Perhaps with such early education and communication, through more formal orientation sessions or otherwise, an IG and a Secretary might dispel potential misconceptions about one another's roles. IGs could be admonished to exercise fully their independence, and agency managers to vigorously protect that independence and the valuable, objective information it generates. Both could also be instructed as to the importance of the IG's role in ensuring "up front" that programs are administered in a cost effective manner and structured so as to avoid fraud and abuse. Then, as envisioned by this Committee when passing the IG Act of 1978, the Inspector General could truly be "the strong right arm"I of the Secretary in combating fraud, waste and abuse. Proposed Amendments to the Inspector General Act As I testified earlier this year before the House Committee on Government Reform and Oversight (Subcommittee on Government Management Information and Technology), I believe that the last 2 decades have demonstrated that the overall structure of the IG Act is sound and does not need to be radically altered. Having said that, there are occasional roadblocks to OIG effectiveness that could be legislatively removed. For this reason, I welcomed Senator Collins' carefully crafted bill, S. 2167, the "Inspector General Act Amendments of 1998.” This bill does not scrap the fundamental IG concept-that of an internal yet independent agency watchdog who reports dually both to the agency head and to the Congress. Instead, Senator Collins has proposed more specific amendments that would address the few problem areas encountered by IGs during the last 20 years. I would like to briefly discuss a few of these provisions. Term of Office: Congress sought to insulate statutory IGs from political influences in various ways. For example, IGs are selected without regard to political affiliation and solely on the basis of qualifications and merit; and, if the President chooses to remove an IG, he must communicate his reasons to the Congress. However, history has shown that even with these protections, changes in administration may cause lengthy periods of uncertainty in the IG community. Months can go by while IGs await news of whether their services will be continued under a new administration-the resulting "limbo" could inhibit OIG operations and staff. Senator Collins' bill would eliminate this uncertainty by establishing a fixed term of office of 9 years for IGs in establishment agencies. Such a fixed term would foster continuity and stability even during a transition period. It would also contribute to job security for those considering service as an IG, and might enhance the appeal of an IG position. The length of the fixed term is less important, so long as the term does not simply coincide with a Presidential term of office-thus 5 or 9 years seems reasonable. The provision also is careful not to impede the President's ability to remove an Inspector General when warranted. For these reasons, I endorse the fixed term of office included in the proposed amendments. • Salary Level: As a way to attract career government employees to IG positions, to raise the stature of the IG position within the Agency, and to eliminate any controversy over IGs accepting bonuses, a provision in Senator Collins's bill would increase the salary of IGs from Executive Level IV to Executive Level III. However, because of a provision in Title 5 authorizing career members of the Senior Executive Service (SES) to receive locality pay up to level III of the Executive Schedule, this legislative fix may not achieve its intended purpose. Under 5 U.S.C. §5304 (g) (2) (A), career members of the Senior Executive Service can receive locality pay in addition to their base salary, but only up to level III of the Executive Schedule. As a result, raising IG pay to Executive Level III does not provide any additional incentive for career SES employees to accept an IG position since many may already be earning at the "cap" set at the Executive Level III salary. Possible modifications to this provision may be to lift the cap (although we would need to consult with the Office of Personnel Management concerning the broader impact of such a decision). Alternatively, the bill might raise IG salaries to Executive Level II, thus allowing the intended outcome. External Reviews: The Senate's bill would require an independent, external review of specified operations of each OIG every three years, including a review of contracting, hiring, and travel and training expenditures by the IG. This provision is in apparent response to the findings of the Subcommittee during their review of practices at the Department of Treasury OIG. We have no ob 1 Report of the Senate Committee on Governmental Affairs, accompanying the Inspector General Act of 1978; Report. No. 95-1071, at page 9. jection to such oversight reviews. We suggest only that the reviews not duplicate existing "peer reviews" such as the internal quality control reviews required of OIG Audit offices (also once every three years) under the "Yellowbook" standards of the General Accounting Office and the IG Act. · Annual Reporting: The bill would substitute an annual report for the semiannual reports currently required of Inspectors General. We have no objection to reducing the frequency of these reports. Although the change would not affect the resource level my office dedicates to reporting activities, the bill's provision would ease the administrative burden on some of the smaller OIG offices. We note that the HHS report, already quite long, would be even lengthier if issued annually. Therefore, we would continue to include an introductory section that highlights and directs the reader to significant reviews during the reporting period. The Collins