Inspectors General
Activities of the Department of State Office of Inspector General Gao ID: GAO-07-138 March 23, 2007GAO was asked to review the Department of State Office of Inspector General (State IG) including its (1) organization, budget levels, and accomplishments; (2) audit and inspection coverage of the department; (3) role of inspections in the oversight of the department; (4) quality assurance process including assurance of independence; and (5) coordination of State IG investigations with the State Department's Bureau of Diplomatic Security. GAO obtained information from State IG reports, interviews, and documentation for a sample of inspections.
The State IG provides oversight of the State Department, the Broadcasting Board of Governors, and the foreign affairs community, including the approximately 260 bureaus and posts around the world, through financial and performance audits, inspections, and investigations. Over fiscal years 2001 through 2005, in terms of constant dollars, the State IG's budget has increased by 1 percent while the State Department's overall budget has increased by 50 percent. This represents a relative decrease when comparing State IG with other agencies' ratios of IG budget to total agency budget. The State IG provides oversight coverage of the areas designated as high-risk by GAO and management challenges identified by the IG, with a heavy emphasis on inspections. The State IG covers the high-risk areas of human resources, counterterrorism, public diplomacy, and information security, almost exclusively through inspections. In fiscal year 2005, the State IG's ratio of inspections to audits was over two to one, while the federal statutory IGs had a combined ratio of one inspection to every ten audits. There are fundamental differences between inspections and audits. By design, audits performed under Government Auditing Standards are subject to more in-depth requirements for the levels of evidence and the documentation supporting the findings than are inspections performed under inspection standards. Due to the significance of the high-risk areas covered largely by inspections, the State IG would benefit by reassessing the mix of audit and inspection coverage of those areas. The State IG's audit and investigative functions both had recent peer reviews of quality assurance that resulted in "clean opinions." There is no requirement for a peer review of inspections; however, during our audit the State IG began an internal quality review process for inspections but did not include reviews of information technology inspections. Independence is critical to the quality and credibility of all the work of the State IG. Two areas of continuing concern that we have with the independence of the State IG involve (1) the temporary appointment of State Department management personnel to head the State IG office in an acting IG capacity and who subsequently return to management positions, and (2) the rotation of Foreign Service staff to lead IG inspections, including many who, along with other IG staff, move to positions in department management offices. Such staffing arrangements represent potential impairments to independence and the appearance of independence under professional standards applicable to the IGs. Both the State IG and the State Department's Bureau of Diplomatic Security pursue allegations of fraud by department employees. There is no functional written agreement in place to help ensure the independence of internal departmental investigations and preclude the duplication of efforts.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-07-138, Inspectors General: Activities of the Department of State Office of Inspector General
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Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
March 2007:
Inspectors General:
Activities of the Department of State Office of Inspector General:
GAO-07-138:
GAO Highlights:
Highlights of GAO-07-138, a report to the Chairman and Ranking Member,
Committee on Foreign Affairs, and the Honorable F. James Sensenbrenner,
Jr., House of Representatives.
Why GAO Did This Study:
GAO was asked to review the Department of State Office of Inspector
General (State IG) including its (1) organization, budget levels, and
accomplishments; (2) audit and inspection coverage of the department;
(3) role of inspections in the oversight of the department; (4) quality
assurance process including assurance of independence; and (5)
coordination of State IG investigations with the State Department‘s
Bureau of Diplomatic Security. GAO obtained information from State IG
reports, interviews, and documentation for a sample of inspections.
What GAO Found:
The State IG provides oversight of the State Department, the
Broadcasting Board of Governors, and the foreign affairs community,
including the approximately 260 bureaus and posts around the world,
through financial and performance audits, inspections, and
investigations. Over fiscal years 2001 through 2005, in terms of
constant dollars, the State IG‘s budget has increased by 1 percent
while the State Department‘s overall budget has increased by 50
percent. This represents a relative decrease when comparing State IG
with other agencies‘ ratios of IG budget to total agency budget.
The State IG provides oversight coverage of the areas designated as
high-risk by GAO and management challenges identified by the IG, with a
heavy emphasis on inspections. The State IG covers the high-risk areas
of human resources, counterterrorism, public diplomacy, and information
security, almost exclusively through inspections. In fiscal year 2005,
the State IG‘s ratio of inspections to audits was over two to one,
while the federal statutory IGs had a combined ratio of one inspection
to every ten audits.
There are fundamental differences between inspections and audits. By
design, audits performed under Government Auditing Standards are
subject to more in-depth requirements for the levels of evidence and
the documentation supporting the findings than are inspections
performed under inspection standards. Due to the significance of the
high-risk areas covered largely by inspections, the State IG would
benefit by reassessing the mix of audit and inspection coverage of
those areas.
The State IG‘s audit and investigative functions both had recent peer
reviews of quality assurance that resulted in ’clean opinions.“ There
is no requirement for a peer review of inspections; however, during our
audit the State IG began an internal quality review process for
inspections but did not include reviews of information technology
inspections.
Independence is critical to the quality and credibility of all the work
of the State IG. Two areas of continuing concern that we have with the
independence of the State IG involve (1) the temporary appointment of
State Department management personnel to head the State IG office in an
acting IG capacity and who subsequently return to management positions,
and (2) the rotation of Foreign Service staff to lead IG inspections,
including many who, along with other IG staff, move to positions in
department management offices. Such staffing arrangements represent
potential impairments to independence and the appearance of
independence under professional standards applicable to the IGs.
Both the State IG and the State Department‘s Bureau of Diplomatic
Security pursue allegations of fraud by department employees. There is
no functional written agreement in place to help ensure the
independence of internal departmental investigations and preclude the
duplication of efforts.
What GAO Recommends:
GAO is making five recommendations for the State IG to (1) reassess the
proper mix of audits and inspections to ensure appropriate oversight,
(2) include reviews of information technology inspections in its
internal quality review process, (3) develop a succession planning
policy that specifies appropriate personnel to serve in an acting IG
capacity, (4) provide staffing alternatives for identifying those who
lead inspections, and (5) develop a formal agreement to coordinate
internal department investigations with the Bureau of Diplomatic
Security.
In comments on a draft of the report, the State IG agreed with two
recommendations, partially agreed with one, and disagreed with two.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-138].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Jeanette Franzel, (202)
512-9471, franzelj@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Scope and Methodology:
Background:
State IG Organization, Budgets, and Reported Accomplishments:
State IG Audit and Inspection Coverage of High-Risk Areas and
Management Challenges:
Fundamental Differences between Audits and Inspections:
State IG Quality Assurance Process, Including Assurance over
Independence:
IG Coordination with State Department Investigations:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Response:
Appendix I: A Comparison of Fiscal Year 2001 Budgetary Resources for
Selected Inspectors General and Agencies:
Appendix II: A Comparison of Fiscal Year 2005 Budgetary Resources for
Selected Inspectors General and Agencies:
Appendix III: Comments from the Inspector General, Department of State:
Appendix IV: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: State IG Audit and Inspection Coverage of High-Risk Areas and
Management Challenges for Fiscal Years 2004 through 2005:
Table 2: State Department Positions Held by Management Officials before
and after Serving in an Acting State IG Capacity from January 24, 2003,
through May 2, 2005:
Figures:
Figure 1: State IG Organization:
Figure 2: Selected State Department and State IG Resources for Fiscal
Years 2001 through 2005:
Figure 3: Distribution of State IG Onboard Staff, September 30, 2005:
Abbreviations:
DS: Bureau of Diplomatic Security:
ECIE: Executive Council on Integrity and Efficiency:
FISMA: Federal Information Security Management Act of 2002:
FTE: Full-time-equivalent:
IG: Inspector General:
IG Act: Inspector General Act of 1978, as amended:
IRS CI: Internal Revenue Service Criminal Investigation:
IT: information technology:
OMB: Office of Management and Budget:
PCIE: President's Council on Integrity and Efficiency:
State IG: Department of State Office of Inspector General:
TIGTA: Treasury Inspector General for Tax Administration:
TVA: Tennessee Valley Authority:
United States Government Accountability Office:
Washington, DC 20548:
March 23, 2007:
The Honorable Tom Lantos:
Chairman:
The Honorable Ileana Ros-Lehtinen:
Ranking Member:
Committee on Foreign Affairs:
House of Representatives:
The Honorable F. James Sensenbrenner, Jr.
House of Representatives:
This report responds to your request that we review the operations and
activities of the Department of State Office of Inspector General
(State IG), including the audit, inspection, and investigative
functions of the office. The State IG was established by section 413 of
the Omnibus Diplomatic Security and Antiterrorism Act of 1986,[Footnote
1] which amended the Inspector General Act of 1978 (IG Act),[Footnote
2] to include an independent office within the Department of State with
a mission to prevent and detect waste, fraud, abuse and mismanagement,
and to improve the efficiency, effectiveness, economy, integrity, and
accountability of the department. The IG Act created independent and
objective Offices of Inspectors General to conduct and supervise audits
and investigations.
The State IG provides oversight of the Department of State, the
Broadcasting Board of Governors, and the foreign affairs community
through audits, inspections, and investigations. The State IG performs
financial and performance audits that cover a wide range of the
department's operations, financial management, contracts and grants,
property management, and procurement. The State IG also performs
inspections of the department's approximately 260 bureaus and posts
around the world to evaluate whether policy goals and objectives are
being achieved, U.S. interests are effectively represented, posts are
operating in accordance with U.S. foreign policy, and security
vulnerabilities are identified that could compromise national security
and threaten the safety and well-being of U.S. personnel and facilities
domestically and abroad. Also, specific allegations or other
information indicating possible violations of law or regulation are
investigated by IG investigators, supported by experts from other IG
offices.
To review the activities of the State IG, our specific objectives were
to provide information regarding (1) organization, budget levels, and
reported accomplishments; (2) audit and inspection coverage of the
department; (3) the role of inspections in the State IG's oversight of
the department; (4) the quality assurance process used by the State IG,
including assurance over independence; and (5) the coordination of the
State IG's investigative activity with the department's Bureau of
Diplomatic Security. We obtained information about the State IG's
budget and staffing levels by analyzing budget data reported by the
Office of Management and Budget (OMB), and information regarding
reported accomplishments in the State IG's semiannual reports to the
Congress. We conducted interviews with State IG officials and reviewed
internal documents to obtain an understanding of the State IG's
allocation of resources and its quality assurance processes. We also
reviewed the State IG's documentation for a sample of inspection
reports.
Results in Brief:
Over fiscal years 2001 through 2005, the State IG's budget has
increased from $29 million to $32 million, which, when adjusted for
inflation, represents an increase of approximately 1 percent in
constant dollars. During the same period, the overall State Department
budget has increased from $13.7 billion to $22.4 billion, an increase
of approximately 50 percent in constant dollars adjusted for inflation.
When compared with other federal IG budgets, State IG's relative
ranking has declined in terms of its ratio of budgetary resources as a
percentage of agency budget resources between fiscal years 2001 and
2005. During these same years, the State IG's authorized full-time
equivalent (FTE) staffing level went from 289 to 314, with staff on
board at 191 at the end of fiscal year 2005. In distributing its
resources, the State IG's greatest use of staff during fiscal year 2005
was in performing inspections, which involved 38 percent of total
staff, with audits representing 28 percent of staff, and investigations
representing 9 percent. The remaining 25 percent of staff provided
administrative, personnel and legal support, and other specialized
services. The State IG's reported accomplishments over fiscal years
2001 through 2005 include the issuance of 461 inspection reports and
210 audit reports, and the closing of 252 investigative cases. The
State IG also reported $75 million in financial accomplishments and
$58.6 million in judicial recoveries and court-ordered fines and
restitutions during that same period.
The State IG provides oversight coverage of the areas designated as
high-risk by GAO and of the significant management challenges
identified by the IG through a combination of audits and inspections,
with a heavy emphasis on inspections and to a lesser extent on audits.
