The 31 DFEs we surveyed were established in various statutes as commissions, boards, authorities, corporations, endowments, institutions, agencies, and administrations. Their heads may be individuals, such as a chairperson or a director, or groups, such as commissions or boards. Individuals and members of commissions and boards are generally appointed by the President and confirmed by the Senate, but members for some entities are set statutorily without additional appointment and confirmation. For instance, the Pension Benefit Guaranty Corporation’s statute sets the corporation’s board members as the Secretary of Labor, Secretary of the Treasury, and Secretary of Commerce, all of whom are appointed to their cabinet positions by the President and confirmed by the Senate. Each year, the Office of Management and Budget (OMB) determines and publishes a list of DFEs and their heads. OMB uses the definition under the IG Act, as amended, for the head of a DFE, which is any person or persons designated by statute as the head of the DFE or if no such designation exists, the chief policymaking officer or board of the DFE. It is important to note that the term governing body for purposes of this report is broad and therefore could include members in addition to the entity head under the IG Act, as amended. Table 1 shows the 31 DFEs categorized by organizational structure and entity head for 2008. Governance can be described as the process of providing leadership, direction, and accountability in fulfilling an organization’s mission, meeting its objectives, and providing stewardship of public resources, while establishing clear lines of responsibility for results. Accountability represents the processes, mechanisms, and other means—including financial reporting and internal controls—by which an entity’s management carries out its stewardship and responsibility for resources and performance. Commonly accepted governance practices for federal entities and nonprofit corporations have significantly evolved since the financial scandals at large public companies in the early 2000s and passage of the Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act outlined a framework for more effective corporate governance and introduced reforms to public company financial reporting and auditing. Although the act strengthened corporate governance only in the private sector, the federal government and nonprofit sectors have also strengthened governance and internal control requirements and practices. According to OMB, passage of the Sarbanes-Oxley Act served as an impetus for the federal government to reevaluate its current policies related to internal control over financial reporting and management’s related responsibility. The Inspector General Act of 1978 (1978 IG Act) created offices of inspectors general at major departments and agencies to prevent and detect fraud and abuse in their departments’ and agencies’ programs and operations; conduct audits and investigations; and recommend policies to promote economy, efficiency, and effectiveness. In 1988, the 1978 IG Act was amended to establish additional IG offices in certain federal entities designated by the legislation. Generally, the DFE IGs have the same authorities and responsibilities as those established by the 1978 IG Act, but there is a clear distinction—they are appointed and removed by their agency heads rather than by the President and are not subject to Senate confirmation. The 31 DFE IGs make up about half of all IG offices established under the IG Act, as amended, and in fiscal year 2007 were responsible for oversight with respect to gross agency budgets that ranged from $10 million to $80.2 billion. The IG Reform Act of 2008 (2008 Reform Act) was enacted on October 14, 2008, to, among other things, enhance the independence of the inspectors general. (We have reported several times on independence issues and challenges for the IG community.) Specifically, the 2008 Reform Act provides that both the President and DFE heads must give written reasons to Congress for removing an IG at least 30 days prior to removal. The 2008 Reform Act mandates that IGs shall submit their budget to their entity’s head, who shall include, among other things, an aggregate request for the IG in the entity’s budget proposal to the President. The President must include in the budget of the U.S. government submitted to Congress a separate statement of each IG’s budget request, and the amount requested by the President for each IG. Before the act, only the presidentially appointed IGs and three DFE IGs had such transparency over their budgets. Regarding pay, the presidentially appointed IGs have been paid at Executive Level IV, while the DFE IGs have been paid at the GS-15 grade, Senior Executive Service level, or equivalent salary level determined by their entity. The 2008 Reform Act requires that all presidentially appointed IGs be paid at Executive Level III, plus 3 percent, and all DFE IGs shall be paid at a level at or above the level of a majority of senior executives of the respective DFEs. The 2008 Reform Act was effective upon passage, but it provided up to 180 days to establish the Council of Inspectors General on Integrity and Efficiency. While Congress has historically weighed many political and policy factors in deciding on DFE governance structures, and applied specific accountability requirements