oversight

Regulatory Burden: Some Agencies' Claims Regarding Lack of Rulemaking Discretion Have Merit

Published by the Government Accountability Office on 1999-01-08.

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

                United States General Accounting Office

GAO             Report to the Chairman, Subcommittee
                on Commercial and Administrative Law,
                Committee on the Judiciary, House of
                Representatives

January 1999
                REGULATORY
                BURDEN
                Some Agencies'
                Claims Regarding Lack
                of Rulemaking
                Discretion Have Merit




GAO/GGD-99-20
GAO                    United States
                       General Accounting Office
                       Washington, D.C. 20548

                       General Government Division



                       B-279405

                   January 8, 1999

                   The Honorable George W. Gekas
                   Chairman, Subcommittee on Commercial and Administrative Law
                   Committee on the Judiciary
                   House of Representatives

                   Dear Mr. Chairman:

                   In November and December 1996, we reported what officials from 15
                   private sector companies said were the federal regulations that were most
                                                     1
                   problematic for their businesses. The 125 concerns that the officials
                   identified focused on a variety of regulatory issues, including the perceived
                   high cost of compliance; excessive paperwork; unreasonable, unclear, and
                   inflexible requirements; and severe penalties for noncompliance. Our
                   report also listed responses from the 19 federal agencies that issued the
                   regulations underlying the 125 company concerns. In response to about
                   one-quarter of the concerns, the agencies indicated that the companies’
                   concerns were, at least in part, attributable to statutory requirements
                   underlying their regulations.

                   This report responds to your request that we examine the agencies’
                   assertions that some of the 125 regulatory concerns were, at least in part,
                   attributable to the underlying statutes. Our specific objectives were to
                   determine, for each of 27 such concerns that we focused on in this report,
                   (1) the amount of discretion the underlying statutes gave the rulemaking
                   agencies in developing the regulatory requirements that the agencies had
                                                                      2
                   said were attributable to the underlying statutes, (2) whether the
                   regulatory requirements at issue were within the authority granted by the
                   underlying statutes, and (3) whether the rulemaking agencies could have
                   developed regulatory approaches that would have been less burdensome
                   to the regulated entities while still meeting the underlying statutory
                   requirements.

                   We concluded that the statutes underlying 13 of the 27 regulatory concerns
Results in Brief   that we examined gave the rulemaking agencies no discretion in
                   establishing the regulatory requirements at issue. In these cases, the
                   1
                    Regulatory Burden: Measurement Challenges and Concerns Raised by Selected Companies
                   (GAO/GGD-97-2, Nov. 18, 1996); and Regulatory Burden (GAO/GGD-97-26R, Dec. 11, 1996).
                   2
                     In some of the concerns, the statutory provisions were enforced through the use of policy statements
                   or directly through the statutes themselves. Therefore, we interpreted “regulatory requirements” to
                   include the various approaches used by the agencies to enforce their statutory requirements.




                       Page 1                                                      GAO/GGD-99-20 Regulatory Burden
 B-279405




underlying statutes specifically stated what the regulated entities must do
and, by inference, what the related regulations must require. We
concluded that the underlying statutes for 12 of the 27 concerns gave the
agencies some discretion in developing the regulatory requirements at
issue. In these cases, the agencies often had no rulemaking discretion with
regard to certain issues but had some or broad discretion regarding other
issues (e.g., the exact type and/or frequency of the action required). We
concluded that the agencies had broad discretion in developing the
regulatory requirements at issue in the two remaining concerns.

We also concluded that the regulatory provisions the agencies developed
in relation to all of the 27 company concerns were within the authorities
granted by the underlying statutes. For those concerns in which the
underlying statutes gave the agencies no discretion as to how the
associated regulations could be developed, those regulations were
consistent with, and often mirrored, the specific requirements in the
statutes. For those concerns in which the statutes gave the agencies some
or broad rulemaking discretion, the regulations did not appear to exceed
the discretion allowed in those statutes.

Finally, for the 13 concerns for which we concluded agencies had no
discretion, we also concluded that there were no less burdensome
regulatory approaches available to the agencies that would have met the
requirements of the statutes. We could not determine whether less
burdensome regulatory approaches were available for the remaining 14 of
the 27 concerns, for which the statutes gave the agencies some or broad
rulemaking discretion. To make those determinations, we would have had
to conduct a detailed examination of the implementation of each of the
regulatory provisions that the agencies had said were attributable to the
underlying statutes and/or the implications of alternative approaches—
analyses that would have required time and resource commitments that
were beyond the scope of this review.

Although this review focused on only 27 regulatory concerns, we believe
that it can offer insights into some broader issues. For example, the
review suggests that regardless of how much or how little rulemaking
discretion the underlying statutes permit, the entities being regulated may
still consider the associated regulations burdensome. Also, if an
underlying statute is the source of regulatory burden, that burden can be
alleviated only by changes in the statute. In such cases, regulatory reform
initiatives focused on the agencies (e.g., cost-benefit analysis
requirements) are unlikely to have much direct effect on the regulatory
burden that those agencies impose.



 Page 2                                         GAO/GGD-99-20 Regulatory Burden
                                  B-279405




                              Regulations generally start with an act of Congress and are the means by
Background                    which statutes are implemented and specific requirements are established.
                              The statutory basis for a regulation can vary in terms of its specificity,
                              from (1) very broad grants of authority that state only the general intent of
                              the legislation and leave agencies with a great deal of discretion as to how
                              that intent should be implemented to (2) very specific requirements
                              delineating exactly what regulatory agencies should do and how they
                              should do it. For example, the Agricultural Adjustment Act provides a
                              broad grant of authority to the Secretary of Agriculture, stating only that
                              agricultural marketing should be “orderly” but providing little guidance
                              regarding which crops should have marketing orders or how to apportion
                              the market among growers. On the other hand, the Department of
                              Transportation (DOT) has concluded that it has no discretion in setting the
                              average fuel economy standards (known as the “Corporate Average Fuel
                              Economy” or “CAFE” standards) for light trucks. DOT’s 1998
                              appropriations act stated that “(n)one of the funds in this Act shall be
                              available to prepare, propose, or promulgate any regulations (prescribing
                              CAFE standards for automobiles) . . . in any model year that differs from
                              standards promulgated for such automobiles prior to the enactment of this
                              section.” At the time this appropriations act was enacted, DOT was
                              preparing the CAFE standard for model year 2000. Therefore, DOT
                              concluded that it was required to keep the same light truck CAFE standard
                              for model year 2000 that applied to model year 1999—20.7 miles per
                                     3
                              gallon.

Views Regarding               Some regulatory analysts believe that Congress too often writes overly
                                                                                                 4
                              broad laws that provide too much discretion to regulatory agencies.
Congressional Delegation of   Similarly, the perception by some Members of Congress that federal
Authority                     agencies have promulgated regulations that go beyond the intent of
                              Congress helped lead to the establishment of expedited congressional
                              regulatory review procedures in the Small Business Regulatory
                                                                           5
                              Enforcement Fairness Act (SBREFA) of 1996. In a joint statement

                              3
                                DOT ‘s 20.7 mile per gallon CAFE standard for model year 1999 was a continuation of the standard for
                              model years 1998 and 1997 because of similar language in DOT’s 1997 and 1996 appropriation acts.
                              See Department of Transportation, National Highway Traffic Safety Administration: Light Truck
                              Average Fuel Economy Standard, Model Year 2000 (GAO/OGC-98-42, Apr. 17, 1998).
                              4
                               See, for example, David Schoenbrod, Power Without Responsibility: How Congress Abuses the People
                              Through Delegation (New Haven: Yale University Press, 1993).
                              5
                                Under SBREFA’s congressional review procedures, Congress can review rules before they take effect
                              and disapprove those it considers too burdensome, excessive, inappropriate, duplicative, or otherwise
                              objectionable. The act requires agencies to submit a copy of each final rule to both Houses of Congress
                              and the Comptroller General before they take effect. SBREFA also requires the Comptroller General to
                              provide a report on each “major” rule within 15 calendar days after the rule is submitted. In the first 2
                              years of the act, we received 8,284 rules, of which 122 were major rules. For an analysis of these rules,




                                  Page 3                                                        GAO/GGD-99-20 Regulatory Burden
    B-279405




intended to provide a legislative history of the SBREFA review procedures,
some Members said:

“As the number and complexity of federal statutory programs has increased over the last
fifty years, Congress has come to depend more and more upon Executive Branch agencies
to fill out the details of the programs it enacts . . . . As more and more of Congress’
legislative functions have been delegated to federal regulatory agencies, many have
complained that Congress has effectively abdicated its constitutional role as the national
legislature in allowing federal agencies so much latitude in implementing and interpreting
congressional enactments . . . .”

“Because Congress is often unable to anticipate the numerous situations to which the laws
it passes must apply, Executive Branch agencies sometimes develop regulatory schemes at
odds with congressional expectations . . . . Rules can be surprisingly different from the
expectations of Congress or the public. Congressional review gives the public the
opportunity to call the attention of politically accountable, elected officials to concerns
about new agency rules.”

Similar concerns about agencies’ regulatory actions have led Congress to
establish analytical requirements that agencies must comply with during
the rulemaking process. For example, the Regulatory Flexibility Act of
1980, as amended, requires agencies to analyze the anticipated effects of
rules they plan to propose on small entities unless they certify that the
rules will not have a “significant economic impact on a substantial number
of small entities.” Title II of the Unfunded Mandates Reform Act of 1995
                                                                          6
requires federal agencies (other than independent regulatory agencies) to
prepare written statements for certain rules. Those written statements
must, among other things, contain a qualitative and quantitative
                                                               7
assessment of the anticipated costs and benefits of the rules. Various
executive orders have imposed similar analytical requirements on federal
          8
agencies.

In contrast, other regulatory analysts have concluded that Congress has, at
times, been overly restrictive in writing the statutes underlying agencies’
regulations. For example, in an April 1998 policy statement, the
Committee for Economic Development (CED) pointed out that those

see Regulatory Reform: Major Rules Submitted for Congressional Review During the First 2 Years
(GAO/GGD-98-102R, Apr. 24, 1998).
6
  Independent regulatory agencies include such agencies as the Federal Communications Commission,
the Securities and Exchange Commission, and the Consumer Product Safety Commission.
7
 For an analysis of these requirements, see Unfunded Mandates: Reform Act Has Had Little Effect on
Agencies’ Rulemaking Actions (GAO/GGD-98-30, Feb. 4, 1998).
8
 For example, Executive Order 12866 requires nonindependent regulatory agencies to assess the costs
and benefits of “economically significant” proposed and final rules.




    Page 4                                                     GAO/GGD-99-20 Regulatory Burden
                           B-279405




                                                                         9
                      statutes can, at times, be too narrow. In particular, the policy statement
                      said that the traditional focus of regulatory reform on improving the way
                      federal agencies write regulations

                      “ignores the fact that the key decisions occur when Congress writes an Occupational Safety
                      and Health Act or an amendment to the Food, Drug, and Cosmetics Act or any other
                      important regulatory law, usually with hundreds of pages of detailed specifications. . . . The
                      way those statutes are written frequently precludes the agencies from even considering the
                      most cost-effective approaches.”

                      Therefore, CED concluded that the traditional focus of regulatory reform
                      should be shifted from regulatory agencies to Congress. CED
                      recommended, among other things, that each congressional committee be
                      required, when writing a regulatory statute, to articulate the expected
                      benefits and costs of the regulatory program in the report accompanying
                      the legislation. It also recommended that Congress eliminate provisions in
                      existing statutes that prevent or limit regulatory agencies from considering
                                                                         10
                      costs or comparing expected benefits with costs.

Related Reports and   Several of our recent reports and testimonies have raised the issue of
                      whether regulatory burden was based on the underlying statutes. As noted
Testimonies           previously, in our 1996 reports on which this review is based, the agencies
                      responding to some of the companies’ concerns said that the specific
                                                                                             11
                      requirements that the businesses mentioned were statutorily driven. We
                      noted in our November 1996 report that we did not review the regulations
                      and statutes that the agencies cited to determine whether the underlying
                      statutes required the regulatory provisions that were of concern to the
                      companies. However, we said that if the statutes do not require those
                      regulatory provisions, the agencies have a responsibility to address those
                      concerns on their own and not shift the responsibility to Congress. We
                      also said that if Congress believes an agency’s regulation is inconsistent
                      with the intent of the underlying statute, Congress could amend the statute
                      to reflect current congressional intent and, in effect, require the agency to
                      amend its regulation.



                      9
                       Committee for Economic Development, Modernizing Government Regulation: The Need for Action,
                      April 1, 1998.
                      10
                       See also Murray Weidenbaum, A New Approach to Regulatory Reform, Center for the Study of
                      American Business, Policy Study Number 147, August 1998.
                      11
                        In response to other company concerns, the agencies (1) indicated that the companies
                      mischaracterized, misstated, or misinterpreted the regulations involved; or (2) agreed that corrective
                      actions were needed and said they were taking or had taken such actions.




                           Page 5                                                      GAO/GGD-99-20 Regulatory Burden
                              B-279405




                         In three reviews of agencies’ implementation of the Paperwork Reduction
                         Act of 1995, we reported that agencies believed the paperwork burden
                         associated with their regulations had increased since the act was passed
                                                                            12
                         because of congressionally imposed requirements. As a result of such
                         requirements, we said that some agencies believed that they were limited
                         in the amount to which they can reduce their paperwork burden. For
                         example, the Internal Revenue Service (IRS) said it could not reach the
                         burden reduction goals established in the Paperwork Reduction Act under
                         the current statutory framework and still carry out its mission. We noted
                         that we had not assessed the extent to which the paperwork burden
                         agencies impose is directly a consequence of statutory requirements and,
                         therefore, is out of the agencies’ control. However, we also noted that if
                         agencies’ paperwork requirements are truly statutorily mandated, those
                         agencies may not be able to reduce their burden-hour estimates by the
                         amounts envisioned in the 1995 act without changes in the legislation
                         underlying those requirements.

                         In our 1997 review of four agencies’ efforts to eliminate or revise pages in
                         the Code of Federal Regulations (CFR), we found that two of the four
                                                                                         13
                         agencies had added more pages to the CFR than they deleted. Agency
                         officials said that statutory requirements imposed by Congress often drive
                         CFR page additions, and they provided several examples of those statutory
                         requirements. However, we did not examine those statutes to determine
                         the extent to which they required the CFR page additions.

                         This review focuses on a subset of the 125 regulatory concerns that
Objectives, Scope, and   companies cited in our 1996 reports—the concerns that federal agencies
Methodology              indicated were, at least in part, attributable to the statutes underlying the
                         relevant regulatory provisions. Our objectives were to determine, for each
                         such concern, (1) the amount of discretion the underlying statutes gave the
                         agencies in developing the regulatory requirements, (2) whether the
                         regulatory requirements at issue were within the authority granted by the
                         underlying statutes, and (3) whether the rulemaking agencies could have
                         developed regulatory approaches that would have been less burdensome
                         to the regulated entities while still meeting the underlying statutory
                         requirements.


                         12
                           Paperwork Reduction: Burden Reduction Goal Unlikely To Be Met (GAO/T-GGD-RCED-96-186, June
                         5, 1996); Paperwork Reduction: Governmentwide Goals Unlikely To Be Met (GAO/T-GGD-97-114, June
                         4, 1997); Paperwork Reduction Act: Implementation at IRS (GAO/GGD-99-4, Nov. 16, 1998).
                         13
                           Regulatory Reform: Agencies’ Efforts to Eliminate and Revise Rules Yield Mixed Results (GAO/GGD-
                         98-3, Oct. 2, 1997).




                              Page 6                                                   GAO/GGD-99-20 Regulatory Burden
     B-279405




Appendix I provides a detailed discussion of our scope and methodology.
In brief, we identified the 27 company concerns that we focused on in this
review by (1) subdividing some concerns in our December 1996 report to
facilitate the analysis; and (2) eliminating some of the concerns that were
too broad or that focused only on federal statutes, not agencies’ regulatory
requirements. For example, in one concern company officials said that the
Comprehensive Environmental Response, Compensation, and Liability Act
(CERCLA) was expensive and exposed the company to unforeseen
liability, but the officials did not cite any EPA regulations in their concern.
The 27 concerns were raised by officials from 10 of the 15 companies we
visited during the preparation of our 1996 reports, 7 of whom asked that
we use generic descriptors such as “Bank A” or “a paper company” to
identify them. A total of 11 federal departments and agencies issued the
regulations underlying the 27 company concerns at issue in the report.

To address our first objective we reviewed the statutory provisions
underlying each of the concerns and coded the level of discretion that we
believed those provisions permitted the agencies in developing the specific
regulatory requirements at issue in the concerns into one of three
categories— “no discretion,” “some discretion,” or “broad discretion.” We
coded statutory provisions as allowing rulemaking agencies “no
discretion” if they delineated specific actions that regulated entities or the
agencies themselves must take and did not allow the agencies to develop
their own regulatory requirements. We coded statutory provisions as
allowing the agencies “some discretion” if they delineated certain
requirements that had to be included in the regulations but gave the
agencies at least some discretion regarding other requirements (e.g., the
timing or frequency of a reporting requirement). We coded statutory
provisions as allowing the agencies “broad discretion” if they contained
few specific requirements or imposed few to no constraints on what the
agencies had to include in their regulations.

To address our second objective, we compared the relevant statutory and
regulatory provisions for each concern and decided whether we believed
the regulatory requirements at issue in the concerns were within the
                                              14
authority granted by the underlying statutes. We coded the regulatory
provisions as being within the authority granted by the statutes if (1) the
statutory provision gave the agency no discretion in how the regulations
could be developed and the regulatory provision strictly adhered to the
statutory requirements; or (2) the statutory provision gave the agency

14
 If a court considering this matter determined that a regulation exceeded the authority granted by the
underlying statute, that regulation could be invalidated.




     Page 7                                                      GAO/GGD-99-20 Regulatory Burden
     B-279405




some or broad discretion, and the regulatory provision was consistent with
the requirements or the limitations in the statute.

To address our third objective we examined our answers to the previous
objectives and decided whether we believed the rulemaking agencies
could have developed regulatory approaches that would have been less
burdensome to the regulated entities while still meeting the underlying
statutory requirements. If the underlying statutes gave an agency no
rulemaking discretion and the agency adopted regulations that strictly
adhered to the statutory requirements, we concluded that the agency could
not have developed a less burdensome regulatory approach. If the
underlying statutes gave an agency some or broad rulemaking discretion,
we were not able to determine if the agencies could have developed a less
burdensome approach. To do this we would have needed detailed
information on how the agencies’ regulations were being implemented and
how alternative approaches would be perceived by the regulated entities in
order to determine whether a less burdensome approach was available. As
is discussed in Appendices III and IV, that information was not readily
available.

Because this review is based on a subset of the company concerns and
agency responses originally presented in our 1996 reports, the results of
our analysis are not generalizable to other companies, other regulatory
issues, or even to all of the original 125 regulatory concerns. However, as
we pointed out in our November 1996 report, the companies’ comments
were similar in many respects to comments made by companies in some of
                                             15
our previous reports and in the literature. Therefore, we believe that the
companies’ comments, the agencies’ responses, and our analysis of the
related regulations and statutes are not atypical and can provide some
insights regarding the broader issues addressed in this report.

This report reflects the views of selected companies and regulatory
agencies gathered during our earlier effort but does not reflect the views of
other individuals and organizations that may be affected by the regulations
at issue (e.g., labor unions or potential beneficiaries). We did not attempt
to determine whether the companies’ or the agencies’ views were correct
with regard to issues that were outside the scope of this review (e.g.,
whether any of the agencies’ actions were, in fact, “burdensome”).
Although we approached this review systematically, our conclusions are
ultimately matters of judgement, not determinations that have a legally

15
 See, for example, Workplace Regulation: Information on Selected Employer and Union Experiences
(GAO/HEHS-94-138, June 30, 1994).




     Page 8                                                  GAO/GGD-99-20 Regulatory Burden
 B-279405




binding effect on the agencies issuing the rules or the regulated
community.

The report focuses primarily on the amount of discretion that the relevant
statutes gave rulemaking agencies in developing the regulatory
requirements at issue in the companies’ concerns. However, the report
does not address the amount of discretion that the agencies had in writing
regulations outside of the specific issues raised by the companies.
Agencies may have broad discretion in how regulations can be developed
within a general area, but little or no discretion with regard to particular
issues within those areas. Also, the report does not address enforcement
issues. As our 1996 reports indicated, agencies may have considerable
discretion in carrying out their enforcement authority, and the use of that
discretion can significantly affect the burden felt by regulated entities. For
example, several companies expressed concerns about rigid and inflexible
regulations and about certain regulators’ “gotcha” enforcement approach.
In response to those concerns, the agencies sometimes indicated that they
reduced penalties in response to good faith efforts to comply, were not
“aggressively” enforcing certain technical requirements, or were changing
their enforcement approaches.

