homeland Security OIG  submitted 104 entities receiving debris-removal contracts totaling  $329 million from 32 cities in New York and New Jersey to the ROC  for further research. The ROC analysts’ review was forwarded to the  department OIG for appropriate investigative or audit follow-up  actions. ROC analysts also provided a risk analysis of these entities to  the department OIG for use in planning future audits. Findings  submitted to the department OIG included identification of the  following:

Debris-removal firms whose owners had federal and state tax  liens.

Firms previously listed on the Excluded Parties List System,  indicating potential financial problems.

Two companies that received contracts despite having filed for  Chapter 7 bankruptcy in December 2010 and having federal tax  liens totaling more than $1 million since 2011.

Organizations with previous fraudulent activities receiving debris- removal contracts from cities where there was an indication the  company heads had relationships with city officials.

In part on the basis of these findings, the Department of Homeland  Security OIG opened three criminal investigations involving Hurricane  Sandy Public Assistance program funds, and the Department of  Homeland Security OIG Emergency Management Office conducted four  Hurricane Sandy–related audits.

The ROC assisted the Department of Housing and Urban  Development OIG with information confirming allegations that a loan  guarantee specialist had sold HUD-owned properties for less than fair  market value to shell companies that he owned and operated, stealing  over $843,000 in federal funds. Due in part to the analysts’ efforts, the  employee pleaded guilty to wire fraud for his involvement and was  sentenced to 26 months in jail.

section_title: Treasury Decided Not to Transfer the ROC’s Assets but Has an Opportunity to Transfer Additional Information That Could Benefit the Do Not Pay Center Business Center
subsections: section_title: Treasury Decided Not to Transfer the ROC’s Assets, Citing Cost, Lack of Investigative Authority, and Other Reasons
paragraphs: In May 2015, Treasury officials told us that the department did not plan to  exercise its discretionary authority to establish a data-analysis center or  expand an existing service under the DATA Act. Officials explained that  transferring the ROC assets would not be cost-effective or add value to  Treasury operations that identify, prevent, and recover improper  payments and identified the following principal concerns regarding the  utility of transferring ROC assets:

Hardware. Treasury officials viewed hardware, such as monitors and  servers, as being feasible to transfer, but raised questions about  whether it was cost-effective to do so because the ROC’s hardware is  aging, lessening the value of these assets. In addition, they noted that  hardware requires software support contracts to be functional, and as  discussed below such contracts are not transferrable.

Human capital (personnel). Federal personnel rules would not allow  a direct transfer of ROC staff to Treasury. Instead Treasury would  have to advertise and hire for these positions using the competitive  hiring process, which can be time-consuming. In addition, because  some ROC personnel were term-limited hires or contractors, a  competitive hiring process would not guarantee that ROC staff would  ultimately be selected for employment.

Data sets. The ROC obtained access to federal datasets through  memorandums of understanding (MOU), which neither Treasury  officials nor ROC officials believed could be transferred. Instead  Treasury would have to negotiate new MOUs with the federal agency  that owned a data set Treasury wished to use. Commercially procured  data sets also are not transferrable but would instead have to go  through a procurement process.

Software contracts. Because the Recovery Board extended its  software contracts on a sole-source basis when it was reauthorized 2  years ago, Treasury would need to use a competitive procurement  process to obtain these data-analytic tools again. Such processes can  be time-consuming and lengthy.

In July 2015, Treasury’s Fiscal Assistant Secretary testified before the  House Committee on Oversight and Government Reform’s Subcommittee  on Government Operations and Subcommittee on Information  Technology and addressed the point mentioned above that while the  DATA Act authorized Treasury to transfer the Recovery’s Board’s assets,  the act did not transfer the Recovery Board’s authorities to Treasury. For  instance, the Recovery Board was granted law enforcement authorities  available under the Inspector General Act of 1978, which allowed the  Recovery Board to negotiate relevant access so that the ROC could  handle, analyze, and store law-enforcement-sensitive data, including  evidence to support grand jury investigations. Similarly, the Recovery  Board had special hiring authority that allowed it to select and employ  term-limited hires, which provided the Recovery Board greater flexibility in  selecting individuals with specific technical expertise and experience.  Treasury officials noted that the DATA Act did not transfer the specific  mission of the Recovery Board to Treasury, and that, combined with the  absence of law-enforcement authority, created a barrier to fulfilling an  identical role as that of the ROC.