To illustrate, the State IG relies almost exclusively on inspections to
provide coverage for the following four areas identified both as high-
risk areas and as management challenges: human resources,
counterterrorism, public diplomacy, and information security. In the
high-risk areas and management challenges of physical security the
State IG provides coverage mostly through inspections, but includes
audits that address specific contracts and procurements for the
purchase of equipment and services. The high-risk areas and management
challenges of financial management are covered by the State IG's
financial audits and by a related component in each post inspection. As
a comparison with other IG offices, in fiscal year 2005, the State IG's
ratio of inspections to audits was over two to one, while the statutory
IGs across the federal government had a combined ratio of one
inspection to every ten audits. Due to the significance of the high-
risk areas covered largely by inspections, the State IG would benefit
by reassessing the mix of audit and inspection coverage of those areas.
There are fundamental differences between inspections and audits. For
example, inspections and audits are typically conducted under separate
standards with different basic requirements. IGs are required by the IG
Act to follow Government Auditing Standards when performing
audits.[Footnote 3] In contrast, there are no statutorily mandated
standards for inspections, although IGs are encouraged by the
President's Council on Integrity and Efficiency (PCIE) and the
Executive Council on Integrity and Efficiency (ECIE)[Footnote 4] to
follow the councils' jointly created standards, Quality Standards for
Inspections, when conducting inspections. By design, audits performed
under Government Auditing Standards are subject to more in-depth
requirements for levels of evidence and documentation supporting the
findings than are inspections performed under the Quality Standards for
Inspections. Also, auditing standards require external quality reviews
of audits, or peer reviews, on a 3-year cycle, while inspection
standards do not call for any such external reviews.
The State IG has distinct quality assurance processes that cover, in
varying degrees, its three major lines of work: audits, inspections,
and investigations. The State IG has received "clean" opinions on its
audit practice from the two external peer reviews it has received since
2001. The State IG has also implemented regular internal reviews of its
audit process. For investigations, the State IG obtained the results of
its first external quality review in November 2005. The results
included a conclusion that the State IG's investigative function was in
full compliance with PCIE Quality Standards for Investigations and the
Attorney General Guidelines For Offices Of Inspector General With
Statutory Law Enforcement Authority. The external review also suggested
improvements, which are being addressed by the IG. An external quality
review, or peer review, of the State IG's inspections is not required
under the inspection standards. However, during our audit, the State IG
established an internal program to review the quality of the inspection
practice to determine whether that work was done in accordance with the
PCIE and ECIE inspection standards. The internal review did not include
information technology (IT) inspections, and a report of the internal
review results was not yet available at the time we completed our work.
Independence is an overarching element critical to the quality and
credibility of all the work of the State IG and is at the heart of
Government Auditing Standards and the IG Act. In addition, the Quality
Standards for Federal Offices of Inspector General issued by the PCIE
and ECIE to provide an overall quality framework for all the activities
of the IG offices states that independence is a critical element of an
IG's obligation to be objective and free of conflicts of interest
whether factual or perceived. Likewise, inspection standards also
require that the inspection organization and each individual inspector
be free both in fact and appearance from impairments to independence.
The above standards recognize that personal impairments to independence
can result from having responsibility for managing an entity or
decision making that could affect operations of the entity or program
being reviewed.
Two continuing areas of concern that we have with the independence of
the State IG involve (1) the temporary appointment of State Department
management personnel to head the State IG office in an acting IG
capacity and who subsequently return to management positions, and (2)
the rotation of Foreign Service staff to lead IG inspections, including
many who, along with other IG staff, move to positions in department
management offices. For example, Foreign Service officials with the
rank of ambassador or at the ambassador level typically lead the
inspections work in accordance with the State IG's policy. Such
staffing arrangements represent potential impairments to independence
and to the appearance of independence under all applicable professional
standards. We raised concerns about these independence issues in
reports as far back as 1978[Footnote 5] and 1982.[Footnote 6]
The IG Act established an independent and objective Office of Inspector
General to conduct and supervise audits and investigations to prevent
and detect fraud, waste, abuse, and mismanagement in the State
Department.[Footnote 7] In addition to the State IG, the Bureau of
Diplomatic Security (DS) of the State Department's Office of Management
performs investigations for the department as part of its worldwide law
enforcement functions and security mission. However, there is no
functional agreement between DS and the State IG for coordinating their
investigative activities. Both the State IG and DS investigators have
responsibility for pursuing cases of passport and visa fraud that may
involve State Department employees. Other agencies with investigative
functions apart from their IGs, such as at the U.S. Postal Service and
the Internal Revenue Service, have formal arrangements between the
agency and the IG generally making the IG responsible for internal
investigations of agency employees to help ensure not only the
independence of the investigations, but also to prevent duplicative
reviews. The State IG does not have such an agreement with DS regarding
its internal investigations of department employees. Such an agreement
could help to provide independent investigations of fraud with regard
to State Department personnel, promote an efficient use of limited
resources, and prevent duplication of efforts.
Due to the risk and significance of the areas of the State Department's
operations that are largely being covered by inspections, and in light
of the increasing level of funding provided to the department, we
recommend in this report that the State IG reassess the proper mix of
audit and inspection coverage with input from key stakeholders in the
department and the Congress. In addition, to provide for a more
complete quality review, we recommend that the State IG include
inspections performed by the State IG's Office of Information
Technology (IT) in its quality review process. Also, to address our
concerns regarding independence, we recommend that the State IG work
with the Secretary of State to develop a succession planning policy
that would prohibit career Foreign Service officers or other department
management staff from heading the State IG office in an acting IG
capacity, and would remove reliance on career Foreign Service staff,
and others who routinely rotate to management offices, to lead
inspections. We also recommend that the State IG work with DS, the
State Department Office of Management, and the Secretary of State to
develop a formal written agreement to help ensure the independence and
coordination of internal department investigations.
In comments on a draft of this report the State IG agreed to include
all IG inspections, including inspections performed by IT, in its
quality review process and to work with DS and others to develop a
written agreement delineating the areas of responsibility for
department investigations. The State IG disagreed with our
recommendation to reassess the mix of audit and inspection coverage and
stated that little can be accomplished by reassessment if there are not
more auditors and more resources to perform audits. In addition, the
State IG does not disagree with our concerns about Foreign Service
officers temporarily heading the IG office in an acting capacity, but
believes that our recommendation goes too far by limiting the pool of
eligible candidates to personnel without State Department management
careers. Also, the State IG believes that ambassadors who serve as team
leaders for inspections raise a concern about the appearance of
independence but that this concern is significantly outweighed by the
overriding need for people with the experience and expertise of
ambassadors to lead inspections.
We continue to recommend that the State IG reassess the mix of audits
and inspections as a way for the IG to define the appropriate level of
oversight, reallocate current resources as appropriate, and justify any
additional resources that may be necessary. In addition, we continue to
recommend that the State IG better safeguard the independence
requirements of his office through succession planning that excludes
career department management officials from consideration for acting
State IG positions. We also continue to recommend that the State IG
inspections not be led by career Foreign Service officials,
ambassadors, or other staff who could impair the independence of the
inspection team or create the appearance of impaired independence. As
team members rather than team leaders, such staff could provide the
benefits of their experience and expertise without jeopardizing the
inspection team's independence.
Scope and Methodology:
We obtained the budget authority and the staffing levels at the State
IG office and the budget authority of the State Department for fiscal
years 2001 through 2005 by analyzing OMB budget data for those years.
Additional information on staff levels and resource distribution were
obtained from the State IG to identify trends over this period. We
identified audit, inspection, and investigative accomplishments
reported by the State IG in semiannual reports to the Congress for
fiscal years 2001 through 2005. We did not audit or otherwise verify
the dollar amounts of the financial accomplishments reported by the
State IG.
To review the IG's audit and inspection oversight coverage of the State
Department, we compared the contents of the audits and inspections
completed by the State IG in fiscal years 2004 and 2005 with the high-
risk areas designated by GAO and with the management and performance
challenges identified by the State IG. To review the investigative
coverage, we used the investigative accomplishments reported by the
State IG to show the level of investigative activity.
To obtain information about the quality control process used by the
State IG, we obtained an understanding of the internal quality review
process used by the IG. We also obtained reports of the most recent
external quality peer reviews of the State IG's audit and investigative
activities performed by other IG offices. Due to the lack of a peer
review requirement for inspections, we compared the State IG's
inspections with relevant standards related to independence, quality
control, and evidence from the PCIE and ECIE Quality Standards for
Inspections, 2005 revision, as well as the State IG's implementing
policies and procedures for these standards. We also compared relevant
inspection standards with Government Auditing Standards, and compared
additional activities of the State IG related to independence with PCIE
and ECIE Quality Standards for Offices of Inspector General, revised in
October 2003. Specifically, we gained an understanding of the types of
documentation and evidence supporting inspection recommendations
through a judgmental sample of 10 inspection reports selected from a
total of 112 inspection reports issued over fiscal years 2004 through
2005 that were not classified for national security purposes, and that
did not include inspections of the Board of Broadcasting Governors. We
did not test the reasonableness of the inspection recommendations or
otherwise re-perform the inspections. Our sample covered different
months, various team leaders, and different State Department locations.
Due to the concerns of the State IG about the confidentiality of
information sources used to complete the IG's inspections, we agreed to
limit the types of documentation subject to our review. Officials for
the IG stated that the documents not provided for our review were
memorandums with information from confidential sources. We base our
conclusions on the documents and information that we reviewed related
to our sample of inspection reports. In those examples where inspection
report recommendations lacked documented support, we verified that this
was not due to any such limitation to our review.
To review the coordination of the State IG with DS, we obtained the
annual reports issued by DS and additional information on cases of visa
fraud that were investigated during fiscal years 2004 through 2005 from
DS reports and a prior GAO report.[Footnote 8] We also compared the
coordination of investigations at the State Department with the
practices of other IG offices at the U.S. Postal Service and the
Internal Revenue Service.
We obtained comments on a draft of this report from the State IG which
are reprinted in their entirety in appendix III. A summary of the State
IG's written comments and our response are presented on page 29. We
performed our audit from November 2005 through October 2006, in
accordance with U.S. generally accepted government auditing standards.
Background:
The inspection function within the State Department originated in 1906,
when the Congress statutorily created a consular inspection corps of
five officers to inspect the activities of the U.S. consulates at least
once every 2 years.[Footnote 9] In 1924, the Congress established the
Foreign Service to replace the Diplomatic and Consular Service, and
required the officers of the newly created Foreign Service to inspect
diplomatic and consular branches, as provided under the 1906
Act.[Footnote 10] The provisions of the 1906 and 1924 acts were
repealed by the Foreign Service Act of 1946,[Footnote 11] which
required the Secretary of State to assign Foreign Service officers to
inspect the diplomatic and consular establishments of the United States
at least once every 2 years. In 1957, the State Department established
an Inspector General of Foreign Service, which carried out the
inspections of diplomatic and consular offices for the State
Department. In 1961, the Congress created a statutory Inspector General
in the State Department with duties separate from that of the Inspector
General of Foreign Service, which had been established by the State
Department. The new inspector general had the statutory responsibility
to conduct reviews, inspections, and audits of State Department
economic and military assistance programs and the activities of the
Peace Corps.[Footnote 12] Effective July 1, 1978, the statutory IG
office created in 1961 was abolished by law and all of the duties of
that office were statutorily transferred to the Inspector General of
Foreign Service.[Footnote 13] The newly designated Inspector General of
Foreign Service was tasked with carrying out the foreign assistance
program review function and the inspections of diplomatic and consular
offices that had previously been conducted by the two separate offices.
In 1978, GAO reviewed the operations of the Inspector General of
Foreign Service and determined that the IG's inspection reports lacked
substance because of the legal requirement for biennial inspections and
the exceedingly broad scope and thin coverage of each
inspection.[Footnote 14] GAO recommended that the Congress substitute
the requirement for an inspection of each diplomatic and consular post
at least every 2 years with a more flexible review schedule. GAO also
questioned the independence of Foreign Service officers who were
temporarily detailed to the IG's office and recommended the elimination
of this requirement provided by the Foreign Service Act of 1946.
