Inspectors General: Independence of Legal Services Provided to IGs
Released: 1995-03-01T00:00:00

Letter

Background

Under the IG Act, OIGs are to provide agency heads and the Congress with independent assessments of the management and operation of agencies and their programs. Specifically, the IGs’ mission is to audit and investigate agency programs and operations with an eye toward (1) promoting economy, efficiency, and effectiveness and (2) detecting fraud, waste, and abuse.

The IG Act provides IGs with broad authority to hire employees with the knowledge and skills needed to make the requisite assessments. The act also grants IGs significant discretion regarding matters of OIG structure and composition. The IGs initially obtained necessary audit and investigative expertise from the internal auditors and investigators transferred to the newly established OIGs and legal services from their agencies’ OGCs. Over the years, presidentially appointed IGs have increasingly placed their primary source of legal services in their own offices, and only five still have principal legal advisors organizationally located in their agencies’ OGCs.

During consideration of the bill that became the Federal Acquisition Streamlining Act of 1994, the Senate considered amending the IG Act to require presidentially appointed IGs to place their attorneys in their own offices. Proponents raised concerns about the independence of legal advice provided to IGs by OGC attorneys and argued that reliance on such attorneys compromises IGs’ independence. Others argued that IGs are best able to determine how to obtain legal services and, thus, opposed requiring IGs to place attorneys in their offices. A compromise measure, which ultimately became section 6007 of the Federal Acquisition Streamlining Act of 1994, requires us to review the independence of legal services provided to IGs appointed by the President under the IG Act.

Objectives, Scope, and Methodology

Consistent with section 6007 of the Federal Acquisition Streamlining Act of 1994, the objectives of our work were to (1) review the independence of legal services being provided by OGC attorneys to IGs appointed by the President under the IG Act and (2) compare the independence of these legal services to those provided in agencies where the IG’s principal source of legal advice is located in the OIG. Appendix I identifies the 27 OIGs included in our review.

We interviewed the five IGs whose principal legal advisors are located in their agencies’ OGCs—those at DOD, EPA, FEMA, HHS, and Treasury—and seven of the IGs whose principal legal advisors are located in OIGs—those at the United States Information Agency (USIA) and the Departments of Education, Housing and Urban Development (HUD), Interior, Labor, Transportation, and Veterans Affairs. Our interviews focused on the role of the IGs’ attorneys and their working relationships with the agencies’ OGCs, the extent of the IGs’ control over the activities of their attorneys, and the framework in which legal services are provided.

In addition, to determine whether there are differences between the OGC and OIG attorneys currently providing legal services to IGs that might suggest that those located in OGCs are less able than those located in OIGs to provide independent legal services, we used a questionnaire to gather information from all 27 IGs on how IGs obtain legal services as well as on the composition, supervision, and budgetary independence of the legal staffs providing services to IGs; interviewed selected OIG staff and IGs’ principal legal advisors; and compared the mechanisms through which OGC and OIG attorneys provide legal services. Finally, we obtained information on the volume and nature of legal services provided to the IGs over the last 2 fiscal years and on the frequency and resolution of disagreements between the IGs’ attorneys and other agency attorneys during this period. We did not attempt to evaluate the quality of the legal services provided by either OGC or OIG attorneys and therefore did not review legal products prepared for IGs by either OGC or OIG attorneys.

Our work was performed in accordance with generally accepted government auditing standards from November 1994 through January 1995.

We discussed our findings and recommendations with the IGs at Treasury and FEMA and have incorporated their comments where appropriate.

Organizational Location of OGC Attorneys Gives Rise to Independence Concerns

The General Counsel serves as an agency’s chief legal official and, as such, advises the agency head and articulates the agency’s positions on legal matters. The IG serves as an independent evaluator of the agency’s programs and operations and reports on the evaluations to the agency head and the Congress. Occasionally, attorneys advising the agency head and those advising the IG may view legal issues differently. As a result, the IG’s attorneys may be placed in the position of offering legal advice or preparing opinions that differ from those of senior OGC officials, including the General Counsel. When the differences cannot be resolved by the staffs, or by the General Counsel and IG themselves, the IG may elevate them to the agency head during the audit resolution process and require further legal assistance.