We initially gathered the company concerns and agency responses
between June 1994 and September 1996. We conducted our work for this
review between February and October 1998 in the Washington, D.C.,
headquarters offices of each of the 11 departments and agencies that
issued the regulations in accordance with generally accepted government
auditing standards. During the preparation of this report, the agencies
responsible for the regulations related to the company concerns reviewed
and commented on our observations regarding each applicable concern.
The agencies often offered suggestions regarding how the statutes and
regulations should be characterized in the report, and we incorporated
those suggestions where appropriate. The agencies ultimately concurred
with our analysis in all 27 concerns. At the end of our review we sent a
draft of this report for comment to the Director of the Office of
Management and Budget (OMB). Executive Order 12866 states that OMB’s
Office of Information and Regulatory Affairs (OIRA) is “the repository of
expertise concerning regulatory issues, including methodologies and
procedures that affect more than one agency . . . .” OIRA is also
responsible for reviewing significant regulations before their publication
as proposed and final rules and for approving agencies’ information
collection requests under the Paperwork Reduction Act. On December 10,
1998, we met with the Acting Administrator of OIRA, who said he had no
comments on the report.



 Page 9                                          GAO/GGD-99-20 Regulatory Burden
                                        B-279405




                                       As shown in figure 1, we concluded that the statutory provisions
Statutes Provided A                    underlying 13 of the 27 company concerns that we reviewed provided the
Range of Rulemaking                    agencies with no discretion in how the relevant regulatory provisions
Discretion                             could be developed. We concluded that the statutory provisions
                                       underlying 12 of the remaining 14 concerns permitted the agencies some
                                       discretion in establishing regulatory requirements, and the provisions
                                       related to 2 concerns allowed the agencies broad rulemaking discretion.



Figure 1: Agencies Appeared to Have
No Discretion in Developing Rules
Related to About Half of the Company
Concerns




                                       Note 1: We reviewed twenty-seven concerns to determine the amount of discretion allowed by the
                                       relevant statutory provisions.
                                       Source: GAO analysis based on GAO/GGD-97-2 (Nov. 18, 1996); and GAO/GGD-97-26R (Dec. 11,
                                       1996).




                                       Table 1 shows the number of concerns at each level of discretion for each
                                       agency issuing the related regulations.




                                        Page 10                                                     GAO/GGD-99-20 Regulatory Burden
                                         B-279405




Table 1: Number of Concerns by Agency
                                                                      Number of concerns by level of discretion
and Level of Discretion
                                                                         No         Some            Broad             Total number of
                                        Agency                        discretion discretion      discretion              concerns
                                        Board of Governors of the
                                        Federal Reserve System
                                        (FRB)                               6              5               0                  11
                                        Environmental Protection
                                        Agency (EPA)                        3              1               0                   4
                                        Federal Deposit Insurance
                                        Corporation (FDIC)                  1              3               0                   4
                                        Internal Revenue Service
                                        (IRS)                               2              1               0                   3
                                        Office of the Controller of
                                        the Currency (OCC)                  0              2               1                   3
                                        Health Care Financing
                                        Administration (HCFA)               0              2               0                   2
                                        Housing and Urban
                                        Development (HUD)                   0              1               0                   1
                                        Occupational Safety and
                                        Health Administration
                                        (OSHA)                              1              0               0                   1
                                        Department of
                                        Transportation (DOT)                0              1               0                   1
                                        Equal Employment
                                        Opportunity Commission
                                        (EEOC)                              0              0               1                   1
                                        Pension Benefit Guaranty
                                        Corporation (PBGC)                  1              0               0                   1
                                        Total number of
                                        concerns                           14             16               2                  32
                                        Note: The total number of concerns is greater than 27 because the regulations relevant to 2 of the
                                        concerns were issued by 3 agencies, and the regulations underlying another concern were issued by
                                        2 agencies.
                                        Source: GAO analysis based on GAO/GGD-97-2 (Nov. 18, 1996); and GAO/GGD-97-26R (Dec. 11,
                                        1996).




Statutes Permitted No                   For 13 of the 27 company concerns in this report, we concluded that the
                                        relevant statutory provisions allowed the agencies no discretion in how the
Rulemaking Discretion for               related regulations could be developed. As discussed previously, we
About Half the Concerns                 considered statutory provisions as allowing rulemaking agencies “no
                                        discretion” if they delineated the specific actions that regulated entities or
                                        the agencies themselves must take and did not allow the agencies to
                                        develop their own regulatory requirements.

                                        The following examples illustrate the types of statutory provisions that we
                                        concluded did not allow agencies any discretion in developing the relevant
                                        regulations. These and other examples of statutory provisions that did not
                                        appear to allow the agencies rulemaking discretion are discussed more
                                        fully in appendix II.



                                         Page 11                                                      GAO/GGD-99-20 Regulatory Burden
   B-279405




• Officials from Multiplex Company, Inc. said increased premium costs paid
  to PBGC to guarantee their employees’ pensions is costly for the company,
  rising from $2.60 per participant in 1982 to $19.00 per participant in 1994.
  PBGC officials said the agency’s insurance premiums are statutorily
  established in Section 4006 of the Employee Retirement Income Security
  Act (ERISA). We concluded that ERISA (codified at 29 U.S.C. 1001 et seq.)
  gave PBGC no discretion in setting the pension insurance rates at issue in
  this concern. Under the statute, the $19.00 rate is the minimum amount
  businesses with single-employer plans must pay for basic benefits.
• Multiplex Company, Inc. officials also said that IRS-required
  “nondiscrimination tests” for 401(k) thrift savings plans were of
  questionable value after IRS lowered the amount of money that could be
  contributed to the plans, thereby making it less likely that higher income
  employees would dominate the plan. IRS said that both the test, known as
  the actual deferral percentage test, and the limit on the amount that could
  be contributed to a 401(k) plan were required by statute. We examined the
  relevant statutory provisions and concluded that IRS had no discretion in
  how the regulations could be developed. The deferral percentage test and
  the deferral limit were both specifically established by statute. A
  subsequently enacted statute that reduced the amount that could be
  contributed to 401(k) plans did not eliminate the requirement that
  companies perform this test.
• An official from Bank A said that a FRB regulation on the availability of
  funds and the collection of checks (Regulation CC) requires information
  that is time consuming for banks to develop. Officials from FRB said that
  the Expedited Funds Availability Act requires depository institutions to
  provide written copies of their funds availability policies to their
  customers. We examined the act and concluded that it gave the agency no
  discretion in how its regulations could be written. The statute specifically
  requires depository institutions to provide their customers with preprinted
  slips describing their policies regarding the amount of time between when
  a deposit is made into a customer’s account and when funds can be
  withdrawn from that deposit.
• A Metro Machine Corporation official said that EPA regulators establish
  unrealistic requirements that are not attainable with current treatment
  technology. For example, the official said that federal water quality
  standards require that water the company discharges be made cleaner than
  rainwater. In its response to this concern, EPA said that under the Clean
  Water Act, it could not consider available treatment technologies or the
  cost of treatment in the development of water quality criteria for a
  particular designated use. We agreed that EPA had no discretion under the
  act regarding the role that cost or treatment technologies can play in
  establishing federal water quality criteria.



   Page 12                                        GAO/GGD-99-20 Regulatory Burden
                                    B-279405




Statutes Allowed Agencies      For 12 of the 27 company concerns, we concluded that the underlying
                               statutory provisions gave the agencies some discretion in how the
Some Rulemaking                associated regulations could be developed. As discussed previously, we
Discretion for 12 Concerns     considered rulemaking agencies to have “some discretion” if the statutory
                               provisions delineated certain requirements that had to be included in the
                               regulations but allowed the agencies at least some flexibility regarding
                               other requirements.

                               The following examples illustrate the types of statutory provisions that we
                               concluded allowed agencies some discretion in developing the relevant
                               regulations. These and other examples of statutory provisions that
                               allowed some rulemaking discretion are discussed more fully in appendix
                               III.

                             • An official from Bank A said that provisions of Regulation DD under the
                               Truth in Savings Act requires the bank to disclose certain information to
                               its customers in a single document. The bank officials said that they had
                               been disclosing this information in a variety of brochures, but had to revise
                               their brochures to disclose this information in one document to comply
                               with Regulation DD. In response to this concern, officials at FRB said that
                               the Truth in Savings Act required all depository institutions to disclose
                               information about the rates paid and fees charged in a uniform manner.
                               We concluded that the Truth in Savings Act gave FRB some discretion in
                               how it could establish what became Regulation DD. Although the act gave
                               FRB no discretion regarding the disclosures that must be required in
                               Regulation DD, the act gave FRB discretion to determine how these
                                                                                16
                               disclosures should be made to bank customers.
                             • Officials from the paper company said DOT regulations that required
                               hazardous materials (“hazmat”) training and testing cost the company
                               $475,000 each year. According to DOT, the Hazardous Materials
                               Transportation Uniform Safety Act specifically required the issuance of
                               regulations requiring employers to provide hazmat training to certain
                               employees. We examined the training requirements in the act and
                               concluded that the act gave DOT no rulemaking discretion in some areas
                               and some discretion in other areas. For example, the act said the
                               Secretary of Transportation “shall prescribe by regulation requirements for
                               training that a hazmat employer must give hazmat employees of the
                               employer on the safe loading, unloading, handling, storing, and
                               transporting of hazardous material.” The act also required the regulations
                               to establish the date by which the training shall be completed and to

                               16
                                As discussed in appendix III, FRB’s regulations require only that these disclosures be made in a clear
                               and conspicuous manner, not in a single document.




                                    Page 13                                                     GAO/GGD-99-20 Regulatory Burden
                                   B-279405




                              require employers to certify that their hazmat employees have received
                              training and been tested on at least one of nine specific areas of
                              responsibility that are delineated in the statute. However, the statute also
                              said that DOT’s regulations “may provide for different training for different
                              classes or categories of hazardous material and hazmat employees.”
                              Because the statute gave DOT the flexibility to tailor its regulatory
                              requirements for hazmat training to different classes of hazmat materials
                                                                                                         17
                              and employees, we concluded that DOT had some rulemaking discretion.
                            • Officials from the fish farm said that pesticide manufacturers were either
                              not renewing the aquatic use of certain pesticides or were not seeking EPA
                              approval of the products for use in aquaculture because of the expense
                              associated with the testing requirements in EPA’s reregistration program.
                              EPA officials said that the Federal Insecticide, Fungicide, and Rodenticide
                              Act (FIFRA) requires EPA to certify that all pesticides meet current testing
                              standards for safety. We concluded that these FIFRA provisions gave EPA
                              some discretion regarding the requirements that manufacturers must
                              satisfy in the pesticide reregistration process. Section 4 of FIFRA
                              specifically states that the Administrator of EPA must reregister “each
                              registered pesticide containing any active ingredient contained in any
                              pesticide first registered before November 1, 1984,” and it prescribes in
                              detail the approach EPA is to use to reregister pesticides. However, the
                              statute gives the EPA administrator discretion in establishing the data
                              requirements that would be needed to support the reregistration of the
                              pesticides. These requirements can have a direct impact on the expense
                              incurred by manufacturers in the reregistration process.

Statutes Allowed Agencies     We concluded that the statutory provisions underlying 2 of the 27 concerns
                              gave the agencies broad discretion in how regulatory provisions could be
Broad Rulemaking              developed. As noted previously, we coded statutory provisions as allowing
Discretion for Two            rulemaking agencies “broad discretion” if the provisions contained few
Concerns                      specific requirements or imposed few to no constraints on what had to be
                              included in agencies’ regulations.

                              In the first of the two concerns, Bank A officials said EEOC’s record
                              retention standards were inconsistent with the way EEOC pursued cases.
                              In response to the Bank’s concern, EEOC officials said that its record
                              retention requirements were tied to the filing periods in each of the civil
                              rights statutes. For example, EEOC officials said that because an
                              employee could file a discrimination suit under the Equal Pay Act within
                              either 2 or 3 years of the alleged discrimination, EEOC requires that

                              17
                               As discussed in appendix III, DOT’s hazmat training regulations reflect the statutory requirements
                              and require some additional information that the statute permits the agency to impose.




                                   Page 14                                                    GAO/GGD-99-20 Regulatory Burden
     B-279405




related records be kept for 2 or 3 years. EEOC officials also said that
under all of the statutes, when a claim of discrimination is pending, the
employer must keep all relevant personnel records until final disposition
of the charge or action. We concluded that the statutory provisions
underlying EEOC’s record retention standards gave EEOC broad
discretion in developing the standards because those provisions (1) do not
specify how long employers must retain records and (2) give EEOC broad
authority to establish retention periods. For example, the Equal Pay Act
states that every employer must preserve records for such periods of time
as the Administrator of EEOC “shall prescribe by regulation or order as
necessary or appropriate for the enforcement of the provisions of this
chapter or the regulations or orders thereunder.” Title VII of the Civil
Rights Act of 1964, as amended, requires every employer to make such
reports from its personnel records “as the Commission shall prescribe by
                            18
regulation or order . . . .” Therefore, we concluded that EEOC had broad
discretion in establishing record retention requirements.

In the second of the two concerns, Bank B officials said that some banking
regulations gave “nonbanks” (e.g., investment brokerage firms) an unfair
competitive edge in the marketplace. For example, the officials said that
one regulation required banks (but not investment firms) to disclose the
risks associated with certain investment products. In their 1996 response
to this concern, OCC officials said that the examples of competitive
inequality cited by the bank officials “are due to the fact that banks and
nonbanks operate under different statutory schemes.” During this review
they explained that under these statutes, banks are subject to a different
regulatory scheme than nonbanks because they are federally insured.
Therefore, they said it is appropriate for banking agencies to adopt
additional disclosure requirements that address the unique features of the
banking industry. In 1994, OCC and the other banking agencies issued an
interagency policy statement at their own initiative requiring the
disclosures that Bank B found burdensome under their general statutory
authority to issue rules and regulations. Because (1) the statutes give OCC
and the other banking agencies authority to take whatever actions they
believe are necessary to remedy or prevent unsafe and unsound banking
practices (see 12 U.S.C. 1818), and (2) the disclosures required in the
policy statement appear related to that end, we believe that OCC had
broad discretion to issue the policy statement requiring the disclosures at
issue in this concern.


18
  As discussed in appendix IV, EEOC’s record retention requirements align fairly closely with the
statutory time limits for filing discrimination complaints.




     Page 15                                                     GAO/GGD-99-20 Regulatory Burden
                        B-279405




                       Appendix IV contains our detailed analysis of the statutory and regulatory
                       provisions relating to both of the concerns for which we concluded the
                       agencies had broad rulemaking discretion.

                       Our second objective was to determine whether the regulatory
Agencies’ Regulatory   requirements at issue in each of the 27 company concerns were within the
Requirements Were      authority granted by the underlying statutes. We concluded that the
Within Statutory       regulatory provisions related to all of the concerns were within the
                       authority granted by those statutes.
Authority
                       For the 13 concerns in which we concluded the underlying statutes gave
                       the agencies no rulemaking discretion, the language in the agencies’
                       regulations either mirrored the language in the statutes or was
                       substantively consistent with the statutory requirement. Therefore, we
                       concluded that the regulations were within the authority granted by the
                       statutes. For example, in relation to a concern from Zaclon, Inc., regarding
                       a permit application under the Resource Conservation and Recovery Act
                       (RCRA), we compared the relevant RCRA statutory provisions with EPA’s
                       regulations and found that the language in the regulations mirrored the
                       language in the statute. The RCRA provisions (codified at 42 U.S.C.
                       6925(a)) required the EPA Administrator to “promulgate regulations
                       requiring each person owning or operating an existing facility or planning
                       to construct a new facility for the treatment, storage, or disposal of
                       hazardous waste . . . to have a permit issued pursuant to this section.”
                       EPA’s RCRA regulations (40 C.F.R. 270.1(c)) directly quote the statute’s
                       requirements that a permit is needed for the “treatment,’ ‘storage,’ and
                       ‘disposal’ of any ‘hazardous waste’” and goes on to require companies to
                       obtain such permits. Because the regulatory provisions reflected the
                       specific statutory requirements, we concluded that those provisions were
                       within the authority granted by the statutes.

                       We reached a similar conclusion with regard to a concern from Multiplex
                       Company, Inc., involving what it referred to as IRS’ “nondiscrimination
                       tests” for companies’ 401(k) thrift savings plans. We compared the
                       nondiscrimination test provisions in the tax code with IRS’ regulations and
                       concluded that the regulations essentially mirror the statutory provisions
                       and add some explanatory language. The statute (codified at 26 U.S.C.
                       401(k)(3)(A)(ii)) specifically requires the test and establishes specific
                       dollar amounts for deferral limits and detailed procedures that companies
                       must follow. For example, the statute says that the “actual deferral
                       percentage for the group of eligible highly compensated employees is not
                       more than the actual deferral percentage of all other eligible employees




                        Page 16                                       GAO/GGD-99-20 Regulatory Burden
                        B-279405




                       multiplied by 1.25.” The related IRS regulations (26 C.F.R. 1.401(k)-1(b)
                       and 1.402(g)-1) repeat these statutory requirements word for word.

                       We concluded that the regulations underlying the 12 concerns for which
                       the agencies had some rulemaking discretion were within the authority
                       granted by the related statutes because they (1) contained the elements
                       required by those statutes and/or (2) did not exceed the authority granted
                       or limits imposed by those statutes. For example, we concluded that the
                       Expedited Funds Availability Act allowed FRB some discretion in
                       developing the regulation (Regulation CC) that established the periods
                       during which banks could hold funds before making them accessible to
                       depositors. Although the act gave FRB no discretion regarding the
                       maximum number of days banks could hold particular types of deposits, it
                       allowed FRB to establish hold periods that were less than those
                       maximums or to standardize those time periods. Regulation CC
                       established hold periods that were consistent with the maximum periods
                       specified in the statute. Therefore, we concluded that the regulation was
                       within the authority granted by the statute.

                       For the two concerns in which we concluded that the underlying statutes
                       gave the agencies broad rulemaking discretion, the statutes contained
                       language that allowed agencies to develop the rules they believed were
                       necessary to carry out their statutory missions. We viewed regulations
                       that agencies developed to carry out their statutory responsibilities as
                       being within the authority of those statutes. For example, we concluded
                       that EEOC had broad discretion under the various civil rights statutes to
                       impose record retention requirements. Therefore, we also concluded that
                       EEOC’s practice of establishing requirements closely related to the filing
                       periods of each statute was within the authority granted by those statutes.

                       Appendixes II, III, and IV describe our analyses of the relevant regulations
                       for all of the concerns that we categorized as allowing no discretion, some
                       discretion, and broad discretion, respectively.

                       Our third objective was to determine whether the rulemaking agencies
Less Burdensome        could have developed regulatory approaches that would have been less
Regulatory             burdensome to the regulated entities while still meeting the underlying
Approaches Were Not    statutory requirements. We concluded that in relation to 13 of the 27
                       concerns, the agencies could not have developed less burdensome
Available for About    regulatory approaches. For the remaining 14 concerns, we could not
Half of the Concerns   determine whether less burdensome regulatory approaches were available
                       to the agencies without substantial additional information about how the




                        Page 17                                        GAO/GGD-99-20 Regulatory Burden
 B-279405




current approaches were being implemented or how alternative
approaches would be perceived by regulated entities.

We believe that an agency cannot develop regulatory requirements that are
less burdensome to a regulated entity if (1) the statute underlying the
regulation gives the agency no discretion regarding how regulatory
provisions can be developed, and (2) the agency develops regulations that
are consistent with (and sometimes mirror images of) the statutory
requirements. Because 13 of the 27 concerns met these criteria, we
concluded that the agencies involved in the concerns could not have
developed less burdensome regulatory provisions. For example, in one of
these concerns, officials from a paper company said that EPA regulations
under title V of the Clean Air Act were problematic because they regulated
extremely low levels of emissions. We concluded that under title V, EPA
had no discretion regarding the development of regulations on the
emissions levels that trigger the permitting requirements because the
statute specifically requires any “major source” of hazardous air pollutants
to obtain a title V permit and defines a major source as any source that
emits 10 tons or more a year of any hazardous air pollutant or 25 tons or
more per year of a combination of pollutants. EPA’s regulations
implementing title V are similar to the statutory language and specifically
refer to the definition of “major source” in the United States Code.
Therefore, we concluded that there was no less burdensome regulatory
approach that the agency could have selected that would have met the
requirements of the statute. (See app. II for a discussion of all of these
concerns.)