In 1980, the Congress again established a statutory IG, this time to
act as a centralized unit within the State Department to include the
functions of the previous IG of Foreign Service and to perform all
audits, inspections, and investigations. Section 209 of the Foreign
Service Act of 1980 established the Inspector General of the Department
of State and Foreign Service and outlined the authority and functions
of that position in specific terms.[Footnote 15] Section 209 patterned
the State Department IG office after similar offices in other agencies
under the IG Act, but added functions from the Foreign Service Act of
1946 specific to the State Department. With regard to inspections, the
Congress directed the IG to "periodically (at least every 5 years)
inspect and audit the administration of activities and operations of
each Foreign Service post and each bureau and other operating units of
the Department of State."
In 1982, we reviewed the operations of the Inspector General for the
Department of State and Foreign Service.[Footnote 16] In that report,
we compared the differences between the Foreign Service Act and the IG
Act and noted that the 5-year inspection cycle required by the Foreign
Service Act led to problems with the IG's effectiveness by limiting the
ability to do other work. In addition, our report expressed our
persistent concerns about independence. These concerns were due, in
part, to the IG's continued use of temporarily assigned Foreign Service
officers and other persons from operational units within the department
to staff the IG office. Our report also noted that the IG had not
established a quality review system to help ensure that the work of the
office complied with professional standards, and that the IG used staff
from the State Department's Office of Security, a unit of management,
to conduct investigations of fraud, waste, and abuse. We recommended
that the Secretary of State work with the IG to establish a permanent
IG staff and discontinue its reliance on temporary staff who rotate
back to assignments in the Foreign Service or management positions. We
also recommended that the Secretary and the IG establish an
investigative capability within the IG office to enable it to conduct
its own investigations, and to transfer qualified investigators from
the Office of Security to the IG for this work.
Reacting to concerns similar to those expressed in our 1982 report, the
Congress established an IG for the Department of State through
amendments to the IG Act in both 1985[Footnote 17] and 1986.[Footnote
18] These amendments designated the State Department as an agency
requiring an IG under the IG Act and abolished the previous Office of
Inspector General of State and Foreign Service, which was created under
section 209 of the Foreign Service Act of 1980. The 1986 Act authorized
the State IG to perform all duties and responsibilities, and to
exercise the authorities, stated in section 209 of the Foreign Service
Act and in the IG Act. The 1986 Act also prohibited a career member of
the Foreign Service from being appointed as the State IG.
Since 1996, the Congress, through Department of State appropriations
acts, annually waives the language in section 209(a) of the Foreign
Service Act that calls for every post to be inspected every 5 years.
The State IG continues to inspect the department's approximately 260
posts and bureaus, and international broadcasting installations
throughout the world by applying a risk-based approach. To illustrate,
the State IG completed inspections at 223 bureaus and posts over the 5-
year period of fiscal years 2001 through 2005. These inspections
encompass a wide range of objectives, which include reviewing whether
department policy goals are being achieved and whether the interests of
the United States are being represented and advanced effectively. In
addition, the State IG performs specialized security inspections and
audits in support of the department's mission to provide effective
protection to its personnel, facilities, and sensitive intelligence
information. Therefore, while there is no requirement as a result of
the annual waiver that inspections be performed, the State IG continues
to conduct inspections as part of its plan for oversight of the
department, using a risk-based approach to identify locations for
inspections rather than the 5-year requirement.
Inspections are defined by the PCIE and ECIE[Footnote 19] as a process
that evaluates, reviews, studies, and analyzes the programs and
activities of an agency for the purposes of providing information to
managers for decision making; making recommendations for improvements
to programs, polices, or procedures; and identifying where
administrative action may be necessary. Inspections may be used to
provide factual and analytical information; monitor compliance; measure
performance; assess the efficiency and effectiveness of programs and
operations; share best practices; and inquire into allegations of
fraud, waste, abuse, and mismanagement.
The IG Act requires the IGs to recommend policies, and to conduct,
supervise, or coordinate other activities, in addition to audits and
investigations, carried out by the department for the purpose of
promoting economy and efficiency, and preventing fraud and abuse in its
programs and operations.[Footnote 20] These requirements of the IG Act
are broad enough to cover inspections, which are widely used by the IG
community. According to the IG community, inspections provide the
benefits of a flexible mechanism for optimizing resources, expanding
agency coverage, and using alternative review methods and techniques.
In fiscal year 2005, across the federal government, the statutory IGs
issued a total of 443 inspection reports compared to a total of 4,354
audit reports, a ratio of inspections to audits of about 1 to 10. As a
comparison, the State IG issued 99 inspection reports and 44 audit
reports during fiscal year 2005, or a ratio of inspections to audits of
over 2 to 1.
State IG Organization, Budgets, and Reported Accomplishments:
The State IG currently provides oversight of the Department of State,
the Broadcasting Board of Governors, and the foreign affairs community
through audits, inspections, and investigations. This work is led by
the State Department Inspector General, Deputy Inspector General,
Assistant Inspectors General for Audits; Inspections; Management,
Policy, and Planning; and Investigations, and a Director for
Information Technology. In addition, the State IG has four advisory and
support offices, which are the Office of Counsel, Congressional and
Public Affairs, Senior Advisor for Security and Intelligence, and
Coordinator for Iraq and Afghanistan. (See fig. 1.)
Figure 1: State IG Organization:
[See PDF for image]
Source: State IG.
[End of figure]
From fiscal year 2001 through 2005, the State IG's overall budget
authority went from $29 million to $32 million, which, when expressed
in constant dollars,[Footnote 21] is an increase of approximately 1
percent. (See fig. 2.) Over the same period of time, the State
Department's overall budget authority increased from $13.7 billion in
fiscal year 2001 to $22.4 billion in fiscal year 2005, an increase of
approximately 50 percent in constant dollars. When compared with other
federal IG budgets, the State IG's ranking in terms of percentage of
total agency budgetary resources decreased from eighth (0.21 percent of
total agency budgetary resources) to twelfth (0.14 percent of total
agency budgetary resources) between fiscal years 2001 and 2005. (See
apps. I and II.) The department's budgetary increases reflect, in part,
initiatives in transformational diplomacy, particularly in Iraq and
Afghanistan, and substantial increases in programs for counter
narcotics, counterterrorism, embassy construction and security, and IT.
During the same time period, the State IG's authorized FTE staff
increased from 289 in fiscal year 2001 to 314 in fiscal year 2005;
however, during 2005, the IG limited the actual onboard staffing to 191
of the 314 authorized FTEs due to budgetary constraints. This
represents a 16 percent reduction of onboard staff when compared to the
fiscal year onboard staffing level of 227 in fiscal year 2001. The
State IG has reported that its limited resources are further strained
by the significant growth in the number of department programs and
grants with mandated IG oversight and requests for joint activities
with other departments, agencies, and IG offices.
Figure 2: Selected State Department and State IG Resources for Fiscal
Years 2001 through 2005:
[See PDF for image]
Source: OMB, State IG.
[End of figure]
For fiscal year 2005, the State IG Office distributed its 191 onboard
staff as follows: 38 percent of the staff performing inspections in the
Office of Inspections and in the Office of Information Technology, 28
percent in the Office of Audits, 9 percent in the Office of
Investigations, and the remaining 25 percent in support positions to
address administrative, personnel, legal and other specialized issues.
(See fig. 3.) This distribution shows the significant emphasis that the
State IG places on inspections in relation to either audits or
investigations.
Figure 3: Distribution of State IG Onboard Staff, September 30, 2005:
[See PDF for image]
Source: State IG.
[End of figure]
Statutory IGs, including the State IG, are required by the IG Act to
summarize the activities and accomplishments of their offices and
include this information in semiannual reports provided for the
Congress.[Footnote 22] The information includes the number of audit
reports issued and the dollar amount of questioned costs, unsupported
costs, and funds to be put to better use. As defined by the IG Act,
questioned costs include alleged violations of laws, regulations,
contracts, grants, or agreements; costs not supported by adequate
documentation; or the expenditure of funds for an intended purpose that
was unnecessary or unreasonable. In addition, unsupported costs are
defined as costs that do not have adequate documentation, and funds to
be put to better use are defined as inefficiencies in the use of agency
funds identified by the IG. As an illustration of funds to be put to
better use, the State IG identified weaknesses in the department's
purchase card program that resulted in untimely purchase card payments
that precluded the department from earning rebates from the purchase
card provider.[Footnote 23]
During fiscal years 2001 through 2005 the State IG reported that it
issued a total of 210 audit reports with total financial
accomplishments of approximately $75 million. This included $37.1
million in questioned costs of which $17.9 million were unsupported
costs, and $38 million in funds to be put to better use. The
investigative activity reported over the same 5-year period included
252 cases closed and financial accomplishments of $29.4 million in
judicial recoveries, $17.6 million in court-ordered fines, and $11.5
million in court-ordered restitutions. In addition, the State IG
reported that its investigations resulted in 92 prosecutorial
referrals, 53 indictments, 52 convictions, and 42 criminal sentences.
Over the same 5-year period the State IG reported that it had issued
461 inspection reports. The State IG's semiannual reports include
summarized results of its inspection activity even though this
information is not specifically required by the IG Act. The results
vary from identification of weaknesses in operations to recommendations
for proper implementation of State Department policies. There were no
significant monetary results reported from the State IG's inspections.
State IG Audit and Inspection Coverage of High-Risk Areas and
Management Challenges:
The State IG provides oversight coverage of the department primarily
through a combination of audits and inspections, with, as shown
earlier, a heavier emphasis on inspections. Although the Congress
annually waives the requirement to conduct inspections under section
209(a) of the Foreign Service Act, State IG officials told us that
State Department management encourages the IG inspections and have
found the results very significant and useful. Therefore, the IG
continues to plan for inspections on a cyclical basis using a risk-
based approach. As a result, over the 5-year period of fiscal years
2001 through 2005, the IG completed inspections at 223 of the 260
department bureaus and posts.
We also analyzed the State IG's coverage of the areas designated as
high risk by GAO and the significant management challenges identified
by the State IG. Since 1990, we have periodically reported on
government operations, including those of the State Department that we
have designated as high risk because of their greater vulnerabilities
to fraud, waste, abuse, and mismanagement. In addition, the IGs began
the identification of management challenges in 1997 at the request of
congressional members who asked the IGs to identify the most serious
management problems in their respective agencies. This began a yearly
process that continues as a result of the Reports Consolidation Act of
2000.[Footnote 24] The act requires executive agencies, including the
State Department, to include their IGs' lists of significant management
challenges in their annual performance and accountability reports to
the President, OMB, and the Congress.
In our most recent reports of government high-risk areas issued in
January 2003[Footnote 25] and January 2005,[Footnote 26] we identified
seven such areas at the State Department. These high-risk areas were
also included in management challenges identified by the State IG. (See
table 1.) Each year the State IG's Office of Inspections includes the
management challenges identified by the IG as areas of emphasis in
inspections of the department's bureaus or missions. Some areas of
emphasis may be applicable only to embassies and other missions, while
other areas of emphasis may be applicable only to domestic entities
such as bureaus, offices, and other units.
In our review of the issues addressed by the State IG's audit and
inspection reports for fiscal years 2004 and 2005, we determined that
the State IG had provided oversight of all identified high-risk areas
and management challenges largely through inspections. The State IG
inspectors use a questionnaire during each inspection to compile the
information regarding the areas of emphasis including management
challenges identified by the IG. Each questionnaire can cover numerous
areas of emphasis, including several management challenges. Therefore,
while the State IG issued a total of 203 inspection reports over fiscal
years 2004 through 2005, these inspections addressed 605 management
challenges in the various posts, bureaus, and offices reviewed. In
addition, the State IG relies almost exclusively on the results of
inspections, as compared to audits, to cover the four high-risk areas
and management challenges related to human resources, counterterrorism,
public diplomacy and information security. (See table 1.)