section_title: Despite Identified Challenges, Treasury Has an Opportunity to Transfer Additional Information to the Do Not Pay Center Business Center
paragraphs: Although Treasury officials identified cost and other practical challenges  to transferring ROC assets, it has an opportunity to transfer information  and documentation that could support Treasury’s efforts to prevent  improper payments—particularly, information on the design of data  sharing agreements and requests for software contracts for analytic tools.  Treasury officials told us that they believe the ROC’s most-valuable asset  is its expertise and said they sought opportunities to informally leverage  the ROC knowledge base in several ways. These efforts centered on  sharing knowledge between the ROC and Treasury’s Do Not Pay Center  Business Center (DNP), which assists federal agencies in preventing  improper payments and leverages some of the same analytical  methodologies as the ROC. Some of these efforts include the following:

Leveraging the knowledge of ROC staff by applying their skills to  similar analytic challenges facing DNP. For example, officials  stated that the current Director of Outreach & Business Process for  DNP is the former Assistant Director for Data and Performance  Metrics at the Recovery Board. Her responsibilities at the Recovery  Board included the assessment and testing of several prototype  systems to support the work of the ROC and its external users in the  oversight community. The capabilities of these systems were very  similar to the capabilities of the DNP systems, in that entity names  were matched against open-source databases to identify high-risk  vendors. Officials also noted that another Recovery Board employee  was hired to DNP, where she uses her knowledge of the root causes  of improper payments to help agencies utilize DNP services more  efficiently.

Documenting business processes, procedures, and lessons  learned. DNP is also working with the Recovery Board to document  business processes and procedures, and lessons learned, as  appropriate, in order to incorporate best practices into Treasury’s  improper-payment prevention infrastructure. Treasury officials  provided documentation of the timeline for obtaining information from  the ROC through several meetings and indicated that they were in the  process of documenting this information.

Treasury officials said they considered DNP as a possible host of the  ROC’s assets but ultimately concluded that the transfer of ROC assets to  Treasury would not be cost-effective or add value to Treasury’s efforts.  Officials explained that Treasury already provides services, such as those  provided by DNP and Treasury’s Philadelphia Financial Center to  agencies and OIGs to assist in the identification, prevention, and recovery  of improper payments. In addition, we note that while Treasury and the  ROC were similar in that both sought to address improper and potentially  fraudulent payments, there are differences in the particular types of  challenges addressed by both entities. For instance, as part of its  mission, DNP scrutinizes various data sources at the preaward,  prepayment, payment, and postpayment stages and analyzes them for  indications of potential improper payments and fraud. It does this  regularly and on a large scale, matching up to $2.5 trillion in payments  each year. DNP’s primary tools for doing this include batch matching  payment information to various excluded parties and other “bad-actor”  lists, and conducting analysis on payment files to examine irregularities,  such as duplicates or the same unique identifier associated with different  names. The ROC also used data-matching techniques to identify risk, but  it generally applied this technique to issues other than payment data,  such as assisting law-enforcement investigations to identify instances  when several entities were collaborating to commit fraud. Treasury  officials have noted that the DATA Act did not grant Treasury the same  authorities that the Recovery Board had to support law-enforcement  efforts. See figure 6 for a summary of DNP and ROC key activities.

While Treasury has taken some steps to transfer expertise to DNP, it may  be missing an opportunity to transfer other information and  documentation from the ROC to DNP. In May 2014, Recovery Board  officials provided Treasury with a transition plan that outlined its assets,  including the data sets used by the ROC. The plan indicated that the  Recovery Board had used MOUs with the federal agency owning certain  data sets to arrange access to the data.