Most of the officials we interviewed acknowledged the potential for IGs whose attorneys are located in agencies’ OGCs to receive legal advice based on the views of General Counsels or senior OGC officials and to compromise their own independence on audits and investigations for which legal services are significant. These officials believe that actions taken by senior OGC officials or the attorneys’ own concerns about such matters as professional relationships or career advancement could make it difficult for OGC attorneys to provide independent legal advice to the IG. Further, we were told by some attorneys now located in OIGs that when they were located in OGCs, they had felt pressure to conform their views to positions favored by senior OGC officials. At one of the agencies in our survey, we were told that OGC had once directed the IG’s attorney in writing not to provide legal advice to the IG on a particular issue. At this agency, the IG’s legal advisors are now located in the OIG.

Most IGs have eliminated concerns associated with their attorney’s organizational location by placing their attorneys in the OIGs. Three of the five IGs with OGC attorneys have implemented MOUs with their agencies’ General Counsels to alleviate the concerns associated with their attorneys’ organizational location. The remaining two IGs do not receive legal services from OGC attorneys under the conditions existing at the other three agencies and are not satisfied with their arrangements.

IGs Have Increasingly Used Authority Under the IG Act to Place Their Attorneys in OIGs

The IG Act specifically authorizes IGs to select, appoint, and employ such officers and employees as may be necessary for carrying out their functions, powers, and duties. According to the legislative history, the act provides such explicit authority because of the possibility that agencies might deny IGs the authority to hire needed staff in order to hamper their operations. The legislative history also clearly indicates that this broad hiring authority applies to attorneys. Accordingly, IGs may obtain legal services from OGC attorneys or from attorneys located in their own offices at their discretion.

Our survey reveals a steady trend over the past decade toward IGs obtaining legal services from attorneys located in their own offices. As illustrated in appendix II, 33 percent of established OIGs obtained legal services from attorneys located within the OIG in 1985, 58 percent in 1990, and 81 percent—or 22 of 27—in 1994.

As illustrated in appendix III, the trend results from existing IGs changing the location of their attorneys as well as from new IGs placing their attorneys in their own offices. Of the nine IGs whose attorneys were located in OGCs in 1980, six have changed the location of their attorneys since 1990. In addition, of the five IGs whose offices were established between 1990 and 1994, all but FEMA placed attorneys in their offices within their first year of operation.

We interviewed the IGs at Education, HUD, Interior, Labor, Transportation, USIA, and Veterans Affairs. At four of these seven agencies—Education, Labor, Transportation, and USIA—the IGs changed the organizational location of their primary source of legal services from OGC to the OIG because of specific unsatisfactory experiences with their OGC arrangements. The IGs were not confident that OGC attorneys could provide independent advice consistent with their needs. At Interior, the attorneys providing legal services to the IG were relocated to the OIG at the request of the Solicitor who believed for management reasons that attorneys providing legal services exclusively to the OIG should be located in that office. Finally, newly appointed IGs at HUD and Veterans Affairs placed their attorneys in the OIG in order to satisfy policy objectives or personal preferences. These IGs are satisfied with the arrangements under which they obtain legal services.

Three of the Five IGs With OGC Attorneys Have Taken Steps to Alleviate Concerns Associated With Their Attorneys’ Location

Three IGs who obtain legal services from OGC attorneys—those at DOD, EPA, and HHS—have implemented MOUs to alleviate the potential that their attorneys’ location will limit the independence of the advice they receive and affect their own independence. The three IGs are satisfied with their current arrangements. These MOUs assert the independence of the OIG and address the specific conditions from which the potential effects on independence arise. They address personnel management responsibilities including the selection and appraisal of attorneys, the protection of sensitive information, and the provision of legal advice.