Table 1: State IG Audit and Inspection Coverage of High-Risk Areas and
Management Challenges for Fiscal Years 2004 through 2005:
GAO high-risk areas[A]: Physical security and management of U.S.
facilities overseas;
Management challenges identified by the State IG[B]: Protection of
people and facilities;
Fiscal year 2004 State IG reports[C]: Audits: 27;
Fiscal year 2004 State IG reports[C]: Inspections: 98;
Fiscal year 2005 State IG reports[D]: Audits: 21;
Fiscal year 2005 State IG reports[D]: Inspections: 92.
GAO high-risk areas[A]: Enhance information technology and security,
strengthen financial management, improve performance planning[E];
Management challenges identified by the State IG[B]: Information
security;
Fiscal year 2004 State IG reports[C]: Audits: 1;
Fiscal year 2004 State IG reports[C]: Inspections: 6;
Fiscal year 2005 State IG reports[D]: Audits: 0;
Fiscal year 2005 State IG reports[D]: Inspections: 7.
GAO high-risk areas[A]: Enhance information technology and security,
strengthen financial management, improve performance planning[E];
Management challenges identified by the State IG[B]: Financial
management;
Fiscal year 2004 State IG reports[C]: Audits: 10;
Fiscal year 2004 State IG reports[C]: Inspections: 0[F];
Fiscal year 2005 State IG reports[D]: Audits: 16;
Fiscal year 2005 State IG reports[D]: Inspections: 0[F].
GAO high-risk areas[A]: Continue to right-size embassy staffing levels;
Management challenges identified by the State IG[B]: Human resources;
Fiscal year 2004 State IG reports[C]: Audits: 1;
Fiscal year 2004 State IG reports[C]: Inspections: 50;
Fiscal year 2005 State IG reports[D]: Audits: 0;
Fiscal year 2005 State IG reports[D]: Inspections: 53.
GAO high-risk areas[A]: Better manage human capital strategies;
Management challenges identified by the State IG[B]: Human resources;
Fiscal year 2004 State IG reports[C]: Audits: 1;
Fiscal year 2004 State IG reports[C]: Inspections: 50;
Fiscal year 2005 State IG reports[D]: Audits: 0;
Fiscal year 2005 State IG reports[D]: Inspections: 53.
GAO high-risk areas[A]: Strengthen the visa process through issuance of
policies and procedures as an antiterrorism tool;
Management challenges identified by the State IG[B]: Counterterrorism
and border security;
Fiscal year 2004 State IG reports[C]: Audits: 0;
Fiscal year 2004 State IG reports[C]: Inspections: 98;
Fiscal year 2005 State IG reports[D]: Audits: 2;
Fiscal year 2005 State IG reports[D]: Inspections: 92.
GAO high-risk areas[A]: Improve the management of public diplomacy
programs;
Management challenges identified by the State IG[B]: Public diplomacy;
Fiscal year 2004 State IG reports[C]: Audits: 1;
Fiscal year 2004 State IG reports[C]: Inspections: 50;
Fiscal year 2005 State IG reports[D]: Audits: 1;
Fiscal year 2005 State IG reports[D]: Inspections: 53.
GAO high-risk areas[A]: Manage the large-scale reconstruction and
nation-building programs;
Management challenges identified by the State IG[B]: Postconflict
stabilization and reconstruction;
Fiscal year 2004 State IG reports[C]: Audits: 4;
Fiscal year 2004 State IG reports[C]: Inspections: 0;
Fiscal year 2005 State IG reports[D]: Audits: 4;
Fiscal year 2005 State IG reports[D]: Inspections: 6.
Total high-risk areas and management challenges addressed by audit and
inspection reports;
Fiscal year 2004 State IG reports[C]: Audits: 44;
Fiscal year 2004 State IG reports[C]: Inspections: 302;
Fiscal year 2005 State IG reports[D]: Audits: 44;
Fiscal year 2005 State IG reports[D]: Inspections: 303.
Total audit and inspection reports issued;
Fiscal year 2004 State IG reports[C]: Audits: 44;
Fiscal year 2004 State IG reports[C]: Inspections: 104;
Fiscal year 2005 State IG reports[D]: Audits: 44;
Fiscal year 2005 State IG reports[D]: Inspections: 99.
Source: GAO.
[A] GAO, High-Risk Series: An Update, GAO-05-207 (Washington, D.C.:
January 2005) and GAO, High-Risk Series: An Update, GAO-03-119
(Washington, D.C.: January 2003).
[B] Department of State, FY 2005 Performance and Accountability Report.
[C] State IG semiannual reports to the Congress for the periods ending
March 31 and September 30, 2004.
[D] State IG semiannual reports to the Congress for the periods ending
March 31 and September 30, 2005.
[E] Strategic and performance planning were removed in recognition of
the State Department's considerable progress in addressing that
challenge.
[F] Post inspections include a selected financial management component.
[End of table]
To illustrate, for fiscal years 2004 and 2005 combined, the State IG
covered human resource issues with 1 audit and 103 inspections,
counterterrorism and border security with 2 audits and 190 inspections,
public diplomacy with 2 audits and 103 inspections, and information
security with 1 audit and 13 inspections. (See table 1.) In contrast,
over the same 2-year period, the State IG issued 88 audit reports and
each addressed a single management challenge. For example, in the high-
risk areas and management challenges of physical security, the State IG
provides coverage mostly through inspections but includes audits that
address specific contracts and procurements for the purchase of
equipment and services. Also, while the State IG's inspections obtain
financial information at the department's bureaus and posts, the high-
risk areas and management challenges of financial management are
covered almost exclusively by the State IG's financial audits. Due to
the significance of the high-risk areas covered largely by inspections,
the State IG would benefit by reassessing the mix of audit and
inspection coverage for those areas.
Fundamental Differences between Audits and Inspections:
There are fundamental differences between inspections and audits. The
PCIE and ECIE developed Quality Standards for Inspections in 1993, and
revised them in 2005, to provide a framework for performing
inspections. There are similarities between these inspection standards
and the Government Auditing Standards required by the IG Act for
audits; but there are fundamental differences as well. Both standards
require that (1) staff be independent, (2) evidence for reported
results be documented, and (3) the elements of a finding--criteria,
condition, cause, and effect--be included with the reported results. A
fundamental difference between audits and inspections is the level of
detail and requirements in the areas of sufficient, appropriate
evidence to support findings and conclusions, and the levels of
documentation of evidence needed to support findings, conclusions, and
recommendations. Audits performed under Government Auditing Standards,
by design, are subject to more depth in the requirements for levels of
evidence and documentation supporting the findings than inspections
performed under the inspection standards. In addition, while auditing
standards require external quality reviews of auditing practices, or
peer reviews, on a 3-year cycle by reviewers independent of the State
IG's office, neither the inspection standards nor the State IG's
policies and procedures require such external reviews of inspections.
We reviewed the documentation for 10 inspections to gain an
understanding of the extent of documented evidence in the inspectors'
working papers to support each report's recommendations. The 10
inspections were taken from a total of 112 inspections, completed over
fiscal years 2004 and 2005 that were not classified for national
security purposes, and for which we had access. The reports for the 10
inspections included a total of 183 recommendations. We found that the
inspectors relied heavily on questionnaires completed by the staff at
each bureau or post that was inspected, official State Department
documents, correspondence and electronic mail, internal department
memos including those from the Secretary, interview memorandums, and
the inspectors' review summaries. We did not find additional testing of
evidence or sampling of agency responses to test for the relevance,
validity, and reliability of the evidence as would be required under
auditing standards.
We also found that for 43 of the 183 recommendations contained in the
10 inspections we reviewed, the related inspection files did not
contain documented support beyond written summaries of the findings and
recommendations. While the State IG's inspection policies for
implementing the PCIE and ECIE inspection standards require that
supporting documentation be attached to the written summaries, the
summaries indicated that there was no additional supporting
documentation.
State IG Quality Assurance Process, Including Assurance over
Independence:
The State IG has quality assurance processes that cover its three main
lines of work: (1) audits, (2) investigations, and (3) inspections.
Independence is a key element that should permeate all of the IG's
major lines of work. For audits, Government Auditing Standards requires
an appropriate internal quality control system and an external peer
review of audit quality every 3 years. These standards specify that
quality control systems should include procedures for monitoring, on an
ongoing basis, whether the policies and procedures related to the
standards are suitably designed and are being effectively applied. For
investigations, the Homeland Security Act of 2002[Footnote 27] amended
the IG Act to require that each IG office with investigative or law
enforcement authority under the act have its investigative function
reviewed periodically by another IG office and that the results be
communicated in writing to the IG and to the Attorney General. For
inspections, PCIE and ECIE inspection standards provide guidance for
quality control and include a requirement for ongoing internal quality
inspection, but they do not contain a requirement for an external
quality review, or peer review.
Following is a summary of recent quality reviews of the State IG's
audit, inspection, and investigative work:
Audits. Peer reviews provide an independent opinion on the quality
control system related to audits. The State IG has obtained two
external peer reviews of its audit practice from other IG offices since
the beginning of fiscal year 2001 and obtained an unqualified, or
"clean," opinion in each review. Both peer reviews concluded that the
State IG's quality control system for the audit function had been
designed in accordance with professional auditing standards. In
addition, the most recent peer review completed by the Department of
the Interior IG in 2004, provided useful suggestions for improvement.
The most significant suggestion was for the State IG to establish
ongoing internal quality reviews of the audit function as required by
professional auditing standards. While the State IG did conduct
internal quality reviews for its audit practice that were completed in
May 2001 and March 2003, the Interior IG found that the reviews were
not the result of an ongoing process. To address the peer review's
suggestion, the State IG established the Policy, Planning, and Quality
Assurance Division in November 2005 under the Assistant IG for Audits,
to conduct internal reviews and provide summary reports on a semiannual
basis, which we view as a very positive action to help ensure ongoing
audit quality.
Investigations. The State IG obtained the results of the first external
quality review of its investigations from the Tennessee Valley
Authority (TVA) IG on November 16, 2005. The TVA IG used the PCIE
Quality Standards for Investigations, the Quality Assessment Review
guidelines established by the PCIE, and the Attorney General Guidelines
For Offices Of Inspector General With Statutory Law Enforcement
Authority to review the quality of the State IG's investigations. The
TVA IG concluded that the State IG's system of internal safeguards and
management procedures for the investigative function was in full
compliance with quality standards established by the PCIE and the
Attorney General's guidelines, and provides reasonable assurance of
conforming with professional standards. The reviewers also suggested
improvements for the State IG and these are currently being addressed
by the Assistant IG for Investigations.
Inspections. An external quality review, or peer review, of the State
IG's inspections is not required under the inspection standards. During
our review, the State IG implemented a plan for conducting an internal
quality review of inspections as called for by the PCIE and ECIE
inspection standards. The first such review was currently being
conducted at the time of our audit, but the report on inspection
quality had not yet been completed. This review includes a sample of
completed inspections to determine whether they meet the PCIE and ECIE
quality inspection standards. Currently, the State IG's quality review
does not include inspections by the Office of Information Technology,
and at the time of our review there was no internal quality review
process for IT inspections. Because the inspection work of the IG's IT
office is used, at least in part, by the department to ensure its
compliance with the requirements of the Federal Information Security
Management Act of 2002 (FISMA)[Footnote 28] for effective information
security controls, the quality of the IT inspections is critical to the
department for providing overall assurance of FISMA compliance.
Inspection quality is critical also because of the State IG's almost
exclusive reliance on inspections to cover the information security
area, which has been identified by GAO as high-risk and by the State IG
as a management challenge for the department.