to achieve its original objectives, current private sector guidance says that governing bodies need to be large enough to accommodate the necessary skills set, but still small enough to promote cohesion, flexibility, and effective participation. DFEs vary in their statutory size and structure as well as their statutory purpose and requirements for governance. Survey responses showed that the size of DFE governing bodies ranges from 1 to 24 members. Thirteen of the 31 DFEs had at least one vacancy in their governing body. At 2 of the DFEs— the Consumer Product Safety Commission and National Labor Relations Board—active members were outnumbered by vacancies. Only 7 of 29 DFE governing bodies have committees that deal with governance or oversight. Committees can enhance the overall effectiveness of the governing body by ensuring focus and oversight in areas of concern. In order to improve governance and accountability at federal agencies, a variety of laws covering a range of management and administrative practices and processes have been enacted. Of 12 key governance and accountability statutes that we selected for review, 13 of 31 DFEs responded that they are statutorily required to comply with all 12 statutes. Based on the responses of the remaining 18 DFEs, the applicability of the 12 statutes varied, with 1 DFE—the Corporation for Public Broadcasting—stating that it is not subject to any of the 12 key governance and accountability statutes. Some entities that said they are not statutorily required to comply with the statutes indicated that they have adopted the provisions voluntarily or implemented an alternative mechanism to attain the objectives of the statute. Finally, in relation to the governing body’s effectiveness, 19 of the 29 DFEs surveyed reported having orientation programs for the new governing body, while only 10 DFEs reported having ongoing training for governing body members. Orientation and training programs for governing body members aimed at providing information on governance practices and the regulatory environment are important for the DFE governing body’s ability to carry out its responsibilities effectively and efficiently. Corporate governance guidelines in the private sector state that governing bodies should establish committees that will enhance their overall effectiveness by ensuring focus and oversight for areas of concern. Our work shows that few DFEs reportedly have audit committees, none have an ethics committee, and only a limited number have orientation and ongoing training for governing body members, which is inconsistent with the governance practices established in other sectors such as public companies or nonprofits. Congress has over many decades weighed a variety of political and policy considerations, such as political independence and accountability, efficiency, and specific entity missions, in deciding on DFE governance structures, and applied specific accountability requirements, such as governing body appointment and removal authorities and governing body public meeting requirements, to achieve its original objectives. Current private sector guidance says that governing bodies need to be large enough to accommodate the necessary skills set, but still small enough to promote cohesion, flexibility, and effective participation. The DFE’s governing bodies range in size from 1 to 24 members. For comparison, according to the 2006 edition of the annual Directors’ Compensation and Board Practices report by The Conference Board, the median board size of publicly traded corporations, depending on the industry, ranges from 9 to 11 members. Of the 31 DFEs, only the Corporation for Public Broadcasting, Legal Services Corporation, and United States Postal Service statutorily have 9 to 11 governing body members. Three entities— the National Science Foundation, Smithsonian Institution, and Appalachian Regional Commission—statutorily have more than 11 members, while the remaining 25 DFEs have 8 or fewer governing-body members. (See table 2.) At the time of our review, vacancies reportedly outnumbered active members on the governing bodies of the Consumer Product Safety Commission (CPSC) and the National Labor Relations Board. In recent years, Amtrak and the Federal Election Commission have also had significant vacancies. In January 2008, four of the six commissioner seats for the Federal Election Commission were vacant. Over the past several years the number of active board members at Amtrak has fluctuated, and at least twice—between December 2007 and March 2008 and between October 2003 and June 2004—the board had only two voting members (excluding the Secretary of Transportation or his designee). Without the minimum number of members required to conduct business, a board may be legally unable to make certain decisions. For instance, the Federal Election Commission’s enabling legislation requires that four of its six commissioners be present for certain entity business to be carried out. Also, the National Endowment for the Humanities and the National Endowment for the Arts governing bodies, which are single-member governing bodies, are currently vacant. According to The Conference Board’s corporate governance guidelines, corporate boards should be structured so that the composition and skill set of a board is appropriate based on the corporation’s particular challenges and strategic vision.