Inspectors General: Treasury's Office of Inspector General Properly Established

Published by the Government Accountability Office on 1990-06-14.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

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                                                                Treasury’s Office of
                                                                Inspector General
                                                                Properly Established

                   United States
GAO                General Accounting Of’flce
                   Washington, D.C. 20648

                   Accounting and Financial
                   Management Division

                   June 14,199O

                   The Honorable Robert C. Byrd
                   Chairman, Committee on Appropriations
                   United States Senate
                   The Honorable John Glenn
                   Chairman, Committee on Governmental
                   United States Senate
                   The Honorable Jamie L. Whitten
                   Chairman, Committee on Appropriations
                   House of Representatives

                   The Honorable John Conyers, Jr.
                   Chairman, Committee on Government Operations
                   House of Representatives
                   The conferencereport (H.R. 101-276,October 11,1989) on the Treasury
                   Department Appropriations Act, 1990 (Public Law lOl-136), directed us
                   to review the Department of the Treasury’s implementation of the
                   Inspector General Act of 1978, as amended,and report the results to the
                   your Committees, As agreedwith your offices, we determined if Trea-
                   sury has taken actions specified by the act to establish an Office of
                   Inspector General (OIG). Becauseof specific congressionalconcerns,we
                   also determined if the OIG has been assignedor has carried out any oper-
                   ational responsibilities, such as the approval of budget submissionsby
                   Treasury’s four law enforcement bureaus-the Bureau of Alcohol,
                   Tobaccoand Firearms; the U.S. CustomsService;the Secret Service; and
                   the Internal RevenueService (IRS).In addition, we ascertained whether
                   Treasury had placed any prohibitions on OIG audits or investigations.

                   We found that Treasury has taken the steps specified by the act to
Results in Brief   establish an OIG. In addition, we found no evidencethat the OIG has any
                   improper operational responsibility concerning the four law enforce-
                   ment bureaus. Also, we found no prohibitions of OIG audits or

                   The Inspector General Act Amendments of 1988 (Public Law 100-604,
Background *       October 18,1988) amendedthe Inspector General Act of 1978 to require

                   Page 1                       GAO/AFMD-90-70 Treasury’s Office of Inspector General
                        the Department of the Treasury to establish an OIG similar to those in 23
                        other agencies.The 1988 amendmentsrequired that the President
                        appoint the Inspector General, subject to Senateconfirmation. Prior to
                        the enactment of this law, Treasury had established an administrative
                        OIG and the Secretary of the Treasury had responsibility for appointing
                        an Inspector General. The administratively established OIG at Treasury
                        had less responsibility than statutory OIGS in other agencies.For exam-
                        ple, we reported in 1986l that Treasury’s administratively established
                        OIG had audit responsibility for about one-tenth of the Department. The
                        remainder of the Department was subject to internal audit and internal
                        investigative units maintained in the law enforcement bureaus.

                        The objectives of our review were to determine if (1) Treasury has taken
Objectives, Scope,and   actions specified by the 1988 amendmentsto the Inspector General Act
Methodology             to establish an OIG, (2) the OIG has been assignedor has conducted any
                        improper operational responsibilities, such as the approval of budget
                        submissions,and (3) Treasury has prohibited any OIG audits or
                        To fulfill these objectives, we met with the Inspector General and other
                        OIG officials. We also reviewed documents related to the establishment of
                        the OIG, including departmental orders, descriptions of OIG functions,
                        plans, and fiscal year 1990 and 1991 budget data. In addition, we inter-
                        viewed officials in Treasury’s law enforcement bureaus regarding the
                        congressionalconcernsrelated to the OIG’S authority and role in these
                        bureaus. To determine if Treasury had prohibited any audit or investi-
                        gation, we talked with the Inspector General and the Acting Inspector
                        General who was his predecessor.
                        We discussedthe contents of this report with the Inspector General and
                        incorporated his views where appropriate. Our work was conducted in
                        accordancewith generally acceptedgovernment auditing standards at
                        Treasury headquarters in Washington, D.C., between January and
                        March 1990. We did not review the quality of Treasury OIG audits or the
                        effectiveness of the OIG in providing internal audit coverageto the

                        ‘Treasury Department: An Assessment of the Need for a Statutory Inspector General (GAO/
                        -86-3,      August 21,19&E).

                        Page 2                                GAO/AFMD-90-70 Treasury’s Office of Inspector General
-----   ----

                      As required by the 1988 amendments, Treasury consolidated the audit
OIG Established at    resources from the Bureau of Alcohol, Tobacco and Firearms; the US.
Treasury              Customs Service; the Secret Service; and the administratively estab-
                      lished OIG to form the statutory OIG. Treasury’s fourth law enforcement
                      bureau, the Internal Revenue Service, retained its own internal audit
                      function, Each of the four law enforcement bureaus retained its internal
                      investigation function.

                      The Secretary also issued Treasury Order 114-01, dated May 16, 1989,
                      which incorporated the requirements of the 1988 amendments into
                      departmental policies. In addition, the President nominated and the Sen-
                      ate confirmed the Inspector General, who was sworn into office on
                      November 22, 1989. The Inspector General had previously served as the
                      Deputy Inspector General at the Environmental Protection Agency and,
                      prior to that, as Assistant Inspector General for Audit at the Depart-
                      ment of Housing and Urban Development. For fiscal year 1990,237 full-
                      time equivalent OIG staff positions have been authorized. In our opinion,
                      the actions taken to establish the OIG have all been consistent with the
                      provisions of the 1988 amendments.