bill also proposes certain substantive amendments to the contents of the Annual Report. We believe that certain of these technical amendments should be revisited. For example, the bill appears to change the correlation between the IG report and the separately issued report by departmental management summarizing the results of its implementation of the IG's recommendations. I would be happy to have our staff consult with Subcommittee staff on these technical details. Statutory Law Enforcement Authorities: Senator Collins has expressly asked for the views of the IG community on the critical issue of statutory law enforcement authority—that is, authority to execute search and arrest warrants, make arrests without warrants in certain circumstances, and carry firearms— for qualified investigators of the HHS Office of Inspector General. I am deeply appreciative of the Senator's efforts to raise and resolve this issue. Let me be clear. Law enforcement authorities are fundamental to the effective investigation of fraud against HHS programs and operations. More importantly, they are critical to the safety of OIG personnel. Our need for law enforcement powers is amply illustrated by the fact that over 95 percent of our 276 criminal investigators are currently deputized as Special Deputy U.S. Marshals under a variety of "blanket deputations," covering health care cases, child support enforcement cases and others. These deputations constitute a clear recognition by the Department of Justice that law enforcement tools are necessary to the effective and safe accomplishment of HHS investigations. A statutory grant of law enforcement authority would not enlarge the authorities that we are already exercising under deputations at HHS, but legislative authority would remove the administrative burden and uncertainty of temporary, limited deputations. Relying on a patchwork of deputations for our law enforcement authority also raises liability issues, not only for the OIG generally, but also for individual special agents. We believe that it is time, even past time, to eliminate the piecemeal approach of our several blanket deputations, and confer upon HHS criminal investigators the statutory law enforcement authorities they have already been long and properly exercising. We are pursuing this legislative proposal within the Executive Branch, in accordance with the Administration Policy Statement concerning statutory law enforcement, and hope to present it to this Committee and the Congress in the near future. Fragmentation of Inspector General Functions In July, the Congress passed and the President signed the Internal Revenue Service Restructuring and Reform Act of 1998. In part, this statute established a second presidentially appointed Inspector General within the Department of the Treasury; an Inspector General whose focus is to be limited exclusively to the programs and operations of the Internal Revenue Service. I am aware that this legislation responded to unique problems and needs in both the Treasury OIG and Internal Revenue Service, and perhaps is an appropriate reaction to an atypical situation. I would, however, like to voice my unease at any widespread return to fragmented internal audit and investigative responsibilities. The original IG Act wisely consolidated these functions under a single, high-level, visible, and independent Inspector General. Splintering the functions among more than one internal unit runs the risk of again diluting their effectiveness. Having said this, I acknowledge that the best way to avoid this outcome is for individual IGs not to present the Congress with any need to single out any individual agency program for special treatment. So long as we in the Inspector General community are operating as intended, there should be no compelling reason to form program specific Inspectors General within our agencies. Conclusion Thank you again for the invitation to testify. I believe that the Committee's focus today on the working relationship between Inspectors General and their respective agency heads will prove useful to managers and IGs alike as they seek to establish or improve an effective alliance with one another. I hope that my remarks have contributed to such an outcome. I welcome your questions. PREPARED STATEMENT OF MS. GAFFNEY Chairman Thompson, Senator Glenn, and other Members of the Committee, I appreciate the opportunity to participate in this 20th anniversary hearing on the state of the Inspector General (IG) community. As you have requested, I will discuss the importance of the relationship between IGs and agency heads, as well as my present working relationship with the Secretary of Housing and Urban Development (HUD). I will also provide my views on changes to the IG Act proposed in S. 2167, and recommend some other changes affecting Offices of Inspector General (OIGs) that might be appropriate. First, however, I would like to establish my credentials for discussing these issues. I have been involved in Federal IG operations for 19 years as Director of Policy, Plans, and Programs at the Agency for International Development OIG (3 years), Assistant Inspector General then Deputy Inspector General at the General Services OIG (8 years), Chief of the Office of Management and Budget's (OMB's) Management Integrity Branch (3 years), and now Inspector General at HUD (5 years). Although I am currently in a presidentially nominated/Senate confirmed position, I retain my status as a member of the career Senior Executive Service. Over these years, the initially controversial IG concept has become institutionalized, and the number of IGs has grown significantly as the OIGS proved their worth. On this 20th anniversary of the IG Act, we are a community with an enviable record of serving our government and