State Department Inspector General
Actions to Address Independence and Effectiveness Concerns Are Under Way Gao ID: GAO-11-382T April 5, 2011In 2007 GAO reported on concerns with the independence and effectiveness of the Department of State Inspector General (State OIG). GAO was asked to provide testimony on the issues we raised and the status of recommendations made to the State OIG in that report. This testimony focuses on the importance of auditor and IG independence, GAO's prior concerns with the State OIG's independence and effectiveness, and the status of OIG actions to address GAO's recommendations. The testimony is primarily based on GAO's 2007 report conducted in accordance with generally accepted government auditing standards, as well as the activities conducted to follow up on the status of our previous recommendations.
The State Department Office of Inspector General (State OIG) has a critical responsibility in preventing and detecting fraud, waste, abuse, and mismanagement; and in providing independent audits and investigations of the department's programs and operations. In addition, the Foreign Service Act of 1980 requires the State OIG to perform inspections of the department's bureaus and posts, which is a unique requirement for an IG office. Independence is a critical element to the quality and credibility of an IG's work under the IG Act and is fundamental to professional auditing standards as well as an essential element of IG effectiveness. An IG must be independent and free from personal, external, and organizational impairments to independence in order to effectively fulfill the full range of requirements for the office. GAO's 2007 report identified areas of concern regarding the State OIG's independence and effectiveness. Specifically, the appointment of management and Foreign Service officials to head the State OIG in an acting capacity for extended periods of time is not consistent with professional standards for independence. In addition, GAO reported that the use of Foreign Service officers at the ambassador level to lead OIG inspections resulted in, at a minimum, the appearance of independence impairment. GAO also reported that inspections, by design, are conducted under less in-depth requirements and do not provide the same level of assurance as audits. However, the OIG relied on inspections rather than audits to provide oversight coverage, resulting in gaps to the audit oversight of the department. GAO also reported that inspections performed by the OIG's Office of Information Technology (IT) were not part of an internal quality review process, and that the State OIG and the department's Bureau of Diplomatic Security (DS) lacked an agreement to coordinate their investigative activities. The State OIG implemented two of GAO's five recommendations and has actions under way related to the remaining three. Specifically, the OIG now includes IT-related inspections in its internal quality-review process and has completed an agreement to coordinate investigations with DS. Also, the OIG is implementing a change to the succession planning for acting IG positions to exclude Foreign Service officers and is in the process of increasing the level of audit coverage through the distribution of staff and audit planning. In addition, the State OIG continues to assign Foreign Service officers at the ambassador level as team leaders for inspections, however, four of the six officers are rehired annuitants unlikely to rotate to State Department Foreign Service positions. GAO remains concerned, however, about the OIG's use of Foreign Service officers and the State Department's need to rely on acting IGs for extended periods of time. GAO continues to reaffirm its recommendations, and encourages the State OIG, with the assistance of the Secretary, to fully address these recommendations to enhance the effectiveness of the OIG's oversight of the State Department's programs and operations. In the 2007 report, GAO recommended that the IG work with the Secretary of State to address two recommendations regarding concerns about the State OIG's independence, and to reassess the mix of audits and inspections to help provide effective audit coverage of the department. In addition, GAO recommended that the IG include inspections performed by the OIG's Office of Information Technology in its internal quality review process and that it work with the department's Bureau of Diplomatic Security (DS) on an agreement to coordinate their investigative efforts.
GAO-11-382T, State Department Inspector General: Actions to Address Independence and Effectiveness Concerns Are Under Way
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United States Government Accountability Office:
GAO:
Testimony:
Before the Committee on Foreign Affairs, House of Representatives:
For Release on Delivery:
Expected at 10:00 a.m. EDT:
Tuesday, April 5, 2011:
State Department Inspector General:
Actions to Address Independence and Effectiveness Concerns Are Under
Way:
Statement of Jeanette M. Franzel:
Managing Director:
Financial Management and Assurance:
GAO-11-382T:
GAO Highlights:
Highlights of GAO-11-382T, a testimony before the Committee on Foreign
Affairs, House of Representatives.
Why GAO Did This Study:
In 2007 GAO reported on concerns with the independence and
effectiveness of the Department of State Inspector General (State
OIG). GAO was asked to provide testimony on the issues we raised and
the status of recommendations made to the State OIG in that report.