For the remaining 14 concerns in which we concluded the underlying
statutes gave the agencies some or broad discretion, we could not
determine whether a less burdensome regulatory approach was available.
To make such a determination in each of these cases, we would have had
to do an in-depth review of how the current regulations were being
implemented at each agency or how alternative approaches would be
viewed by regulated entities. For example, in one of the concerns, a Bank
A official complained about the time and effort required to complete call
reports that summarize bank operations. We concluded that the various
statutes that require or authorize the banking agencies to collect
information through the call reports gave the agencies some discretion in
drafting the relevant regulatory provisions. However, we could not
determine whether the banking agencies could have developed less
burdensome requirements without conducting a detailed review of each of
the nonstatutory data elements in the call reports and their consistency
with the requirements in the statute. This type of detailed analysis would



 Page 18                                        GAO/GGD-99-20 Regulatory Burden
 B-279405




have required significant time and resource commitments that were
beyond the scope of this review. (See app. III and IV for a discussion of all
of these concerns.)

For 2 of these 14 concerns, the agencies appeared to have discretion to
develop alternative regulatory approaches that may have addressed an
aspect of the companies’ original concerns. However, we also concluded
that the regulated entities might not have viewed those alternatives as less
burdensome than the approach that the agencies took. For example, in
one of the concerns a Bank A official said that Regulation CC required the
development and maintenance of expensive and time-consuming
information about the current availability of funds. In response, FRB
officials indicated that Regulation CC’s requirements were based on the
Expedited Funds Availability Act, which establishes different minimum
hold periods for different types of deposits (e.g., deposits of local versus
nonlocal checks). They said that to ensure compliance with this act, banks
must have a system for tracking those deposits. We examined the act and
concluded that it allowed FRB some discretion to establish hold periods
for various types of deposits. For example, the act said that the hold
period for nonlocal checks could not be more than 5 days, but it allowed
FRB to establish hold periods that were less than the maximum period.
However, FRB’s Regulation CC established a 5-day hold period for
nonlocal checks. To reduce Bank A’s burden of having to track holds on
different types of deposits, FRB could have established a standard hold
period in Regulation CC for all types of deposits—e.g., 1 day for all types of
deposits—that was still consistent with the statutory requirements.
However, it is unclear whether banks would welcome a standard 1-day
hold requirement because it would reduce the amount of time available to
the banks to determine whether sufficient funds existed to cover all
categories of checks.

In the other concern, we concluded that EEOC’s practice of establishing
personnel record retention requirements related to the length of the filing
periods of the particular civil rights statutes was within the broad
rulemaking authorities granted by those statutes. However, EEOC could
also have used its discretion to establish uniform record retention
requirements (e.g., 5 or 10 years) for all of the statutes instead of the
variable periods for the different statutes. Although this approach could
have helped eliminate what the company viewed as an inconsistency
between the requirements and the way EEOC pursues cases, it is not clear
whether regulated entities would view a record retention requirement that
is longer than the current requirement as being less burdensome.




 Page 19                                         GAO/GGD-99-20 Regulatory Burden
               B-279405




              Our review focused on a limited set of issues. It did not attempt to assess
Conclusions   the amount of discretion that federal agencies had in enforcing the
              requirements at issue in the companies’ concerns or whether those
              requirements were, in fact, burdensome. The review focused on 27
              regulatory concerns from 10 companies that the agencies issuing the
              regulations indicated were based on the underlying statutes. Therefore,
              the results of our review cannot be viewed as being representative of all
              regulatory concerns, all regulations or statutes, or even all of the concerns
              that the companies mentioned during our initial 1996 study. In fact, it is
              important to remember that for about three-fourths of the companies’
              original 125 concerns, the responding agencies did not indicate that the
              concerns were based on the statutory requirements underlying their
              regulations.

              On the other hand, although our review focused on 27 regulatory concerns
              that the agencies said were, at least in part, statutorily based, the
              companies in our 1996 study mentioned 6 other concerns that centered on
              the statutes themselves, not the regulations. For example, officials from
              one company said that compliance with the Comprehensive
              Environmental Response, Compensation, and Liability Act (not EPA’s
              CERCLA regulations) was expensive and exposed the company to
              unforeseen liability. These statute-directed concerns suggest that the
              companies understood the degree to which their problems were traceable
              to the statutes. Also, the comments that the companies made during our
              1996 study were similar in many respects to comments made by companies
              in some of our previous reports and in the literature. Therefore, we
              believe that the companies’ comments are not atypical, and our analysis of
              the regulations and statutes underlying those concerns can offer some
              insights into how regulatory concerns arise and how they can best be
              addressed.

              For about half of the concerns that we reviewed, we concluded that the
              statutory provisions underlying the regulations that companies perceived
              as problematic gave the agencies no discretion in how they could develop
              those regulations. Some of the statutory provisions specifically delineated
              the actions regulated entities had to take and therefore limited rulemaking
              agencies’ discretion regarding what their regulations could require. As a
              result, the agencies often mirrored the language of the statutes in their
              regulations. We therefore concluded that the agencies’ regulations were
              within the authority granted by the underlying statutes and represented the
              least burdensome option permitted by those statutes. Nevertheless, during
              our 1996 review the companies told us that the requirements for these 27
              concerns were burdensome.



               Page 20                                         GAO/GGD-99-20 Regulatory Burden
                        B-279405




                       The statutes underlying other company concerns gave the agencies some
                       or broad discretion in developing associated regulatory provisions. In
                       these cases the agencies appeared to have developed regulations that were
                       within the authorities permitted by or the limitations of the statutes.
                       However, we could not determine whether the agencies could have
                       developed less burdensome regulatory alternatives with regard to these
                       concerns because to do so would have required detailed information about
                       how the current requirements were being implemented and/or how
                       alternative regulatory approaches would be perceived by regulated
                       entities. In two of these cases, we concluded that the agencies could have
                       developed alternative regulatory requirements that may have addressed
                       some aspects of the companies’ concerns. However, even in those cases,
                       the regulated entities may not have perceived these alternative actions as
                       less burdensome than the actions the agencies took.

Statutory Discretion   Different perspectives exist regarding the amount of discretion that
                       Congress should give agencies to establish regulatory requirements. Some
Appears Unrelated to   observers believe that giving agencies broad discretion to develop
Regulatory Burden      regulations represents an abrogation of Congress’ legislative
                       responsibilities and is an open invitation for agencies to impose
                       burdensome requirements on the public. They contend that Congress
                       should closely direct agencies’ regulatory efforts through narrowly defined
                       statutory requirements. However, other observers believe that some
                       statutory requirements may be to blame for certain types of regulatory
                       burden. In those cases in which Congress has specifically required certain
                       actions or limited agencies’ rulemaking discretion, the agencies are
                       precluded from considering the most cost-effective approaches.

                       Our review indicated that regardless of how much or how little rulemaking
                       discretion is permitted in the underlying statutes, the associated
                       regulations can still be regarded as burdensome by regulated entities. For
                       13 of the 27 company concerns that we examined, Congress gave the
                       regulatory agencies no discretion in how the relevant regulatory provisions
                       could be developed. Although the statutes specifically delineated the
                       requirements that should be imposed, the companies considered those
                       requirements to be burdensome. In the statutes underlying the other 14
                       concerns, Congress gave the regulatory agencies some or broad
                       rulemaking discretion. Although the agencies’ regulatory requirements
                       were within the authority granted by the relevant statutes, the companies
                       again viewed the requirements as burdensome. Also, it is unclear whether
                       alternative regulations could be developed that would be perceived as less
                       burdensome.




                        Page 21                                       GAO/GGD-99-20 Regulatory Burden
                            B-279405




Reduction of Statutorily   Efforts to reduce regulatory burden and reform the regulatory process are
                           often based on the belief that agencies’ rulemaking actions must be
Based Burden Requires      carefully limited. Several of the executive and legislative branch
Statutory Changes          regulatory reform efforts during the past 20 years have directed federal
                           agencies to conduct cost-benefit or regulatory flexibility analyses for
                           certain regulations to ensure that those rules impose as little burden as
                           possible on the regulated public. When the statutes directing or
                           authorizing agencies to develop regulations give those agencies discretion
                           as to the regulatory approach that they can take and the particular
                           requirements that can be imposed, analytical requirements imposed on the
                           agencies (e.g., cost-benefit analysis and regulatory flexibility analysis) can
                           help ensure that they consider all available regulatory options and select
                           the least burdensome option.

                           However, when the statutes underlying those regulations give agencies no
                           discretion in how their regulations can be developed, analytical
                           requirements imposed on the agencies are unlikely to have much direct
                           effect on the regulatory burden that those agencies impose. Agencies
                           cannot adopt regulatory alternatives that are outside the boundaries
                           permitted in the underlying statutes. If a statute underlying a regulation is
                           the source of a company’s regulatory concern, that concern can be
                           addressed only by changes in the statute. Similarly, if Congress
                           disapproves of a regulation pursuant to its authority under SBREFA
                           because of requirements that are based on the underlying statute, sending
                           the regulation back to the issuing agency for further consideration will not
                           resolve the issue. If a statute established the conditions that Congress
                           finds objectionable, only Congress can address the problem by changing
                           that statute.

                           Nevertheless, analytical requirements imposed on agencies can serve a
                           useful purpose even when the underlying statutes give the agencies no
                           rulemaking discretion. For example, cost-benefit analysis can highlight the
                           potential advantages of alternative regulatory approaches not permitted in
                           the underlying statutes, perhaps leading to eventual changes in those
                           statutes and thereby alleviating at least some of the burden felt by the
                           regulated entities.

                           We are sending copies of this report to the Ranking Minority Member of
                           the House Judiciary Committee’s Subcommittee on Commercial and
                           Administrative Law; the Director of OMB; the Secretaries of Health and
                           Human Services, HUD, Department of Labor, DOT, and the Treasury; the
                           Comptroller of the Currency; the Administrator of EPA; EEOC; FDIC; FRB;
                           and PBGC. We will also make copies available to others on request.



                            Page 22                                         GAO/GGD-99-20 Regulatory Burden
 B-279405




Major contributors to this report are listed in appendix V. Please contact
me on (202) 512-8676 if you or your staff have any questions concerning
this report.

Sincerely yours,




L. Nye Stevens
Director
Federal Management and
   Workforce Issues




 Page 23                                       GAO/GGD-99-20 Regulatory Burden
Contents



Letter                                                          1


Appendix I                                                    26

Objectives, Scope, and
Methodology
Appendix II                                                   34

Concerns for Which
Agencies Appeared to
Have No Rulemaking
Discretion
Appendix III                                                  58

Concerns for Which
Agencies Appeared to
Have Some
Rulemaking Discretion
Appendix IV                                                   84

Concerns for Which
Agencies Appeared to
Have Broad Discretion
Appendix V                                                    91

Major Contributors to
This Report




                         Page 24   GAO/GGD-99-20 Regulatory Burden
 Contents




Abbreviations

ADA           Americans with Disabilities Act of 1990
ADEA          Age Discrimination in Employment Act
CAA           Clean Air Act
CED           Committee for Economic Development
CERCLA        Comprehensive Environmental Response, Compensation, and Liability
Act of 1980
CFR           Code of Federal Regulations
DOT           Department of Transportation
EEOC          Equal Employment Opportunity Commission
EPA           Environmental Protection Agency
ERISA         Employee Retirement Income Security Act of 1974
FDIC          Federal Deposit Insurance Corporation
FDICIA        Federal Deposit Insurance Corporation Improvement Act
FIFRA         Federal Insecticide, Fungicide, and Rodenticide Act
FRB           Federal Reserve Board
HCFA          Health Care Financing Administration
HUD           Department of Housing and Urban Development
IRS           Internal Revenue Service
OCC           Office of the Comptroller of the Currency
OIRA          Office of Information and Regulatory Affairs
OMB           Office of Management and Budget
OSHA          Occupational Safety and Health Administration
PBGC          Pension Benefit Guaranty Corporation
RCRA          Resource Conservation and Recovery Act
RESPA         Real Estate Settlement Procedure Act
SBREFA        Small Business Regulatory Enforcement Fairness Act


 Page 25                                          GAO/GGD-99-20 Regulatory Burden
Appendix I

Objectives, Scope, and Methodology


                                This review focuses on a subset of the 125 regulatory concerns that
                                companies cited in our 1996 reports—the concerns that federal agencies
                                indicated were, at least in part, based on the statutes underlying the
                                relevant regulatory provisions. Our objectives were to determine, for each
                                such concern, (1) the amount of discretion the underlying statutes gave the
                                agencies in developing the regulatory requirements that the agencies had
                                said were attributable to the underlying statutes, (2) whether the
                                regulatory requirements at issue were within the authority granted by the
                                underlying statutes, and (3) whether the rulemaking agencies could have
                                developed regulatory approaches that would have been less burdensome
                                to the regulated entities while still meeting the underlying statutory
                                requirements.

Identification of Statutorily   In 1996, the agencies indicated that 31 of the 125 company concerns were,
                                at least in part, statutorily based. However, we eliminated eight of those
Based Regulatory Concerns       concerns from this review because the companies were not expressing
                                concerns about federal agencies’ regulatory requirements. Two of the
                                eight concerns were very broad, asserting that “frequent changes to the tax
                                code are costly” and that doing business in multiple states was difficult
                                because of differences in state laws. The other six concerns involved
                                particular federal statutes but did not focus on agencies’ regulatory
                                requirements. For example, in one of the six concerns company officials
                                said that compliance with the requirements in the Comprehensive
                                Environmental Response, Compensation, and Liability Act (CERCLA) was
                                expensive and exposed the company to unforeseen liability. However, the
                                officials did not cite any particular Environmental Protection Agency
                                (EPA) regulations in their concern. Another of the six concerns focused
                                on the potential liability that officials from one company said its managers
                                faced with regard to certain environmental standards. In its response to
                                that concern, EPA indicated that criminal penalties for the violation in
                                question were established in a particular statute rather than in EPA’s
                                regulations. We eliminated this concern from our review because EPA is
                                not responsible for enforcing those provisions in criminal law, and the
                                issues in the concern were not associated with EPA regulations.

                                We eliminated another company’s concern from this review because the
                                agency that had issued the underlying regulations no longer contended
                                that the concern was statutorily based. In its 1996 response to a concern
                                that one company described as EPA’s “antidegradation policy,” EPA said
                                that the company was actually referring to the agency’s “antibacksliding”
                                requirements that were statutorily mandated by the Clean Water Act.
                                However, an EPA official told us during this review that (1) the company
                                concern was, in fact, about antidegredation; and (2) the policy was



                                Page 26                                        GAO/GGD-99-20 Regulatory Burden
 Appendix I
 Objectives, Scope, and Methodology




adopted by the State of Ohio, not EPA, and was not based on federal
environmental statutes. We therefore eliminated this concern from our
review.

We subdivided 4 of the remaining 22 concerns into 9 separate concerns in
order to facilitate our analysis. For example, one such concern involved
three separate provisions of Regulation DD, which was issued by the
Board of Governors of the Federal Reserve System (FRB) to implement
provisions of the Truth in Savings Act. By dividing this concern into three
separate concerns, we were able to assess each of the provisions
individually. One of the other concerns that we subdivided focused on
what one company viewed as a disparity in federal regulations
requirements between banks and nonbanks (e.g., an investment brokerage
firm) regarding (1) flood insurance and (2) public disclosure requirements.
We subdivided this concern into two concerns to focus on the
requirements for flood insurance and disclosure requirements separately.

After eliminating some company concerns and separating others into
multiple parts, what remained were 27 concerns about federal regulations
that the agencies indicated were, at least in part, based on the underlying
statutes. These 27 concerns were raised by officials from 10 of the 15
companies we visited during the preparation of our 1996 reports. In 1996,
many of the companies asked that their identities not be disclosed during
our discussions with regulators or in our reports. As a result, we used
generic descriptors in the 1996 reports to identify those companies. We
maintained the same policy in this report, using generic descriptors for 7 of
the 10 companies and identifying the remaining 3 companies by name.
Table I.1 shows the name or generic descriptor and the number of
concerns analyzed in this report for each of the 10 companies.




 Page 27                                        GAO/GGD-99-20 Regulatory Burden
                                       Appendix I
                                       Objectives, Scope, and Methodology




Table I.1: Companies and Number of
Concerns Reported by Each Company     Company name or generic                                                              Number of
                                      descriptor                        Description of company                              concerns
                                      Bank A                            A federally chartered community bank                       8
                                      Bank C                            A commercial bank                                          5
                                      Bank B                            A state-chartered community bank                           3
                                      Fish farm                         A tropical fish farm                                       2
                                      Hospital                          A teaching hospital                                        2
                                      Paper company                     A manufacturer of paper and allied products                2
                                      Metro Machine Corporation         A ship repair and maintenance company                      2
                                                                        located in Norfolk, VA
                                      Multiplex Company, Inc.           A beverage dispenser equipment                                2
                                                                        manufacturer headquartered in St. Louis,
                                                                        MO
                                      Glass company                     A manufacturer of consumer glassware and                      1
                                                                        fiber optic systems
                                      Zaclon, Inc.                      A chemical manufacturing company located                      1
                                                                        in Cleveland, OH
                                      Total number of concerns                                                                       28
                                     Note: The total number of concerns is greater than 27 because 2 companies expressed 1 of the
                                     concerns.
                                     Source: GAO analysis based on GAO/GGD-97-2 (Nov. 18, 1996); and GAO/GGD-97-26R (Dec. 11,
                                     1996).


                                     A total of 11 federal departments and agencies issued the regulations
                                     underlying the 27 company concerns at issue in this report. Table I.2
                                     shows the number of those concerns that were applicable to each of the 11
                                     departments or agencies.

Table I.2: Number of Concerns
Applicable to Each Department and                                                                                          Number of
Agency                               Department or agency name                                                              concerns
                                     Board of Governors of the Federal Reserve System (FRB)                                       11
                                     Environmental Protection Agency (EPA)                                                         4
                                     Federal Deposit Insurance Corporation (FDIC)                                                  4
                                     Internal Revenue Service (IRS)                                                                3
                                     Office of the Comptroller of the Currency (OCC)                                               3
                                     Health Care Financing Administration (HCFA)                                                   2
                                     Department of Housing and Urban Development (HUD)                                             1
                                     Occupational Safety and Health Administration (OSHA)                                          1
                                     Department of Transportation (DOT)                                                            1
                                     Equal Employment Opportunity Commission (EEOC)                                                1
                                     Pension Benefit Guaranty Corporation (PBGC)                                                   1
                                     Total number of concerns                                                                     32
                                     Note: The total number of concerns is greater than 27 because the regulations relevant to 2 of the
                                     concerns were issued by 3 agencies, and the regulations underlying another concern were issued by
                                     2 agencies.
                                     Source: GAO analysis based on GAO/GGD-97-2 (Nov. 18, 1996); and GAO/GGD-97-26R (Dec. 11,
                                     1996).




                                       Page 28                                                     GAO/GGD-99-20 Regulatory Burden
                         Appendix I
                         Objectives, Scope, and Methodology




Amount of Discretion    To address our first objective regarding the amount of discretion the
                        underlying statutes gave the agencies in developing regulatory
Permitted by Statutes   requirements, we first had to identify the regulatory provisions at issue in
                        the company concerns and the underlying statutory requirements for those
                        provisions. For most of the concerns, either the company or the
                        responding agency provided relevant statutory and/or regulatory citations.
                        However, for other concerns we had only limited information and had to
                        contact the relevant agencies for additional details. For example, in one
                        concern, Bank A said it was frustrating to spend the time and resources
                        comply with so many bank reporting requirements but did not cite any
                        specific relevant regulations or statutes. In its response to this concern,
                        FDIC said that some bank reporting requirements were mandated by
                        statute, but it did not provide any examples of those requirements to
                        support its statement. During this review, we asked FDIC to identify the
                        specific regulatory reporting requirements that it considered to be
                        statutorily mandated and to provide the relevant statutory citations.

                        We then reviewed the statutory provisions underlying each of the company
                        concerns and coded the level of discretion that we believed those
                        provisions permitted the agencies in developing the specific regulatory
                        requirements at issue in the concerns into one of three categories— “no
                        discretion,” “some discretion,” or “broad discretion.” We coded statutory
                        provisions as permitting “no discretion” if they delineated specific actions
                        that regulated entities or the agencies themselves must take and did not
                        allow the agencies to develop the regulatory requirements at issue in the
                        concern. For example, using a hypothetical illustration unrelated to any of
                        the concerns in this report, assume that a company raised a concern about
                        what it viewed as a burdensome recordkeeping requirement that EPA
                        imposed regarding its recycling efforts. If a statutory provision required
                        companies with 100 or more employees to provide recycling information
                        to EPA on January 30 of each year delineating, for the previous calendar
                        year and for each company work site, (1) the specific materials that were
                        recycled, (2) the manner of recycling, and (3) the costs associated with
                        their recycling efforts, we would have coded the provision as allowing EPA
                        no rulemaking discretion.