the people of this country. This is in large part due to the leadership, counsel, and support we have received from the Committee on Governmental Affairs. Thank you, Mr. Chairman, for moving us to look to the future. Thank you, Senator Glenn, for being with us every step of the way during the difficult years. IGs and Agency Heads Ideally, the relationship between an IG and the agency head is characterized by mutual respect, a common commitment to the agency mission, and a thorough understanding and acceptance of the vastly different roles of the IG and the agency head. This type of relationship sets the tone for the agency as a whole: agency staff will tend to approach OIG findings and recommendations as opportunities for improvement, rather than gratuitous criticism; and OIG staff will be motivated to focus on finding ways to better support the agency mission, rather than nitpicking. With this type of relationship, the agency head should be comfortable asking for the OIG's views, on a formal or informal basis; and the OIG should be comfortable in knowing that those views will be respected as independent and objective assessments. In sum, this type of relationship serves the best interests of the agency by getting maximum value from OIG work. Cultivating the ideal relationship is not easy. OIGs tend to have considerable institutional knowledge and a focus on institutional viability. Agency heads are usually in office for relatively short periods of time and therefore tend to make their marks through policy initiatives. Under these circumstances, OIG reporting may be seen as counterproductive carping. During Secretary Cisneros' tenure, however, a constructive relationship evolved. Operation Safe Home grew out of a discussion the Secretary and I had, early in his administration, about the need for the OIG to better focus its investigative effort. The Secretary solicited and received very substantial OIG input into his plans for reinventing HUD. At the request of the Secretary, the OIG also undertook a series of major reviews of troubled public housing authorities having partnership agreements with HUD. At principal staff meetings, Secretary Cisneros would periodically ask why he got the straight story only from the OIG. Under the present HUD Secretary, the situation is somewhat different. I believe that the Secretary and I share a common, strong commitment to HUD's mission. The Secretary, however, is uncomfortable with the concept of an independent Inspector General who is not subject to his control and who has a dual reporting re sponsibility, to both the Secretary and the Congress. I believe that this hostility to the concept of an independent Inspector General has its roots in a Congressionally requested audit the OIG did in 1995. The audit was of a program under the jurisdiction of then-Assistant Secretary Cuomo. Assistant Secretary Cuomo heatedly disputed the authority of the OIG to raise certain questions, and strongly objected to what he saw as a lack of accountability on my part. Nonetheless, on an individual basis, until the last several months, the Secretary and I frequently discussed HUD issues. And, at the very beginning of his tenure, the Secretary publicly endorsed the GAO and OIG assessments of HUD's management problems. Indeed, the Secretary's principal agenda, HUD 2020, is designed to address those same management problems. Given this, some time ago the Secretary asked me why the OIG didn't declare victory and go look at something else. But we have continued to look at HUD 2020, because its progress is vitally important to HUD's ability to carry out its mission. Not surprisingly, given the depth and pervasiveness of management problems at HUD, we have expressed reservations about the Secretary's ability to transform HUD in the radical manner and under the abbreviated timetable he has adopted. The Secretary has characterized this as biased reporting and naysaying. His impatience with the independence of the OIG has led to a truly extraordinary series of events. In early April 1997, the Secretary received an anonymous letter alleging that I had targeted minorities-Native Americans, Latinos, and African Americans—and OIG operations were riddled with abuse. Key aides to the Secretary spent weeks trying to convince the Office of Management and Budget that HUD's Office of General Counsel should be authorized to investigate the allegations. When I finally got a copy of the letter in early May, I referred it to the Integrity Committee of the President's Council on Integrity and Efficiency for investigation. The Integrity Committee is the governmentwide mechanism established by executive order to deal with allegations against IGs. · In the spring of 1997, the Acting General Counsel (a key aide to the Secretary) asserted that OIG audit reports should be issued through the Office of the Secretary; the OIG was not authorized to have its own Office of Counsel; and the OIG was violating its Memorandum of Understanding (MOU) with the HUD Office of General Counsel. The first and second issues were eventually dropped, based on the OIG's providing overwhelming evidence to the contrary. My efforts to find out how the OIG was violating its MOU with the Office of General Counsel were to no avail. Finally, when the permanent General Counsel was appointed, she said there was no issue. In June 1997, I was asked to meet with the Deputy Secretary about OIG public affairs. At the meeting, which was attended by the Deputy Secretary and key aides to the Secretary, I was given and asked to agree to a memorandum from the Deputy Secretary directing me to follow a HUD-dictated public affairs protocol. The memorandum also alleged that the OIG was disseminating confidential information. I refused to agree to the protocol, and key aides to