With respect to personnel, the three MOUs require the General Counsel to establish a separate division within OGC so that attorneys providing legal services to the IG do not also provide legal services to other agency components. Several officials emphasized the importance of placing the IG Division physically in or near the OIG rather than in OGC. To varying degrees, they also require IG concurrence in the selection of the legal staff and prohibit the transfer, reassignment, assignment of additional duties to, or termination of such staff without IG concurrence. The three MOUs also provide for IG involvement in performance appraisals. Under the HHS MOU, the General Counsel is to seek the IG’s views on the principal legal advisor’s annual performance evaluation and bonus. The DOD and EPA MOUs provide that the principal legal advisor is to be evaluated by the General Counsel with the concurrence of the IG.

The IGs at DOD, EPA, and HHS and their attorneys explained how the MOUs have been implemented. Each agency’s OGC has a separate division comprised of attorneys who provide legal services exclusively to the IG as reflected, to varying degrees, in the position descriptions of the IGs’ principal legal advisors. The IGs at the three agencies also participate in the selection and appraisal of their attorneys, consistent with the provisions of their respective MOUs. For example, the DOD IG and General Counsel jointly selected the IG’s current principal legal advisor, and the HHS IG provides the General Counsel with an annual written appraisal of the principal legal advisor’s performance.

With respect to sensitive information, the MOUs in effect at the three agencies authorize the IGs to limit their communication about particular matters to their OGC attorneys where broader communication would undermine or impair their function. The OGC attorneys providing legal services to the IG are not to communicate any information received from the OIG about such matters without specific authorization from the IG.

Finally, the MOUs in effect at DOD, EPA, and HHS contain provisions addressing the relationship between the IGs and their attorneys and the General Counsels and their staffs. The three MOUs provide for the IGs’ attorneys to seek the expertise of other attorneys who may be knowledgeable about particular agency programs and activities. The MOUs also contemplate that the IGs may disagree with opinions of the General Counsels and that, if requested, the IGs’ attorneys will provide assistance to the IGs under such circumstances. While the MOUs specify procedures for the resolution of certain differences between the IGs’ attorneys and other attorneys, they do not bind either the IGs or their attorneys to OGC’s views.

For example, the MOU in effect at HHS provides that the IG is free to disregard the General Counsel’s advice and that legal opinions provided by the IG’s attorneys that conflict with the legal positions of the Department are to state that they are solely the positions of the IG Division. The DOD MOU states that if the IG disagrees with the General Counsel’s legal opinion and requires assistance from the IG’s attorney, the attorney may provide whatever legal assistance the IG requires to carry out IG responsibilities.Echoing the MOU, the position description for the DOD IG’s principal legal advisor states that the attorney is to provide legal advice through the IG to the most senior DOD officials on any aspect of the IG’s authority or activities and on DOD’s programs and operations. While high-level disagreements are infrequent, the OGC attorneys for the three IGs explained that they have disagreed with their OGC colleagues and advised the IGs accordingly.

Like the IGs whose principal legal advisors are in their own offices, the IGs at DOD, EPA, and HHS are satisfied with their current arrangements. They believe that these arrangements facilitate necessary communication with OGC as well as the resolution of audit findings and do not believe that the advice they receive is affected by their advisors’ organizational location. They also emphasized that they would exercise their authority under the IG Act to place their attorneys within the OIG if the independence of the legal services they receive became suspect or if they otherwise became dissatisfied.

Two IGs Are Concerned About OGC Arrangements

The IGs at FEMA and Treasury do not obtain legal services from OGC attorneys under the conditions that exist at DOD, EPA, and HHS. In 1984, the then nonstatutory IG and General Counsel of FEMA signed an MOU similar to those currently in effect at DOD, EPA, and HHS. However, this MOU was not implemented. The position description for the IG’s current principal legal advisor, a GS-14 attorney, includes providing assistance to the IG as only one of a myriad of duties to be performed in support of FEMA’s activities. Moreover, the attorney’s performance plan characterizes the duties in support of the IG—serving as OGC’s liaison and central clearing point for OIG matters—as “noncritical.” Consistent with the position description, the attorney provides limited services to the IG. Accordingly, OIG staff regularly obtain legal services from program attorneys. The current IG told us that he is dissatisfied with this arrangement. He told us that he would consider hiring an OIG attorney, particularly to provide experienced legal support to OIG investigators, if a GS-15 level position were vacant. In addition, he plans to discuss with the General Counsel an MOU that would ensure that dedicated attorneys are available to meet his needs and that appropriate safeguards to independence are in place.