                        We coded statutory provisions as allowing rulemaking agencies “some
                        discretion” if they delineated certain requirements that had to be included
                        in the agencies’ regulations but gave the agencies at least some discretion
                        regarding other requirements. For example, in the above illustration, if the
                        statute gave EPA discretion regarding the timing or the frequency with



                         Page 29                                        GAO/GGD-99-20 Regulatory Burden
                              Appendix I
                              Objectives, Scope, and Methodology




                          which recycling information had to be provided by the companies, but
                          EPA still had no discretion regarding the content of the reporting
                          requirement, we would have coded the statutory provision as allowing
                          some rulemaking discretion.

                          We coded statutory provisions as allowing the rulemaking agencies “broad
                          discretion” if the provisions contained few specific requirements or
                          imposed few to no constraints on what the agencies had to include in their
                          regulations. In the hypothetical recycling example, if the statutory
                          provision only required EPA to periodically report to Congress on
                          businesses’ recycling efforts, we would have coded the provision as
                          allowing EPA broad rulemaking discretion. In this scenario, EPA could
                          unilaterally decide what information to collect, from which businesses to
                          collect the information, and the timing and frequency of companies’
                          reporting requirements.

Statutory Authority and   To address our second objective, we compared the relevant statutory and
                          regulatory provisions for each concern and decided whether we believed
Less Burdensome Options   the regulatory requirements at issue in the concerns were within the
                                                                        1
                          authority granted by the underlying statutes. We coded the regulatory
                          provisions as being within the authority granted by the statutes if (1) the
                          statutory provisions gave the agency no discretion in how the regulations
                          could be developed and the regulatory provision strictly adhered to the
                          statutory requirements; or (2) the statutory provisions gave the agency
                          some or broad discretion, and the regulatory language was consistent with
                          the requirements or the limitations in the statutes. For example, if the
                          relevant statutory provision in the above recycling illustration allowed
                          EPA to establish whatever reporting requirements it “deemed necessary”
                          to determine the status of companies’ recycling efforts, we would have
                          considered almost any regulatory reporting requirements that EPA
                          established as being within the authority granted by the statute. However,
                          if the statutory provision said EPA could collect information from
                          companies no more than twice annually but the regulation established
                          quarterly reporting requirements, we would have considered the regulatory
                          requirements outside of the authority granted by the statute.

                          Our third objective was to determine whether the rulemaking agencies
                          could have developed regulatory approaches that would have been less
                          burdensome to the regulated entities while still meeting the underlying
                          statutory requirements. We considered agencies to have been unable to

                          1
                           If a court considering this matter determined that a regulation exceeded the authority granted by the
                          underlying statute, that regulation could be invalidated.




                              Page 30                                                      GAO/GGD-99-20 Regulatory Burden
                         Appendix I
                         Objectives, Scope, and Methodology




                     develop less burdensome regulatory approaches if the underlying statutes
                     gave the agencies no rulemaking discretion and the agencies adopted
                     regulations that strictly adhered to the statutory requirements. If the
                     underlying statutes gave the agencies some or broad rulemaking
                     discretion, we were not able to determine if the agencies could have
                     developed a less burdensome approach. To do so, we would have needed
                     detailed information on how the agencies’ regulations were being
                     implemented and how alternative approaches would be perceived by the
                     regulated entities in order to determine whether a less burdensome
                     approach was available. As discussed in Appendices III and IV, that
                     information was not readily available.

Review Limitations   Because this review is based on a subset of the company concerns and
                     agency responses originally presented in our 1996 reports, several of the
                     limitations discussed in those reports are also applicable to this report. As
                     we noted in our November 1996 report, the companies from whom we
                     initially gathered the concerns were generally those that (1) were
                     identified by interest groups, identified by officials from the Small
                     Business Administration, or were in the literature; and (2) were willing to
                     participate in our review. Therefore, neither the companies’ concerns nor
                     the results of our analysis are generalizable to other companies or to other
                     regulatory issues. The results of this analysis are not even generalizable to
                     all of the original 125 regulatory concerns because this review focuses only
                     on the subset of the concerns and related regulations that the agencies
                     indicated were, at least in part, statutorily based. However, as we pointed
                     out in our November 1996 report, the companies’ comments were similar
                     in many respects to comments made by companies in some of our
                                                             2
                     previous reports and in the literature. Therefore, we believe that the
                     companies’ comments, the agencies’ responses, and our analysis of the
                     related regulations and statutes are not atypical and can provide some
                     insights regarding the broader issues addressed in this report.

                     In preparing both of the 1996 reports and during this review, we did not
                     collect information from individuals and organizations outside of the
                     companies and federal agencies responsible for the regulatory issues
                     mentioned by the companies. For example, we did not obtain information
                     from labor unions or other employee organizations about the regulations
                     the companies mentioned. Neither did we collect information from
                     individuals and organizations that were the potential beneficiaries of the
                     regulations cited by the companies as being problematic. Collecting the

                     2
                      See, for example, Workplace Regulation: Information on Selected Employer and Union Experiences
                     (GAO/HEHS-94-138, June 30, 1994).




                         Page 31                                                  GAO/GGD-99-20 Regulatory Burden
 Appendix I
 Objectives, Scope, and Methodology




views of all such organizations for all the regulations and statutes cited in
the 1996 reports and this report would have been very time consuming, if
not impossible. Therefore, as was the case in the 1996 reports, this report
does not reflect the full range of opinions that may exist regarding the
issues raised during the reviews. However, this report reflects the views of
the two stakeholder groups in which we were most interested—the
elements of the regulated community that raised these concerns and the
agencies that issued the underlying regulations.

Our approach in the 1996 reports was to present the views of both the
businesses and the agencies without attempting to resolve the many
differences in perspectives and interpretation that arose between the two
groups. We followed the same approach in this review, and we did not
attempt to determine whether the companies’ or the agencies’ views were
correct with regard to issues that were outside of the scope of this review.
For example, one company said that certain IRS-required tests were of
questionable value to the agency in determining whether thrift savings
plans were being fairly administered. We focused our analysis on whether
the tests were (as IRS contended) statutorily required, not on whether they
were of value to IRS. Also, we did not attempt to determine whether any
of the agencies’ actions were, in fact, “burdensome.”

The report focuses primarily on the amount of discretion that the relevant
statutes gave rulemaking agencies in developing the regulatory
requirements at issue in the companies’ concerns. However, the report
does not address the amount of discretion that the agencies had in writing
regulations outside of the specific issues raised by the companies.
Agencies may have broad discretion in how regulations can be developed
within a general area, but little or no discretion with regard to particular
issues within those areas. Also, the report does not address enforcement
issues. As our 1996 reports indicated, agencies may have considerable
discretion in carrying out their enforcement authority, and the use of that
discretion can significantly affect the burden felt by regulated entities. For
example, several companies expressed concerns about rigid and inflexible
regulations and about certain regulators’ “gotcha” enforcement approach.
In response to those concerns, the agencies sometimes indicated that they
reduced penalties in response to good faith efforts to comply, were not
“aggressively” enforcing certain technical requirements, or were changing
their enforcement approaches.

We approached our review objectives systematically. First, we developed
a coding scheme for each objective to ensure consistency of analysis.
Multiple staff members then analyzed the issues related to each concern,



 Page 32                                         GAO/GGD-99-20 Regulatory Burden
 Appendix I
 Objectives, Scope, and Methodology




reviewed the statutory and regulatory requirements, and agreed on how
each concern should be coded. However, determining how much
discretion a statute gives a rulemaking agency, whether a regulation is
within the authority granted by the underlying statute, and whether less
burdensome regulatory approaches could have been developed are
ultimately matters of judgement. Therefore, our conclusions should be
viewed in that light, not as determinations that have a legally binding effect
on the agencies issuing the rules or the regulated community.

We initially gathered the company concerns and agency responses
between June 1994 and September 1996. In this review, we analyzed the
statutory and regulatory provisions as they existed between 1994 and 1996.
If a statutory or regulatory provision changed after this period, we noted
those changes in this report. We conducted our work between February
and October 1998 in the Washington, D.C., headquarters offices of each of
the previously identified agencies in accordance with generally accepted
government auditing standards.




 Page 33                                         GAO/GGD-99-20 Regulatory Burden
Appendix II

Concerns for Which Agencies Appeared to
Have No Rulemaking Discretion

                  One of the objectives of our review was to determine, for each of 27
                  company concerns, the amount of discretion the underlying statutes gave
                  rulemaking agencies in drafting the regulatory requirements that the
                  agencies said were attributable to the underlying statutes. The agencies
                  that issued those requirements indicated in two of our 1996 reports that
                  the concerns could, at least in part, be traced to statutory requirements
                                                1
                  underlying their regulations. In this review we concluded that the
                  statutory provisions underlying 13 of the 27 concerns gave the rulemaking
                  agencies no discretion in how the related regulatory requirements could be
                  drafted. We coded statutory provisions as allowing agencies “no
                  discretion” if they delineated specific actions that regulated entities or the
                  agencies themselves must take and did not allow the agencies to develop
                  their own regulatory requirements.

                  This appendix provides our detailed analysis of each of these 13 company
                  concerns. Specifically, for each such concern it provides the following
                  information: (1) the portion of the concern in our 1996 reports that the
                  agency or agencies indicated was statutorily based, (2) the portion of the
                  agency response in our 1996 reports that indicated the concern was
                  statutorily based, (3) our analysis of the amount of rulemaking discretion
                  the relevant statutory provisions gave the agencies (the first objective of
                  our review), (4) our analysis of whether the regulatory requirements at
                  issue in the concern were within the authority granted by the underlying
                  statutes (the second objective of our review), (5) our analysis of whether
                  the rulemaking agencies could have developed regulatory approaches that
                  would have been less burdensome to the regulated entities while
                  accomplishing the underlying statutory objectives (the third objective of
                  our review), and (6) the main purpose of the underlying statutes (where
                  such purpose statements were available). Appendix I of this report
                  contains a detailed discussion of our scope and methodology.


Concern 1
Company Concern   A Metro Machine Corporation official said that EPA regulators establish
                  regulations that are not relevant to the industry and establish unrealistic
                  requirements that are not attainable or verifiable with current treatment
                  technology and measurement systems. For example, the official said that
                  federal water quality standards require that the water the company
                  discharges be made cleaner than rainwater. The official also said that up
                  to 90 percent of pollution reduction generally can be achieved with

                  1
                   Regulatory Burden: Measurement Challenges and Concerns Raised by Selected Companies
                  (GAO/GGD-97-2, Nov. 18, 1996); and Regulatory Burden (GAO/GGD-97-26R, Dec. 11, 1996).




                  Page 34                                                    GAO/GGD-99-20 Regulatory Burden
                               Appendix II
                               Concerns for Which Agencies Appeared to Have No Rulemaking Discretion




                              reasonable costs, but the last 10 percent of pollution reduction is very
                              difficult or costly (sometimes up to double the cost) because the needed
                              technology is either not available or very expensive.

Agency Response               EPA officials noted that Metro Machine Corporation is located in Virginia
                              and said that the State of Virginia establishes water quality standards for
                              state waters. They also said that the State of Virginia is authorized to
                              administer the National Pollutant Discharge Elimination System (NPDES)
                              program related to this concern. Under the standard-setting process, EPA
                              officials said that states initially establish the “designated use” or water
                              quality goal for individual bodies of water to protect aquatic life and
                              human health. Once states make those designations, they typically adopt
                              EPA-developed water quality criteria to support the designated use. EPA
                              officials said the Clean Water Act stipulates that EPA cannot consider
                              available treatment technologies or the cost of treatment in the
                              development of water quality criteria. EPA officials also noted that, in
                              certain cases, air pollution carried to earth by rainwater may cause surface
                              water to be harmful to aquatic life and/or human health. Because
                              Virginia’s water quality criteria are designed to protect aquatic life and
                              human health, the criteria may indeed be more restrictive than for polluted
                              rainwater in certain instances. However, Virginia has the option of
                              providing economic relief in its water quality standards, where justified by
                              the State and approved by EPA, through modification of its goals for a
                              water body or by providing a water quality-based variance for specific
                              discharges.

Amount of Discretion          The issue that we focused on in this concern is EPA’s assertion that it
                              cannot consider cost or available treatment technologies when it
Permitted in the Statute in   establishes water quality criteria under the Clean Water Act.
Drafting Regulatory
Requirements                  Although the State of Virginia had discretion in establishing the designated
                              use for the body of water at issue in the concern, we believe EPA had no
                              discretion to consider cost or available treatment technologies in
                              developing water quality criteria pursuant to the Clean Water Act (codified
                              at 33 U.S.C. Chapter 26). Under the statute (33 U.S.C. 1313(c)(2)), water
                              quality standards consist of designated uses for the body of water involved
                              (e.g., public water supplies or recreation) and water quality criteria. Water
                              quality criteria provide technical information on the effects of pollution on
                              water quality and frequently identify what maximum safe concentrations
                              of pollutants would be to protect particular designated uses.




                               Page 35                                             GAO/GGD-99-20 Regulatory Burden
                             Appendix II
                             Concerns for Which Agencies Appeared to Have No Rulemaking Discretion




                            The statute (33 U.S.C. 1314 (a)(1)) also says that the EPA Administrator
                            must develop and publish criteria for water quality “accurately reflecting
                            the latest scientific knowledge (A) on the kind and extent of all identifiable
                            effects on health and welfare . . . ; (B) on the concentration and dispersal
                            of pollutants, or their byproducts . . . ; and (C) on the effects of pollutants
                            on biological community diversity, productivity, and stability . . . .” The
                            statute also requires the Administrator to develop and publish information
                            “on the factors necessary to restore and maintain the chemical, physical,
                            and biological integrity” of water.

                            The Clean Water Act sets forth EPA’s responsibilities and the factors that
                            it must consider in the development of water quality criteria. Because the
                            consideration of costs and available treatment technologies are not among
                            those factors, we do not believe that EPA could consider costs or
                            technology limits in developing water quality criteria pursuant to the act.

Whether Regulatory          We believe that EPA’s regulatory provisions delineating the factors that
                            states should consider in establishing water quality standards (codified at
Provisions Are Within the   40 C.F.R. Part 131) are within the authority granted by the Clean Water
Authority Granted by the    Act. According to those regulations (40 C.F.R. 131.10(a)), in establishing
Statute                     such standards, states must "take into consideration the use and value of
                            water for public water supplies, protection and propagation of fish,
                            shellfish, and wildlife, recreation in and on the water, agricultural,
                            industrial, and other purposes including navigation." Subsection 131.10(b)
                            of the regulation also says, "the State shall take into consideration the
                            water quality standards of downstream waters" and shall ensure that the
                            water quality standards that will be established provide for the attainment
                            and maintenance of the standards for the downstream waters. Also, 40
                            C.F.R. 131.11 (a)(1) says that states must adopt water quality standards
                            that protect the designated use and “must be based on sound scientific
                            rationale and must contain sufficient parameters or constituents to protect
                            the designated use.” Because these regulatory requirements essentially
                            mirror or are logically related to the requirements in the Clean Water Act
                            regarding the establishment of water quality standards, we believe the
                            requirements are within the authority granted by the Clean Water Act.

Whether Less Burdensome     We do not believe that EPA could have developed less burdensome water
                            quality criteria by taking cost or treatment technology into account and
Regulatory Approach Was     still meet the requirements of the Clean Water Act. The regulatory
Available                   requirements regarding the establishment of water quality standards either
                            mirrored the statutory provisions or were logically related to those
                            provisions.




                             Page 36                                             GAO/GGD-99-20 Regulatory Burden
                               Appendix II
                               Concerns for Which Agencies Appeared to Have No Rulemaking Discretion




Statutory Purpose             According to 33 U.S.C. 1251(a), the purpose of the Clean Water Act is to
                              restore and maintain the chemical, physical, and biological integrity of the
                              nation's waters.


Concern 2
Company Concern               Zaclon, Inc. officials said the company was appealing a fine for failure to
                              respond on time to an EPA letter asking them for information related to
                              the Resource Conservation and Recovery Act (RCRA). They said EPA
                              fined them without any follow-up or other communication regarding the
                              original request. The officials also said they were disturbed that the fine
                              was imposed on them because of a procedural matter (failing to file
                              information) rather than something that had a real environmental impact.

Agency Response               EPA officials said the agency sent Zaclon, Inc. a certified letter, which the
                              company acknowledged receiving, notifying the company of its
                              responsibility to either file a RCRA permit application for a hazardous
                              waste pile at a facility that the company had acquired, or submit a
                              demonstration of equivalency indicating that the waste pile had been
                              “clean closed.” EPA officials said that the agency initially proposed
                              assessing a penalty against the company of approximately $81,000.
                              However, after discussions with the company, EPA later reduced the
                              penalty to $37,600. EPA officials said the obligation to obtain either the
                              permit or demonstrate that the waste pile has been “clean closed.” They
                              also said this is not a “procedural matter.” They said this is a substantive
                              requirement to ensure that hazardous waste management units are
                              designed and operated to prevent releases of hazardous waste. The
                              officials also said that under RCRA, companies have a positive obligation
                              to comply even if EPA does not issue any reminders of their responsibility.

Amount of Discretion          The issues that we focused on in this concern are EPA’s assertions that
                              RCRA requires the company to obtain a hazardous waste permit and to
Permitted in the Statute in   comply with the statutory requirement in the absence of a notice from
Drafting Regulatory           EPA.
                                   2


Requirements
                              We believe that RCRA gave EPA no discretion in how it could draft its
                              regulations requiring a hazardous waste permit. The statute (42 U.S.C.
                              6925(a)) says that the EPA Administrator must promulgate regulations
                              requiring each person owning or operating an existing facility or planning
                              2
                                Another issue in this concern was the fine imposed by EPA on the company for the company not
                              obtaining the hazardous waste permit. Because the agency response to this concern had not indicated
                              that the fine imposed on the company was established in the statute, our analysis did not address this
                              issue.




                               Page 37                                                        GAO/GGD-99-20 Regulatory Burden
                             Appendix II
                             Concerns for Which Agencies Appeared to Have No Rulemaking Discretion




                            to construct a new facility for the treatment, storage, or disposal of
                            hazardous waste to have a permit. It also states that the treatment,
                            storage, or disposal of any such hazardous waste and the construction of
                            any new facility for the treatment, storage, or disposal of hazardous waste
                            is prohibited except in accordance with such a permit. Therefore, EPA
                            had no discretion in drafting its regulations about requiring a permit for
                            those facilities in existence or under construction that treat, store, or
                            dispose of hazardous waste. Also, the statute does not indicate that EPA is
                            required to notify companies of their responsibility to obtain a RCRA
                            permit.

Whether Regulatory          We believe that EPA’s regulations requiring a RCRA permit are within the
                            authority granted the agency by the statute. The regulations (40 C.F.R.
Provisions Are Within the   270.1(c)) require companies to obtain a RCRA permit for the treatment,
Authority Granted by the    storage, or disposal of hazardous wastes identified or listed in 40 C.F.R.
Statute                     261. The regulation also says that owners and operators of hazardous
                            waste management units must have permits during the active lives of the
                            units, including the closure period. Because these regulatory provisions
                            closely follow the statutory language in 42 U.S.C. 6925(a), we believe that
                            EPA’s regulations are within the authority granted by the statute.

Whether Less Burdensome     We do not believe that EPA could have developed a less burdensome
                            regulatory approach for its RCRA permit process while still meeting the
Regulatory Approach Was     underlying statutory requirements. RCRA gave the agency no discretion in
Available                   drafting the regulatory requirements at issue in this concern, and those
                            requirements closely followed the requirements in the statute.

Statutory Purpose           RCRA does not contain a statement of purpose.




Concern 3
Company Concern             Officials from the paper company said that regulations under Title V of the
                            Clean Air Act (CAA) are problematic because they regulate extremely low
                            levels of emissions. They said that they are required to get a title V permit
                            for methanol emissions that, at the company's fence line, are no more
                            concentrated than the methanol in a person's breath.

Agency Response             According to EPA, the emission levels that trigger Title V coverage are
                            specified in CAA, ranging from 10 to 100 tons of emissions per year
                            depending on the pollutant and/or the location of the emissions' sources.
                            Companies capable of emissions above these levels are called "major"



                             Page 38                                             GAO/GGD-99-20 Regulatory Burden
                               Appendix II
                               Concerns for Which Agencies Appeared to Have No Rulemaking Discretion




                              sources under the act, triggering title V permitting requirements. For
                              hazardous air pollutants, EPA said that title V coverage is triggered by
                              annual emissions of 10 tons of a given pollutant or 25 tons or more of a
                              combination of pollutants. EPA also said that although specific
                              information about the company was not provided, a typical paper mill
                              emits about 600 tons per year of hazardous air pollutants other than
                              methanol, including approximately 20 of the 189 hazardous air pollutants
                              listed in CAA.