This testimony focuses on the importance of auditor and IG
independence, GAO‘s prior concerns with the State OIG‘s independence
and effectiveness, and the status of OIG actions to address GAO‘s
recommendations. The testimony is primarily based on GAO‘s 2007 report
conducted in accordance with generally accepted government auditing
standards, as well as the activities conducted to follow up on the
status of our previous recommendations.
What GAO Found:
The State Department Office of Inspector General (State OIG) has a
critical responsibility in preventing and detecting fraud, waste,
abuse, and mismanagement; and in providing independent audits and
investigations of the department‘s programs and operations. In
addition, the Foreign Service Act of 1980 requires the State OIG to
perform inspections of the department‘s bureaus and posts, which is a
unique requirement for an IG office. Independence is a critical
element to the quality and credibility of an IG‘s work under the IG
Act and is fundamental to professional auditing standards as well as
an essential element of IG effectiveness. An IG must be independent
and free from personal, external, and organizational impairments to
independence in order to effectively fulfill the full range of
requirements for the office.
GAO‘s 2007 report identified areas of concern regarding the State
OIG‘s independence and effectiveness. Specifically, the appointment of
management and Foreign Service officials to head the State OIG in an
acting capacity for extended periods of time is not consistent with
professional standards for independence. In addition, GAO reported
that the use of Foreign Service officers at the ambassador level to
lead OIG inspections resulted in, at a minimum, the appearance of
independence impairment. GAO also reported that inspections, by
design, are conducted under less in-depth requirements and do not
provide the same level of assurance as audits. However, the OIG relied
on inspections rather than audits to provide oversight coverage,
resulting in gaps to the audit oversight of the department. GAO also
reported that inspections performed by the OIG‘s Office of Information
Technology (IT) were not part of an internal quality review process,
and that the State OIG and the department‘s Bureau of Diplomatic
Security (DS) lacked an agreement to coordinate their investigative
activities.
The State OIG implemented two of GAO‘s five recommendations and has
actions under way related to the remaining three. Specifically, the
OIG now includes IT-related inspections in its internal quality-review
process and has completed an agreement to coordinate investigations
with DS. Also, the OIG is implementing a change to the succession
planning for acting IG positions to exclude Foreign Service officers
and is in the process of increasing the level of audit coverage
through the distribution of staff and audit planning. In addition, the
State OIG continues to assign Foreign Service officers at the
ambassador level as team leaders for inspections, however, four of the
six officers are rehired annuitants unlikely to rotate to State
Department Foreign Service positions. GAO remains concerned, however,
about the OIG‘s use of Foreign Service officers and the State
Department‘s need to rely on acting IGs for extended periods of time.
GAO continues to reaffirm its recommendations, and encourages the
State OIG, with the assistance of the Secretary, to fully address
these recommendations to enhance the effectiveness of the OIG‘s
oversight of the State Department‘s programs and operations.
What GAO Recommends:
In the 2007 report, GAO recommended that the IG work with the
Secretary of State to address two recommendations regarding concerns
about the State OIG‘s independence, and to reassess the mix of audits
and inspections to help provide effective audit coverage of the
department. In addition, GAO recommended that the IG include
inspections performed by the OIG‘s Office of Information Technology in
its internal quality review process and that it work with the
department‘s Bureau of Diplomatic Security (DS) on an agreement to
coordinate their investigative efforts.
View [hyperlink, http://www.gao.gov/products/GAO-11-382T] or key
components. For more information, contact Susan Ragland, (202) 512-
8486, raglands@gao.gov.
[End of section]
Madam Chairman Ros-Lehtinen, Ranking Member Berman, and Members of the
Committee:
I am pleased to be here today to discuss the Department of State
Office of Inspector General (State OIG), which is responsible for
providing oversight of the State Department including the Foreign
Affairs community in more than 270 embassies, consulates, and other
posts worldwide as well as the Broadcasting Board of Governors. The
State Inspector General (IG) has a critical responsibility to provide
effective and objective oversight of the department to support
managers in their efforts to improve performance and prevent or detect
losses from fraud, waste, or abuse and to the Congress in its
responsibility for oversight of the executive branch.
The statutory IGs, including the State IG, play a critical role in
federal agency oversight and in identifying mismanagement of scarce
taxpayer dollars. In light of this important role, the IG Act provides
specific protections to IG independence that are unprecedented for an
audit and investigative function located within an organization being
reviewed. These protections are necessary due in large part to the
unusual reporting requirements of the IGs who are both part of their
federal agencies and also expected to provide independent reports of
their work externally to the Congress.