We note that some of the ROC’s documentation—particularly the MOUs  that it had to develop to gain access to certain data sets—represent  expertise that may be transferred to supplement DNP’s resources and  help support its mission; Treasury might benefit by reconsidering its  decision not to assume some of these assets. For example, Treasury is  responsible for developing MOUs for data sharing with original source  agencies and periodically reviewing the MOUs to determine whether the  terms are sufficient. The development of data-sharing agreements is  difficult and time-consuming. The Recovery Board maintains information  of potential use to Treasury in this regard—namely, it currently retains  copies of all MOUs between the Recovery Board and the original source  agency. Some information will be archived or destroyed when the  Recovery Board sunsets. These documents may provide Treasury with a  template for future data-sharing agreements—for instance, by providing  language on how data might be shared, secured, used, and disposed of  that the agency owning the data found acceptable.

In addition, as part of procuring the software to develop the ROC’s  analytic capabilities, Recovery Board staff worked with the General  Services Administration to draft requests for proposals that included  technical specifications for the software. This documentation along with  other guidance or technical information that the ROC developed or  retained could serve as templates as DNP expands its capabilities over  time. Standards for Internal Controls in the Federal Government provides  guidance on the importance of managers achieving results through  effective stewardship of public resources. Taking advantage of the  opening created by the DATA Act to expand its data-analysis capabilities  by transferring the expertise gained through the operation of the ROC  could assist DNP in its mission to reduce improper payments. In addition,  documenting the rationale for any future decisions on transferring  information and documentation would ensure transparency and would be  consistent with Standards for Internal Controls in the Federal Government  guidance on recording and communicating information, including to  external stakeholders that may have a significant effect on the agency  achieving its goals.

section_title: The ROC’s Dissolution Creates a Capability Gap for the Oversight Community That It Could Begin to Mitigate through Developing a Legislative Proposal
paragraphs: The ROC provided analytic services to its clients, including many OIGs, in  support of their audits and investigations supporting fraud prevention and  detection. As part of an oversight mission, these entities are often  required to improve the efficiency and accountability of federal spending  and address fraud, waste, and abuse. However, because Treasury  currently does not plan to transfer the assets of the ROC, the center’s  users will need to consider alternatives when the Recovery Board closes.  Some large OIGs that previously used the ROC told us that they intend to  develop their own analytic capabilities. For instance, Department of  Homeland Security OIG officials said they hired analysts familiar with link  analysis and the relevant software as well as rebidding contracts in an  attempt to replicate some of the resources currently offered at the ROC.  Expanding the analytic capabilities of OIGs could help to strengthen the  rigor of oversight, allow OIGs to develop tools that are the most useful for  their portfolios, and broaden the types of audit and investigative activities  OIGs can undertake. However, it is unknown whether OIGs developing  these capacities on their own may lead to potential duplication and  fragmentation as well as whether the expansion of these capabilities  across many entities would offer the same level of expertise and  efficiency that OIG officials obtained from the ROC. In addition, such an  expansion could also be duplicative if each OIG purchased the same  types of software and support resources, which may not be the most  efficient use of federal funds.

While OIGs with the financial resources to do so may pursue replication  of the ROC’s tools, the ROC’s termination may have more effect on the  audit and investigative capabilities of some small- and medium-sized  OIGs that do not have the resources to develop independent data  analytics or pay fees for a similar service, according to some OIG  officials. According to these officials, the loss of the ROC’s analytical  capabilities could also result in auditors and investigators working much  longer to research the same types of linkages as opposed to verifying the  information that the ROC could provide more efficiently and in a shorter  time frame.

According to CIGIE officials, maintaining a centralized data-analytics  center like the ROC might help reduce unnecessary duplication of effort  across the OIG community, and help ensure that all OIGs continue to  have these resources at their disposal, especially the small- to medium- sized offices that do not have the funding to obtain separate capabilities.  Established by the Inspector General Act of 2008, CIGIE currently  provides oversight resources and guidance to the OIG community and  has taken steps to expand the analytic capabilities of the OIGs. For  instance, CIGIE developed a virtual platform that allows OIG community  members to both contribute and use shared resources such as  algorithms, best practices, models, and support documentation. While  these resources are helpful, the ROC provided more advanced,  customized data-analytics services to the OIGs, and also allowed them to  leverage ROC software that otherwise would not have been available.