Amount of Discretion          The issue that we focused on in this concern is EPA’s assertion that Title V
                              of CAA establishes the level of emissions of hazardous air pollutants that
Permitted in the Statute in   subjects a company to permit requirements.
Drafting Regulatory
Requirements                  We believe that CAA (codified at 42 U.S.C. 7401 et seq.) gave EPA no
                              discretion in developing its regulations regarding the emissions levels that
                              trigger title V permitting requirements (codified at 42 U.S.C. 7661-7661f)
                                                                                3
                              when those emissions are above a certain level. The act requires any
                              “major source” of hazardous air pollutants to obtain a title V permit, and
                              defines a major source in 42 U.S.C. 7412(a)(1) as “any stationary source or
                              group of stationary sources located within a contiguous area and under
                              common control that emits or has the potential to emit considering
                              controls, in the aggregate, 10 tons per year or more of any hazardous air
                              pollutant or 25 tons per year or more of any combination of hazardous air
                              pollutants.” Methanol is specifically listed in 42 U.S.C. 7412(b)(1) as a
                              hazardous air pollutant, so a company would have to obtain a title V permit
                              if it emitted 10 tons of methanol per year or more. However, a company
                              could also be required to obtain a permit if it emitted no methanol but
                              emitted 10 tons of any other hazardous air pollutant or 25 or more tons of
                              any combination of covered pollutants.

Whether Regulatory            We believe that EPA’s regulatory provisions regarding the emissions levels
                              that trigger the title V permitting requirements are within the authority
Provisions Are Within the     granted by CAA. The regulation (40 C.F.R. 70.2) defines a “major source”
Authority Granted by the      that is required to have a permit by specifically referencing the statutory
Statute                       definition of the term in 42 U.S.C. 7412(a)(1). By using the same definition
                              of a major source, EPA’s regulations are consistent with CAA’s
                              requirements regarding the emissions levels that trigger title V permit

                              3
                                CAA provides that the EPA Administrator may consider a facility to be a “major source” at levels less
                              than 10 tons of any hazardous air pollutant per year or 25 tons of any combination of hazardous air
                              pollutants per year "on the basis of the potency of the air pollutant, persistence, potential for
                              bioaccumulation, other characteristics of the air pollutant, or other relevant factors." Therefore, EPA
                              has some discretion to require permits for facilities that emit levels of hazardous air pollutants that are
                              lower than the level specified in the statute.




                               Page 39                                                           GAO/GGD-99-20 Regulatory Burden
                           Appendix II
                           Concerns for Which Agencies Appeared to Have No Rulemaking Discretion




                          requirements, and therefore they are within the authority granted by the
                          statute.

Whether Less Burdensome   We do not believe that EPA could have developed a less burdensome
                          regulatory approach while still meeting the underlying requirements of
Regulatory Approach Was   CAA. The act gave the agency no discretion in drafting the regulatory
Available                 requirements at issue in this concern, and those requirements were
                          consistent with the requirements in the statute.

Statutory Purpose         According to 42 U.S.C. 7401(c), a primary goal of CAA’s air pollution
                          prevention and control program is to "encourage or otherwise promote
                          reasonable Federal, State, and local governmental actions . . . for pollution
                          prevention.” Section 7401(b) says that the purposes of the subchapter on
                          “Programs and Activities” are

                          “ (1) to protect and enhance the quality of the Nation’s air resources so as to promote the
                          public health and welfare and the productive capacity of its population; (2) to initiate and
                          accelerate a national research and development program to achieve the prevention and
                          control of air pollution; (3) to provide technical and financial assistance to State and local
                          governments in connection with the development and execution of their air pollution
                          prevention and control programs; and (4) to encourage and assist the development and
                          operation of regional air pollution prevention and control programs.”


Concern 4
Company Concern           Fish farm officials said IRS rules on how to account for the capital costs of
                          company construction projects done by the firm's employees are complex
                          and costly. They said prior to a 1986 change in the tax code, indirect costs
                          (e.g., telephone costs associated with the construction project) could be
                          treated as a business expense and therefore could be deducted from that
                          year's taxes. After 1986, IRS required that indirect costs be included as a
                          capital expense; therefore, they could be deducted only over a long period
                          of time. They said because of this change, the company's deductions
                          decreased and taxable income increased, and they had to pay higher taxes.

Agency Response           IRS officials said the requirement to capitalize indirect costs allocable to
                          the production of self-constructed assets was established by statute rather
                          than by IRS regulations. They said Congress enacted the uniform
                          capitalization rules as a part of the Tax Reform Act of 1986 for two
                          reasons. First, Congress wanted to provide a series of uniform rules of
                          capitalization for construction contractors, manufacturers, and taxpayers
                          that produce property for their own use. Second, Congress believed that
                          allowing the immediate deduction of indirect costs (1) resulted in a
                          mismatch of costs and the income produced by those expenses, (2)



                           Page 40                                                    GAO/GGD-99-20 Regulatory Burden
                             Appendix II
                             Concerns for Which Agencies Appeared to Have No Rulemaking Discretion




                            permitted an unwarranted deferral of federal income tax, and (3) resulted
                            in differences in the tax treatment of costs between purchased and self-
                            constructed assets. IRS officials said Congress clearly intended that 26
                            U.S.C. 263A would result in a decrease in the taxpayer's current
                            deductions and a corresponding increase in taxable income.

Amount of Discretion        The issue that we focused on in this concern is IRS’ assertion that the
                            requirement that taxpayers capitalize indirect costs of construction
Permitted by Statute in     projects was established by statute.
Drafting Regulatory
Requirements                We believe that the tax code gave IRS no discretion as to how it could
                            write its regulations with regard to the capitalization of indirect costs.
                            According to 26 U.S.C. 263A(a), any “allocable costs” (defined as a
                            property’s direct costs and a property’s “proper share” of indirect costs
                            that are allocable to the property) must be capitalized. However, if the
                            property “is inventory in the hands of the taxpayer,” the statute says that
                            those costs must be included in inventory costs.

Whether Regulatory          We believe that IRS’ regulatory provisions regarding the capitalization of
                            indirect costs are within the authority granted by the statute. The
Provisions Are Within the   provisions are substantively the same as the statutory requirements and
Authority Granted by the    specifically reference several portions of the statute. For example, 26
Statute                     C.F.R. 1.263A-2(a)(3)(i) says that "[e]xcept as specifically provided in
                            section 263A(f) with respect to interest costs, producers must capitalize
                            direct and indirect costs properly allocable to property produced under
                            section 263A, without regard to whether those costs are incurred before,
                            during, or after the production period (as defined in section
                            263A(f)(4)(B))."

Whether Less Burdensome     We do not believe that IRS could have developed a less burdensome
                            regulatory approach that would have met the requirements of the
Regulatory Approach Was     underlying statute. The tax code gave IRS no discretion in how it could
Available                   draft the regulatory requirements at issue in this concern, and IRS’
                            regulations were consistent with (and specifically referenced) the
                            statutory requirements.

Statutory Purpose           This section of the tax code does not contain a statement of purpose.




                             Page 41                                             GAO/GGD-99-20 Regulatory Burden
                           Appendix II
                           Concerns for Which Agencies Appeared to Have No Rulemaking Discretion




Concern 5
Company Concern           Officials from Multiplex Company, Inc., said that the IRS-required
                          nondiscrimination tests for 401(k) thrift savings plans are of questionable
                          value because IRS lowered the amount of money that can be contributed
                          to the plans, thereby making it less likely that higher income employees
                          will dominate the plans.

Agency Response           IRS officials said that the “IRS-required nondiscrimination test” that
                          Multiplex Company, Inc. officials mentioned appears to refer to the actual
                          deferral percentage test, which is required by section 401(k)(3) of the
                          Internal Revenue Code. Similarly, they said that the limit on deferrals
                          under a 401(k) plan was imposed by section 402(g) of the Internal Revenue
                          Code. Therefore, they said it is incorrect to claim that the “IRS lowered
                          the amount of money that can be contributed.”

Amount of Discretion      The issues that we focused on in this concern are IRS’ assertions that the
                          “nondiscrimination tests” used to determine the actual deferral percentage
Permitted by Statute in   for highly compensated employees and the amount of money that can be
Drafting Regulatory       contributed to 401(k) plans are established by statute.
Requirements
                          We believe that IRS had no discretion in drafting its regulations requiring
                          the test or setting the dollar amount of the deferral limit because they were
                          both specifically established by statute. According to 26 U.S.C.
                          401(k)(3)(A)(ii) “the actual deferral percentage” (i.e., the amount that can
                          be put into the thrift savings plan) for eligible highly compensated
                          employees must meet one of the following tests:

                          “(I) The actual deferral percentage for the group of eligible highly compensated employees
                          is not more than the actual deferral percentage of all other eligible employees multiplied by
                          1.25.

                          “(II) The excess of the actual deferral percentage for the group of eligible highly
                          compensated employees over that of all other eligible employees is not more than 2
                          percentage points, and the actual deferral percentage for the group of eligible highly
                          compensated employees is not more than the actual deferral percentage of all other eligible
                          employees multiplied by 2.”

                          With regard to the amount that can be contributed and deferred each year,
                          26 U.S.C. 402(g)(1) states that “the elective deferrals of any individual for
                          any taxable year shall be included in such individual's gross income to the




                           Page 42                                                  GAO/GGD-99-20 Regulatory Burden
                                Appendix II
                                Concerns for Which Agencies Appeared to Have No Rulemaking Discretion




                                                                                                                                      4
                            extent the amount of such deferrals for the taxable year exceeds $7,000.”
                            Also, 26 U.S.C. 402(g)(5) states that “[t]he Secretary shall adjust the $7,000
                            amount under paragraph (1) at the same time and in the same manner as
                            under section 415(d); except that any increase under this paragraph which
                            is not a multiple of $500 shall be rounded to the next lowest multiple of
                            $500.”

Whether Regulatory          We believe that IRS’ regulatory provisions regarding the
                            “nondiscrimination test” referred to in the company’s concern are within
Provisions Are Within the   the authority granted by the statute. IRS' implementing regulations for this
Authority Granted by the    requirement (26 C.F.R. 1.401(k)-1(b) and 1.402(g)-1) essentially mirror the
Statute                     language of the statute with some additional explanatory language. For
                            example, 26 C.F.R. 1.401(k)-1(b)(2)(i) contains almost identical language
                            to that in 26 U.S.C. 401(k)(3)(A)(ii). It says that a cash or deferred
                            arrangement satisfies the regulation only if:

                            “(A) [t]he actual deferral percentage for the group of eligible highly compensated
                            employees is not more than the actual deferral percentage for the group of all other eligible
                            employees multiplied by 1.25; or (B) [t]he excess of the actual deferral percentage for the
                            group of eligible highly compensated employees over the actual deferral percentage for the
                            group of all other eligible employees is not more than two percentage points, and the actual
                            deferral percentage for the group of eligible highly compensated employees is not more
                            than the actual deferral percentage for the group of all other eligible employees multiplied
                            by two.”

                            The regulation is also similar to the statute with regard to the limits on the
                            amount that can be contributed to the plans. For example, 26 C.F.R.
                            1.402(g)-1(d) states that “[t]he applicable limit for an individual's taxable
                            year beginning in the 1987 calendar year is $7,000. This amount is
                            increased for the taxable year beginning in 1988 and subsequent calendar
                            years in the same manner as the $90,000 amount is adjusted under section
                            415(d).”

Whether Less Burdensome     We do not believe that IRS could have developed a less burdensome
                            regulatory approach that would have satisfied the underlying statutory
Regulatory Approach Was     requirements. The statute gave IRS no discretion in drafting the regulatory
Available                   requirements at issue in this concern, and its regulations essentially mirror
                            the language in the statute.



                            4
                             Although the company referred to an "approximately $9,000 per year" limit and 26 U.S.C. 402(g)(1)
                            establishes the limit as $7,000, 26 U.S.C. 402(g)(5) allows for this amount to be increased annually in
                            accordance with 26 U.S.C. 415(d).




                                Page 43                                                       GAO/GGD-99-20 Regulatory Burden
                             Appendix II
                             Concerns for Which Agencies Appeared to Have No Rulemaking Discretion




Statutory Purpose           This section of the tax code does not contain a statement of purpose.


Concern 6
Company Concern             Multiplex Company, Inc. officials said that increased premium costs paid
                            to PBGC to guarantee their employees’ pensions is costly for the company
                            (over $2,600 in 1994). They said the mandated premium per participant
                            increased from $2.60 in 1982 to $19.00 in 1994.

Agency Response             PBGC officials said that the insurance premiums the agency charges are
                            statutorily established in Section 4006 of the Employee Retirement Income
                            Security Act (ERISA).

Amount of Discretion        The issue that we focused on in this concern is PBGC’s assertion that the
                            increase in pension insurance premiums that Multiplex mentioned was
Permitted by Statute in     statutorily driven.
Drafting Regulatory
Requirements                We believe that ERISA (codified at 29 U.S.C. 1001 et seq.) gave PBGC no
                            discretion to set pension insurance premium rates below $19 per
                            participant in 1994. The statute establishes specific premium rates for
                            certain types of employer plans. For example, 29 U.S.C. 1306(a)(3)(A)
                            states that the annual premium rate payable to PBGC in the case of a
                            single-employer plan for basic benefits for plan years beginning after
                            December 31, 1990, at “an amount equal to the sum of $19 plus the
                            additional premium (if any) determined under subparagraph (E) for each
                            individual who is a participant in such plan during the plan year.” The
                            statute allows PBGC to raise the premium rate for particular plans under
                            certain circumstances. However, the $19 rate is the minimum amount
                            businesses with single-employer plans must pay for basic benefits.

Whether Regulatory          We believe that PBGC’s regulatory provisions concerning premium rates
                            are within the authority granted by the statute. According to 29 C.F.R.
Provisions Are Within the          5
                            4006.3, “. . . the premium paid for basic benefits guaranteed under section
Authority Granted by the    4022(a) of ERISA shall equal the flat-rate premium under paragraph (a) of
Statute                     this section plus, in the case of a single-employer plan, the variable-rate
                            premium under paragraph (b) of this section.” In paragraph (a) the flat-
                            rate premium is calculated as “. . . equal to the number of participants in
                            the plan on the last day of the plan year preceding the premium payment
                            year, multiplied by-- (1) $19 for a single-employer plan . . . .”

                            5
                              In the 1994 and 1995 editions of the Code of Federal Regulations this section is found at 26 C.F.R.
                            2610.




                             Page 44                                                           GAO/GGD-99-20 Regulatory Burden
                           Appendix II
                           Concerns for Which Agencies Appeared to Have No Rulemaking Discretion




Whether Less Burdensome   We do not believe that PBGC could have developed less burdensome
                          premium rates while still meeting the requirements of ERISA. The statute
Regulatory Approach Was   gave the agency no discretion in drafting the regulatory requirements at
Available                 issue in this concern, and the regulations mirror the statutory
                          requirements.

Statutory Purpose         According to 29 U.S.C. 1001 (a),

                          “ [t]he Congress finds that the growth in size, scope, and numbers of employee benefit
                          plans in recent years has been rapid and substantial; that the operational scope and
                          economic impact of such plans is increasingly interstate; that the continued well-being and
                          security of millions of employees and their dependents are directly affected by these plans;
                          that they are affected with a national public interest; that they have become an important
                          factor affecting the stability of employment and the successful development of industrial
                          relations; that they have become an important factor in commerce; . . . that owing to the
                          lack of employee information and adequate safeguards concerning their operation, it is
                          desirable in the interests of employees and their beneficiaries, and to provide for the
                          general welfare and the free flow of commerce, that disclosure be made and safeguards be
                          provided with respect to the establishment, operation, and administration of such plans;
                          that they substantially affect the revenues of the United States because they are afforded
                          preferential [f]ederal tax treatment; . . . and that it is therefore desirable in the interests of
                          employees and their beneficiaries, for the protection of the revenue of the United States,
                          and to provide for the free flow of commerce, that minimum standards be provided
                          assuring the equitable character of such plans and their financial soundness.”

                          Also, 29 U.S.C. 1001(b) states that

                          “[i]t is hereby declared to be the policy of this chapter to protect interstate commerce and
                          the interests of participants in employee benefit plans and their beneficiaries, by requiring
                          the disclosure and reporting to participants and beneficiaries of financial and other
                          information with respect thereto, by establishing standards of conduct, responsibility, and
                          obligation for fiduciaries of employee benefit plans, and by providing for appropriate
                          remedies, sanctions, and ready access to the [f]ederal courts.”

                          Finally, 29 U.S.C. 1001(c) says that

                          “[i]t is further declared to be the policy of this chapter to protect interstate commerce, the
                          [f]ederal taxing power, and the interests of participants in private pension plans and their
                          beneficiaries by improving the equitable character and the soundness of such plans by
                          requiring them to vest the accrued benefits of employees with significant periods of service,
                          to meet minimum standards of funding, and by requiring plan termination insurance.”


Concern 7
Company Concern           An official from Metro Machine Corporation said that OSHA should
                          differentiate between corporate negligence and employee responsibility in
                          assessing workplace safety. He said OSHA currently holds companies, not



                           Page 45                                                      GAO/GGD-99-20 Regulatory Burden
                           Appendix II
                           Concerns for Which Agencies Appeared to Have No Rulemaking Discretion




                          individual employees, accountable for violations caused by employee
                          negligence or willful removal of company-installed safety devices.

Agency Response           OSHA officials said that Section 5 of the Occupational Safety and Health
                          Act of 1970 places specific responsibilities for workplace safety and health
                          on both employers and employees. Although the act gives OSHA the
                          authority to enforce safety and health standards and issue citations to
                          employers for violations of the act, the officials said the act does not
                          authorize OSHA to penalize individual employees for misconduct related
                          to safety or health standards. They noted that in Atlantic & Gulf
                          Stevedores v. OSHRC, 534 F.2d 541, 555 (3rd Cir., 1976), the Court found
                          that the Occupational Safety and Health Act does not confer upon the
                          Secretary of Labor the power to sanction employees who disregard safety
                          standards because the act's enforcement scheme is directed only against
                          employers. Therefore, OSHA officials said its enforcement policy of
                          holding companies liable for safety and health violations is wholly
                          consistent with the intent of the act.

                          However, OSHA officials also noted that since the early 1980s OSHA's
                          policy has been to excuse the employer from a violation when an OSHA
                          compliance officer determines that employees are systematically refusing
                          to comply with safety and health standards and rules. To be excused from
                          the violation, they said the employer would have to demonstrate that (1)
                          his or her employees had received appropriate training and the necessary
                          equipment, (2) the employer had communicated and enforced the work
                          rules designed to prevent employee misconduct, (3) the employees failed
                          to observe work rules that led to the violation, and (4) the employer had
                          taken reasonable steps to discover the violation.

Amount of Discretion      The issue that we focused on in this concern is OSHA’s assertion that the
                          Occupational Safety and Health Act does not allow it to hold individual
Permitted by Statute in   employees accountable for violations of health and safety rules.
Drafting Regulatory
Requirements              We believe that the Occupational Safety and Health Act (codified at 29
                          U.S.C. 651 et seq.) gave OSHA no discretion in how it could write its
                          regulations holding companies responsible for health and safety violations.
                          Several sections of the act specifically mention holding employers
                          accountable for violations, but none of those sections say that employees
                          should be held accountable. For example, 29 U.S.C. 658(a) says that “[i]f,
                          upon inspection or investigation, the Secretary . . . believes that an
                          employer has violated a requirement of section 654 of this title, of any
                          standard, rule or order promulgated pursuant to section 655 of this title, or
                          of any regulations prescribed pursuant to this chapter, he shall with



                           Page 46                                             GAO/GGD-99-20 Regulatory Burden
                             Appendix II
                             Concerns for Which Agencies Appeared to Have No Rulemaking Discretion




                            reasonable promptness issue a citation to the employer.” Another section
                            of the act (29 U.S.C. 659) says that “[i]f, after an inspection or
                            investigation, the Secretary issues a citation . . . he shall . . . notify the
                            employer . . . of the penalty . . . .” The act goes on to say that “the citation
                            and the assessment shall be deemed a final order . . . [i]f the Secretary has
                            reason to believe that an employer has failed to correct a violation for
                            which a citation has been issued . . . .”

Whether Regulatory          We believe that OSHA’s regulations holding employers and not employees
                            accountable for safety violations are within the authority granted by the
Provisions Are Within the   Occupational Safety and Health Act. The regulations, like the statute,
Authority Granted by the    specifically hold employers accountable for violations of the act. For
Statute                     example, 29 C.F.R. 1903.14 states that

                            “ [t]he Area Director shall review the inspection report of the Compliance Safety and Health
                            Officer. If, on the basis of the report the Area Director believes that the employer has
                            violated a requirement of section 5 of the [a]ct, of any standard, rule or order promulgated
                            pursuant to section 6 of the [a]ct, or of any substantive rule published in this chapter . . . he
                            shall issue to the employer either a citation or a notice of de minimis violations. . . .”


