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. 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. 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. 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 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.