The Secretary of State does not administer or control the Peace Corps. The Peace Corps Director does not report to the Secretary of State, unlike the heads of the U.S. Information Agency, the Agency for International Development, and the Arms Control and Disarmament Agency. The agency itself is not under State Department control, so why move the Peace Corps OIG to State OIG?

The most nuanced and insightful OIG work occurs when staff know their agency from the inside. Placing Peace Corps OIG at State OIG would remove staff from that knowledge base. It also would reduce the impact and utility of OIG conclusions and recommendations from audits, inspections, evaluations and investigations. A possible exception to the demonstrable utility of the effectiveness from working within the agency is the rare major felony investigation, which could be conducted equally well from the vantage point of State OIG or the FBI.

The Peace Corps and the State Department have different administrative systems, including the daily management of appropriated funds. In fact, the Peace Corps is just completing the establishment of its own financial management system separate from the State Department's system. No special expertise with respect to the Peace Corps devolves to State OIG staff from its position in the State Department.

Annual (or semiannual) OIG reports to Congress about the Peace Corps will be submitted by State OIG through the Secretary of State. The Congress will receive no direct response from the agency head (the Secretary could invite him to respond, but he does not report to her), and the Secretary will be unequipped to comment on the Peace Corps in her transmittal since she has no authority over the agency and, as noted above, agency financial and other management systems do not mirror the State Department's. Alternatively, if State OIG submits a separate report on the Peace Corps through the Peace Corps Director, the presumed savings from consolidation will start to evaporate. Structurally, State OIG will have to prepare separate audit, inspection, evaluation and (except for certain felonies as noted above) investigation reports as the basis for the periodic reports to Congress.

Finally, it is not readily apparent how the 7 OIGs were selected from among the 30 designated Federal entities.

UCT 1 3 1998

SOCIAL SECURITY

The Honorable Fred Thompson

Office of the Inspector General

Chairman, Committee on Governmental Affairs

United States Senate

Washington, D.C. 20510

Dear Mr. Chairman:

Thank you for the opportunity to provide the Committee on Governmental Affairs with a formal statement, for the record, that conveys my views on the importance of the relationship between Inspectors General (IG) and agency heads and changes to the IG Act that are proposed in S. 2167.

I see the role of the Office of the Inspector General (OIG) within an agency as being constructive as well as instructive. I believe each OIG should ensure that its function exists as a valued part of the agency it serves. Too often, the model of an OIG's interactivity within an agency is (because of a misunderstanding of the concept of IG independence) one of confrontation and isolation. This type of interaction engenders an adversarial and sometimes hostile relationship between an IG and his/her agency. I am convinced that this is a distortion of the Congress' intent when it passed the IG Act of 1978.

It is critical for an IG to maintain independence and objectivity and yet foster a positive cooperative relationship with the head of his/her agency. IGs must balance their need for independence with an equal responsibility to become a valued partner in the agency they serve. This relationship should be built on a foundation of mutual respect. To attain this relationship, the IG must be perceived as fair-minded. As agents of positive change, IGs must ensure that their activities are above-board and that they do not hold the agency to a different set of standards than they hold themselves. This enhances an agency's trust in the OIG and makes the head of the agency more amenable to their recommendations. An IG whose reports and counsel are ignored or rejected has no

utility.

Page 2 - The Honorable Fred Thompson

Regarding the proposed changes to the IG Act, I believe the most important one is giving each IG a fixed term. Because an IG needs to sustain a relationship of respect and selfconfident counsel with the head of an agency, they need legislated tenure over fixed terms of office. This legislative adjustment would ensure that IGs maintain their independence within an agency's organizational structure. IG tenure and fixed terms would also attenuate the tendency of some to distance themselves from the leadership of their agencies.

If I can be of any further assistance regarding this matter, please call me or have your staff contact Stephanie J. Palmer, Acting Assistant Inspector General for External Affairs, at (410) 965-9704.

Sincerely,

James G. Huse, Jr.

Acting Inspector General

This is in response to your September 2, 1998, letter requesting the President's Council on Integrity and Efficiency (PCIE) to submit a statement for the record for the hearing held September 9, 1998, on the Inspector General Act.

Your letter requested comments on the following three topics: (1) the importance of the relationship between IGs and agency heads, (2) changes to the IG Act proposed in S. 2167, and (3) other statutory changes to the IG Act or oversight issues. With regard to the first topic, I have requested that individual Inspectors General provide their comments directly to the committee. In response to the second topic, Ken Mead, Chair of the PCIE Legislation Committee, has submitted a statement for the hearing record that presents the results of a survey of PCIE members on S. 2167. To respond to the third topic, I am enclosing the results of a legislative survey of PCIE members conducted earlier this year. Inspectors General were asked to provide recommended changes to the Inspector General Act, other statutes or to Federal regulations.

Thank you for the opportunity to provide our comments on these matters and for your support of the Inspector General Community. If you have any questions or need additional information, please call me or Mr. John R. Crane, PCIE Vice Chair Liaison, at (703) 604-8324.

Amend all relevant regulations to clarify that Special Agents (1811 series) are law enforcement officers

Amend OPM regulation requiring 24 hours accounting for the 511 series for special areas

Amend the ICITAP regulations to exempt OIGS

Change GAO required audit peer reviews from a 3-year cycle to a 5-year cycle