Whether Less Burdensome     We do not believe that OSHA could have developed a less burdensome
                            regulatory approach while still meeting the requirements of the
Regulatory Approach Was     Occupational Safety and Health Act. The statute gave OSHA no discretion
Available                   in drafting the regulatory requirements at issue in this concern, and the
                            agency’s regulations were consistent with the statutory requirements.

Statutory Purpose           As stated in 29 U.S.C. 651(b), the purpose of the Occupational Safety and
                            Health Act is to ensure so far as possible every working man and woman in
                            the nation safe and healthful working conditions and to preserve human
                            resources. The statute delineates 13 actions intended to achieve this goal,
                            including (1) encouraging employers and employees in their efforts to
                            reduce the number of occupational safety and health hazards at their
                            places of employment, and to stimulate employers and employees to
                            institute new and perfect existing programs for providing safe and
                            healthful working conditions; (2) providing that employers and employees
                            have separate but dependent responsibilities and rights with respect to
                            achieving safe and healthful working conditions; and (3) authorizing the
                            Secretary of Labor to set mandatory occupational safety and health
                            standards applicable to businesses affecting interstate commerce.


Concern 8
Company Concern             An official from Bank A said that the regulation on the Availability of
                            Funds and Collection of Checks (Regulation CC) requires the development



                             Page 47                                                     GAO/GGD-99-20 Regulatory Burden
                             Appendix II
                             Concerns for Which Agencies Appeared to Have No Rulemaking Discretion




                            and maintenance of expensive and time-consuming information on the
                            current availability of funds. The official said that to provide this
                            information to clients as the regulation requires, the bank must regularly
                            review, update, and reprint brochures with this information.

Agency Response             Officials at FRB said that Regulation CC implements the Expedited Funds
                            Availability Act (12 U.S.C. 4001-4010), which limits the length of time
                            depository institutions may place holds on deposits to transaction
                            accounts. They said the act and the regulation also require depository
                            institutions to provide to their customers written copies of their
                            availability policies and written notices when certain types of extended
                            holds are placed on deposits. In addition to providing general policy
                            disclosure notices to customers, depository institutions also incur the
                            ongoing costs of providing exceptions to hold notices and change-in-policy
                            notices, as well as costs related to employee training. FRB officials said
                            that because the disclosure provisions in Regulation CC are required by
                            the Expedited Funds Availability Act, statutory amendments would be
                            necessary to relieve any of the burdens on depository institutions
                            associated with those provisions.

Amount of Discretion        The issue that we focused on in this concern is FRB’s assertion that the
                            Expedited Funds Availability Act requires banks to maintain and disclose
Permitted by Statute in     specific information about their funds availability policies.
Drafting Regulatory
Requirements                We believe that the Expedited Funds Availability Act gave FRB no
                            discretion in how it could write its regulations requiring depository
                            institutions to disclose their funds availability policies. The statute (12
                            U.S.C. 4004) requires depository institutions to disclose to their customers,
                            on preprinted deposit slips, their policies regarding the withdrawal of
                            deposits. The statute also requires these disclosures to be provided before
                            an account is opened, whenever there is a policy change within the
                            institution, if the customer requests a copy of the policy, and when
                            deposits are accepted at automated teller machines.

Whether Regulatory          We believe that Regulation CC’s provisions requiring the disclosure of
                            bank policies on funds availability (codified at 12 C.F.R. Part 229, Subpart
Provisions Are Within the   B) are within the authority granted by the Expedited Funds Availability
Authority Granted by the    Act. The regulation’s requirements essentially repeat the requirements in
Statute                     the statute. For example, 12 C.F.R. 229.17 states that before an account is
                            opened, a bank shall provide a potential customer with its funds
                            availability policy. Section 229.18 states that disclosure notices shall be on
                            all preprinted deposit slips and posted at all locations where the bank
                            accepts deposits, including automated teller machines. The regulation also



                             Page 48                                             GAO/GGD-99-20 Regulatory Burden
                           Appendix II
                           Concerns for Which Agencies Appeared to Have No Rulemaking Discretion




                          requires disclosure information to be provided upon customer request and
                          sent to customers at least 30 days before a change in the bank's policy on
                          funds availability is implemented.

Whether Less Burdensome   We do not believe that FRB could have developed a less burdensome
                          regulatory approach that would have satisfied the requirements of the
Regulatory Approach Was   Expedited Funds Availability Act. The act gave the agency no discretion in
Available                 drafting the regulatory requirements at issue in this concern, and those
                          requirements essentially repeat the requirements in the act.

Statutory Purpose         Neither the Expedited Funds Availability Act nor in the Competitive
                          Equality Banking Act, of which this act was a part, contain a statement of
                          purpose.


Concern 9
Company Concern           Bank B officials said that Regulation DD, which implements the Truth in
                          Savings Act, should be simplified by reducing the number of times that
                          banks are required to disclose transaction information.

Agency Response           Officials at FRB said that the Truth in Savings Act requires institutions to
                          provide information about rates paid and fees charged for consumer
                          deposit accounts (a) upon request, (b) before an account is opened, (c)
                          before terms previously disclosed are adversely changed, (d) if periodic
                          statements are sent, and (e) before automatically renewable ("rollover")
                          time accounts mature. They also said that promoting certain account
                          terms in advertisements triggers the duty to disclose additional account
                          terms.

                          In adopting Regulation DD, FRB officials said the agency sought to
                          facilitate compliance with the disclosure requirements in several respects.
                          For example, they said change-in-term notices are not required when
                          institutions lower rates for variable-rate accounts or for changes in check
                          printing charges, which are often under the control of third-party vendors.
                          Similarly, information regularly provided to consumers about their
                          certificates of deposit or passbook savings accounts does not trigger the
                          periodic statement disclosure requirements. Finally, although institutions
                          are required to provide account-opening disclosures to all maturing
                          rollover certificates of deposit, Regulation DD provides flexibility in the
                          timing and content of these disclosures. However, because the number
                          and timing of these disclosure provisions of Regulation DD are required by
                          the Truth in Savings Act, the officials said that statutory amendments




                           Page 49                                             GAO/GGD-99-20 Regulatory Burden
                             Appendix II
                             Concerns for Which Agencies Appeared to Have No Rulemaking Discretion




                            would be needed to further relieve the burdens associated with those
                            provisions.

Amount of Discretion        The issue that we focused on in this concern is FRB’s assertion that the
                            Truth in Savings Act requires banks to disclose information about interest
Permitted by Statute in     rates and fees to their customers repeatedly.
Drafting Regulatory
Requirements                We believe that the Truth in Savings Act (codified at 12 U.S.C. 4301 et seq.)
                            gave FRB no discretion in drafting Regulation DD’s requirements for
                            repeated disclosures of depository institutions’ terms and conditions.
                            Various provisions in the act require disclosures at various points in time.
                            For example, 12 U.S.C. 4302(a) requires, with certain exceptions, that each
                            institution disclose such information as annual percentage yields and
                            minimum account balances. The institution must also provide a statement
                            that an interest penalty is required for early withdrawal in conjunction
                            with each advertisement, announcement, or solicitation that includes a
                            reference to a specific rate of interest payable. According to 12 U.S.C.
                            4305(a), a schedule of fees, charges, interest rates, and terms and
                            conditions applicable to each class of accounts offered by a depository
                            institution must be (1) made available to any person upon request, (2)
                            provided to any potential customer before an account is opened or a
                            service is rendered, and (3) provided to depositors at least 30 days before
                            the date of maturity of any time deposits that are renewable at maturity
                            without notice from the depositor.

                            Before any change is made in any term or condition that is to be disclosed
                            in the required schedule that may reduce the yield or adversely affect any
                            account holder, 12 U.S.C. 4305(c) requires institutions to notify customers
                            and provide them with a description of the change by mail at least 30 days
                            before the change takes effect. According to 12 U.S.C. 4307, each
                            depository institution must include on or with each periodic statement
                            provided to each account holder a clear and conspicuous disclosure of the
                            annual percentage yield earned, the amount of interest earned, the amount
                            of any fees or charges imposed, and the number of days in the reporting
                            period.

Whether Regulatory          We believe that the requirements in Regulation DD regarding repeated
                            disclosures (codified at 12 C.F.R. Part 230) are within the authority granted
Provisions Are Within the   to FRB by the Truth in Savings Act. Many of the regulatory requirements
Authority Granted by the    mirror the requirements in the statute. For example, according to 12
Statute                     C.F.R. 230.4, depository institutions must provide account disclosures to a
                            consumer (a) upon request; or (b) before an account is opened or a service
                            is provided, whichever is earlier. According to 12 C.F.R. 230.5, institutions



                             Page 50                                             GAO/GGD-99-20 Regulatory Burden
                           Appendix II
                           Concerns for Which Agencies Appeared to Have No Rulemaking Discretion




                          must give at least 30 calendar days’ advance notice to affected consumers
                          of any change in a term required to be disclosed if the change may reduce
                          the annual percentage yield or adversely affect the consumer. Also,
                          institutions must provide disclosure for time accounts with maturity longer
                          than 1 month that renew automatically. According to 12 C.F.R. 230.6,
                          institutions must include disclosures in the periodic statements mailed or
                          delivered to consumers.

Whether Less Burdensome   We do not believe that FRB could have developed a less burdensome
                          regulatory approach that would have satisfied the requirements of the
Regulatory Approach Was   Truth in Savings Act. The act gave the agency no discretion in drafting the
Available                 regulatory requirements at issue in this concern, and Regulation DD’s
                          requirements were consistent with the statutory requirements.

Statutory Purpose         According to 12 U.S.C. 4301(b), the purpose of the Truth in Savings Act is
                          “to require the clear and uniform disclosure of (1) the rates of interest
                          which are payable on deposit accounts by depository institutions; and (2)
                          the fees that are assessable against deposit accounts, so that consumers
                          can make a meaningful comparison between the competing claims of
                          depository institutions with regard to deposit accounts.”


Concern 10
Company Concern           Bank B officials said that Regulation Z (which implements the Truth in
                          Lending Act) requires the bank to disclose the same information regarding
                          bank practices (e.g., interest rates and loan terms) several times during a
                          single transaction (e.g., when taking out a loan or opening an account).
                          They recommended that Regulation Z be simplified to permit banks to
                          disclose information only once during the transaction, or to give them the
                          latitude to ask customers how often they need the disclosure information
                          during a transaction.

Agency Response           Officials at FRB said that the Truth in Lending Act and Regulation Z
                          require creditors to provide increasing levels of detail about the potential
                          cost of a transaction as the consumer progresses through the credit-
                          shopping process. For example, promoting certain terms in
                          advertisements triggers the duty to state additional credit terms; but these
                          disclosures are limited to key terms, such as annual fees for a credit card
                          plan or repayment terms for an installment loan. When consumers apply
                          for a line of credit or certain variable-rate loans secured by their homes,
                          general disclosures about the loan terms are provided that assist
                          consumers in deciding whether to obtain the credit. Disclosures can also
                          be required during the term of a loan, such as when the lender implements



                           Page 51                                             GAO/GGD-99-20 Regulatory Burden
                             Appendix II
                             Concerns for Which Agencies Appeared to Have No Rulemaking Discretion




                            an adverse change to previously disclosed account terms in a revolving
                            credit line or other "open-end" credit plan. Transaction-specific
                            disclosures are given before the consumer becomes obligated for the
                            credit. FRB officials also said that the timing of the disclosures is
                            mandated by the Truth in Lending Act itself and not by Regulation Z.
                            Amendments to the Truth in Lending Act would be required for changes in
                            when and how often a lender must provide most of these disclosures.

Amount of Discretion        The issue that we focused on in this concern is FRB’s assertion that the
                            Truth in Lending Act establishes the frequency with which banks must
Permitted by Statute in     disclose certain types of information to customers.
Drafting Regulatory
Requirements                We believe the Truth in Lending Act (codified at 15 U.S.C. 1601 et seq.)
                            gave FRB no discretion in drafting the regulatory requirements governing
                            when banks are required to make certain disclosures. The act’s
                            requirements in this area are very specific. For example, 15 U.S.C. 1637(a)
                            states that before opening an account under an open-end consumer credit
                            plan, the creditor must disclose to the person getting the credit such items
                            as the conditions under which a finance charge may be imposed and the
                            method for determining the balance upon which to impose the finance
                            charge. Also, 15 U.S.C. 1637(b) states that at the end of each billing cycle
                            for an open-end consumer credit plan for which there is an outstanding
                            balance in that account or with respect to which a finance charge is
                            imposed, the creditor must transmit a statement containing several
                            specific items (as applicable). For example, the statute says the statement
                            should contain the outstanding balance in the account at the beginning and
                            end of the period and the total amount credited to the account during the
                            period. Finally, according to 15 U.S.C. 1637(c), certain information must
                            be disclosed on an application for a credit card or charge card. For
                            example, the application must disclose the annual percentage rates, annual
                            and other fees, any grace period, and method by which the credit balance
                            is calculated.

Whether Regulatory          We believe that the requirements in Regulation Z are within the authority
                            granted by the Truth in Lending Act. The regulatory requirements closely
Provisions Are Within the   parallel the requirements in the statute. For example, 12 C.F.R. 226.5(b)(1)
Authority Granted by the    and (2) state that for open-end credit, the creditor must furnish initial
Statute                     disclosures before the first transaction is made under the plan and
                            periodically provide a statement for each billing cycle at the end of which
                            an account has a debit or credit balance of more than $1 or on which a
                            finance charge has been imposed. Section 226.5a of the regulation says
                            that the credit and charge card issuer must provide the disclosures




                             Page 52                                             GAO/GGD-99-20 Regulatory Burden
                           Appendix II
                           Concerns for Which Agencies Appeared to Have No Rulemaking Discretion




                          specified on or with a solicitation or an application to open a credit or
                          charge card account.

Whether Less Burdensome   We do not believe that FRB could have developed a less burdensome
                          regulatory approach that would have met the requirements of the Truth in
Approach Was Available    Lending Act. The act gave the agency no discretion in drafting the
                          regulatory requirements at issue in this concern, and the agency’s
                          regulatory requirements were consistent with the statutory requirements.

Statutory Purpose         The Truth in Lending Act is a subchapter within the Consumer Credit
                          Protection Act. The subchapter (15 U.S.C. 1601(a)) says that the purpose
                          of the Truth in Lending Act is to ensure a meaningful disclosure of credit
                          terms so that the consumer will be able to compare more readily the
                          various credit terms available to him and avoid the uninformed use of
                          credit and to protect the consumer against inaccurate and unfair credit
                          billing and credit card practices.


Concern 11
Company Concern           A Bank C official said that Regulation DD reduces the bank's flexibility in
                          providing services to customers. The official said that the bank cannot
                                                                                                    6
                          customize accounts for customers, put customers on analyzed accounts,
                          or do bonus programs because of the expensive and complex computer
                          system changes that would be needed to comply with the regulation.

Agency Response           Officials of FRB said the agency made a concerted effort during the
                          development of Regulation DD to provide flexibility to institutions in order
                          to minimize compliance costs and maximize the development of new
                          products. However, the Truth in Savings Act requires disclosure of the
                          fees that may be assessed against a consumer's account. The officials said
                          if an institution chooses to offer different fees or other terms to different
                          consumers, the disclosures must reflect the terms agreed to by the parties.

Amount of Discretion      The issue that we focused on in this concern is FRB’s assertion that the
                          Truth in Savings Act requires the disclosure of potential fees and other
Permitted by Statute in   terms, which may have the effect of reducing a bank’s flexibility in
Drafting Regulatory       providing services to its customers.
Requirements

                          6
                            According to an official at FRB, an analyzed account usually refers to the bundling of individual
                          accounts to determine, on the basis of the total of the balances of all the accounts in one bank (rather
                          than on the basis of each of the accounts), what fees must be paid on the accounts or how much
                          interest the accounts will earn.




                           Page 53                                                          GAO/GGD-99-20 Regulatory Burden
                             Appendix II
                             Concerns for Which Agencies Appeared to Have No Rulemaking Discretion




                            We believe the Truth in Savings Act gave FRB no discretion in how it could
                            draft Regulation DD’s disclosure requirements. According to 12 U.S.C.
                            4303(a) through (c), each institution must maintain a schedule of fees,
                            charges, interest rates, and terms and conditions applicable to each class
                            of accounts offered by the institution. The statute specifies the items that
                            must be on the schedule. For example, the statute says that the schedule
                            must contain (1) descriptions and amounts of all fees and service charges
                            and the conditions under which those fees would be applicable; (2) all
                            minimum balance requirements that would affect fees, charges, and
                            penalties; (3) any minimum amount required to open the account; and (4)
                            information on interest rates, such as any annual rate of simple interest
                            and the frequency with which the interest would be compounded and
                            credited. Although the statute does not specifically address whether banks
                            must maintain similar schedules of disclosures about customized and
                            analyzed accounts or bonus programs, it appears that disclosures would be
                            required for these accounts or programs under the general heading of
                            “terms and conditions.”

Whether Regulatory          We believe the referenced provisions of Regulation DD are within the
                            rulemaking authority granted by the Truth in Savings Act because they are
Provisions Are Within the   similar to the requirements in the act. For example 12 C.F.R. 230.4(a) and
Authority Granted by the    (b) state that a financial institution must provide account disclosures to a
Statute                     consumer before an account is opened, before a service is provided, or
                            upon request. The regulation also states that the disclosures shall include
                            rate information, compounding and crediting information, balance
                            information, fees, transaction limitations, features of time accounts, and
                            bonuses.

Whether Less Burdensome     We do not believe that FRB could have developed a less burdensome
                            regulatory approach that would have satisfied the requirements of the
Regulatory Approach Was     Truth in Savings Act. The act gave the agency no discretion in drafting the
Available                   regulatory requirements at issue in this concern, and the agency’s
                            regulatory requirements were consistent with the statutory requirements.

Statutory Purpose           According to 12 U.S.C. 4301(b), the purpose of the Truth in Savings Act is
                            “to require the clear and uniform disclosure of (1) the rates of interest
                            which are payable on deposit accounts by depository institutions; and (2)
                            the fees that are assessable against deposit accounts, so that consumers
                            can make a meaningful comparison between the competing claims of
                            depository institutions with regard to deposit accounts.”


Concern 12

                             Page 54                                             GAO/GGD-99-20 Regulatory Burden
                             Appendix II
                             Concerns for Which Agencies Appeared to Have No Rulemaking Discretion




Company Concern             A Bank C official said that Regulation DD requires as part of its
                            “redisclosure” rules that the bank provide customers with a written
                            description of all the bank's services and fees each time the customer
                            opens, changes, or reopens an account--even if the customer had
                            previously received the same information.

Agency Response             Officials at FRB said that the Truth in Savings Act requires financial
                            institutions to provide complete account disclosures when an account is
                            opened, and it also requires institutions to provide consumers with a
                            notice of any change in terms. They said disclosures are required if an
                            account is "re-opened" only if the institution deemed the account closed at
                            some point in time.

Amount of Discretion        The issue that we focused on in this concern is FRB’s assertion that the
                            Truth in Savings Act establishes when a bank must disclose information on
Permitted by Statute in     the terms of their accounts to customers.
Drafting Regulatory
Requirements                We believe that the Truth in Savings Act gave FRB no discretion in how it
                            could draft Regulation DD regarding disclosures when an account is
                            opened or when there are changes to the account. According to 12 U.S.C.
                            4305(a)(2), institutions are required to provide complete account
                            disclosures when an account is opened or when a service is rendered.
                            According to 12 U.S.C. 4305(c), all account holders who may be affected
                            by changes in terms or conditions or adversely affected by changes must
                            be notified and provided with a description of the changes by mail at least
                            30 days before the changes take effect.

Whether Regulatory          We believe that FRB’s disclosure requirements in Regulation DD are within
                            the authority granted by the Truth in Savings Act. The regulatory
Provisions Are Within the   requirements parallel the statutory requirements in many respects. For
Authority Granted by the    example, according to 12 C.F.R. 230.4(a), a depository institution must
Statute                     provide account disclosures to a consumer before an account is opened or
                            a service is rendered, whichever is earlier. The regulation states that an
                            institution is considered to have provided a service when a fee required to
                            be disclosed is assessed. Also, 12 C.F.R. 230.5(a) states that institutions
                            are to provide consumers with advance notice of any change in terms if the
                            change may reduce the annual percentage yield or adversely affect the
                            consumer. No notice is required for variable rate changes, check printing
                            fees, or short-term time accounts. The notice of change shall include the
                            effective date of the change and shall be mailed or delivered at least 30
                            calendar days before the effective date of the change.