Independence. Independence is an overarching element that is critical
to quality and credibility across all of the work of the State IG and
is fundamental to Government Auditing Standards and the IG Act. Quality
Standards for Federal Offices of Inspector General, updated by the PCIE
and ECIE in October 2003, also addresses independence in its quality
standards for the management, operations, and conduct of federal IG
offices. Both sets of standards recognize that IG independence is a
critical element of the IG's obligation to be objective, impartial,
intellectually honest, and free of conflicts of interest. Also,
consistent with Government Auditing Standards, the IG quality standards
for IG offices state that without independence both in fact and in
appearance, objectivity is impaired. In addition, the PCIE and ECIE
Quality Standards for Inspections require that the inspections
organization and each individual inspector to be free both in fact and
appearance from impairments to independence.
Two areas of continuing concern regarding independence are (1) the
temporary appointment of management personnel with various titles such
as Deputy IG, Acting IG, or Acting Deputy IG, to head the State IG
office; and (2) the use of Foreign Service staff to lead State IG
inspections. For example, between the last two presidentially appointed
IGs--covering a period of over 2 years from January 24, 2003, until May
2, 2005--all four of those heading the State IG office in an acting IG
capacity were selected from State Department management staff and
temporarily employed in the State IG office. These individuals had
served in the Foreign Service in prior management positions, including
as U.S. ambassadors to foreign countries. In addition, three of these
individuals returned to significant management positions within the
State Department after heading the State IG office. Table 2 shows prior
and subsequent positions held by those heading the State IG office for
a recent 27-month period until the current IG was confirmed on May 2,
2005. This use of temporarily assigned State Department management
staff to head the State IG office can affect the perceived independence
of the entire office in its reviews of department operations, and the
practice is not consistent with (1) independence requirements of
Government Auditing Standards, (2) other professional standards
followed by the IGs, and (3) the purpose of the IG Act. Career members
of the Foreign Service are prohibited by statute from being appointed
as State IG.[Footnote 29] This exclusion of career Foreign Service
staff from consideration when appointing the State IG avoids the
personal impairments to independence that could result when reviewing
the bureaus and posts of fellow Foreign Service officers and diplomats.
The same concern with independence arises when career Foreign Service
officers and diplomats temporarily head the State IG office in an
acting IG capacity.
Table 2: State Department Positions Held by Management Officials before
and after Serving in an Acting State IG Capacity from January 24, 2003,
through May 2, 2005:
Department positions prior to serving as acting State IG: Ambassador to
Kyrgyzstan;
Department positions after serving as acting State IG: Retired from
government service;
Beginning dates of service as acting State IG: January 24, 2003;
Period of time serving as the acting State IG: 8 months.
Department positions prior to serving as acting State IG: Ambassador to
Columbia;
Department positions after serving as acting State IG: Deputy and
Acting Permanent Representative at the U.S. Mission to the United
Nations[A];
Beginning dates of service as acting State IG: September 28, 2003;
Period of time serving as the acting State IG: 10 months.
Department positions prior to serving as acting State IG: Deputy Global
AIDS Coordinator;
Department positions after serving as acting State IG: Special
Representative on Avian and Pandemic Influenza;
Beginning dates of service as acting State IG: August 3, 2004;
Period of time serving as the acting State IG: 1 month.
Department positions prior to serving as acting State IG: Ambassador to
South Africa;
Department positions after serving as acting State IG: Chargé
d'Affaires, Khartoum, Sudan;
Beginning dates of service as acting State IG: August 23, 2004;
Period of time serving as the acting State IG: 8 months.
Source: State IG.
[A] Currently the Assistant Secretary for International Narcotics and
Law Enforcement Affairs.
[End of table]
In addition to the potential independence impairment of acting IGs, the
State IG can impair its independence with its reliance on staff in the
Foreign Service temporarily employed by the IG office to lead
inspections. As a condition of their employment, Foreign Service staff
are expected to help formulate, implement, and defend government
policy, which severely limits the appearance of objectivity when
reviewing department activities that may require them to question
official policies.
The State IG's inspection policy is for Foreign Service staff with the
rank of ambassador, or other staff who serve at the ambassador level,
to lead inspections. Long-serving State IG officials told us that the
program knowledge of these State Department officials is important when
reviewing the department's bureaus and posts. In the 112 inspections
completed during fiscal years 2004 and 2005 for which we had access, 79
had team leaders who held the rank of ambassador or served at the
ambassador level. Foreign Service staff on these inspections often move
through the State IG office on rotational assignments to serve again in
Foreign Service positions for the department after working for the
State IG. For example, 9 of the 22 Foreign Service officials who were
assigned to these 112 inspections as either staff or team leaders had
transferred or returned to management offices in the State Department
by December 2005.
The State IG's use of career Foreign Service staff and others at the
ambassador level to lead inspections provides a potential impairment to
independence. In both our 1978 and 1982 reports we reported concerns
about the independence of inspection staff reassigned to and from
management offices within the department. In these prior reports, we
stated that the desire of State IG staff to receive favorable
assignments after their State IG tours could influence their
objectivity. While they may offer valuable insights from their
experience in the department, we believe that there is considerable
risk that independence could be impaired, resulting in a detrimental
effect on the quality of State IG inspections and the effectiveness of
the State Department, and that it is important that officials not
sacrifice independence, in fact or appearance, for other factors in the
staffing and leadership of the IG's office. As an alternative, such
staff could provide the benefits of their experience and expertise as
team members rather than team leaders without impairing the inspection
team's independence.
IG Coordination with State Department Investigations:
The IG Act established the State IG to conduct and supervise
independent audits and investigations that prevent and detect fraud,
waste, abuse, and mismanagement in the State Department.[Footnote 30]
The Bureau of Diplomatic Security (DS)--as part of its worldwide
responsibilities for law enforcement and security operations--also
performs investigations of passport and visa fraud both externally and
within the department.[Footnote 31] Currently, there is no functional
written agreement or other formal mechanism in place between DS and the
State IG to coordinate their investigative activities.
DS assigns special agents to U.S. diplomatic missions overseas and to
field offices throughout the United States. The special agents conduct
passport and visa fraud investigations and are responsible for security
at 285 diplomatic facilities around the world. This effort currently
entails a global force of approximately 32,000 special agents, security
specialists, and other professionals who make up the security and law
enforcement arm of the State Department. In fiscal year 2004, DS
reported that it opened 5,275 new criminal investigations and made 538
arrests for passport fraud, 123 for visa fraud, and 54 for other
offenses. For fiscal year 2005, DS reported 1,150 arrests combined for
passport and visa fraud.
Both the State IG and DS pursue allegations of passport and visa fraud
by State Department employees. State IG officials stated that they were
aware of DS investigations in these areas that were not coordinated
with the State IG. Without a formal agreement to outline the
responsibilities of both DS and the State IG regarding these
investigations, there is inadequate assurance that this work will be
coordinated to avoid duplication or that independent investigations of
department personnel will be performed. Also, because DS reports to the
State Department's Undersecretary for Management, DS investigations of
department employees, especially when management officials are the
subjects of the allegations, can result in management investigating
itself.
In other agencies where significant law enforcement functions like
those at DS exist alongside their inspectors general, the division of
investigative functions between the agency and the IG is established
through written agreements. For example, the U.S. Postal Service has
the Postal IG established by the IG Act and the Chief Postal Inspector
who is head of the U.S. Postal Inspection Service with jurisdiction in
criminal matters affecting the integrity and security of the mail.
Postal inspectors investigate postal crimes and provide security for
the protection of postal employees at 37,000 postal facilities
throughout the country. In 2006, a memorandum was signed by the
Chairman of the Board of Governors and the Postmaster General
announcing the completion of the transfer of investigative jurisdiction
for postal employees from the Postal Inspection Service to the Office
of Inspector General. The Postal IG was recognized as having full
responsibility for the investigation of internal crimes, whereas the
Postal Inspection Service is responsible for security and the
investigation of external crimes. This agreement also included a shift
of resources between both organizations to cover their
responsibilities.
In another example, the Internal Revenue Service Criminal Investigation
(IRS CI) and the Treasury Inspector General for Tax Administration
(TIGTA) have signed a memorandum of understanding that recognizes IRS
CI's responsibility to investigate criminal violations of the tax code
while TIGTA has the responsibility to protect the IRS against attempts
to corrupt or threaten IRS employees, and to investigate violations by
IRS employees. This agreement includes the coordination of
investigative activities between these offices and recognizes TIGTA as
the final authority to investigate IRS Criminal Investigation
employees. Agreements such as those crafted by the U.S. Postal Service
and the IRS can serve as models for a formal agreement between DS and
the State IG.
Conclusions:
The State IG relies heavily on inspections instead of audits for
oversight of high-risk areas and management challenges. Areas such as
human resources, counterterrorism, public diplomacy, and information
security, are almost exclusively covered through inspections. By
design, inspections are conducted under less in-depth requirements than
audits performed under Government Auditing Standards in terms of levels
of evidence and documentation to support findings and recommendations.
Federal IGs use inspections as an important oversight tool along with
audits and investigations, which are specifically required by the IG
Act. However, the State IG conducts a much greater proportion of
inspections to audits than the federal statutory IG community as a
whole. Due to the risk and significance of the high-risk areas being
covered largely by inspections, the State IG would benefit from
reassessing risk and its heavy reliance on inspections in those areas
to determine whether the current mix of audits and inspections provides
the amount and type of oversight coverage needed. Given the important
role that inspections currently play in the State IG's oversight of the
department, assurance of inspection quality is also important. The
State IG is currently conducting its first internal review of
inspections, but the results are not yet reported and the review does
not include IT inspections.
Independence is a critical element to the quality and credibility of an
IG's work under the IG Act and is fundamental to Government Auditing
Standards and professional standards issued by the PCIE and ECIE. Based
on our current concerns and those from our past reports, we believe
that the State IG would benefit from additional policies and revised
structures in order to avoid situations that raise concerns about
independence, such as State Department management officials appointed
to head the State IG office in an acting IG capacity, and State
Department career Foreign Service staff and others who transfer from or
return to department management offices leading IG inspections. Such
policies and structures would be geared toward (1) providing for
independent acting IG coverage in the event of delays between IG
appointments and (2) assuring that State IG inspections are not led by
career Foreign Service or other staff who move to assignments within
State Department management. With regard to ambassadors, Foreign
Service officers, and other rotational staff leading inspections,
approaches could range from the State IG limiting its inspection
activities to a level that is supportable without reliance on staff
that routinely rotate to management offices, to permanently
transferring or hiring additional staff, or FTEs, along with associated
resources for the State IG office to eliminate the need to rely on
Foreign Service and other rotational staff to conduct inspections. In
addition, the State IG's inspection teams could include experienced
ambassadors and Foreign Service officers at the ambassador level as
team members rather than team leaders to help mitigate concerns
regarding the lack of an appearance of independence caused by the State
IG's current practice.
Finally, there is a need for a formal agreement between the State IG
and the State Department Bureau of Diplomatic Security to coordinate
their investigative activities to help ensure the independence of
investigations of the State Department's management staff and to
prevent duplication.
Recommendations for Executive Action:
To help ensure that the State IG provides the appropriate breadth and
depth of oversight of the State Department's high-risk areas and
management challenges, we recommend that the State IG reassess the
proper mix of audit and inspection coverage for those areas. This
reassessment should include input from key stakeholders in the State
Department and the Congress and also entail an analysis of an
appropriate level of resources needed to provide adequate IG coverage
of high-risk and other areas in light of the increasing level of
funding provided to the State Department.
To provide for more complete internal quality reviews of inspections we
recommend that the State IG include inspections performed by the State
IG's Office of Information Technology in its internal quality review
process.
