Prior to 1996, agencies generally did not have the authority to adjust civil monetary penalty maximums that were established in statute. Congress would occasionally adjust individual penalties or specific groups of penalties through various statutes but not all civil penalties. As a result, many penalties had not been changed for decades. When the Federal Civil Penalties Inflation Adjustment Act of 1990 (the 1990 Act) was enacted, Congress noted in the “Findings” section of the legislation that inflation had weakened the deterrent effect of many civil monetary penalties. The stated purpose of the 1990 Act was “to establish a mechanism that shall (1) allow for regular adjustments for inflation of civil monetary penalties; (2) maintain the deterrent effect of civil monetary penalties and promote compliance with the law; and (3) improve the collection by the federal government of civil monetary penalties.” However, the act did not give agencies the authority to adjust their civil monetary penalties for inflation. In 1996, Congress enacted section 31001(s)(1) of DCIA, amending the 1990 Act to require agencies to issue regulations adjusting their covered penalties for inflation. The 1990 Act as amended by DCIA required agencies with covered penalties to adjust them by regulation published in the Federal Register by October 23, 1996, and at least once every 4 years thereafter. The 1996 Inflation Adjustment Act amendment limited the first such adjustment to 10 percent of the penalty amount. It required specific calculation and rounding procedures to be followed and excluded penalties under certain statutes (e.g., the Occupational Safety and Health Act of 1970, the Social Security Act, the Internal Revenue Code of 1986, and the Tariff Act of 1930). However, as we reported in March 2003, the 10 percent cap on initial adjustments prevented some agencies from fully adjusting for inflation in the hundreds of percentages since last set or adjusted by Congress. The 1990 Act was further amended in 2015 to improve the effectiveness of civil monetary penalties and to maintain their deterrent effect. Specifically, the Inflation Adjustment Act requires: 1. agencies to adjust each civil monetary penalty with an initial catch-up adjustment through an interim final rulemaking (IFR) in the Federal Register, no later than July 1, 2016, and to take effect no later than August 1, 2016; 2. agencies to include in the annual AFRs, submitted under OMB Circular A-136, Financial Reporting Requirements, information about the civil monetary penalties within the agencies’ jurisdiction, including the inflation adjustment of the civil monetary penalty amounts; and 3. OMB to issue guidance to agencies for implementing the inflation adjustments. In response to the Inflation Adjustment Act, in February 2016, OMB issued OMB Memorandum M-16-06, Implementation of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, for agencies implementing the civil monetary penalty inflation adjustment requirements of the Inflation Adjustment Act and, in October 2016, revised OMB Circular A-136 to include guidance to federal agencies for including inflation adjustments in annual financial reporting. Consistent with OMB guidance for implementing inflation adjustments, federal agencies are responsible for identifying the civil monetary penalties that fall under the statutes and regulations they enforce. Agencies with questions on the applicability of the inflation adjustment requirement to an individual penalty should first consult with their offices of general counsel and then seek clarifying guidance from OMB if necessary. In addition, agencies may request OMB concurrence that they be allowed to adjust the amount of a civil monetary penalty by less than the amount required under the Inflation Adjustment Act (a reduced catch- up adjustment determination), if they demonstrate that the otherwise required increase of the penalty or penalty range would have a negative economic effect or that the social costs would outweigh the benefits. Consistent with the Inflation Adjustment Act, agencies should consult with OMB before proposing a reduced catch-up adjustment determination. We confirmed with OMB that it did not receive any requests from agencies to be allowed to adjust the amount of a civil monetary penalty by less than the required amount in 2016. Of the 52 federal agencies reviewed, we determined that 49 federal agencies were required to publish IFRs with the initial catch-up inflation adjustment amounts in the Federal Register. We excluded three agencies—the International Trade Commission and Postal Regulatory Commission based on their determination that they are not subject to the Inflation Adjustment Act provisions, and the Tennessee Valley Authority based on its determination that it currently has no civil monetary penalties to assess or enforce. We found that 34 of the 49 federal agencies subject to the Inflation Adjustment Act published IFRs with the initial catch-up inflation adjustment amounts in the Federal Register by the July 1, 2016, deadline. In addition, 9 of the 15 remaining agencies made the required publication after the July 1, 2016, deadline set by the Inflation Adjustment Act and by December 31, 2016. The remaining 6 agencies had not made