                             Page 55                                             GAO/GGD-99-20 Regulatory Burden
                           Appendix II
                           Concerns for Which Agencies Appeared to Have No Rulemaking Discretion




Whether Less Burdensome   We do not believe that FRB could have developed a less burdensome
                          regulatory approach that would have satisfied the requirements of the
Regulatory Approach Was   Truth in Savings Act. The act gave the agency no discretion in drafting the
Available                 regulatory requirements at issue in this concern, and those requirements
                          are consistent with the statutory requirements.

Statutory Purpose         According to 12 U.S.C. 4301(b), the purpose of the Truth in Savings Act is
                          to require the clear and uniform disclosure of the rates of interest and the
                          fees that can be assessed against deposit accounts so that consumers can
                          make a meaningful comparison between the competing claims of
                          depository institutions with regard to deposit accounts.


Concern 13
Company Concern           A Bank C official said that regulations requiring federally insured
                          institutions to require flood insurance for properties located in floodplains
                          are not applicable to nonbanking organizations such as the Money Store,
                          where the public can apply for loans without having to acquire flood
                          insurance.

Agency Response           Officials at FRB and FDIC said the Flood Disaster Protection Act of 1973
                          created a significant disparity between the treatment of mortgage
                          companies or other nondepository lenders and depository institutions with
                          respect to flood insurance purchase requirements. The act also directed
                          federal banking agencies to adopt regulations applicable to depository
                          institutions to require the purchase of flood insurance for any improved
                          property used to secure a loan if the property was located in a flood hazard
                          area. No similar requirements were placed on mortgage banks.

Amount of Discretion      The issue that we focused on in this concern is FDIC’s assertion that the
                          Flood Disaster Protection Act created the disparity between depository
Permitted by Statute in   and nondepository institutions with respect to flood insurance
Drafting Regulatory       requirements.
Requirements
                          We believe the Flood Disaster Protection Act gave FRB and FDIC no
                          discretion in writing their regulations in this area. The statute (particularly
                          42 U.S.C. 4121(a)(13) and 42 U.S.C. 4012a(b)(1)) requires that regulated
                          lending institutions not make real estate loans in an area having special
                          flood hazards unless the building or property is covered by flood
                          insurance. Also, 42 U.S.C. 4012a(b)(1) requires regulated lending
                          institutions not to make, increase, extend, or renew any loan secured by
                          improved real estate or a mobile home located, or to be located, in an area
                          having special flood hazards and in which flood insurance has been made



                           Page 56                                             GAO/GGD-99-20 Regulatory Burden
                             Appendix II
                             Concerns for Which Agencies Appeared to Have No Rulemaking Discretion




                            available under the National Flood Insurance Act of 1968,unless the
                            building or mobile home and any personal property securing the loan is
                            covered for the term of the loan by flood insurance. A “regulated lending
                            institution” is defined in 42 U.S.C. 4121(a)(13) in such a way that
                            nondepository lenders such as the Money Store would not be subject to
                            the requirements of 42 U.S.C. 4012a(b)(1).

Whether Regulatory          We believe that FRB’s and FDIC’s regulatory requirements regarding flood
                            insurance are within the authority granted by the Flood Disaster
Provisions Are Within the   Protection Act of 1973 because those requirements are, in essence, the
Authority Granted by the    same as the statutory requirements. According to 12 C.F.R. 208.23(c), a
Statute                     state member bank may not make, increase, extend, or renew any
                            designated loan unless the building securing the loan is covered by flood
                            insurance for the term of the loan.

Whether Less Burdensome     We do not believe that FRB and FDIC could have developed a less
                            burdensome regulatory approach while still meeting the underlying
Approach Was Available      statutory requirements of the Flood Disaster Protection Act of 1973. The
                            statute gave the agencies no discretion in drafting the regulatory
                            requirements at issue in this concern, and those requirements were
                            consistent with the statutory requirements.

Statutory Purpose           According to 42 U.S.C. 4002(b), the purpose of the Flood Disaster
                            Protection Act of 1973 is to (1) substantially increase the limits of coverage
                            authorized under the national flood insurance program; (2) provide for the
                            expeditious identification of, and the dissemination of information
                            concerning, flood-prone areas; (3) require states or local communities, as a
                            condition of future federal financial assistance, to participate in the flood
                            insurance program and to adopt adequate flood plan ordinances with
                            effective enforcement provisions consistent with federal standards to
                            reduce or avoid future flood losses; and (4) require the purchase of flood
                            insurance by property owners who are being assisted by federal programs
                            or by federally supervised, regulated, or insured agencies or institutions in
                            the acquisition or improvement of land or facilities located, or to be
                            located, in identified areas having special flood hazards.




                             Page 57                                             GAO/GGD-99-20 Regulatory Burden
Appendix III

Concerns for Which Agencies Appeared to
Have Some Rulemaking Discretion

                  One of the objectives of our review was to determine, for each of 27
                  company concerns, the amount of discretion the underlying statutes gave
                  rulemaking agencies in drafting the regulatory requirements that the
                  agencies said were attributable to the underlying statutes. The agencies
                  that issued those requirements indicated in two of our 1996 reports that
                  the concerns could, at least in part, be traced to statutory requirements
                                                1
                  underlying their regulations. In this review we concluded that the
                  statutory provisions underlying 12 of the 27 concerns gave the rulemaking
                  agencies some discretion in how the related regulatory requirements could
                  be drafted. We coded statutory provisions as allowing agencies “some
                  discretion” if they delineated certain requirements regarding how the
                  agencies’ regulations could be drafted but gave the agencies at least some
                  flexibility regarding other requirements.

                  This appendix provides our detailed analysis of each of these 12 company
                  concerns. Specifically, for each such concern it provides the following
                  information: (1) the portion of the concern in our 1996 reports that the
                  agency or agencies indicated was statutorily based, (2) the portion of the
                  agency response in our 1996 reports that indicated the concern was
                  statutorily based, (3) our analysis of the amount of rulemaking discretion
                  the relevant statutory provisions gave the agencies (the first objective of
                  this review), (4) our analysis of whether the regulatory requirements at
                  issue in the concern were within the authority granted by the underlying
                  statutes (the second objective of our review), (5) our analysis of whether
                  the rulemaking agencies could have developed regulatory approaches that
                  would have been less burdensome to the regulated entities while meeting
                  the underlying statutory requirements (the third objective of our review),
                  and (6) the main purpose of the underlying statutes (where such purpose
                  statements were available). Appendix I of this report contains a detailed
                  discussion of our scope and methodology.


Concern 1
Company Concern   Officials from the paper company said DOT’s required hazardous materials
                  (hazmat) training is expensive. Under the regulations that took effect in
                  January 1994, they said employees who deal with hazardous materials
                  must be trained and tested, and this training costs the company $475,000
                  per year.

Agency Response   DOT officials said the Hazardous Materials Transportation Uniform Safety
                  Act, implemented in 1990, specifically required the issuance of regulations
                  1
                      GAO/GGD-97-2 (Nov. 18, 1996); and GAO/GGD-97-26R (Dec. 11, 1996).




                  Page 58                                                       GAO/GGD-99-20 Regulatory Burden
                                Appendix III
                                Concerns for Which Agencies Appeared to Have Some Rulemaking Discretion




                            requiring that hazmat employers provide training to their hazmat
                                        2
                            employees. They said DOT’s Hazardous Materials Regulations were
                            revised May 15, 1992, to reflect those statutory requirements.

Amount of Discretion        The issue that we focused on in this concern is DOT’s assertion that the
                            Hazardous Materials Transportation Safety Act requires employers to
Permitted by Statute in     provide certain employees with hazmat training.
Drafting Regulatory
Requirements                We believe that the Hazardous Materials Transportation Uniform Safety
                            Act (now codified at 49 U.S.C. 5101 et seq.) gave DOT some discretion
                            regarding how its regulations on hazmat training could be drafted. The
                            statute said that the Secretary of Transportation “shall prescribe by
                            regulation requirements for training that a hazmat employer must give
                            hazmat employees of the employer on the safe loading, unloading,
                            handling, storing, and transporting of hazardous material. . .” The statute
                            also said the regulation must establish the date by which the training shall
                            be completed, and to require employers to certify that their hazardous
                            materials employees have received training and been tested on at least one
                            of nine specific areas of responsibility that are delineated in the statute.
                            Therefore, DOT had no discretion regarding whether to issue regulations
                            requiring hazmat training or how it could draft those regulations with
                            regard to the provisions described in the statute. However, we believe that
                            DOT had some discretion in how it could draft other regulatory
                            requirements. For example, the statute said that DOT’s regulations “may
                            provide for different training for different classes or categories of
                            hazardous material and hazmat employees.” It also said that the Secretary
                            of Transportation “may require by regulation” documentation to support
                            employers’ training certifications.

Whether Regulatory          We believe that DOT’s regulatory provisions requiring hazardous material
                            training (49 C.F.R. 172.700-172.704) are within the authority granted by the
Provisions Are Within the   Hazardous Materials Transportation Uniform Safety Act. DOT’s
Authority Granted by        regulations contain the requirements that were specifically delineated in
Statute                     the statute. For example, the statute required the regulation to establish
                            the date by which the hazardous materials training shall be completed, and
                            the regulation (49 C.F.R. 172.704 (c)(ii)) says that employees must
                            complete the training within 90 days after beginning employment or a
                            change in job function. In other areas, the regulatory provisions appear to
                            fall within the discretion afforded DOT by the statute. For example, the
                            statute said that the Secretary of Transportation “may require by

                            2
                             In 1994, the Hazardous Materials Transportation Uniform Safety Act was recodified as the Federal
                            Hazardous Materials Transportation Law.




                                Page 59                                                    GAO/GGD-99-20 Regulatory Burden
                           Appendix III
                           Concerns for Which Agencies Appeared to Have Some Rulemaking Discretion




                          regulation” documentation to support employers’ training certifications,
                          and the regulation (49 C.F.R. 172.704 (d)) requires such documentation.

Whether Less Burdensome   We could not determine whether DOT could have developed an alternative
                          approach to hazmat training that would have been less burdensome to
Regulatory Approach Was   regulated entities while still accomplishing the requirements of the
Available                 Hazardous Materials Transportation Uniform Safety Act. To make that
                          determination we would have had to conduct a detailed examination of
                          DOT’s training requirements that were not statutorily mandated and
                          determine whether the Department could have eliminated them or used an
                          alternative approach that regulated entities would have perceived as less
                          burdensome. For example, we would have had to examine DOT’s
                          regulatory requirement that employers provide documentation to support
                          training certifications and determine whether DOT could have eliminated
                          or amended that requirement and still met the requirements of the
                          underlying statute. Such an examination of each nonstatutory requirement
                          would have demanded extensive time and resource commitments that
                          were beyond the scope of this assignment.

Statutory Purpose         According to 49 U.S.C. 5101, “[t]he purpose of this chapter is to provide
                          adequate protection against the risks to life and property inherent in the
                          transportation of hazardous material in commerce by improving the
                          regulatory and enforcement authority of the Secretary of Transportation.”


Concern 2
Company Concern           According to hospital officials, it is very difficult to keep pace with
                          frequently changing Medicare and Medicaid billing rules. Although the
                          hospital’s computer programmers have spent many hours trying to keep
                          their automated patient billing system up to date, the hospital officials said
                          it is like “chasing a moving target.”

Agency Response           According to HCFA officials, in a number of situations, the changes to
                          hospital billing procedures are due to enhancements or changes made by
                          Congress.

Amount of Discretion      The issue that we focused on in this concern is HCFA’s assertion that
                          changes to Medicare and Medicaid billing rules are, at times,
Permitted by Statute in   congressionally driven.
Drafting Regulatory
Requirements              HCFA officials said that the general mechanisms the government uses to
                          pay for medical services are spelled out in the Code of Federal Regulations
                          but are operationalized through the billing instructions published in



                           Page 60                                             GAO/GGD-99-20 Regulatory Burden
 Appendix III
 Concerns for Which Agencies Appeared to Have Some Rulemaking Discretion




numerous HCFA manuals. Although these billing rules do not appear in
the Code of Federal Regulations and therefore do not have the force and
effect of law, we considered them to be “regulatory requirements” in this
report. HCFA’s Medicare Hospital Manual contains billing procedures that
hospitals must follow when submitting bills to “fiscal intermediaries”
(insurance companies with which HCFA contracts for hospital bill
processing and payment). Although other HCFA publications may
indirectly affect the billing procedures at issue in the hospital’s concern
(e.g., changes to HCFA’s Medicare Part A Intermediary Manual that
describe the procedures that intermediaries must follow when processing
bills from hospitals), we focused our review on the changes to the billing
procedures in HCFA’s Medicare Hospital Manual.

We believe that HCFA had some discretion in deciding whether to make
specific changes to its billing rules. In general, HCFA has authority to
require that certain types of information be submitted and to change those
information requirements. For example, one provision of the Social
Security Act (codified at 42 U.S.C. 1395g) says

“ [t]he Secretary [of the Department of Health and Human Services] shall periodically
determine the amount which should be paid under this part to each provider of services . . .
except that no such payments shall be made to any provider unless it has furnished such
information as the Secretary may request in order to determine the amounts due such
provider under this part for the period with respect to which the amounts are being paid or
any prior period.” (Emphasis added.) ”

To determine the extent to which specific changes to HCFA’s Medicare
Hospital Manual were driven by statutory requirements, we reviewed the
13 changes that HCFA made to the manual in 1995 (the year prior to our
1996 reports on which this review is based). We concluded that 5 of these
13 changes were directly traceable to statutory requirements that gave the
agency no rulemaking discretion. For example, one of the changes to the
manual implemented a new subsection to the Social Security Act that
delineated procedures to be used in calculating payment for surgical
dressings. The statute said that

“[p]ayment under this subsection for surgical dressings . . . shall be made in a lump sum
amount for the purchase of the item in an amount equal to 80 percent of the lesser of (A)
the actual charge for the item; or (B) a payment amount determined in accordance with the
methodology described in subparagraphs (B) and (C) of subsection (a)(2) (except that in
applying such methodology, the national limited payment amount referred to in such
subparagraphs shall be initially computed based on local payment amounts using average
reasonable charges for the 12-month period ending December 31, 1992, increased by the
covered item updates described in such subsection for 1993 and 1994.”




 Page 61                                                  GAO/GGD-99-20 Regulatory Burden
                             Appendix III
                             Concerns for Which Agencies Appeared to Have Some Rulemaking Discretion




                            Because the statute specified that payment must be made for surgical
                            dressings, the amount of those payments, and how those charges should
                            be paid, we concluded that HCFA did not have discretion with regard to
                            making changes to its billing instructions in this area.

                            The other eight changes to the Medicare Hospital Manual appeared to be
                            clarifications and technical corrections to HCFA’s billing procedures, and
                            HCFA appeared to rely on its general authority to require “such
                            information as the Secretary may request” in making these changes. In
                            these cases, we believe that HCFA had considerable discretion in deciding
                            whether to make the changes. For example, two of the changes affected
                            billing requirements for inpatient hospital stays. One of the changes added
                            a new requirement that bills be submitted in the sequence in which
                            services were furnished. The other change clarified the previous change,
                            noting that if the new policy disadvantaged (i.e., raised the liability of) the
                            hospital, the beneficiary, or a secondary insurer, the hospital should notify
                            its intermediary to arrange reprocessing of all affected claims.

Whether Regulatory          We believe that the changes that HCFA made to the Medicare Hospital
                            Manual’s billing procedures were within the authority granted by the
Provisions Are Within the   underlying statutes. In those cases in which HCFA had no discretion to
Authority Granted by the    make statutorily directed changes, the changes were consistent with (and,
Statute                     in some cases, identical to) the statutory requirements. Therefore, we
                            concluded that those changes were within the authority granted by the
                            statutes. For example, in the above illustration involving surgical
                            dressings, HCFA changed the Medicare Hospital Manual to provide
                            instructions for billing and payment that mirrored the requirements in the
                            new subsection of the Social Security Act. In those cases in which HCFA
                            appeared to make the changes at its own initiative, the agency relied on its
                            authority to “periodically determine the amount which should be paid” and
                            to collect “such information as the Secretary may request.” The statute
                            also authorizes the Secretary to prescribe “such regulations as may be
                            necessary to carry out the administration of the insurance programs . . . .”
                            We believe that the changes that HCFA initiated to the billing procedures
                            were within the authority provided to the agency in the statute.

Whether Less Burdensome     We could not determine whether HCFA could have made changes to its
                            Medicare Hospital Manual that would have been perceived as less
Regulatory Approach Was     burdensome to the hospitals while still meeting the requirements of the
Available                   underlying statutes. To do so we would have had to initiate a separate
                            review of each change for which HCFA had at least some rulemaking
                            discretion and determine whether the agency needed to make the change
                            and, if so, whether another approach would have been less burdensome.



                             Page 62                                             GAO/GGD-99-20 Regulatory Burden
                           Appendix III
                           Concerns for Which Agencies Appeared to Have Some Rulemaking Discretion




                          Those reviews would have required extensive time and resource
                          commitments that were beyond the scope of this review.

Statutory Purpose         The Social Security Act contains no specific statement of purpose.
                          However, 42 U.S.C. 1395c states that

                          “ [t]he insurance program for which entitlement is established by sections 426 and 426-1 of
                          this title provides basic protection against the costs of hospital, related post-hospital, home
                          health services, and hospice care in accordance with this part for (1) individuals who are
                          age 65 or over and are eligible for retirement benefits under subchapter II of this chapter,
                          (2) individuals under age 65 who have been entitled for not less than 24 months to benefits
                          under subchapter II of this chapter, and (3) certain individuals who did not meet the
                          conditions specified in either clause (1) or (2) but who are medically determined to have
                          end stage renal disease.”


Concern 3
Company Concern           Officials from the hospital said the annual Medicare cost report is
                          extremely difficult to prepare. They said the report’s information
                          requirements place a considerable recordkeeping burden on the hospital’s
                          health care providers. For example, they said each housekeeping
                          supervisor must spend 2 to 3 hours each month preparing the necessary
                          paperwork that will feed into this annual report, and some staff members
                          must devote all of their time to compiling the required information.

Agency Response           HCFA officials said section 1886(f)(1) of the Social Security Act requires
                          the Secretary of Health and Human Services to maintain a system of cost
                          reporting for prospective payment system hospitals. They also said that
                          under sections 1815(a) and 1861(v)(1)(A) of the act, providers of service
                          participating in the Medicare program must submit annual information to
                          achieve settlement of costs for health care services rendered to Medicare
                          beneficiaries.

Amount of Discretion      The issue that we focused on in this concern is HCFA’s assertion that the
                          Social Security Act requires the information in the annual Medicare cost
Permitted by Statute in   report.
Drafting Regulatory
Requirements              We believe that the Social Security Act gave HCFA some discretion in how
                          its regulations in this area could be drafted. The act contains several
                          provisions that require the Department of Health and Human Services or
                          HCFA to collect information from hospitals in order to determine the
                          amount of reimbursements that hospitals are due for patient care.
                          Therefore, the agency had no discretion in whether to require a system for
                          reporting cost information by hospitals. However, the Social Security Act



                           Page 63                                                    GAO/GGD-99-20 Regulatory Burden
                             Appendix III
                             Concerns for Which Agencies Appeared to Have Some Rulemaking Discretion




                            gave HCFA discretion in determining the specific information required in
                            the reports. For example, section 1815(a) of the act (codified at 42 U.S.C.
                            1395g) states that the Secretary “shall periodically determine the amount
                            which should be paid under this part to each provider of services with
                            respect to the services furnished by it . . . .” This section goes on to say
                            that “no such payments shall be made to any provider unless it has
                            furnished such information as the Secretary may request (emphasis added)
                            in order to determine the amounts due such provider….” Section 1861 of
                            the act (codified at 42 U.S.C. 1395x) states that “[t] he reasonable cost of
                            any services shall be the cost actually incurred . . . and shall be determined
                            in accordance with regulations establishing the method or methods to be
                            used, and the items to be included, in determining such costs . . . .” The
                            section goes on to delineate certain factors the Secretary must take into
                            account in prescribing the regulations, such as considering both direct and
                            indirect costs and using principles generally applied by national
                            organizations.

Whether Regulatory          We believe that HCFA’s regulatory provisions for cost reports (codified at
                            42 C.F.R. Parts 412 and 413) are within the authority granted by the Social
Provisions Are Within the   Security Act. According to 42 C.F.R. 412.52, “[a]ll hospitals participating in
Authority Granted by        the prospective payment systems must meet the recordkeeping and cost
Statute                     reporting requirements of [paragraph] 413.20 and [paragraph] 413.24 of this
                            chapter.” According to 42 C.F.R. 413.24(a), “[p]roviders receiving payment
                            on the basis of reimbursable cost must provide adequate cost data. This
                            must be based on their financial and statistical records which must be
                            capable of verification by qualified auditors.” Similarly, section 413.24(c)
                            states that “[a]dequate cost information must be obtained from the
                            provider’s records to support payments made for services furnished to
                            beneficiaries.” Other portions of 42 C.F.R. 413 delineate the periods
                            covered by the reports and the frequency with which they must be
                            submitted. All of these regulatory requirements appear to fall within the
                            rulemaking authority granted to HCFA by the Social Security Act.