To help ensure the independence of the IG office, we recommend that the
State IG work with the Secretary of State to take the following
actions:
* Develop a succession planning policy for the appointment of
individuals to head the State IG office in an acting IG capacity that
is consistent with the IG Act regarding State IG appointment and
provides for independent coverage in the event of delays between IG
appointments. The policy should prohibit career Foreign Service
officers from heading the State IG office in an acting IG capacity and
specify within the IG's own succession order that acting IG vacancies
are to be filled by eligible personnel without State Department
management careers.
* Develop options to ensure that State IG inspections are not led by
career Foreign Service officials or other staff who rotate to
assignments within State Department management. Approaches could range
from the State IG limiting its inspection activities to a level that is
supportable without reliance on staff who routinely rotate to
management offices, to permanently transferring or hiring additional
staff, or FTEs, along with associated resources for the State IG office
to eliminate the need to rely on Foreign Service and other rotational
staff to lead inspections.
In order to provide for independent investigations of State Department
management and to prevent duplicative investigations, we recommend that
the State IG work with the Bureau of Diplomatic Security, the Office of
Management, and the Secretary of State to develop a formal written
agreement that delineates the areas of responsibility for State
Department investigations. Such an agreement would, for example,
address the coordination of investigative activities to help ensure the
independence of internal departmental investigations and preclude the
duplication of efforts.
Agency Comments and Our Response:
In comments on a draft of this report the State IG provided additional
clarifying information and acknowledged that our review helped identify
areas for improvement. With respect to our five recommendations in the
draft report, the State IG agreed with two recommendations, partially
agreed with one, and disagreed with two others. We are reaffirming our
recommendations and provide our reasons below.
With respect to the two recommendations for which there is agreement,
the State IG agreed with our recommendations to (1) include all IG
inspections, including inspections performed by the Office of
Information Technology, in the internal quality review process and (2)
work with DS and others to develop a written agreement delineating the
areas of responsibility for department investigations.
The State IG disagreed with our recommendation to reassess the mix of
audit and inspection coverage stating that "simply reassessing the mix
of audit and inspection coverage will accomplish little if there are
not more auditors and more resources available to perform audits." Our
recommendation provides the IG with a way to define the appropriate
level of oversight of the department, reallocate current resources as
appropriate, and justify any additional resources that may be
necessary. This reassessment is especially important given the
increased appropriations provided to the State Department and in light
of the fact that the current mix of audits and inspections has evolved
over a number of years when State Department management personnel
served as acting IGs. By achieving a proper mix of audits and
inspections the State IG can help maximize the use of the department's
resources through more effective oversight. In addition, the State IG's
comments do not recognize the potential for reallocating inspection
staff to an audit role. Under Government Auditing Standards, the
current inspection staff may also conduct performance audits in order
to provide both a forward-looking analysis and a review of historical
performance. Redesigning some inspections as performance audits to be
performed by the current inspection staff could meet the needs of
management for inspection results at the department's bureaus and posts
and also provide the level of objectivity and evidence needed to assess
high-risk areas and management challenges. Thus, for all the above
stated reasons we continue to recommend that the State IG reassess the
mix of audit and inspection coverage.
The State IG does not disagree with our concerns about Foreign Service
officers temporarily heading the IG office in an acting capacity, but
believes that the recommendation goes too far by limiting the pool of
eligible candidates to personnel without State Department management
careers. We disagree with the IG's comments due to the importance of
independence which is the most critical element for IG effectiveness
and success. To preserve IG independence, the IG Act requires that the
IG not report to or be subject to supervision by any other officer
other than the Secretary, or if delegated, the Deputy Secretary.
Appointing career department managers as acting State IGs would
effectively have the IG office subject to supervision by a management
official other than the Secretary or Deputy Secretary. Therefore, we
continue to recommend that the State IG exclude from consideration in
the succession planning of his office department officials with
management careers due to possible conflicts of interest and resulting
independence issues. As alternatives, the State IG could consider PCIE
recommendations for personnel to fill future acting IG positions, as
well as IG staff with proven ability from other agencies. In addition,
we have revised the recommendation in our report to clarify that the
intended action is directed to the succession planning activities of
the State IG's office in order to avoid any unintended conflict with
the Vacancies Act,[Footnote 32] which gives the President wide
authority to appoint personnel to acting positions throughout the
executive branch of the federal government.
The State IG acknowledged that ambassadors who serve as team leaders
for inspections raise a concern about the appearance of independence.
The State IG also believes that this concern is significantly
outweighed by the overriding need for people with the experience and
expertise of ambassadors to lead inspections. We disagree with putting
independence second to experience and expertise and believe that the
State IG can achieve both objectives with the proper staffing and
structuring of its inspections. Our position remains that the State
IG's inspection teams should not be led by career Foreign Service
officers and ambassadors, but could include experienced ambassadors and
staff at the ambassador level as team members rather than team leaders
to help mitigate concerns about the appearance of independence caused
by the State IG's current practice. Therefore, we continue to recommend
that the State IG work with the Secretary of State to develop options
to ensure that the IG's inspections are not led by career Foreign
Service officials, including ambassadors or other staff who rotate from
State Department management.
As agreed with your office, unless you publicly announce the contents
of this report earlier, we will not distribute it until 30 days from
its date. At that time we will send copies of the report to the
Secretary of State, the State Department IG, the State Department
Undersecretary for Management, the State Department Assistant Secretary
for Diplomatic Security, the OMB Deputy Director for Management, the
Chairman and Ranking Member of the Senate Committee on Foreign
Relations, other congressional committees, and interested parties. This
report will also be available at no charge on the GAO Web site at
http://www.gao.gov. If you have any questions or would like to discuss
this report please contact me at (202) 512-9471 or by e-mail at
franzelj@gao.gov. Major contributors to this report are listed in
appendix IV.
Signed by:
Jeanette M. Franzel:
Director:
Financial Management and Assurance:
[End of section]
Appendix I: A Comparison of Fiscal Year 2001 Budgetary Resources for
Selected Inspectors General and Agencies:
Dollars in millions.
1;
Federal departments and agencies: Nuclear Regulatory Commission ;
IG total budgetary resources: 7;
Agency total budgetary resources: 546;
IG budgetary resources as a percentage of agency budgetary resources:
1.28.
2;
Federal departments and agencies: Small Business Administration;
IG total budgetary resources: 15;
Agency total budgetary resources: 2,580;
IG budgetary resources as a percentage of agency budgetary resources:
0.58.
3;
Federal departments and agencies: Environmental Protection Agency;
IG total budgetary resources: 56;
Agency total budgetary resources: 11,577;
IG budgetary resources as a percentage of agency budgetary resources:
0.48.
4;
Federal departments and agencies: Corporation for National and
Community Service;
IG total budgetary resources: 6;
Agency total budgetary resources: 1,265;
IG budgetary resources as a percentage of agency budgetary resources:
0.47.
5;
Federal departments and agencies: Agency for International Development;
IG total budgetary resources: 35;
Agency total budgetary resources: 9,269[A];
IG budgetary resources as a percentage of agency budgetary resources:
0.38.
6;
Federal departments and agencies: Treasury Inspector General for Tax
Administration;
IG total budgetary resources: 127;
Agency total budgetary resources: 39,937;
IG budgetary resources as a percentage of agency budgetary resources:
0.32.
7;
Federal departments and agencies: Department of Commerce;
IG total budgetary resources: 21;
Agency total budgetary resources: 8,632;
IG budgetary resources as a percentage of agency budgetary resources:
0.24.
8;
Federal departments and agencies: Department of State;
IG total budgetary resources: 29;
Agency total budgetary resources: 13,679[B];
IG budgetary resources as a percentage of agency budgetary resources:
0.21.
9;
Federal departments and agencies: Department of Justice;
IG total budgetary resources: 60;
Agency total budgetary resources: 31,780;
IG budgetary resources as a percentage of agency budgetary resources:
0.19.
10;
Federal departments and agencies: Department of the Interior;
IG total budgetary resources: 31;
Agency total budgetary resources: 19,871;
IG budgetary resources as a percentage of agency budgetary resources:
0.16.
11;
Federal departments and agencies: General Services Administration;
IG total budgetary resources: 36;
Agency total budgetary resources: 23,115;
IG budgetary resources as a percentage of agency budgetary resources:
0.16.
12;
Federal departments and agencies: National Aeronautics and Space
Administration;
IG total budgetary resources: 24;
Agency total budgetary resources: 15.807;
IG budgetary resources as a percentage of agency budgetary resources:
0.15.
13;
Federal departments and agencies: Tennessee Valley Authority (TVA);
IG total budgetary resources: 8[C];
Agency total budgetary resources: 7,016;
IG budgetary resources as a percentage of agency budgetary resources:
0.11.
14;
Federal departments and agencies: Department of Energy;
IG total budgetary resources: 34;
Agency total budgetary resources: 30,638;
IG budgetary resources as a percentage of agency budgetary resources:
0.11.
15;
Federal departments and agencies: Department of Housing and Urban
Development;
IG total budgetary resources: 95;
Agency total budgetary resources: 83,063;
IG budgetary resources as a percentage of agency budgetary resources:
0.11.
16;
Federal departments and agencies: Department of Labor;
IG total budgetary resources: 69;
Agency total budgetary resources: 65,489;
IG budgetary resources as a percentage of agency budgetary resources:
0.11.
17;
Federal departments and agencies: Department of Veterans Affairs;
IG total budgetary resources: 50;
Agency total budgetary resources: 57,391;
IG budgetary resources as a percentage of agency budgetary resources:
0.09.
18;
Federal departments and agencies: Federal Deposit Insurance
Corporation;
IG total budgetary resources: 43;
Agency total budgetary resources: 47,967;
IG budgetary resources as a percentage of agency budgetary resources:
0.09.
19;
Federal departments and agencies: Department of Agriculture;
IG total budgetary resources: 78;
Agency total budgetary resources: 106,365;
IG budgetary resources as a percentage of agency budgetary resources:
0.07.
20;
Federal departments and agencies: Railroad Retirement Board;
IG total budgetary resources: 6[D];
Agency total budgetary resources: 9,201;
IG budgetary resources as a percentage of agency budgetary resources:
0.07.
21;
Federal departments and agencies: Department of Education;
IG total budgetary resources: 37;
Agency total budgetary resources: 55,858;
IG budgetary resources as a percentage of agency budgetary resources:
0.07.
22;
Federal departments and agencies: Department of Transportation;
IG total budgetary resources: 55;
Agency total budgetary resources: 85,399;
IG budgetary resources as a percentage of agency budgetary resources:
0.06.
23;
Federal departments and agencies: Department of Health and Human
Services;
IG total budgetary resources: 231[E];
Agency total budgetary resources: 555,621;
IG budgetary resources as a percentage of agency budgetary resources:
0.04.
24;
Federal departments and agencies: Department of Defense--Military;
IG total budgetary resources: 156;
Agency total budgetary resources: 453,875;
IG budgetary resources as a percentage of agency budgetary resources:
0.03.
25;
Federal departments and agencies: Office of Personnel Management;
IG total budgetary resources: 12;
Agency total budgetary resources: 126,224;
IG budgetary resources as a percentage of agency budgetary resources:
0.01.
26;
Federal departments and agencies: Social Security Administration;
IG total budgetary resources: 70;
Agency total budgetary resources: 498,918;
IG budgetary resources as a percentage of agency budgetary resources:
0.01.
27;
Federal departments and agencies: Department of the Treasury;
IG total budgetary resources: 35;
Agency total budgetary resources: 366,620[F];
IG budgetary resources as a percentage of agency budgetary resources:
0.01.
28;
Federal departments and agencies: Department of Homeland Security[G];
IG total budgetary resources: n.a;
Agency total budgetary resources: n.a;
IG budgetary resources as a percentage of agency budgetary resources:
n.a.
29;
Federal departments and agencies: Central Intelligence Agency[G];
IG total budgetary resources: n.a;
Agency total budgetary resources: n.a;
IG budgetary resources as a percentage of agency budgetary resources:
n.a.
Source: GAO analysis of OMB data.
Notes: The agencies presented are those with presidentially appointed
inspectors general (IG).