My statement today is based primarily on our March 2007[Footnote 1]
report on the activities of the State OIG, our October 2007 testimony
[Footnote 2] that followed on the same subject, and updated
information we received from State OIG officials to follow up on the
status of our recommendations. In our 2007 report and testimony, we
raised a number of concerns with the State OIG's independence, the
lack of audit oversight in high-risk areas, and the lack of assurance
that the department is receiving independent investigations. I will
discuss in more detail (1) the importance of auditor and IG
independence, (2) prior reporting on our concerns with the State OIG's
independence and effectiveness, and (3) information about the current
status of the State OIG's actions to address our recommendations. This
testimony is based on our prior work and follow-up activities which
were performed in accordance with generally accepted government
auditing standards.
Background:
The State OIG, as currently constituted, was established by the
Omnibus Diplomatic Security and Antiterrorism Act of 1986,[Footnote 3]
which expanded on the 1985 amendments[Footnote 4] to the Inspector
General Act of 1978 (IG Act),[Footnote 5] as an independent office to
prevent and detect fraud, waste, abuse, and mismanagement in the
department's programs and operations; conduct and supervise audits and
investigations; and recommend policies to promote economy, efficiency,
and effectiveness.
The State OIG is unique among federal inspectors general in its
history and responsibilities due to a statutory requirement for the
OIG to provide inspections of the department's bureaus and posts
worldwide. From 1906 until 1957, inspections were to be carried out at
least once every 2 years and were viewed as a management function, and
not a function of an independent inspector general. In 1957, the State
Department administratively established an Inspector General of
Foreign Service, which was the first inspector general office within
the State Department to conduct inspections. Congress enacted
legislation in 1961 and in 1980 creating statutory inspectors general
who were tasked with performing inspections on certain State
Department activities. In 1978, GAO reviewed the IG's inspection
reports and questioned the independence of Foreign Service officers
who were temporarily detailed to the IG's office and recommended the
elimination of this requirement. [Footnote 6] The 1980 legislation,
section 209(a) of the Foreign Service Act, required the State IG to
inspect every foreign service post, bureau, or other operating unit in
the State Department at least once every 5 years.
In 1982, we reviewed the IG's operations and noted that the 5-year
inspection cycle led to problems with the IG's effectiveness by
limiting the ability to do other work.[Footnote 7] In addition, we
continued to question the use of Foreign Service officers and other
persons from operational units within the department to staff the IG
office. In 1986, reacting to concerns similar to those expressed in
our 1982 report, Congress made the State IG a presidentially appointed
inspector general subject to the Inspector General Act and prohibited
a career member of the Foreign Service from being appointed as the
State IG. Starting in 1996 and continuing until today, Congress, in
the Department of State appropriations acts, annually waives the 5-
year statutory requirement for inspections. However, while the
inspection requirement is waived annually by Congress, the State IG
continues to conduct inspections as part of its plan for oversight of
the department.
The State OIG's inspection responsibilities encompass a wide range of
objectives, which include reviewing whether department policy goals
are achieved and whether the interests of the United States are
represented and advanced effectively. In addition, the State OIG is
assigned responsibility for specialized security inspections in
support of the department's mission to provide effective protection to
its personnel, facilities, and sensitive intelligence information.
Inspections are defined by the Council of the Inspectors General on
Integrity and Efficiency (CIGIE)[Footnote 8] 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.
There are fundamental differences between inspections and audits.
Inspections and audits are typically conducted under separate
standards with different basic requirements. That is, IGs are required
by the IG Act to conduct audits in accordance with Government Auditing
Standards (also known as generally accepted government auditing
standards).[Footnote 9] In contrast, the IGs follow CIGIE's Quality
Standards for Inspection and Evaluation[Footnote 10] when conducting
inspections as required by law.[Footnote 11] 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 CIGIE's inspection
standards. Also, auditing standards require external quality reviews
of audit organizations (peer reviews) on a 3-year cycle, while
inspection standards do not require such external reviews. According
to CIGIE, inspections provide the benefits of a flexible mechanism for
optimizing resources, expanding agency coverage, and using alternative
review methods and techniques. However, as reported by a recent peer
review performed by the National Aeronautics and Space Administration
(NASA) IG, the State OIG's Middle East Regional Office did not always
provide audits consistent with generally accepted government auditing
standards (GAGAS). Consequently, because these audits were not
performed in accordance with GAGAS, they were reclassified by the OIG
as inspections.