In 2013, CIGIE explored the viability of assuming some of the ROC’s  assets as a way to provide some additional analytic capabilities to the  OIG community. At the time, CIGIE estimated that it would cost about $10  million per year to continue to operate the ROC. Because CIGIE is  primarily funded by membership dues, CIGIE determined the additional  cost to operate the ROC would be too burdensome for the organization.  A CIGIE official indicated the organization has continued to look for  opportunities to provide centralized data-analytic resources to OIGs.  However, this official said that, given its financial resources (about $6.5  million in operating funds in fiscal year 2016), even if CIGIE were able to  do so, this capability would be at a significantly scaled-back level  compared to the ROC.

Through the DATA Act, Congress provided Treasury the option to transfer  the ROC’s assets. The act specifically identifies improving the efficiency  and transparency of federal spending and the reduction and prevention of  improper payments as functions of a data analysis center or expanded  service, if Treasury chose to establish or expand one. In this regard, the  Chairmen and Ranking Members of the Senate Committee on Homeland  Security and Governmental Affairs and the House Committee on  Oversight and Governmental Reform wrote a joint letter to the Secretary  of the Treasury in July 2015 expressing their concern that the ROC’s  powerful analytical capabilities would be lost at the end of the fiscal year,  and underscored their interest in preserving these capabilities. In  highlighting the ROC’s evolution since the Recovery Act to assume  multiple roles in improving efficiencies in federal spending, the  committees stressed that the ROC’s various data-analytics capabilities  are essential to detect and prevent fraud and reduce improper payments.  Specifically, the committees noted that federal agencies agree fraud  detection and prevention could be significantly improved with greater  access to data and analytical tools, such as those provided by the ROC.

A legislative proposal that explicitly articulates the relative costs and  benefits of developing an analytics center with a mission and capabilities  similar to the ROC could help Congress decide whether to authorize and  fund such an entity. Given its close connection to the oversight  community, and the research it has already undertaken pertaining to the  ROC, CIGIE is a logical entity to develop that proposal. If it were to do so,  CIGIE could identify and recommend the resources needed—particularly  in terms of employees and technology—to establish a ROC-like entity  under its auspices. A proposal might also outline the data-analytic  services that center could offer the OIG community and the potential  results those services might provide. In addition, a proposal could outline  any additional authorities, such as the ability to handle law-enforcement- sensitive data—that Treasury noted was a barrier for DNP to provide  similar services to the ROC. That element of the proposal would help  ensure such a new entity would effectively support the oversight  community in matters related to law enforcement. By creating a legislative  proposal, CIGIE could thus present Congress the detailed information  Congress would need to make an informed decision about the merits of  creating a CIGIE-led data-analytics center.

CIGIE officials stated that they have not developed such a proposal  absent specific direction from Congress, but these officials expressed  concerns about the effect of the September 30, 2015, sunset of the  Recovery Board on the OIG community and, as noted above, have  sought options within their current budget to increase analytic resources  available to OIGs. Further, CIGIE officials stated that with Congress’s  support they could develop such a proposal, which would be intended to  (1) expand analytic resources for the oversight community and (2) help  refine the tools Congress and the oversight community use to address  improper payments and fraud, waste, and abuse.