the required publication as of December 31, 2016. Because of the complex nature of the initial catch-up inflation adjustments, OMB staff from the Office of Federal Financial Management, and the Labor Branch emphasized to us that its preference was for federal agencies to take the necessary time to publish accurate and complete initial catch-up inflation adjustments through IFRs, even if agencies were not able to meet the Inflation Adjustment Act publication deadline. In light of the challenges agencies faced in publishing on time and their efforts to publish accurate and complete initial catch-up adjustments, we are reporting on agencies that published these adjustments as of December 31, 2016; however, we do not consider these agencies to be in compliance with the July 1, 2016, deadline set by the Inflation Adjustment Act. The remaining 6 agencies subject to the Inflation Adjustment Act that did not publish IFRs with the initial catch-up inflation adjustment amounts by December 31, 2016, in the Federal Register were the 1. Merit Systems Protection Board (MSPB), 2. National Aeronautics and Space Administration (NASA), 3. National Endowment for the Arts (NEA), 4. General Services Administration (GSA), 5. National Transportation Safety Board (NTSB), and 6. U.S. Department of Agriculture (USDA). As a result of our inquiries, 3 of these federal agencies, MSPB, NASA, and NEA, subsequently published their initial catch-up inflation adjustment amounts in the Federal Register in June 2017. GSA officials told us that GSA had difficulties coordinating internally to timely submit its IFR and that, as of July 31, 2017, the projected timeframe to publish the initial catch-up inflation adjustment amounts in the Federal Register is within the next 90 days. In addition, NTSB officials stated that although NTSB has the statutory authority to assess civil penalties for violations, it has never sought to impose civil penalties. Thus, NTSB originally determined that it did not have to publish an initial catch-up inflation adjustment. However, as a result of our inquiries, NTSB officials told us that NTSB now plans to publish its initial catch-up inflation adjustment amounts in October 2017. USDA officials stated that USDA is in the process of preparing and reviewing a draft rulemaking and plans to begin its clearance process to submit an initial catch-up inflation adjustment rulemaking for publication in the Federal Register in 2017. Although GSA, NTSB, and USDA state that they plan to publish catch-up inflation adjustments in the Federal Register, it has now been over a year since the July 1, 2016, publication deadline set by the Inflation Adjustment Act. Without timely adjustments of their civil monetary penalties, there is an increased risk that agencies’ civil monetary penalties are not keeping pace with inflation. Civil monetary penalties are a key method of regulatory enforcement, providing federal agencies authority to punish violators and serving as a deterrent to future violations. Civil monetary penalties can lose their ability to punish willful and egregious violators appropriately and to serve and protect the public as a deterrent to future violations if not timely adjusted for inflation. Figure 1 summarizes the status as of December 31, 2016, of the publication of the initial catch-up inflation adjustments for civil monetary penalties for the 52 federal agencies that we reviewed. Further details of each federal agency’s status are provided in appendix II. Under the Inflation Adjustment Act and OMB Circular A-136, section II.5.11, Civil Monetary Penalty Adjustment for Inflation, federal agencies are directed to report in the 2016 AFRs information about the civil monetary penalties within agencies’ jurisdiction, including the catch-up inflation adjustment of the civil monetary penalty amounts, and federal agencies must report this information if the agencies, or their subbureaus or divisions, enforce any civil monetary penalties. Of the 52 federal agencies that we reviewed, we found that 9 agencies are not subject to the requirements to report civil monetary penalties information in the AFR. Of the remaining 43 agencies, we found that 32 agencies reported information in the 2016 AFRs about their civil monetary penalties, including the catch-up inflation adjustment of the civil monetary penalty amounts, as directed by OMB guidance. The other 11 federal agencies did not report civil monetary penalty catch-up inflation adjustment information in the 2016 AFRs, as required by the Inflation Adjustment Act and consistent with OMB guidance. Officials from 8 of the 11 federal agencies told us that although their agencies had the authority to assess or enforce penalties within their jurisdictions, they had not actually assessed or enforced any civil monetary penalties during the reporting period. Some of these officials indicated that they interpreted the terms “assess” and “enforce” in the implementing guidance, and “enforce” in the reporting guidance, to mean that they imposed a civil monetary penalty. Therefore, they took the position that their agencies did not need to report civil monetary penalties information in the 2016 AFRs because they did not impose any civil monetary penalties during the reporting period.