Importance of Auditor and IG Independence:
Independence is a fundamental principle to the auditing profession and
the most critical element for IG effectiveness. Without independence,
an audit organization cannot conduct independent audits in compliance
with generally accepted government auditing standards. Likewise, an IG
who lacks independence cannot effectively fulfill the full range of
requirements of the office. Lacking this critical attribute, an audit
organization's work might be classified as studies, research reports,
consulting reports, or reviews, rather than independent audits.
Quality Standards for Federal Offices of Inspector General adopted by
CIGIE includes requirements for IG independence.[Footnote 12]
Specifically, IGs and their staff must be free both in fact and
appearance from personal, external, and organizational impairments to
their independence. The IGs and their staff have a responsibility to
maintain independence so that opinions, conclusions, judgments, and
recommendations will be impartial and viewed as impartial by
knowledgeable third parties. Likewise, Government Auditing Standards
states: "in all matters relating to the audit work, the audit
organization and the individual auditor, whether government or public,
must be free from personal, external, and organizational impairments
to independence and must avoid the appearance of such impairments to
independence. Auditors and audit organizations must maintain
independence so that their opinions, findings, conclusions, judgments,
and recommendations will be impartial and viewed as impartial by
objective third parties with knowledge of the relevant information."
Personal independence applies to individual auditors at all levels of
the audit organization, including the head of the organization.
Personal independence refers to the auditor's ability to remain
objective and maintain an independent attitude in all matters relating
to the audit, as well as the auditor's ability to be recognized by
others as independent. The auditor is to have an independent and
objective state of mind that does not allow personal bias or the undue
influence of others to override the auditor's professional judgments.
This attitude is also referred to as intellectual honesty. The auditor
must also be free from direct financial or managerial involvement with
the audited entity or other potential conflicts of interest that might
create the perception that the auditor is not independent.
The IG's personal independence and appearance of independence to
knowledgeable third parties is critical to IG decision making related
to the nature and scope of audit and investigative work to be
performed by the IG office. The IG's personal independence must be
maintained when conducting any audit and investigative work and when
making decisions to determine the type of work to pursue and the
nature and scope of the individual audits themselves.
External independence refers to both the auditor's and the audit
organization's freedom to make independent and objective judgments
free from external influences or pressures. Examples of impairments to
external independence include restrictions on access to records,
government officials, or other individuals needed to conduct the
audit; external interference over the assignment, appointment,
compensation, or promotion of audit personnel; restrictions on funds
or other resources provided to the audit organization that adversely
affect the audit organization's ability to carry out its
responsibilities; or external authority to overrule or to
inappropriately influence the auditors' judgment as to appropriate
reporting content.
The IG Act provides the IGs with protections against impairments to
external independence by providing that IGs have access to all agency
documents and records, prompt access to the agency head, and the
authority to independently (1) select and appoint IG staff, (2) obtain
services of experts, and (3) enter into contracts. The IGs may choose
whether to exercise the act's specific authority to obtain access to
information that is denied by agency officials.
In addition, the IG Act granted the IGs additional insulation from
impairment of external independence by requiring that IGs report the
results of their work in semiannual reports to Congress without
alteration by their respective agencies, and that these reports
generally are to be made available to the general public. The IG Act
also directed the IGs to keep their agency heads and Congress fully
and currently informed of any deficiencies, abuses, fraud, or other
serious problems relating to the administration of programs and
operations of their agencies. Also, the IGs are required to report
particularly serious or flagrant problems, abuses, or deficiencies
immediately to their agency heads, who are required to transmit the
IG's report to Congress within 7 calendar days.
Organizational independence refers to the audit organization's
placement in relation to the activities being audited. Professional
auditing standards have different criteria for organizational
independence for external and internal audit organizations. The IGs,
in their statutory role of providing oversight of their agencies'
operations, represent a unique hybrid including some characteristics
of both external and internal reporting responsibilities. For example,
the IGs have external-reporting requirements outside their agencies,
such as to the Congress, which are consistent with the reporting
requirements for external auditors. At the same time the IGs are part
of their respective agencies and must also keep their agency heads, as
well as the Congress, concurrently informed.
