In 1978, Congress passed the Inspector General Act, creating Inspector General offices in 12 federal agencies. This followed growing reports of serious and widespread breakdowns in agencies’ internal controls. These new OIGs were established as independent and objective offices within their respective agencies to promote economy, efficiency, and effectiveness in government programs and operations and to prevent and detect fraud and abuse. In addition, they were created to keep agency heads and Congress fully informed about problems and deficiencies in program operations, as well as needed corrective action. Over the years, the act has been amended to increase the number of inspectors general. The President, with the advice and consent of the Senate, appoints inspectors general at cabinet-level departments and other large agencies, including HHS. The inspectors general at smaller, independent agencies and other federal entities are appointed by the heads of their organizations and have essentially the same authorities and duties as those appointed by the President. Presently, there are 28 inspectors general appointed by the President and 29 appointed by their agency heads. Inspectors general hold a unique place in the executive branch of government. They report to and are subject to the general supervision of their agency heads, but carry out their duties independently. In addition, they have reporting obligations to both the heads of their agencies and Congress. Those that are presidentially appointed are among the few such appointees that are to be selected “without regard to political affiliation and solely on the basis of integrity and demonstrated ability.” To help maintain their independence and fulfill their mission—which often involves being publicly critical of their own departments—inspectors general must familiarize their departmental colleagues with their special role. Because they are charged with independently protecting the integrity of federal programs, inspectors general must be impartial in fact and appearance. Government Auditing Standards, effective in January 2003, call for auditors to “be free, both in fact and appearance from personal, external, and organizational impairments to independence.” These standards also require that auditors “avoid situations that could lead reasonable third parties with knowledge of the relevant facts and circumstances to conclude that the auditor is not capable of exercising objective and impartial judgment . . ..” Given that their independence and impartiality is so critical, inspectors general need to be sensitive to how their actions might be perceived and interpreted by their staffs, the administration, Congress, and the public. About 300 of the approximately 1,600 HHS OIG employees are employed in its Washington D.C. headquarters. The remainder work in its 8 regional offices and 85 field offices in all 50 states. The OIG consists of five components, or major units, each headed by a deputy inspector general. The office is led by 13 Senior Executive Service level employees, who all work in headquarters, and about 60 GS-15 level employees. About two- thirds of the GS-15 employees are spread across the various components in headquarters with the remaining third located in the OIG’s regional offices. Consistent with the act, the OIG maintains the Office of Audit Services (OAS) and the Office of Investigations (OI). They each represent about 40 percent of the OIG’s budget. OAS is responsible for auditing a variety of HHS health care programs and generally spends about 80 percent of its resources on projects related to the Medicare and Medicaid programs. Its findings can result in program improvements and the return of overpayments to the federal government. In addition, OAS provides audit support to OI. OI investigators typically pursue allegations of criminal conduct that they receive from contractors that process Medicare claims, state Medicaid Fraud Control Units, officials involved in administering HHS’s many grant programs, and others. When investigators find evidence of potential wrongdoing, they refer the matter to DOJ for possible prosecution or the OIG may opt to impose other sanctions. The OIG has established three additional components to enable it to fulfill its mission. The Office of Evaluation and Inspections (OEI) conducts short-term management evaluations of HHS programs that generally involve significant expenditures and services to beneficiaries or in which important management issues have surfaced. Its reports are expected to identify opportunities for improvement in departmental programs. While OAS may audit the same federal programs examined by OEI, the scope of OEI studies is typically broader and would more likely involve the use of surveys, interviews, and other qualitative research methods. A relatively small component, OEI represents about 10 percent of the office’s resources. The Office of Counsel to the Inspector General (OCIG) provides legal services to the OIG. Among other things, it renders advisory opinions to health care providers and develops model industry guidance for compliance with relevant laws and regulations. It also has several sanctions at its disposal to penalize those who abuse HHS programs. Finally, the Office of Management and Policy (OMP) is responsible for the administration of the office, which includes overseeing the budget, supporting the office’s information technology needs, and working with the media. It is also responsible for