While the OGC attorneys from whom the Treasury IG obtains legal services are dedicated exclusively to the IG and are physically located near the OIG, there is no MOU in effect to address concerns associated with the attorneys’ organizational location. Further, the position description for the IG’s principal legal advisor, which predates the establishment of a statutory IG at Treasury, contains language suggesting that the independence of the legal services provided to the IG could be limited. The IG believes that her selection and appraisal of a principal legal advisor are essential elements of a satisfactory arrangement. She is dissatisfied with the current arrangement. The Treasury IG told us that she and the General Counsel have agreed on the outlines of an MOU and will continue to discuss the matter.

Government Auditing Standards Allow Different Approaches for Obtaining Legal Services

The professional standards applicable to IGs do not require them to select one method of obtaining legal services over another and do not preclude different arrangements that reflect IGs’ preferences. Government Auditing Standards require auditors and audit organizations to be independent and to maintain an independent attitude and appearance so that opinions, conclusions, judgments, and recommendations will be impartial and will be viewed as such by third parties. To this end, they also require auditors to evaluate whether evidence is sufficient, competent, and relevant to afford a reasonable basis for findings and conclusions. An auditor’s approach to determining the sufficiency, competence, and relevance of evidence depends on the source of that evidence. In considering whether to rely on an attorney’s work, an auditor considers the attorney’s qualifications and independence, both personal and organizational.

Twenty-five of the 27 IGs in our survey currently obtain legal services in the manner they prefer. Having their primary source of legal services in the OIG helps to provide 22 IGs with confidence that their reliance on the legal advice they receive will not compromise their independence. The requirements and conditions contained in the MOUs at DOD, EPA, and HHS help to provide those IGs with similar confidence. In the final analysis, the IGs, under governing standards, must determine whether to rely on the legal advice they receive.

Composition and Duties of Legal Staffs Vary From Office to Office

During our review, we gathered information on the composition and duties of the legal staffs currently providing services to IGs to determine whether those located in OGCs differ as a group from those located in OIGs. As shown in appendix IV, the size of legal staffs supporting IGs, both in isolation and in comparison to total OIG staff, bears no relation to the location of the attorneys. The size of legal staffs varies from 1 to 19 attorneys. The median number of attorneys providing services to IGs is three. The ratio of attorneys to total OIG staff also varies widely, with no widespread correlation between the ratio and the location of the IG’s attorneys. Likewise, we found that there is no distinguishable difference between the grade levels of principal legal advisors located in OGCs and those in the OIGs. In the five agencies at which OGC attorneys provide legal services to the OIG, three (60 percent) of the principal legal advisors are in the Senior Executive Service, one is a GS-15, and one is a GS-14. In the 22 agencies where OIG attorneys provide such services, 15 of the principal legal advisors (68 percent) are in the Senior Executive Service and 7 are GS-15s. The grade levels of the OGC and OIG staff attorneys are also mixed. Appendix V contains data on the grades of the legal staffs providing services to IGs.

We also found that the nature and scope of the legal services provided to the IGs vary from office to office and are not necessarily related to the location of the attorneys. We found that IGs routinely ask their attorneys to interpret federal laws and regulations and to advise OIG staff on issues arising during audits and investigations. In agencies with programs that are particularly susceptible to fraud, the IGs are more likely to also ask their attorneys to prepare subpoenas, assist Assistant United States Attorneys with criminal litigation, and help negotiate settlements. Regardless of attorney location, IGs and their attorneys recognize that they may benefit from the assistance of other agency attorneys with expertise in particular programs. In fact, some IGs with OIG attorneys have formal agreements with their agencies’ General Counsels that provide for such assistance. While IGs’ attorneys and other agency attorneys generally enjoy cooperative relationships, differences of opinion occasionally arise. However, IGs reported few differences between IGs’ attorneys, wherever located, and senior agency attorneys during the past 2 fiscal years. Differences between attorneys were usually resolved at the staff level. Further, several IGs told us that compliance issues often arose during the audit resolution process not as differences between lawyers but as disputes between the IGs and program officials over particular facts or the application of such facts to governing law.