The IG Act provides specific protections to the IGs' organizational
independence including the requirement that IGs report only to their
agency heads and not to lower-level management. The head of the agency
may delegate supervision of the IG only to the officer next below in
rank, and is prohibited from preventing the IG from initiating,
carrying out, or completing any audit or investigation. In addition,
IGs in large federal departments and agencies, such as the State
Department, are appointed by the President and confirmed by the
Senate. Only the President has the authority to remove these IGs and
can do so only after explaining the reasons to the Congress 30 days
before taking action.
The Inspector General Reform Act of 2008 provided additional
enhancements to overall IG independence that included establishing
CIGIE by statute to continually address areas of weakness and
vulnerability to fraud, waste, and abuse in federal programs and
operations; requiring that IGs have their own legal counsel or use
other specified counsel; and requiring that the budget amounts
requested by the IGs for their operations be included in the overall
agency-budget requests to the President and the Congress.
Independence and Effectiveness Concerns We Reported in 2007:
Concerns Regarding the State OIG's Independence:
In March 2007, we reported on two areas of continuing concern
regarding the independence of the State OIG. These concerns involved
the appointment of management officials to head the State OIG in an
acting capacity for extended periods of time and the use of Foreign
Service staff to lead State OIG inspections. These concerns were
similar to independence issues we reported in 1978 and 1982 regarding
Foreign Service officers temporarily detailed from program offices to
the IG's office and inspection staff reassigned to and from management
offices within the department. In response to concerns about personal
impairments to the State IG's independence, the act that created the
current IG office prohibits a career Foreign Service official from
becoming an IG of the State Department.[Footnote 13]
Nevertheless, our 2007 review found that during a period of
approximately 27 months, from January 2003 through April 2005, four
management officials from the State Department served as an acting
State IG. All four of these officials had served in the Foreign
Service in prior management positions, including political
appointments as U.S. ambassadors to foreign countries. In addition, we
also found that three of the officials returned to significant
management positions in the State Department after serving as acting
IGs. We found that acting IG positions continue to be used and are
filled by officials with prior management positions at the department.
Independence concerns surrounding such acting appointments are
additionally troublesome when the acting IG position is held for such
prolonged periods. (See table 1.)
Table 1: Length of Service of the State Department IG and Management
Officials Who Served as Acting IGs January 24, 2003, to the present:
Position prior to serving as IG: Ambassador to Kyrgyzstan;
Starting dates and length of service: 1/24/2003 - 8 months;
Position after serving as IG: Retired from government service.
Position prior to serving as IG: Ambassador to Columbia;
Starting dates and length of service: 9/28/2003 - 10 months;
Position after serving as IG: Permanent Representative at the U.S.
Mission to the United Nations.
Position prior to serving as IG: Deputy Global AIDs Coordinator;
Starting dates and length of service: 8/3/2004 - 1 month;
Position after serving as IG: Special Representative on Avian and
Pandemic Influenza.
Position prior to serving as IG: Ambassador to South Africa;
Starting dates and length of service: 8/23/2004 - 8 months;
Position after serving as IG: Charge d'Affaires, Kharton, Sudan.
Position prior to serving as IG: State Department Inspector General
served 32 months 5/2/2005 - 1/15/2008.
Position prior to serving as IG: Executive Director/Controller, Bureau
of International Narcotics and Law Enforcement Affairs;
Starting dates and length of service: 1/16/2008 - 6 months;
Position after serving as IG: Ambassador to Brunei.
Position prior to serving as IG: 25 years in senior State Department
positions;
Starting dates and length of service: 6/2/2008 - 33 months;
Position after serving as IG: Currently Deputy IG.
Source: GAO's March 2007 report and current information from the State
Department.
[End of table]
Another independence concern discussed in our March 2007 report is the
use of Foreign Service officers to lead inspections of the
department's bureaus and posts. We found it was State OIG policy for
inspections to be led by ambassador-level Foreign Service officers.
These Foreign Service officers frequently move through the OIG on
rotational assignments. As Foreign Service officers, they are expected
to help formulate, implement, and defend government policy which now,
as team leaders for the IG's inspections, they are expected to review.
These officers may return to Foreign Service positions in the
department after their rotation through the OIG which could be viewed
as compromising the OIG's independence. Specifically, the appearance
of objectivity is severely limited by this potential impairment to
independence resulting in a detrimental effect to the quality of the
inspection results.
Reliance on Inspections Limited Effectiveness due to Gaps in Oversight:
In our 2007 audit, we found that the State OIG's emphasis on
inspections limited its effectiveness because it resulted in gaps in
the audit coverage of the State Department's high-risk areas and
management challenges. These critical areas were covered almost
exclusively through OIG inspections that were not subject to the same
level of scrutiny that would have been the case if covered by audits.