[A] Total budgetary resources appearing in Agency for International
Development's FY 2001 Performance and Accountability Report.
[B] State Department budget does not include amounts for the
Broadcasting Board of Governors.
[C] Amount for TVA IG is from fiscal year 2002 PCIE profile data.
[D] Amount for Railroad Retirement Board IG is from fiscal year 2002
PCIE profile data.
[E] Includes budget authority to combat Medicare fraud.
[F] Treasury's total budget authority excludes amounts for IRS.
[G] Information not available.
[End of table]
[End of section]
Appendix II: A Comparison of Fiscal Year 2005 Budgetary Resources for
Selected Inspectors General and Agencies:
Dollars in millions.
1;
Federal departments and agencies: Nuclear Regulatory Commission;
IG total budgetary resources: 9;
Agency total budgetary resources: 723;
IG budgetary resources as a percentage of agency budgetary resources:
1.24.
2;
Federal departments and agencies: Corporation for National and
Community Service;
IG total budgetary resources: 9;
Agency total budgetary resources: 1,190;
IG budgetary resources as a percentage of agency budgetary resources:
0.76.
3;
Federal departments and agencies: Environmental Protection Agency;
IG total budgetary resources: 64;
Agency total budgetary resources: 13,153;
IG budgetary resources as a percentage of agency budgetary resources:
0.49.
4;
Federal departments and agencies: Agency for International Development;
IG total budgetary resources: 49;
Agency total budgetary resources: 14,822[A];
IG budgetary resources as a percentage of agency budgetary resources:
0.33.
5;
Federal departments and agencies: Small Business Administration;
IG total budgetary resources: 14;
Agency total budgetary resources: 4,855;
IG budgetary resources as a percentage of agency budgetary resources:
0.29.
6;
Federal departments and agencies: Department of Justice;
IG total budgetary resources: 80;
Agency total budgetary resources: 31,073;
IG budgetary resources as a percentage of agency budgetary resources:
0.26.
7;
Federal departments and agencies: Department of Commerce;
IG total budgetary resources: 22;
Agency total budgetary resources: 10,179;
IG budgetary resources as a percentage of agency budgetary resources:
0.22.
8;
Federal departments and agencies: Treasury Inspector General for Tax
Administration;
IG total budgetary resources: 131;
Agency total budgetary resources: 66,338;
IG budgetary resources as a percentage of agency budgetary resources:
0.20.
9;
Federal departments and agencies: General Services Administration;
IG total budgetary resources: 46;
Agency total budgetary resources: 26,378;
IG budgetary resources as a percentage of agency budgetary resources:
0.17.
10;
Federal departments and agencies: National Aeronautics and Space
Administration;
IG total budgetary resources: 31;
Agency total budgetary resources: 19,045;
IG budgetary resources as a percentage of agency budgetary resources:
0.16.
11;
Federal departments and agencies: Department of Interior;
IG total budgetary resources: 42;
Agency total budgetary resources: 26,890;
IG budgetary resources as a percentage of agency budgetary resources:
0.16.
12;
Federal departments and agencies: Department of State;
IG total budgetary resources: 32;
Agency total budgetary resources: 22,371[B];
IG budgetary resources as a percentage of agency budgetary resources:
0.14.
13;
Federal departments and agencies: Department of Housing and Urban
Development;
IG total budgetary resources: 103;
Agency total budgetary resources: 83,359;
IG budgetary resources as a percentage of agency budgetary resources:
0.12.
14;
Federal departments and agencies: Department of Energy;
IG total budgetary resources: 42;
Agency total budgetary resources: 34,728;
IG budgetary resources as a percentage of agency budgetary resources:
0.12.
15;
Federal departments and agencies: Tennessee Valley Authority (TVA);
IG total budgetary resources: 9[C];
Agency total budgetary resources: 8,027;
IG budgetary resources as a percentage of agency budgetary resources:
0.11.
16;
Federal departments and agencies: Department of Homeland Security;
IG total budgetary resources: 117;
Agency total budgetary resources: 121,830;
IG budgetary resources as a percentage of agency budgetary resources:
0.10.
17;
Federal departments and agencies: Department of Labor;
IG total budgetary resources: 69;
Agency total budgetary resources: 72,893;
IG budgetary resources as a percentage of agency budgetary resources:
0.09.
18;
Federal departments and agencies: Department of Veterans Affairs;
IG total budgetary resources: 74;
Agency total budgetary resources: 83,656;
IG budgetary resources as a percentage of agency budgetary resources:
0.09.
19;
Federal departments and agencies: Railroad Retirement Board;
IG total budgetary resources: 7[D];
Agency total budgetary resources: 10,849;
IG budgetary resources as a percentage of agency budgetary resources:
0.06.
20;
Federal departments and agencies: Department of Agriculture;
IG total budgetary resources: 84;
Agency total budgetary resources: 135,903;
IG budgetary resources as a percentage of agency budgetary resources:
0.06.
21;
Federal departments and agencies: Department of Education;
IG total budgetary resources: 48;
Agency total budgetary resources: 84,359;
IG budgetary resources as a percentage of agency budgetary resources:
0.06.
22;
Federal departments and agencies: Federal Deposit Insurance
Corporation;
IG total budgetary resources: 28;
Agency total budgetary resources: 50,612;
IG budgetary resources as a percentage of agency budgetary resources:
0.06.
23;
Federal departments and agencies: Department of Transportation;
IG total budgetary resources: 65;
Agency total budgetary resources: 117,707;
IG budgetary resources as a percentage of agency budgetary resources:
0.06.
24;
Federal departments and agencies: Department of Health and Human
Services;
IG total budgetary resources: 437[E];
Agency total budgetary resources: 789,041;
IG budgetary resources as a percentage of agency budgetary resources:
0.06.
25;
Federal departments and agencies: Department of Defense--Military;
IG total budgetary resources: 205;
Agency total budgetary resources: 716,702;
IG budgetary resources as a percentage of agency budgetary resources:
0.03.
26;
Federal departments and agencies: Social Security Administration;
IG total budgetary resources: 91;
Agency total budgetary resources: 605,134;
IG budgetary resources as a percentage of agency budgetary resources:
0.02.
27;
Federal departments and agencies: Office of Personnel Management;
IG total budgetary resources: 18;
Agency total budgetary resources: 160,759;
IG budgetary resources as a percentage of agency budgetary resources:
0.01.
28;
Federal departments and agencies: Department of the Treasury;
IG total budgetary resources: 20;
Agency total budgetary resources: 329,345[F];
IG budgetary resources as a percentage of agency budgetary resources:
0.01.
29;
Federal departments and agencies: Central Intelligence Agency[G];
IG total budgetary resources: n.a;
Agency total budgetary resources: n.a;
IG budgetary resources as a percentage of agency budgetary resources:
n.a.
Source: GAO analysis of OMB data.
Notes: The agencies presented are those with presidentially appointed
inspectors general (IG).
[A] Total budgetary resources appearing in Agency for International
Development's FY 2005 Performance and Accountability Report.
[B] State Department budget does not include amounts for the
Broadcasting Board of Governors.
[C] Amount for TVA IG is from fiscal year 2005 PCIE profile data.
[D] Amount for Railroad Retirement Board IG is from fiscal year 2005
PCIE profile data.
[E] Includes budget authority to combat Medicare fraud.
[F] Treasury's total budget authority excludes amount for IRS.
[G] Information not available.
[End of table]
[End of section]
Appendix III: Comments from the Inspector General, Department of State:
United States Department of State and the Broadcasting Board of
Governors:
Inspector General:
March 2, 2007:
Jeanette M. Franzel:
Director:
Financial Management and Assurance:
U.S. Government Accountability Office:
Washington, DC 20548:
Dear Ms. Franzel:
Thank you for the opportunity to review and comment on the draft GAO
report on the Activities of the Department of State Office of Inspector
General ("OIG"). GAO's review has helped to identify areas where
improvements can be made to OIG's oversight activities. OIG appreciates
the professionalism and courtesies extended by you and your staff in
carrying out this review.
GAO's review covers a period consisting of fiscal years 2001 through
2005. Over 90% of that period occurred prior to my arrival at OIG.
Nevertheless, I will try to comment on several of the broad issues
raised in GAO's report. In a previous e-mail, OIG has provided what it
believes to be technical and factual corrections to the draft report.
For purposes of this letter, I am assuming changes and corrections will
be made as necessary in the final report to reflect the points
previously made.
There are at least two elements that significantly affect OIG's
structure and activities and against which the structure and activities
should be judged:
1. Statutorily Mandated Post and Bureau Inspections.
As noted by GAO, Section 209 of the Foreign Service Act of 1980
mandates that OIG inspect each Foreign Service post and each bureau and
other operating unit of the Department of State (the "Department") at
least every five years. This means that OIG must plan its work, staff
its personnel, and budget its resources in order to comply with this
statutory mandate. Parenthetically, it should be noted that the number,
size and complexity of U.S. missions abroad have expanded vastly since
1980 - for example, missions in places such as Baghdad, Kabul, Hanoi,
the former states of the Soviet Union, Beijing, member states of the
United Nations that did not exist, and others either were not present
in 1980 or have changed radically since. As early as 1982, GAO noted
that the mandated five-year inspection cycle adversely affected OIG's
effectiveness by limiting its ability to do other work.
For the years reviewed by GAO (2001 through 2005), Congress, in
Department appropriations acts, annually waived the five-year
inspection language. However, those waivers have come from three to six
months after the commencement of each fiscal year, and their eventual
grant by Congress cannot be assumed, with the result that OIG has had
to go into each fiscal year with work plans, staff, and resources
designed to comply with existing law. Moreover, the Department has come
to rely on the deterrent effects and constructive evaluations and
recommendations that come from the inspection process, and to have
posts and bureaus go more than seven or so years without inspection is
considered to be high risk. On balance, OIG tries to comply with a five
to seven year cycle, but my experience suggests this should be done
free from a statutory mandate so that high risk or high priority
matters at a particular time can be attended to.
2. Declining Resources.
While OIG's numbers show an actual decrease in OIG resources over the
five-year period (as opposed to the 1 % increase suggested in the draft
report) and an increase in Department resources even greater than the
50% suggested in the draft report --particularly if numbers for the
Broadcasting Board of Governors, for which OIG also has oversight
authority, are included --whatever numbers are used, it is abundantly
clear that over a period where world events have exponentially
increased the demands upon OIG and the opportunities for it to produce
savings, increase efficiency, reduce waste, and bring about positive
change throughout the Department's activities, OIG's resources have
been static or declining. This anomaly is accentuated when one
considers that approximately 85% of OIG's resources go to compensation
and the next biggest expense is foreign travel. Even in a period of
relatively low inflation, OIG has faced to a greater proportion than
most others mandatory wage increases and higher travel costs due to
increased jet fuel costs, post 9/11 security costs, and lower dollar
exchange rates.
Against the foregoing background, I will comment on GAO's broadest
areas:
Proper Mix of Audits and Inspections:
The statutory mandate for inspections means that OIG must have the
people on board to perform inspections. For the most part, auditors and
inspectors are not inter-changeable or fungible. Simply "reassessing
the mix of audit and inspection coverage" will accomplish little if
there are not more auditors and more resources available to perform
audits. One thing that OIG does, and which skews the figures cited by
GAO comparing the number of inspection reports issued to the number of
audit reports, is to include auditors and audit-like procedures in most
inspections. Thus, while GAO observes that OIG covers high-risk areas
"almost exclusively through inspections" with a higher ratio of
inspections to audits than other federal statutory IGs, in fact many of
these inspections have audit components to them. Moreover, I am unaware
of any other IG that has a statutory inspection mandate such as OIG,
and more than a few perform few or no inspections. The House Committee
on Foreign Affairs report on Section 209 of the Foreign Service Act
explained that it went beyond the financial audit and investigation
aspects of the Inspector General Act of 1978 by providing for authority
to determine compliance with U.S. foreign policy objectives. "In the
view of the committee, the historically dual responsibility of the
office of the Inspector General to prevent waste and misuse of funds
and also to determine compliance with U.S. foreign policy objectives
sets this office apart from other Inspectors General."