section_title: Conclusions
paragraphs: Agencies seeking to address improper payments and fraud, waste, and  abuse face challenging prospects, especially in an environment in which  estimated improper payments rose by $19 billion to $124.7 billion in fiscal  year 2014. To help address such challenges, agencies need  sophisticated capabilities to help narrow the window of opportunity for  improper payments, including fraud. Such capabilities include data- analytic tools such as those that permit Treasury to perform large-scale  analysis of payment data at DNP, as well as the ROC’s link analysis and  unstructured-text-mining tools that identify and target risk and that, in  conjunction with the Recovery Board’s investigative authority, aid the  government in preventing and reducing improper payments. Although  cost and other challenges may limit the viability of transferring certain of  the ROC’s assets to Treasury, other assets—especially information and  documentation that could serve as templates for data sharing or  developing the technical specifications for procuring additional software— may assist DNP as it expands its services and capabilities to address  improper payments. The ROC’s May 2014 transition plan may serve as a  basis for Treasury to further assess whether certain data sets could be of  assistance to DNP, and documentation of MOUs could help Treasury  more quickly replicate such arrangements.

Such action by Treasury will not ultimately prevent some loss of  capabilities for the oversight community as DNP and the ROC generally  serve different communities of users and deploy their analytic tools to  address different types of problems. Thus, maintaining a separate  centralized form of analytic and investigative support for the oversight  community would help prevent OIGs from losing valuable tools useful for  targeting oversight resources in a data-driven, risk-based manner. In  addition, a centralized analytics resource could help prevent a potentially  inefficient use of funds that could result if OIGs proceeded to duplicate  similar oversight tools upon the loss of the ROC. Further, a centralized  analytics resource could help maintain high-quality analyses by ensuring  regular use of those tools and expertise. Given that congressional  oversight committees have shown substantial interest in the ROC’s  capabilities, recognized its value in helping combat fraud, waste, and  abuse in federal spending, and demonstrated intent in preserving this  value for its users, a legislative proposal could begin the process of  reestablishing a ROC-like capability to help OIGs sustain their oversight  of federal expenditures.

section_title: Matter for Congressional Consideration
paragraphs: To help preserve a proven resource supporting the oversight community’s  analytic capabilities, Congress may wish to consider directing CIGIE to  develop a legislative proposal to reconstitute the essential capabilities of  the ROC to help ensure federal spending accountability. The proposal  should identify a range of options at varying scales for the cost of analytic  tools, personnel, and necessary funding, as well as any additional  authority CIGIE may need to ensure such enduring, robust analytical and  investigative capability for the oversight community.

section_title: Recommendation for Executive Action
paragraphs: To capitalize on the opportunity created by the DATA Act, we recommend  that the Secretary of the Treasury reconsider whether certain assets— especially information and documentation such as MOUs that would help  transfer the knowledge gained through the operation of the ROC—could  be worth transferring to DNP to assist in its mission to reduce improper  payments. Additionally, the Secretary should document the decision on  whether Treasury transfers additional information and documentation and  what factors were considered in this decision.

section_title: Agency Comments and Our Evaluation
paragraphs: We provided Treasury, CIGIE, and the Recovery Board with a draft of this  report for review and comment. Treasury and CIGIE provided written  comments, and the Recovery Board did not provide official comments on  our draft report.

In its written comments, which are reproduced in appendix II, Treasury  concurred with our recommendation that it should consider additional  knowledge transfers from the ROC to assist in the DNP’s mission to  reduce improper payments and will document its rationale and final  decision in this regard. In its response, Treasury noted that it has taken  steps to preserve the knowledge gained through the operation of the  ROC, including hiring ROC personnel. Furthermore, Treasury noted that it  has a robust program in place that is meeting the needs of federal  agencies in preventing, reducing, and recovering improper payments  including DNP and the Philadelphia Financial Center.

In its written comments, which are reproduced in appendix III, CIGIE  agreed that the ROC provided valuable assistance to many OIGs in  support of their investigative, audit, evaluation, and inspection efforts and  this support will be missed when the Recovery Board closes. In its  response, CIGIE noted that the OIG community has long recognized the  importance of using a variety of techniques, including data analysis, to  assist in its oversight responsibility and there may be efficiencies  achieved in the development of analytics capabilities by CIGIE that could  support the entire OIG community. CIGIE stated that it has already  undertaken steps to develop an array of scalable options for such data- analytic capabilities with appropriate regard to both the costs and benefits  of such options and the current needs of the OIG community. However, to  expand these efforts, it would need additional resources to develop and  maintain data-analytic activities. CIGIE also stated that it is essential that  CIGIE have a steady stream of funding for it to develop and maintain any  kind of data-analysis function.