Specifically, we found gaps of OIG audit coverage in key State
Department programs and operations such as (1) information security,
(2) human resources, (3) counterterrorism and border security, and (4)
public diplomacy. In these areas the State OIG was relying on
inspections rather than audits for oversight. In the 10 inspections
that we examined, we found that the State OIG inspectors relied
heavily on invalidated agency responses to questionnaires completed by
the department staff at each inspected bureau or post. We did not find
any additional testing of evidence or sampling of agency responses to
determine the relevance, validity, and reliability of the evidence as
would be required under auditing standards. In addition, we found that
for 43 of the 183 recommendations contained in the 10 inspections we
reviewed, the related inspection files did not contain any documented
support beyond written report summaries of the findings and
recommendations.
Inspections by the OIG's Office of Information Technology Were Not
Included in Quality Reviews:
In our 2007 report we also found that inspections by the OIG's Office
of Information Technology were not included in the internal quality
reviews that the OIG conducts of its own work. Information security is
a high-risk area and management challenge for the State Department,
and the OIG relied almost exclusively on inspections for oversight of
this area. Therefore, the quality of these inspections is key to the
OIG's oversight effectiveness. In addition, CIGIE's standards for
inspections require that IG inspections be part of a quality-control
mechanism that provides an assessment of the inspection work.
Lack of Coordination of Investigations between the State OIG and the
Bureau of Diplomatic Security:
We found in 2007 that there was inadequate assurance that the
investigative efforts of the State Department were coordinated to
avoid duplication or to ensure that independent OIG investigations of
the department would be performed. Specifically, while part of its
worldwide responsibilities for law enforcement and security
operations, the department's Bureau of Diplomatic Security(DS)
performed investigations that included passport and visa fraud, both
externally and within the department; these investigations were not
coordinated with the OIG investigators. The IG Act, as amended,
authorizes the State IG to conduct and supervise independent
investigations and prevent and detect fraud, waste, abuse, and
mismanagement throughout the State Department.
DS performs its investigations as a function of management, reporting
to the State Department Undersecretary for Management. In contrast,
the State OIG is required by the IG Act to be independent of the
offices and functions it investigates. We reported in 2007 that
without a formal agreement to outline the responsibilities of both DS
and the State OIG regarding these investigations, there was inadequate
assurance that this work would be coordinated to avoid duplication or
that independent OIG investigations of the department would be
performed.
The State Department's OIG Has Actions Under Way or Completed to
Address Most of Our Recommendations:
Recommendations from Our 2007 Report:
To address the concerns we raised in our March 2007 report we made
five recommendations.
To help ensure the independence of the IG Office, which also impacts
the effectiveness of the office, we recommended that the IG work with
the Secretary of State to:
(1) develop a succession-planning policy for the appointment of
individuals to head the State IG office in an acting capacity that
provides for independent coverage between IG appointments and also to
prohibit career Foreign Service officers and other department managers
from heading the State OIG in an acting capacity, and:
(2) develop options to ensure that State OIG inspections are not led
by career Foreign Service officials or other staff who rotate to
assignments within State Department management.
We also made the following three recommendations to the State IG to
address the effectiveness of the OIG:
(1) help ensure that the State IG provides the appropriate breath and
depth of oversight of the State Department's high-risk areas and
management challenges, reassess the proper mix of audit and inspection
coverage for these areas;
(2) provide for more complete internal quality reviews of inspections,
include inspections performed by the State IG's Office of Information
Technology in the OIG's internal quality review process; and:
(3) develop a formal written agreement with the Bureau of Diplomatic
Security to coordinate departmental investigations in order to provide
for more independent investigations of State Department management and
to prevent duplicative investigations.
Progress Has Been Made in Addressing Our Prior Recommendations:
In response to a draft of our 2007 report, the State OIG has
implemented two recommendations and has taken actions related to the
remaining three recommendations. Although the State OIG has not fully
addressed a recommendation that has been the subject of GAO
recommendations regarding the independence of the State OIG's
inspections since our 1978 report, there has also been some progress
in this area.
The OIG implemented our recommendation to include inspections
performed by the Office of Information Technology in its internal
quality review process in June 2008, by abolishing the State OIG's
Office of Information Technology and transferring staff into either
the Office of Audits or into the Office of Inspections. As a result,
the OIG's information technology inspections are now included in the
Office of Inspections' internal quality-review process.