Because of the Congressional mandate and OIG's limited resources to
hire more auditors, there are things that could be done in the context
of an audit which OIG has to do through an inspection. If an inspection
team is already going to a foreign location, it would not be a wise use
of limited resources to also send an audit team to that location.
Nevertheless, OIG does provide coverage through audits not just to
contracts, procurements, and financial management, but also to matters
such as emergency preparedness. Moreover, OIG Audit's significant
contributions to the audit of the Department's financial statements and
the implementation of OMB Circular 123 have come near and subsequent to
the close of the period reviewed by GAO.
With respect to the "fundamental differences between audits and
inspections" cited by GAO, I agree that inspections have a different
level of detail and requirements in the areas of sufficient,
appropriate evidence to support findings and conclusions and the level
of documentation to reflect that support. This is a principal reason
why your reviewers did not find the level of documented support they
might have expected. Inspections by their nature tend to be much more
subjective and less objective than audits, and they require experience
and expertise in the unique operations of foreign posts. Many
inspection assignments do not lend themselves to audits. Inspections
also tend to be forward looking as well as historical, and it is often
difficult to document just why a particular recommendation will improve
the overall effectiveness of a post. Nevertheless, OIG very much takes
to heart GAO's observation that summary worksheets, questionnaires from
post employees, and interview memoranda are not always adequate, and
OIG's Office of Inspections has increased its emphasis on workpapers
and supporting documentation in the training of new inspectors.
Independence:
1. I agree with GAO's concern when career Foreign Service officers and
diplomats temporarily head OIG in an acting IG capacity. While
independence is a part of my concern, perhaps an even greater concern
is that a career Foreign Service officer is specifically precluded by
law (22 USC 4861 d) from becoming IG of the Department. Thus, a Foreign
Service Acting IG, no matter how good a job he/she is doing, cannot
become permanent and is always temporary, and is known by all to be so.
This can have a debilitating effect on OIG, particularly over a lengthy
period.
The four Foreign Service Acting IGs were, of course, prior to my time.
However, I am aware that each was the Deputy Inspector General at the
time of becoming Acting IG. In OIG at the present time under my
leadership, the Deputy Inspector General is a Civil Service officer
rather than Foreign Service. This reduces the possibility that a
Foreign Service officer would become Acting IG.
Although I do not disagree with GAO's recommendation that a policy be
adopted to "prohibit career Foreign Service officers from heading the
State IG office in an acting IG capacity", I believe the recommendation
goes too far by limiting eligibility to "personnel without State
Department management careers". To eliminate all Foreign Service
officers and all Civil Service officers with management careers is to
unduly limit the eligible sources for an Acting IG and inhibit the
ability to get a prompt, capable Acting IG in place. GAO should also
consider whether its recommendation is consistent with the Vacancies
Act (5 USC 3345-3349d).
2. 1 do not agree with GAO's recommendation "to ensure that State IG
inspections are not led by career Foreign Service officials or other
staff who rotate to assignments within State Department management".
Having spent nearly 25 years in the private sector as legal counsel to
Big Eight and Big Six independent public accounting firms, I can assure
you I am extremely sensitive to the concept of independence.
Independence comprises the appearance of independence and the fact of
independence. I acknowledge that OIG's policy of having ambassadors
serve as team leaders for inspections raises a concern about the
appearance of independence. However, I believe this concern is
significantly outweighed by the overriding need to have people with the
experience and expertise of an ambassador lead an inspection of a
foreign post. There is simply no substitute for "having been there,
done that", "having walked in those shoes", and having performed under
the difficult and often adverse conditions that characterize a foreign
post. Likewise, there is no substitute to the credibility which is
given to the evaluations and recommendations of an ambassador,
including the critical Inspector Evaluation Reports on the performance
of the COM and DCM at a post, or to the trust and acceptance accorded
to an ambassador by people at a foreign post. A keystone of the
inspection process is the willingness of the whole range of foreign and
civil service personnel at a post, foreign service nationals, locally
employed staff, entry and junior level officers, eligible family
members, and the whole community up to the COM --and even outsiders in
the host country and the local diplomatic corps --to be open, candid,
and critical in expressing views to the inspection team. I just do not
believe this process can be replicated without the presence of an
ambassador team leader and to the exclusion from the team of those with
foreign service experience. As the Preface to the PCIE Quality
Standards for Inspections states: "The inspection function at each
Department/Agency is tailored to the unique mission of the respective
Department/Agency." OIG needs the experience and expertise of
ambassadorial leaders and Foreign Service staff to design and implement
inspections tailored to the unique mission of the State Department. I
believe that 9 of 22 Foreign Service officers transferring over the
five years is, if anything, too low, not too high. As the House Foreign
Affairs Committee Report referred to above observed: "The Inspector
General must be served . by individuals who possess foreign policy
training and knowledge of the Foreign Service".
Even more critical than the appearance of independence is the fact of
independence. As the draft report notes, GAO has been expressing for
nearly 30 years --going back to its 1978 report --its concern that the
desire of OIG staff to receive favorable assignments could influence
their objectivity. Based on my knowledge and experience, this concern
is theoretical but is unwarranted in fact. There are several checks and
balances in OIG's policies and procedures, as well as in Department
standards and PCIE Quality Standards, but more important, I am unaware
of any situation in thirty years of a credible allegation supporting
this concern and I have not seen during my tenure any sign of actual
impairment of independence. I also note that the entire Federal
government is characterized by and populated with people moving and
graduating to other positions within and outside their present
agencies, and to make that a negative or a prima facie concern for
objectivity risks greater concerns for efficiency. In terms of actual
numbers, I am advised that over the past five years, out of 14 Foreign
Service team leaders, only three went back to the Department (one for a
brief time before leaving) and 11 have retired or plan to retire after
leaving OIG. Fifteen other team leaders were retired annuitants and not
likely to present a concern. At the end of FY 06 only 18 of the 65
Office of Inspection positions were filled by Foreign Service officers.
Reviews of IT Inspections:
The draft report recognizes that, although external quality or peer
review is not required for inspections, at the time of GAO's work "the
State IG established an internal program to review the quality of the
inspection practice". The draft report states that the internal review
did not include information technology inspections. Actually, the
internal quality review undertaken by OIG does include a review of the
information technology portion of any inspection in which IT staff
participated. However the draft report rightly notes that the quality
of IT inspections is critical for providing overall assurance of FISMA
compliance. Accordingly, OIG agrees with the recommendation that all
inspections performed by the Office of Information Technology be
included in the internal quality review process.
Agreement on Investigative Activities:
The draft report correctly points out the absence of a functional
agreement between OIG and the Bureau of Diplomatic Security ("DS") for
coordinating investigative activities. It is my understanding that
efforts were made some ten years ago and thereafter to, reach a
Memorandum of Understanding between OIG and DS but it was never
completed. I am advised that an obstacle was the significant disparity
in size and resources between DS and OIG/INV. The GAO draft report
describes DS as "a global force of approximately 32,000". I cannot
confirm that number or its components, but OIG/INV consisted at the end
of FY 2006 of 21 people of whom 17 were Special Agents, whereas DS had
approximately 1,448 Special Agents.
OIG agrees with GAO's recommendation that it work with DS and others to
develop a written agreement delineating the areas of responsibility for
Department investigations. OIG appreciates the examples provided by GAO
of other agencies where significant law enforcement functions exist
alongside inspectors general and the written agreements they have
achieved. OIG will pursue efforts to develop an agreement with DS using
the models suggested.
Thank you again for the professionalism and courtesies of your staff.
Should you have any questions regarding the comments herein, please
contact me.
Sincerely,
Signed by:
Howard J. Krongard:
Inspector General:
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
Jeanette M. Franzel, (202) 512-9471 or franzelj@gao.gov:
Acknowledgments:
Financial Management and Assurance:
Jackson W. Hufnagle, Assistant Director Clarence A. Whitt, Analyst-in-
Charge:
Office of the General Counsel:
Francis Dymond, Assistant General Counsel Jacquelyn Hamilton, Deputy
Assistant General Counsel Amy Bowser, Attorney:
FOOTNOTES
[1] Pub. L. No. 99-399, Title IV, § 413, 100 Stat. 853, 867-68 (Aug.
27, 1986).
[2] Pub. L. No. 95-452, 92 Stat. 1101 (Oct. 12, 1978), codified as
amended at 5 U.S.C. App.
[3] 5 U.S.C. App. § 4(b)(1).
[4] The PCIE is composed principally of the presidentially appointed
and Senate-confirmed IGs, and the ECIE is composed principally of IGs
appointed by the heads of designated federal entities defined by the IG
Act. Both were established by Executive Order to coordinate and enhance
the work of the IGs.
[5] GAO, State Department's Office of Inspector General, Foreign
Service, Needs to Improve Its Internal Evaluation Process, ID-78-19
(Washington, D.C.: Dec. 6, 1978).
[6] GAO, State Department's Office of Inspector General Should Be More
Independent and Effective, AFMD-83-56 (Washington, D.C.: June 2, 1982).
[7] 5 U.S.C. App. § 2.
[8] GAO, Border Security: More Emphasis on State's Consular Safeguards
Could Mitigate Visa Malfeasance Risks, GAO-06-115 (Washington, D.C.:
Oct. 6, 2005).
[9] Pub. L. No. 83, ch. 1366, § 4, 34 Stat. 99, 100 (Apr. 5, 1906).
[10] Pub. L. No. 135, ch. 182, § 10, 43 Stat. 140, 142 (May 24, 1924).
[11] Pub. L. No. 724, ch. 957, § 681, 60 Stat. 999, 1018 (Aug. 13,
1946).
[12] Pub. L. No. 87-195, § 624, 75 Stat. 424, 447 (Sept. 4, 1961).
[13] Pub. L. No. 95-88, § 124, 91 Stat. 533, 541-42 (Aug. 3, 1977).
Section 124 authorized the President to assign to the Inspector General
of Foreign Service all of the duties and responsibilities of the
Inspector General of Foreign Assistance, which he did by Executive
Order 12066, June 29, 1978.
[14] ID-78-19.
[15] Pub. L. No. 96-465, Title I, ch. 2, § 209, 94 Stat. 2071, 2080
(Oct. 17, 1980).
[16] AFMD-83-56.
[17] Pub. L. No. 99-93, § 150, 99 Stat. 405, 427 (Aug. 16, 1985).
[18] Pub. L. No. 99-399, Title IV, § 413.
[19] The PCIE and ECIE make no distinction between inspections and
evaluations and include both in their definition.
[20] 5 U.S.C. App. § 4(a)(3).
[21] We adjusted for inflation using the OMB Gross Domestic Product
(GDP) inflator.
[22] 5 U.S.C. App. § 5.
[23] State IG, Review of the Department of State's Overseas Purchase
Card Program, AUD/PPA-05-01 (Washington, D.C.: December 2004).
[24] Pub. L. No. 106-531, 114 Stat. 2537 (Nov. 22, 2000).
[25] GAO, High-Risk Series: An Update, GAO-03-119 (Washington, D.C.:
January 2003).
[26] GAO, High-Risk Series: An Update, GAO-05-207 (Washington, D.C.:
January 2005).
[27] Pub. L. No. 107-296, § 812, 116 Stat. 2135, 2223 (Nov. 25, 2002).
[28] Title III, E-Government Act of 2002, Pub. L. No. 107-347, 116
Stat. 2899, 2946 (Dec. 17, 2002).
[29] 22 U.S.C. § 4861(d).
[30] 5 U.S.C. App. § 2.
[31] 22 U.S.C. § 4807.
[32] 5 U.S.C. §§ 3345-3349(d).
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