Treasury, the Recovery Board, and CIGIE also provided technical  comments that were incorporated into the report, as appropriate.

We are sending copies of this report to relevant congressional  committees, the Secretary of the Treasury, the Chair of the Council of the  Inspectors General on Integrity and Efficiency (CIGIE), and the Chair of  the Recovery Accountability and Transparency Board (Recovery Board).  This report will also be available at no charge on the GAO website at  http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-6722 or bagdoyans@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV.

section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: To determine the analytic value of the Recovery Operations Center’s  (ROC) assets and capabilities to the oversight community, we interviewed  Recovery Accountability and Transparency Board (Recovery Board)  officials who worked on ROC operations. We also obtained  documentation on the types of data sets, analytic tools, and other  capabilities the ROC offers to its primary users—namely, the oversight  community, which included the Offices of Inspector General (OIG) but  also other government entities tasked with ensuring the appropriate use  of federal funds, such as law-enforcement agencies and sometimes  agency programs. To gather information on how the oversight community  used the ROC’s assets, we developed criteria to select ROC users to  interview based on agency size and, based on an analysis of client- service data from fiscal years 2014 through March 2015, including the  frequency and consistency with which the organizations used the ROC.  On the basis of these criteria, we interviewed officials from the OIGs of  the Department of Homeland Security, the Appalachian Regional  Commission, the Environmental Protection Agency, the Department of  Housing and Urban Development, the Export-Import Bank, the National  Science Foundation, the United States Postal Service, and the  Department of Justice, as well as officials from the National Intellectual  Property Rights Coordination Center.

To examine the Department of the Treasury’s (Treasury) plans for a  transfer of ROC assets, we interviewed Treasury officials responsible for  making decisions on transferring the ROC’s assets as well as Recovery  Board officials for their observations on transition activities undertaken by  Treasury. We reviewed relevant transition-plan documents developed by  the Recovery Board that included milestones and guidelines for the  transition of ROC assets, which they provided to Treasury. We also  reviewed documentation from the Recovery Board on the ROC’s  resources, including hardware, software contracts, data sets, and human  capital, as well as information on its staffing levels over time, to develop a  complete picture of the capabilities that Treasury could obtain through a  transition.

To evaluate the effect of the ROC’s capabilities on its audit and  investigative user communities, we reviewed documentation from the  Recovery Board on the ROC’s outcomes, how its clients made use of its  resources, and what they achieved. We also conducted interviews with  OIGs to understand under what circumstances they used the ROC’s  assets. We analyzed these interviews, characterizing themes that were  similar and different based on the size of the OIG, the frequency with  which the OIG used the ROC, and whether the OIG has any in-house  data-analytics capabilities. We also discussed plans the OIGs had to  replace any ROC capabilities should Treasury opt not to assume all of the  ROC’s assets. We also interviewed the Council of the Inspectors General  on Integrity and Efficiency (CIGIE) officials to obtain their perspectives on  how the closure of the ROC may affect the oversight community. We also  reviewed their budget information and their estimate of the cost of ROC  resources and budget information. We did not verify the accuracy of  CIGIE’s estimate of the cost of ROC resources and did not conduct an  analysis of whether CIGIE’s budget appears to be sufficient for covering  these costs.

section_title: Appendix II: Comments from the Department of the Treasury

section_title: Appendix III: Comments from the Council of the Inspectors General on Integrity and Efficiency

section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact

section_title: Staff Acknowledgments
paragraphs: In addition to the contact mentioned above, the following staff members  made significant contributions to this report: Joah Iannotta, Assistant  Director; Lauren Kirkpatrick, Analyst-in-Charge; Giny Cheong; Beryl  Davis; Peter Del Toro; Kathleen Drennan; Vijay D’Souza; Colin Fallon;  Shirley Hwang; Maria McMullen; Paula Rascona; Brynn Rovito; and  Andrew Stephens.

section_title: Related GAO Product
paragraphs: DATA Act: Progress Made in Initial Implementation but Challenges Must  be Addressed as Efforts Proceed. GAO-15-752T. Washington, D.C.: July  29, 2015.