The OIG has implemented our recommendation that the office work with
the Secretary of State and the Bureau of Diplomatic Security (DS) to
develop a formal written agreement that delineates the areas of
responsibility for State Department investigations. In December 2010,
the State IG's investigative office completed an agreement with the
bureau's Assistant Director of Domestic Operations to address the
coordination of investigative activities. This agreement, when fully
implemented, should help to ensure proper coordination of these
offices in their investigations.
Regarding a succession plan for filling acting IGs positions, the
State Deputy IG stated that he issued a memo to abolish the deputy IG
for Foreign Service position to help ensure that any future deputy IG
moving into an acting IG position would not be a Foreign Service
officer. The Deputy IG stated that he is currently working with the
department to update the Foreign Affairs Manual to reflect this
change. Furthermore, the elimination of this position helps to
strengthen the independence of the OIG. We believe the State IG's
changes are responsive to the recommendation made in our 2007 report.
Nevertheless, the State Department has relied on acting IGs to provide
oversight for over 5 of the last 8 years since January 2003. (See
table 1.) This use of temporarily assigned State Department management
staff to head the State OIG can affect the perceived independence of
the entire office in its oversight of the department's operations, and
the practice is questionable when compared to the independence
requirements of Government Auditing Standards and other professional
standards followed by the IGs. Further, career members of the Foreign
Service are prohibited by statute from being appointed as State IG.
[Footnote 14] This exclusion helps to protect against the personal
impairments to independence that could result when a Foreign Service
officer reviews the bureaus and posts of fellow Foreign Service
officers and diplomats.
Regarding our recommendation to reassess the mix of audits and
inspections for the appropriate breadth and depth of oversight
coverage, especially in high-risk areas and management challenges, we
noted gaps in audit coverage. Specifically, in both fiscal years 2009
and 2010, the OIG had gaps in the audit coverage of management
challenges in the areas of (1) coordinating foreign assistance, (2)
public diplomacy, and (3) human resources. However, the State OIG has
made progress in planning for and providing additional audit coverage.
Since 2007 the State OIG's resources have increased, providing the
opportunity to augment its audit oversight of the department.
Specifically, the OIG's total on board staff increased to 227, from
191 in at the end of fiscal year 2005. Also, the OIG's audit staff
increased to 64 compared to 54 at the end of fiscal year 2005. In
addition, the Office of Audits and the Middle East Regional Office are
planning to merge resulting in the OIG's largest component.
In January 2010, the State OIG reorganized the focus of the Office of
Audits and began to align its oversight efforts with the department's
growing global mission and strategic priorities. The newly reorganized
Office of Audit consists of six functional divisions and an audit
operations division to address (1) contracts and grants, (2)
information technology, (3) financial management, (4) international
programs, (5) human capital and infrastructure, (6) security and
intelligence, and (7) audit operations, which includes quality
assurance. These audit areas are intended to develop expertise and
address the department's management challenges. According to the
Office of Audits Fiscal Year 2011 Performance Plan, the office will
target high-cost programs, key management challenges, and vital
operations to provide managers with information that will assist them
in making operational decisions. The 2011 plan includes new areas such
as global health, food security, climate change, democracy and
governance, and human resource issues within the State Department. In
addition, with the assistance of an independent public accountant, the
State OIG has completed an audit of a major issue in coordinating
foreign assistance, the Global HIV/AIDS Initiative related to the
President's emergency plan for AIDS relief.[Footnote 15]
Regarding our recommendation concerning the use of career Foreign
Service officials to lead inspection teams, the State OIG's
inspections handbook requires that the team leaders for inspections be
a Foreign Service officer at the rank of ambassador. We also stated in
our 2007 report that experience and expertise are important on
inspection teams, but the expert need not be the team leader. However,
the Deputy IG stated that having Foreign Service officers with the
rank of ambassador as team leaders is critical to the effectiveness of
the inspection teams. OIG officials stated that there are currently
six Foreign Service officers at the ambassador level serving as the
team leaders for inspections, four of whom are rehired annuitants
working for the State OIG. To address independence impairments the
State OIG relies on a recusal policy where Foreign Service officers
must self-report whether they have worked in a post or embassy that is
subject to an inspection and therefore presents a possible impairment.