the OIG’s human resource management activities, but obtains significant personnel support from the department’s centralized Program Support Center. OCIG and OMP each represent about 5 percent of the OIG’s budget. The OIG plays an instrumental role in identifying and investigating individuals and entities that may have abused HHS programs. It may make referrals to DOJ for possible prosecution under applicable criminal statutes. In addition, health care providers who violate federal laws and regulations may face a variety of civil sanctions. The OIG may make use of the False Claims Act—the federal government’s primary civil remedy for false or fraudulent claims—and refer such matters to DOJ. The act imposes substantial penalties on those who knowingly submit false claims to Medicare and other federal programs. If a provider has filed a false claim that DOJ opts not to pursue through the use of the False Claims Act, the OIG may impose other sanctions, such as civil monetary penalties (CMP), against that health care provider. CMPs are also imposed for other types of improper conduct, such as violations of statutory prohibitions on “kickbacks” in connection with patient referrals. The OIG also can assess CMPs against hospitals for “patient dumping,” that is, failing to provide appropriate treatment to patients presenting a medical emergency. The amount of the CMP imposed is related to each provider’s specific violation. The OIG may also exclude health care providers from participating in Medicare, Medicaid, and other federal health programs if they have, for example, been convicted of a criminal offense related to Medicare—including health care fraud or patient abuse and neglect—or had their license suspended or revoked. OCIG may also opt to negotiate corporate integrity agreements with health care providers. Although the OIG focuses the majority of its attention on health care programs, its activities extend to other areas as well. For example, the OIG has made the detection, investigation, and prosecution of absent parents who fail to pay court-ordered child support a priority. The OIG works with other federal, state, and local agencies to expedite the collection of these payments. Parents who repeatedly fail to honor such obligations are subject to criminal prosecution. The OIG’s recent activities with respect to parents who have defaulted on their child support payments resulted in 152 convictions and more than $7 million in court-ordered criminal restitution in fiscal year 2002. We examined the independence that was reflected in the Inspector General’s decision-making during her tenure. In addition, we reviewed personnel changes that she initiated and evaluated her judgment in several instances. We interviewed appropriate staff, including the Inspector General herself, and examined relevant documentation. Current and former OIG headquarters employees frequently expressed concerns about the Inspector General’s independence. These concerns centered on several incidents—some of which were widely reported by the media. Employees also identified other audits and investigations that they felt may have suffered from inappropriate management intervention. We concluded that the following four incidents involved actions on the part of the Inspector General that at least contributed to the perception of a lack of independence. In the spring of 2002, the OIG was scheduled to begin an audit of the Florida Retirement System. The objective was to evaluate whether the state appropriately charged the federal government for the pension expenses of state agency employees who help administer federal programs. The auditors specifically wanted to determine whether funds designated as federal contributions to the retirement system were used to provide for pension expenses, and whether the federal contribution rates were reasonable. The OIG’s first meeting to discuss this audit with Florida pension officials was scheduled for April 16, 2002. The day before, the Chief of Staff to the Florida governor placed an urgent call to the Office of the HHS Secretary, requesting that the audit be delayed to accommodate the new pension department director who was going to assume his position in a few weeks. This call was ultimately referred to the Inspector General, who instructed her Deputy for Audit Services to delay the audit for a few days. The Inspector General subsequently ordered a second delay until July. Due to subsequent scheduling problems affecting both OIG and Florida pension staff, the audit team did not begin its work until September 2002. Allegations made by OIG employees and the media suggested that the federal government’s contributions to the Florida retirement system could be excessive and that a report on these contributions might affect the outcome of the Florida governor’s race that November. When asked about the incident, the Inspector General stated that she agreed to temporarily postpone the audit until she could determine the appropriate response to the request and did not have any involvement in subsequent delays. She also insisted that audits are frequently delayed, that her decision to delay the audit was not politically motivated, and that, even if the audit had begun in April, it would not have been completed before the election. She told us that, in hindsight, she could have handled the situation differently by referring the request to the Deputy for Audit Services, but she did not believe she acted inappropriately in these circumstances.