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The Chairman also directly influenced a drastic reduction in our FY 1996 budget appropriation through discussions with the House Appropriations Subcommittee. Due to budgetary constraints, we closed our investigative field office in Houston, Texas, and lost five special agents. The appropriation bill also included language restricting any audit, review or investigation of Medicare activities. This action was taken even though Medicare fraud investigations had been established as a priority by the Administration, Congress, the Department of Justice and the health care industry.

Although the previous Chairman strongly opposed every initiative undertaken by this office, we continued our activities to improve the agency's day to day operations. We initiated audits of the agency's financial statements which identified major weaknesses in RRB operations. The audits indicated significant problems related to the accuracy of benefit payments, the annual funds transfer between the RRB and the Social Security Administration, railroad retirement tax deposits and the overall control environment at the agency. We continue to work with agency managers to ensure all deficiencies are addressed in a timely manner.

In response to the financial statement audits, we issued four reinvention proposals to the RRB's Board Members to assist them in streamlining operations. We recommended that agency management revise the RRB's organizational structure by consolidating the existing 22 bureaus into five, reduce the number of field service offices from 86 to 10, and utilize technology to change service delivery methods. We also recommended that the Board propose the type of enabling legislation that would facilitate the transfer of the RRB's Tier I responsibility to the Social Security Administration over the next three years. The transfer of the Tier I program would eliminate duplicate administrative mechanisms, including the financial interchange process, and would minimize the need for continuous benefit coordination. Our final reinvention proposal urged the Board to request a change in its status from an independent agency to a government corporation under the direction of an independent Commissioner who would function as a Chief Executive Officer. Only minor changes were implemented In response to our proposals.

We also reviewed the activities of the RRB Investment Committee which is responsible for the investment of $15 billion in agency trust funds. We found that the Committee lacks an investment policy and strategy and its members have little or no investment experience. We remain very concerned because corrective actions have not been taken to address the identified weaknesses. Our audits in this area as well as the financial statement audits are critical because the financial stability of the railroad retirement system has been a long-term concern.

I am pleased to report that the atmosphere at the RRB has dramatically changed. In June 1998, a new Chair, Ms. Cherryl T. Thomas, was sworn in. Ms. Thomas and this office are currently engaged in open discussions on the significant issues at the Railroad Retirement Board. There is a new atmosphere of cooperation and a free exchange of ideas. We believe that agency management and the Office of Inspector

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General will now move forward in implementing improvements and providing the very best service to the railroad community.

If you or your staff require any additional information, please do not hesitate to contact me at (312) 751-4690.

Thank you for the opportunity to comment on this important issue.

Sincerely,

Martin Dicken

Martin J. Dickman
Inspector General

In connection with proposed changes to the Inspector General Act, you have asked for our thoughts on the relationship between the Inspector General and the head of an agency and the importance of that relationship relative to achieving the government's goals and objectives.

In order for an Inspector General to maximize effectiveness, there are two important elements that must be present. First, the operations of the Office of Inspector General (OIG) must be independent from real or perceived control by the organization he or she oversees, and; second, there must be a cooperative spirit between the Inspector General, his or her office, and the agency. During my term here at the FDIC we have worked to ensure both.

In the last year and a half, there have been two significant changes designed to enhance the independence of the FDIC OIG. First, the office became a congressionally appropriated activity. Previously, the Corporation had determined the funding for this office. Second, Chairman Tanoue agreed, shortly after her arrival, that the OIG should have authority to make its own personnel and contracting decisions. Those authorities had previously resided with the Corporation. I believe that these actions will ensure that my office both operates independently and gives every appearance of doing so.

In addition to ensuring our independence, we have worked to establish a cooperative relationship with our agency head. Chairman Tanoue has been supportive of the OIG since she took office last spring. I meet regularly with her to brief her on the status of significant activities of my office. In addition, I provide her with a weekly "Highlights" memorandum describing noteworthy matters arising from the operations of the OIG.

One outcome of the positive relationship I have with Chairman Tanoue has been increased cooperation between OIG staff and other divisions and offices within the FDIC Another example is the extensive consultative, oversight, and audit work we are doing in the area of the Year 2000 problem. Chairman Tanoue recently testified before Congress that

Senator Fred Thompson

October 21, 1998
Page 2 of 2

"...the U.S. General Accounting Office and the FDIC's Office of
Inspector General have had significant oversight of our Year 2000
efforts. We welcome the independent views that these organizations
provide. In particular, our Office of Inspector General has provided
continuous feedback to management on Year 2000 programs....This
approach has worked well, enabling the FDIC to incorporate
suggestions into both our internal and external Year 2000 programs."

Finally, we have an effective Audit Committee whose presence facilitates the acceptance of recommendations from our office to the other parts of the FDIC.

In conclusion, I believe an Inspector General will be able to assist the agency in more efficiently achieving its mandate when the work is carried out in an atmosphere of

cooperation between the agency and an independent OIG. I am committed to ensuring that my office continues to work in this manner with the FDIC.

Thank you for this opportunity to comment for the record.

Sincerely,

Garten Hanni

Gaston L. Gianni, Jr.
Inspector General

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Post-Hearing Questions of Senator Sam Brownback for

June Gibbs Brown, Inspector General

U.S. Department of Health and Human Services

Has this Administration, through the work of the National Performance Review, coordinated their reinvention recommendations and efforts with you in HHS? Did they consult you on their reinvention recommendations for HHS? Are you satisfied with the reinvention efforts within HHS?"

Answer: The HHS Inspector General's office was involved in most aspects of the
Department's reinvention efforts. Our staff served as members of several reinvention
effort working groups, and senior Office of Inspector General officials were involved in
much of the top-level dialogue. Primarily, our involvement with the initiative occurred
through the efforts of the Office of the Secretary. Although we did not always fully agree
with all of the strategies that were implemented, we believe the process used by HHS to
derive its eventual reinvention actions was thoughtful, inclusive, and fair.

Susan Gaffney, Inspector General to HUD, testified about her struggle with the current HUD Secretary and the HUD senior staff to maintain the independence of the HUD Office of Inspector General. How is the independence of the OIG of any agency enforced? Who enforces it? How can the Congress help the IG community ensure its independence?

Answer: Ensuring the continued independence of an agency Inspector General requires vigilance by both the Inspector General and the Secretary. Where agency officials, intentionally or not, move to impinge on the independence of the Office of Inspector General, the Inspector General must immediately respond, asserting why the move is inappropriate. In my experience, simply explaining to the interested officials why a proposed action is impermissible under the Inspector General Act generally suffices. If not, an Inspector General has "direct and prompt access" to the Secretary under section 6 of the Inspector General Act, and should enlist the help of the Secretary in averting any threats to independence. Finally, if this fails, the Inspector General is authorized to alert the Congress, through semiannual reports, "7-day letters," and otherwise. Except in the most extreme circumstances, these avenues appear to work well to safeguard our independence. In unusual cases, intervention by the Office of Management and Budget, or Congressional oversight committees may also be required.

We heard your testimony in contrast to the testimony of Inspector General Gaffney. Both of you demonstrated how the role of the IG may vary from one agency to the next. In addition, some IGs are more aggressive than others. How can Congress and the Administration make the role of the IG consistent in every agency? Is there adequate coordination among agency OIGs? How can the PCIE/ECIE improve coordination in the IG community?