The way in which IGs use attorneys, wherever located, appears largely to reflect the personalities and preferences of the individual IGs. For example, several IGs use their principal legal advisors as counselors on policy and management issues. Although most of the IGs who emphasized this role during our interviews obtain legal services from OIG attorneys, some IGs’ OGC attorneys also serve in this role to some degree. Further, two IGs explained circumstances in which OIG staff who were attorneys, but not part of the legal staff, provided some legal services. Another IG whose principal legal advisor is in the OIG even suggested that as long as an IG has someone in the OIG qualified to provide legal advice and counsel, particularly on sensitive matters, the organizational location of the attorneys who provide routine legal services to OIG staff is itself of little consequence.

Conclusions

There is concern that IGs whose attorneys are organizationally located in agencies’ OGCs will not always receive independent legal advice and that their own independence will be compromised as a result. Twenty-two of the 27 IGs in our survey have eliminated the issues associated with their attorneys’ organizational location by placing attorneys in their own offices under the authority of the IG Act. Three of the five IGs who obtain legal services from OGC attorneys have implemented MOUs, which include requirements for IG concurrence in the selection and appraisal of their principal legal advisors, to alleviate the potential that their attorneys’ location will adversely affect the independence of the advice the IGs receive and erode their independence. The IGs at FEMA and Treasury do not obtain legal services from OGC attorneys under the conditions that exist at DOD, EPA, and HHS.

In addition, we found no evidence from which to conclude that the composition and duties of the legal staffs providing services to the 27 IGs are significantly different based on their organizational location. We also found that the composition and duties of the IGs’ legal staffs largely reflect the preferences of individual IGs. Accordingly, our comparison of the composition and duties of OGC attorneys advising IGs and OIG attorneys does not indicate that attorneys located in OGCs are less able than those located in OIGs to provide independent legal services to IGs.

Recommendations

To help ensure that the IGs at FEMA and Treasury receive independent legal services, we recommend that they either locate their principal legal advisors within their offices or implement MOUs with their agencies’ General Counsels containing, at a minimum, the requirements and conditions, including participation in the selection and appraisal of the principal legal advisor, in the MOUs in effect at DOD, EPA, and HHS.

We are sending copies of this report to the Chairmen and Ranking Minority Members of the Senate Committee on Governmental Affairs and the House Committee on Government Reform and Oversight. Copies are also being provided to Senator Charles Grassley, the Director of the Office of Management and Budget, the Inspectors General of the agencies included in our review, and other interested parties.

This report was prepared under the direction of Jeffrey A. Jacobson, Assistant General Counsel, who may be reached on (202)512-8261. Major contributors to this report are listed in appendix VI.

OIGs Included in GAO’s Review

Percentage of IGs With OIG Attorneys

Calendar Years in Which IGs Were First Appointed and OIGs First Employed Attorneys

Comparison of Attorney and Total OIG Staff as of September 30, 1994

Corporation for National and Community Service Department of Health and Human Services Department of Housing and Urban Development National Aeronautics and Space Administration (Table notes on next page)

Grade Levels of Attorneys Providing Legal Services to IGs as of September 30, 1994

Corporation for National and Community Service Department of Health and Human Services Department of Housing and Urban Development National Aeronautics and Space Administration (Table notes on next page)

Major Contributors to This Report

Office of the General Counsel

Accounting and Information Management Division, Washington, D.C.

Sharon O. Byrd, Senior Auditor Jackson W. Hufnagle, Assistant Director Clarence A. Whitt, Senior Accountant Charles W. Woodward, Senior Evaluator The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent.

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