the Secretary subsequently directed the highest ranking career attorney in HUD's Office of General Counsel to sign a referral to the Integrity Committee of the PCIE. The referral essentially alleged that I was insubordinate and that the OIG was disseminating confidential information. This referral was eventually withdrawn, through the good offices of Ed DeSeve as OMB's Controller and also due to the prospect of a Washington Post arti cle. My efforts to determine what confidential information the OIG was disseminating proved fruitless. The Secretary finally told me that I was better off not knowing the specifics; they were too specific and negative, and they involved my immediate office. The Deputy Secretary subsequently told me that his role in this matter had been limited to signing the initial memorandum, at the direction of a key aide to the Secretary. During this period from January 1997 to the summer of 1997, the Secretary repeatedly assured me that he had nothing to do with these actions by his key aides. He explained to me that his key aides saw me as the "embodiment of evil," and there was nothing he could do about that. I suggested that, if his key aides were acting without his approval, he should fire them; the Secretary did not respond. In June and July 1997, the Secretary announced the establishment of an En detail to HUD. The Secretary's public statements and the presence of the FBI agent suggested to me that the Enforcement Center might be charged with criminal investigations/referrals, in addition to civil and administrative enforcement matters. I objected on the grounds that such a course of action would undermine the intent of the IG Act to consolidate the criminal investigation and referral process within the OIG. The Secretary finally agreed, in light of my objections, to stipulate that the Enforcement Center would not conduct criminal investigations. Within the last two months, Enforcement Center staff have relayed to me the Secretary's insistence that any MOU between the OIG and the Enforcement Center state the Secretary's right to conduct criminal investigations. While the IG Act is not determinant in this area, another statute is. I have provided the Secretary with a legal analysis demonstrating that he does not have authority to conduct criminal investigations unless specifically provided with such authority by statute. I am submitting a copy of this legal analysis for the record of this hearing. • In August 1997, I became aware that a reporter for a professional newspaper was preparing a story about the HUD Inspector General, and that he had been provided with both the April 1997 anonymous letter and the referral to the PCIE by HUD's Office of General Counsel of the allegations that I was insubordinate and the OIG was disseminating confidential information. I advised the Secretary of the publication's interest and of my concern that persons under his control had released these confidential documents to the news media. The Secretary initially assured me that his staff had not done so, but later indicated that he had reprimanded them in connection with this matter. • In September 1997, personnel in HUD's Budget Office advised me that the Secretary had cut the OIG's 1999 budget request by $10 million. The purpose of the cut was to reduce funding for Operation Safe Home. When the OIG appealed the cut, the Secretary called the Deputy IG to ask why the OIG had made a written appeal, since the Secretary didn't know anything about a cut in the OIG's request. The OIG request was then submitted to ŎMB without change. In September 1998, the OIG has just been advised by personnel in HUD's budget office that the Secretary has cut the OIG's 2000 budget request by $15 million. The budget personnel were not aware of the reason for the cut. The IG Act requires that the OIG's semiannual reports to the Congress be transmitted by the agency heads. The HUD OIG's last two semiannual reports to the Congress (as of September 30, 1997 and March 31, 1998) have instead been transmitted by the Deputy Secretary. The only explanation I have received for this is that a key aide to the Secretary allegedly said the reports did not rise to the level of significance warranting the Secretary's signature. The Veterans Affairs, HUD and Independent Agencies Appropriations Bill for 1998 provided the HUD OIG an additional $9 million to undertake an aggressive anti-fraud initiative in selected cities. We used an elaborate screening process to identify the cities where this initiative could be best piloted. Based on this screening process, the top candidates were Baltimore, New Orleans, and the San Francisco Housing Authority. While the selection of the cities had nothing to do with the identities of the Mayors, I realized, of course, that the Mayors in these three cities were African-American, and there could therefore be a perception problem. I consulted with the Secretary about this well before any selection announcement was made. The Secretary said he wouldn't expect any problems with Baltimore or New Orleans. But San Francisco could be a problem, he said, because everything in San Francisco is perceived in racial terms. I said we needed to look at the San Francisco Housing Authority, but didn't otherwise have enough staff to do it right. He responded, well, you'll just have to go forward. On May 20, 1998, the Los Angeles Times reported that "HUD Secretary Andrew Cuomo had no role in choosing the targeted cities and complained that cities with black Democratic mayors were unfairly singled out for examination. "This is in our opinion either illegal or unethical,' Secretary Cuomo said in an interview. 'It is not a situation that can or should be tolerated.' In February 1998, the Secretary advised me to take care in reporting on HUD |