Further, State OIG officials noted that the team leaders report to a
civil service Assistant IG and the inspection teams include other
members of the civil service. We continue to believe that the State
OIG's use of management staff who have the possibility of returning to
management positions, even if they are rehired annuitants or currently
report to civil service employees in the OIG, presents at least an
appearance of impaired independence and is not fully consistent with
professional standards.
Closing Observations:
The mission of the State OIG is critical to providing independent and
objective oversight of the State Department and identifying
mismanagement of taxpayer dollars. While the IG Act provides each IG
with the ability to exercise judgment in the use of protections to
independence specified in the act, the ultimate success or failure of
an IG office is largely determined by the individual IG placed in that
office and that person's ability to maintain personal, external, and
organizational independence both in fact and appearance, while
reporting the results of the office's work to both the agency head and
to the Congress. An IG who lacks independence cannot effectively
fulfill the full range of requirements for this office.
The State OIG has either implemented or is in the process of
implementing the recommendations from our 2007 report, with the
exception of our recommendation to discontinue the use of Foreign
Service officers as team leaders for inspections. We remain concerned
about the independence issues that can arise from such an arrangement.
In addition, we remain concerned that a permanent IG has not been
appointed at the State Department for almost 3 years.
We commend the OIG for the steps it is taking to build and strengthen
its audit practice, and we are re-emphasizing our 2007 recommendation
for the OIG to reassess its mix of audit and inspections to achieve
effective oversight of the department's areas of high risk and
management challenges.
Madam Chairman Ros-Lehtinen, Ranking Member Berman, and Members of the
Committee, this concludes my prepared statement. I would be happy to
respond to any questions you or other Members of the Committee might
have at this time.
[End of section]
Footnotes:
[1] GAO, Inspectors General: Activities of the Department of State
Office of Inspector General, [hyperlink,
http://www.gao.gov/products/GAO-07-138] (Washington, D.C.: Mar. 23,
2007).
[2] GAO, Inspectors General: Limitations of IG Oversight at the
Department of State, [hyperlink,
http://www.gao.gov/products/GAO-08-135T] (Washington, D.C.: Oct. 31,
2007).
[3] Pub. L. No. 99-399, 100 Stat. 853 (Aug. 27, 1986).
[4] Pub. L. No. 99-93, 99 Stat. 427 (Aug. 16, 1985).
[5] Pub. L. No. 95-452, 92 Stat. 1101 (Oct. 12, 1978), codified as
amended at 5 U.S.C. App.
[6] GAO, State Department's Office of Inspector General, Foreign
Service, Needs to Improve Its Internal Evaluation Process, [hyperlink,
http://www.gao.gov/products/ID-78-19] (Washington, D.C.: Dec. 6, 1978).
[7] GAO, State Department's Office of Inspector General Should Be More
Independent and Effective, [hyperlink,
http://www.gao.gov/products/AFMD-83-56] (Washington, D.C.: June 2,
1982).
[8] The Council of the Inspectors General on Integrity and Efficiency
was established by the Inspector General Reform Act of 2008 (Pub. L.
110-409, 122 Stat. 4302 (Oct. 14, 2008) and consists mainly of IGs, to
address integrity, economy, and effectiveness issues that transcend
individual government agencies, and to increase the professionalism
and effectiveness of personnel in the IG offices.
[9] GAO, Government Auditing Standards, January 2007 Revision,
[hyperlink, http://www.gao.gov/products/GAO-07-162G] (Washington,
D.C.: January 2007).
[10] Council of the Inspectors General on Integrity and Efficiency,
Quality Standards for Inspection and Evaluation (Washington, D.C.:
January 2011).
[11] The Inspector General Reform Act of 2008 requires IGs who are
members of CIGIE to adhere to professional standards developed by
CIGIE for inspections and other work.
Pub. L. 110-409, 122 Stat. 4302, 4308 (Oct. 14, 2008).
[12] Council of the Inspectors General on Integrity and Efficiency,
Quality Standards for Federal Offices of Inspector General
(Washington, D.C.: Oct. 2003).
[13] 22 U.S.C. § 4861(d).
[14] 22 U.S.C. § 4861(d).
[15] State Department OIG, Audit of Sources and Uses of Global
HIV/AIDS Initiative Global Health and Child Survival Funds Related to
the President's Emergency Plan for AIDS Relief (PEPFAR) for FYs 2007
and 2008 (Washington, D.C.: Dec. 2010).
[End of section]
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