Question-summary annotations: questions: question: What services does ROC provide to OIG?
answer: The Recovery Accountability and Transparency Board's (Recovery Board) Recovery Operations Center (ROC) provided significant analytical services primarily to Offices of the Inspector General (OIG) to support antifraud and other activities.

question: Why did Congress initially establish the Recovery Board?
answer: Congress initially established the Recovery Board to oversee funds appropriated by the American Recovery and Reinvestment Act of 2009.
child_questions: question: How did Congress expand the Recovery Board's mandate?
answer: Subsequently, it expanded the Recovery Board's mandate to include oversight of other federal spending, and most recently through the Digital Accountability and Transparency Act of 2014 (DATA Act) authorized the Department of the Treasury (Treasury) to transfer ROC assets to Treasury by September 30, 2015, when the Recovery Board closes.

question: What was the scope of ROC's research in FY2012 and FY2013?
answer: On the basis of the ROC's client-service performance data that GAO reviewed, the center researched roughly 1.7 million entities associated with $36.4 billion in federal funds in fiscal years 2012 and 2013.

questions: question: Why doesn't Treasury plan to transfer the ROC's assets?
answer: Treasury does not plan to transfer the ROC's assets, such as hardware and software, citing cost, lack of investigative authority, and other reasons.
child_questions: question: How could Treasury assist agencies in preventing improper payments?
answer: However, Treasury could transfer additional information to its Do Not Pay Center Business Center (DNP), which assists agencies in preventing improper payments.

question: How could data-sharing agreement documentation help the DNP efforts?
answer: For instance, transferring documentation of data-sharing agreements, which can be difficult and time-consuming to establish, could serve as a template for DNP efforts to expand the number of data sets it uses to identify improper payments.

question: What factors determine the viabiliity of transferring ROC assets?
answer: Although cost and other challenges may limit the viability of transferring certain of the ROC's assets to Treasury, other assets—especially those that could serve as templates for negotiating access to and procuring additional data—may assist DNP as it expands its services and capabilities.

questions: question: What resources will ROC's users use after the closure of the Recovery Board?
answer: Specifically, officials from some large OIGs that have used the ROC told GAO they intend to develop their own analytical capabilities. However, officials from some small- and medium-sized OIGs said they do not have the resources to develop independent data analytics or pay for a similar service, thus foregoing the ROC's capabilities.
child_questions: question: To what extent can CIGIE offer services previously administered by ROC?
answer: The Council of the Inspectors General for Integrity and Efficiency (CIGIE) could reconstitute some of the ROC's analytic capabilities and has explored options to do so. However, CIGIE officials stated that CIGIE does not currently have the resources to accomplish this reconstitution.

question: How could the center's essence be preserved for the benefit of the users?
answer: A legislative proposal that articulates for Congress the relative costs and benefits of developing an entity with a mission and capabilities similar to the ROC could be an appropriate first step in preserving the essence of the center's proven value to its users.
child_questions: question: To what extent has CIGIE explored this proposed idea?
answer: CIGIE officials stated that they have not developed such a proposal absent congressional direction, but noted that they support Congress's expressed interest in preserving and expanding analytic resources for the oversight community.

questions: question: What ROC data did GAO review?
answer: GAO reviewed documentation on the ROC's assets, a transition plan developed by the ROC, and its performance data from fiscal year 2012 through March 2015.
child_questions: question: On what basis did GAO interview ROC users?
answer: On the basis of factors such as frequency of requests for assistance and agency size, GAO interviewed various ROC users about their views.

question: What other officials did GAO interview?
answer: GAO also interviewed Treasury and CIGIE officials to obtain their perspectives on the ROC's capabilities and its future status.