                      Congressional concerns about the OIG'S role in Treasury’s four law
OIG Role in Law       enforcement bureaus were voiced during deliberations over the Depart-
Enforcement Bureaus   ment’s fiscal year 1990 appropriation. In particular, there were concerns
                      that the OIG may improperly exercise operational responsibilities, such
                      as budget approval, for the four bureaus. The Inspector General Act of
                      1978, as amended, provides that an inspector general will not have any
                      program operating responsibilities.

                      In our discussions with OIG and law enforcement bureau officials and
                      our review of Treasury’s policies pertaining to the OIG, we found no evi-
                      dence that the OIG has improperly assumed operational responsibilities
                      in the Department. With respect to the particular congressional concern
                      that the law enforcement bureau budgets might be subject to OIG
                      approval, OIG officials and bureau budget chiefs told us that the OIG does
                      not play a role in the bureau budget approval process.

                      The statutory OIG has assumed internal audit responsibilities in the three
                      law enforcement bureaus whose internal audit functions were consoli-
                      dated into the statutory OIG. OIG auditors are currently conducting audits
                      in each of these bureaus. In addition, the OIG has oversight responsibili-
                      ties for internal investigations in these bureaus.

                      Page 3                       GAO/AFMD-90-70 Treasury’s Office of Inspector General

                      The 1088 amendmentsdid not consolidate the IRS internal audit and
                      internal investigation unit into the OIG but authorized the Inspector Gen-
                      eral to conduct audits and investigations in the IRSas appropriate. The
                      Inspector General has included the IRS in four multibureau internal
                      audits that the OIG has conducted. In these cases,the Inspector General’s
                      staff plans the audits and conducts work in other Treasury bureaus, but
                      auditors from IRSperform the audit work in IRS. The Inspector General
                      has not had his auditors perform any audits solely of IRS functions.
                      However, the Assistant Inspector General for Audit said that this would
                      be done if, for example, he found that IRS internal auditors were not
                      auditing a specific area or their internal audits were not of an acceptable

                       In January 1990, the Commissionerof IRS and the Inspector General
                       agreed,with the approval of the Deputy Secretary of the Treasury, that
                       the Inspector General would (1) perform investigations of all IRS officials
                       at or above grade 16 and other IRS employeeswhere the independenceof
                       IRS internal investigators could be questioned, (2) provide oversight of
                      ‘the internal audit and internal investigation unit, and (3) conduct special
                       reviews of IRS operations. The agreement notes that the 1988 amend-
                       ments authorize the OIG to perform these activities. The agreement also
                       provides for the transfer of 16 full-time equivalent staff and $1.6 mil-
                       lion in appropriated funds for fiscal year 1990 from the IRS to the OIG for
                       the agreed-uponactivities.

                      The 1988 amendmentsgive the Inspector General oversight responsibil-
                      ity for IRS internal audits and all internal investigations conducted by
                      the investigative units of all four law enforcement bureaus. Treasury
                      Order 114-01requires that bureau heads consult with the Inspector
                      General (1) in recruiting candidates to direct the internal audit and
                      internal investigative units in the law enforcement bureaus and (2) prior
                      to completing performance evaluations for the heads of these units.

                      The Inspector General Act of 1978, as amended,states that an inspector
Treasury Has Not      general is under the general supervision of the agency head and that no
Prohibited OIG Work   agency official can prohibit an inspector general from initiating, carry-
                      ing out, or completing any audit, investigation, or subpoena.However,
                      under the 1988 amendments,the Treasury Inspector General is under
         Y            the authority, direction, and control of the Secretary with respect to
                      activities requiring accessto certain sensitive information. Sensitive
                      information includes matters concerning ongoing criminal investigations
                      or proceedings,undercover operations, deliberations on policy matters

                      Page 4                        GAO/AFMD-WI0   Treasury’s Office of Inspector General
              that could reasonably have a significant influence on the national econ-
              omy or market behavior, and matters which if disclosedwould seriously
              threaten the protection of certain persons, including the President. The
              1988 amendments also authorize the Secretary to prohibit Inspector
              General activities if the Secretary determines the prohibition is neces-
              sary to prevent (1) disclosure of sensitive information or (2) a signifi-
              cant impairment to the national interest. The Inspector General told us
              that there had been no such prohibition in his tenure, which began in
              November 1989, and the former Acting Inspector General, his predeces-
              sor, said he knew of no such prohibition.

              Treasury has taken appropriate actions to establish its OIG in accordance
Conclusions   with the Inspector General Act of 1978, as amended.We found no indi-
              cations that the OIG had assumedany improper operational responsibili-
              ties in the Treasury law enforcement bureaus where there had been
              congressionalconcerns.Similarly, we found no indications that the OIG
              has been prohibited from performing any audit or investigation.

              We are sending copies of this report today to the Chairmen of the Senate
              and House Subcommitteeson Treasury, Postal Service, and General Gov-
              ernment, Committees on Appropriations. Unless you publicly announce
              the contents of this report earlier, we will not distribute it further until
              30 days from its date. At that time, we will send copies to the Director,
              Office of Management and Budget; the Secretary of the Treasury; inter-
              ested congressionalcommittees; and other interested parties. Pleasecon-
              tact me at (202) 276-9464 if you or your staff have any questions. Major
              contributors to this report are listed in appendix I.

              Jeffrey C. Steinhoff
              Director, Financial Management Systems
                and Audit Oversight

              Page 6                        GAO/AFMD9O-70 Treasury’s Of&e of Inspector General
Appendix I

Major Contributors to This Report

                        Rex Simmons,Assistant Director, Financial ManagementSystemsand
Accounting and            Audit Oversight, (202) 275-9356
Financial Management    H. Vernon Davis, Project Manager
Division, Washington,   William E. Adams, Evaluator-in-Charge

(911662)                Page 6                   GAO/AFMD-!W70 Treasury’s Office of Inspector General
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