Whether Less Burdensome     We could not determine whether HCFA could have developed cost
                            reporting requirements that would have been perceived as less
Regulatory Approach Was     burdensome to hospitals while still meeting the requirements of the Social
Available                   Security Act. To do so we would have had to initiate a separate review of
                            the Medicare cost reports and how HCFA uses the information that it
                            collects—a review that would have required extensive time and resource
                            commitments that were beyond the scope of this review.

Statutory Purpose           The Social Security Act does not contain a statement of purpose regarding
                            the cost reporting requirements. However, section 1811 of the act



                             Page 64                                             GAO/GGD-99-20 Regulatory Burden
                           Appendix III
                           Concerns for Which Agencies Appeared to Have Some Rulemaking Discretion




                          (codified at 42 U.S.C. 1395c) states that the purpose of the hospital
                          insurance program is to provide “basic protection against the costs of
                          hospital, related post-hospital, home health services, and hospice care . . .”
                          for covered individuals.


Concern 4
Company Concern           An official from Bank A said the regulation on the Availability of Funds
                          and Collection of Checks (Regulation CC) requires the development and
                          maintenance of expensive and time-consuming information on the current
                          availability of funds.

Agency Response           Officials at FRB said that Regulation CC implements the Expedited Funds
                          Availability Act (codified at 12 U.S.C. 4001-4010), which places limits on
                          the length of time depository institutions may place holds on deposits to
                          transaction accounts. To ensure compliance with the act and the
                          regulation, they said a depository institution must have the capacity to
                          assign and track the availability of each check it accepts for deposit. The
                          costs of developing and maintaining such a system likely vary with the
                          complexity of the depository institution’s availability policy. Because the
                          availability provisions of Regulation CC are required by the act, FRB
                          officials said that statutory amendments would be necessary in order to
                          relieve any of the burdens on depository institutions associated with those
                          provisions.

Amount of Discretion      The issue that we focused on in this concern is FRB’s assertion that the
                          Expedited Funds Availability Act limits the amount of time that banks can
Permitted by Statute in   hold deposits, thereby requiring banks to keep track of the availability of
Drafting Regulatory       funds they accept for deposit.
Requirements
                          We believe that the Expedited Funds Availability Act gave FRB some
                          discretion in how it could draft its regulations on funds availability.
                          According to 12 U.S.C. 4002, depository institutions must make funds from
                          different types of deposits available for withdrawal within specified
                          periods of time ranging from 1 day to several days. For example, 12 U.S.C.
                          4002(b)(2) says that funds must be available for withdrawal not more than
                          5 business days after the deposit of a check drawn on a nonlocal bank.
                          Therefore, FRB had no rulemaking discretion in establishing the maximum
                          lengths of time banks can hold funds before making them available to the
                          depositor. However, the statute gives the agency discretion to require
                          shorter holds on funds than the maximums established in the act as long as
                          that period of time is within the time in which a bank can reasonably
                          expect to learn of nonpayment on most items for each category of check.



                           Page 65                                             GAO/GGD-99-20 Regulatory Burden
                             Appendix III
                             Concerns for Which Agencies Appeared to Have Some Rulemaking Discretion




                            Although the act established varying maximum hold periods for different
                            types of deposits, there is no statutory (or regulatory) provision requiring
                            banks to develop and maintain a system for tracking the availability of
                            deposits. However, in practice, banks need to develop tracking systems to
                            enable themselves to comply with the act and the relevant regulation. FRB
                            officials said that the bank could avoid the need for such a system by
                            providing immediate availability for all deposits.

Whether Regulatory          We believe that Regulation CC’s requirements for expedited funds
                            availability are within the authority granted the agency by the Expedited
Provisions Are Within the   Funds Availability Act. Subsections 10, 12, and 13 of 12 C.F.R. 229 require
Authority Granted by        that funds be available for withdrawal not later than specified periods of
Statute                     time ranging from 1 to several days. The time periods established in the
                            regulations are consistent with the time periods in the statute for the
                            different types of deposits.

Whether Less Burdensome     As discussed earlier, FRB had some discretion to write regulations
                            requiring banks to hold deposits for less than the maximum time allowed
Regulatory Approach Was     in the statute. Therefore, FRB could have standardized the hold periods at
Available                   less than the maximum period. Standardizing the hold periods could have
                            been perceived as less burdensome to banks because it would have
                            eliminated the need for banks to have tracking systems for different
                            categories of deposits (e.g., deposits of local checks, government checks,
                            or out-of-state checks). FRB’s discretion, however, is limited in that FRB
                            can shorten a hold period only if banks would have a reasonable period of
                            time to learn of the return of checks subject to the shorter hold.
                            Standardization of hold periods across all categories of checks would
                            require that all hold periods be set to the minimum period established by
                            the act (1 day). In today’s check system, one day would not allow banks to
                            learn of the return of most dishonored checks. Therefore, FRB does not
                            appear to have the discretion to standardize the hold period for all
                            categories of checks. Even if the hold periods were standardized for only
                            some categories of checks, imposing shorter hold periods could also
                            increase a bank’s risk of fraud on those checks. Banks may not have
                            viewed such an approach as less burdensome. Ultimately, we could not
                            determine whether FRB could have developed less burdensome regulatory
                            approaches because to do so would have required extensive time and
                            resource commitments (e.g., surveying the banks on whether standardized
                            minimums would have been less burdensome) that were beyond the scope
                            of this review.

Statutory Purpose           The Expedited Funds Availability Act does not contain a statement of
                            purpose.



                             Page 66                                             GAO/GGD-99-20 Regulatory Burden
                           Appendix III
                           Concerns for Which Agencies Appeared to Have Some Rulemaking Discretion




Statutory
ConcernPurpose
          5
Company Concern           An official from Bank A said the Truth in Savings Act’s (Regulation DD)
                          requirements have not provided substantive benefits to either the bank or
                          its customers. The official also said that before the act was passed, the
                          bank provided savings account information to customers in several
                          different documents. However, under the act this information must be
                          consolidated into one document.

Agency Response           Officials at FRB said Congress enacted the Truth in Savings Act in 1991 to
                          enhance consumer shopping among deposit accounts. Its purpose is to
                          require all depository institutions to disclose information about the rates
                          paid and fees charged in a uniform manner. They said FRB’s Regulation
                          DD requires institutions to disclose terms in a uniform way but allows
                          flexibility in the format of the disclosures. For example, disclosures may
                          be provided in a single document or in several documents, and they may
                          be combined with other contractual provisions or disclosures required by
                          federal or state law.

Amount of Discretion      The issue we focused on in this concern is FRB’s assertion that the Truth
                          in Savings Act requires banks to provide disclosure statements to
Permitted by Statute in   customers in a uniform manner.
Drafting Regulatory
Requirements              We believe that the disclosure requirements in the Truth in Savings Act
                          (codified at 12 U.S.C 4301 et seq.) gave FRB some discretion regarding
                          how its regulations in this area could be drafted. Although the statute gave
                          the agency no discretion regarding much of the information that had to be
                          disclosed about customers’ savings accounts, we believe the agency had
                          some discretion with regard to certain types of information and the format
                          of the disclosures.

                          The Truth in Savings Act’s disclosure requirements were intended to allow
                          consumers to make meaningful comparisons between the competing
                          claims of depository institutions with regard to deposit accounts. The act
                          describes in great detail the specific elements that such institutions must
                          disclose to their customers. For example, 12 U.S.C. 4303(a) states that
                          each banking institution must maintain a schedule of fees, charges,
                          interest rates, and terms and conditions applicable to each class of
                          accounts offered by the institution. According to 12 U.S.C. 4303(b), the
                          schedule for any account must contain (1) a description of all fees,
                          periodic service charges, and penalties that may be charged or assessed
                          against the account, the amount of any fees, charges, or penalties and the
                          conditions under which any amount will be assessed; (2) all minimum



                           Page 67                                             GAO/GGD-99-20 Regulatory Burden
                             Appendix III
                             Concerns for Which Agencies Appeared to Have Some Rulemaking Discretion




                            balance requirements that affect fees, charges, and penalties, including a
                            clear description of how the minimum balance is calculated; and (3) any
                            minimum amount required with respect to the initial deposit in order to
                            open the account. Section 4303(c) states that the information on interest
                            rates in the schedules must include 10 specific items, including any annual
                            percentage yield and the effective period of the annual yield, the annual
                            rate of simple interest, the frequency with which interest will be
                            compounded and credited, a clear description of the method used to
                            determine the balance on which interest is paid, any minimum balance that
                            must be maintained to earn the rates and obtain the yields disclosed and
                            how such a minimum balance is calculated, and a description of any
                            minimum time requirements to obtain the yield advertised.

                            On the other hand, the Truth in Savings Act also gives FRB rulemaking
                            discretion in some areas, particularly with regard to certain types of
                            information and accounts and in the format of the required disclosures.
                            For example, 12 U.S.C. 4303(d) states that the schedule required under
                            subsection (a) “shall include such other disclosures as the Board may
                            determine to be necessary (emphasis added) to allow consumers to
                            understand and compare accounts . . . .” Section 4304 of title 12 permits
                            FRB to make such modifications “as may be necessary” in the disclosure
                            requirements relating to annual percentage yield for certain types of
                            accounts. Section 4303(e) states that the schedules required in section
                            4303(a) must be “presented in a format designed to allow consumers to
                            readily understand the terms of the accounts offered,” but it does not
                            specify the particular format that must be used. Section 4308 of title 12
                            requires FRB to issue regulations on the disclosure requirements and
                            requires the agency to publish model forms and clauses to facilitate
                            compliance. However, the section goes on to say that depository
                            institutions are not required to use any such model form or clause, and the
                            institutions must be considered in compliance with the disclosure
                            requirements if they use an alternative format that “does not affect the
                            substance, clarity, or meaningful sequence of the disclosure.”

Whether Regulatory          We believe that the disclosure provisions in Regulation DD (12 C.F.R. Part
                            230) are within the authority granted by the Truth in Savings Act. The
Provisions Are Within the   regulation’s requirements regarding the content of account disclosures
Authority Granted by        mirror, in many respects, the requirements in the statute. For example, 12
Statute                     C.F.R. 230.4(b) states that account disclosures must (as applicable)
                            include certain elements, including rate information (e.g., the annual
                            percentage yield and the interest rate); balance information (e.g., minimum
                            balance requirements); and the amount of any fees. All of these elements
                            were required in the statute. Although Regulation DD also requires other



                             Page 68                                             GAO/GGD-99-20 Regulatory Burden
                           Appendix III
                           Concerns for Which Agencies Appeared to Have Some Rulemaking Discretion




                          disclosures that are not expressly listed in the statute (e.g., any limitations
                          on the number or dollar amount of withdrawals or deposits), these
                          requirements appear to fall within FRB’s authority in 12 U.S.C. 4303(d) to
                          require such disclosures in the regulations “as the Board may determine to
                          be necessary.”

                          Regulation DD also states (12 C.F.R. 230.3) that depository institutions
                          must make the required disclosures “clearly and conspicuously in writing
                          and in a form the consumer may keep.” It also says that disclosures for
                          each account “may be presented separately or combined with disclosures
                          for the institution’s other accounts . . . .” Appendix B to Part 230 states
                          that institutions may modify model disclosure clauses “as long as they do
                          not delete required information or rearrange the format in a way that
                          affects the substance or clarity of the disclosures.” Because the regulation
                          gives discretion to depository institutions and mirrors the statute’s
                          requirements in this area, we believe the regulation is within the authority
                          granted by the statute.

Whether Less Burdensome   With regard to the elements that the Truth in Savings Act required
                          institutions to disclose, we do not believe that FRB could have developed
Regulatory Approach Was   regulations that would have been less burdensome to financial institutions.
Available                 For example, the act specifically required the disclosure of information on
                          annual yields and interest rates, so Regulation DD had to contain those
                          elements. However, we could not determine whether FRB could have
                          refrained from requiring other information that is not expressly listed in
                          the statute. To do so would have required us to determine if the
                          information was, in fact, necessary to allow consumers to understand and
                          compare accounts. Making that determination would have required an
                          extensive analysis of consumer understanding and behavior that was
                          beyond the scope of this review.

                          With regard to the format of the disclosures, we believe that FRB could not
                          have chosen a less burdensome approach than the one taken in Regulation
                          DD. The agency did not require that banks disclose the information in a
                          single document, and (as the statute required them to do) it allowed
                          financial institutions to vary from the model clauses and sample forms as
                          long as those variances did not affect the substance of the disclosures.

Statutory Purpose         According to 12 U.S.C. 4301(b), the purpose of the Truth in Savings Act is
                          “to require the clear and uniform disclosure of (1) the rates of interest that
                          are payable on deposit accounts by depository institutions; and (2) the fees
                          that are assessable against deposit accounts, so that consumers can make




                           Page 69                                             GAO/GGD-99-20 Regulatory Burden
                           Appendix III
                           Concerns for Which Agencies Appeared to Have Some Rulemaking Discretion




                          a meaningful comparison between the competing claims of depository
                          institutions with regard to deposit accounts.”


Concern 6
Company Concern           A Bank C official said that Regulation DD requires that every fee charged
                          to a customer's account must be separately described on the customer's
                          statement.

Agency Response           Officials at FRB said that the Truth in Savings Act requires institutions that
                          provide periodic statements to consumers to disclose the annual
                          percentage yield earned, any fees imposed, and certain other information
                          on the statements. In adopting the final version of Regulation DD, the
                          officials said that the Board considered concerns raised by commenters on
                          the proposed regulation and implemented several changes to help
                          minimize costs, particularly those associated with periodic statements.
                          For example, information sent in connection with time accounts and
                          passbook savings accounts is exempt from the periodic statement rules.

Amount of Discretion      The issue that we focused on in this concern is FRB’s assertion that the
                          Truth in Savings Act establishes the disclosures that must be made to
Permitted by Statute in   customers on their statements. We believe that the Truth in Savings Act
Drafting Regulatory       gave FRB some discretion in how these regulatory provisions could be
Requirements              drafted. According to 12 U.S.C. 4307, each depository institution must
                          include on or with each periodic statement to each account holder a “clear
                          and conspicuous disclosure” of the following information for each
                          account: (1) the annual percentage yield earned, (2) the amount of interest
                          earned, (3) the amount of any fees or charges imposed, and (4) the number
                          of days in the reporting period. Only separate description of fees on
                          customers’ accounts with periodic statements would appear to meet the
                          statutory requirement that institutions include a “clear and conspicuous”
                          disclosure of “any fee” imposed. However, 12 U.S.C. 4308(a)(3) states that
                          FRB’s regulations

                          “may contain such classifications, differentiations, or other provisions, and may provide for
                          such adjustments and exceptions for any class of accounts as, in the judgement of the
                          Board, are necessary or proper to carry out the purposes of this chapter, to prevent
                          circumvention or evasion of the requirements of this chapter, or to facilitate compliance
                          with the requirements of this chapter.”

                          Therefore, the statute allowed FRB to write regulations excluding certain
                          types of accounts from the fee disclosure requirements if the Board
                          believed such exclusions were “necessary or proper.”




                           Page 70                                                  GAO/GGD-99-20 Regulatory Burden
                             Appendix III
                             Concerns for Which Agencies Appeared to Have Some Rulemaking Discretion




Whether Regulatory          We believe that this provision of Regulation DD is within the authority
                            granted by the Truth in Savings Act because its requirements either mirror
Provisions Are Within the   those in the act or are within the rulemaking discretion provided to the
Authority Granted by the    agency by the act. According to 12 C.F.R. 230.6, the periodic statement to
Statute                     consumers must include the annual percentage yield earned, the amount of
                            interest, any fees imposed, and the length of the statement period. When
                            FRB promulgated the final rule in September 1992, the agency said it had
                            exercised its exception authority in the act to exclude specific types of
                            accounts (i.e., time accounts and passbook savings accounts) from the
                            periodic statement requirements of the final rule. FRB said it believed
                            exempting these accounts from the disclosure requirements was
                            appropriate because it would encourage institutions to continue providing
                            certain information to customers.

Whether Less Burdensome     We could not determine whether FRB could have developed a less
                            burdensome regulatory approach that would have satisfied the
Regulatory Approach Was     requirements of the Truth in Savings Act. To do so we would need to
Available                   know whether it was “necessary or proper” for FRB to exclude other types
                            of accounts from the periodic statement requirements. Making that
                            determination would have required extensive time and resource
                            commitments that were beyond the scope of this review.

Statutory Purpose           According to 12 U.S.C. 4301(b), the purpose of the Truth in Savings Act is
                            “to require the clear and uniform disclosure of (1) the rates of interest
                            which are payable on deposit accounts by depository institutions; and (2)
                            the fees that are assessable against deposit accounts, so that consumers
                            can make a meaningful comparison between the competing claims of
                            depository institutions with regard to deposit accounts.”


Concern 7
Company Concern             Bank A officials said bank regulators should require only reports that the
                            regulators will use. They said it is very frustrating to spend the time and
                            resources needed to complete required reports and not know if the
                            regulators actually use them.

Agency Response             Officials from FDIC said that some bank reporting requirements are
                            specifically mandated by statute. However, they also recognized that some
                            of these requirements might be unduly burdensome for banks compared to
                            the value of the information to FDIC as it seeks to discharge its
                            responsibilities as an insurer and bank supervisor. In such situations, the
                            officials said that FDIC makes recommendations for legislative changes to




                             Page 71                                             GAO/GGD-99-20 Regulatory Burden
                           Appendix III
                           Concerns for Which Agencies Appeared to Have Some Rulemaking Discretion




                          eliminate burdensome reporting requirements. They also said banks are
                          urged to express their opinions on specific reports they consider unused.

Amount of Discretion      The issue that we focused on in this concern is FDIC’s assertion that some
                          bank reporting requirements are specifically required by statute. We did
Permitted by Statute in   not examine whether the reports are actually used by bank regulators.
                                                                                                 3

Drafting Regulatory
Requirements              We believe that FDIC had some discretion in developing regulations
                          governing bank reporting requirements. Some of the relevant statutes did
                          not give FDIC rulemaking discretion, but other statutes gave the agency at
                          least some discretion to impose reporting requirements.

                          FDIC officials said that as of March 31, 1998, the agency had 58 active
                          “information collections” that had been approved by the Office of
                                                                                                  4
                          Management and Budget (OMB) under the Paperwork Reduction Act. Of
                          these, the officials said that 54 were statutorily mandated. We reviewed
                          the statutory provisions underlying many of the 54 information collections
                          and concluded that some of those provisions gave FDIC no discretion in
                                                    5
                          drafting its regulations. For example, 12 U.S.C. 1972(2)(G)(i) requires
                          certain bank executive officers and principal shareholders to submit a
                          written report to the board of directors for any year during which they
                          have an outstanding extension of credit. The statute describes in detail the
                          information required in this report. Therefore, FDIC had no discretion in
                          drafting its regulations regarding whether the report was required, what
                          information the report must contain, or the timing of the report. However,
                          other statutory provisions gave FDIC considerable discretion in
                          establishing reporting requirements. For example, 12 U.S.C. 1817(i)
                          requires insurance of trust funds, and it permits FDIC’s Board of Directors
                          to “prescribe such regulations as may be necessary (emphasis added) to
                          clarify the insurance coverage under this subsection and to prescribe the
                          manner of reporting and depositing such trust funds.”


                          3
                            In our December 1996 report (GAO/GGD-97-26R), two other banking agencies responded to this
                          concern about the usefulness of bank reports. Officials from FRB said there was an interagency effort
                          to review the content of reports to determine the ongoing need for the data. Similarly, officials at the
                          Office of the Comptroller of the Currency said they were taking steps to eliminate duplicative or
                          unhelpful reports, if the required reports were not used.
                          4
                            Under the Paperwork Reduction Act, agencies must obtain OMB approval before collecting or
                          sponsoring the collection of information from nonfederal entities. FDIC officials said that they could
                          not determine what information collection requirements were in place at the time that we did our
                          earlier review in 1995.
                          5
                            We did not review the statutory provisions underlying all 54 of the collections because of time and
                          resource constraints and because doing so would not have altered our conclusion that FDIC had some
                          rulemaking discretion.




                           Page 72                                                          GAO/GGD-99-20 Regulatory Burden
                             Appendix III
                             Concerns for Which Agencies Appeared to Have Some Rulemaking Discretion




Whether Regulatory          We reviewed the relevant regulatory provisions for many of the
                            information collections that FDIC said were statutorily mandated and
Provisions Are Within the   concluded that of those we reviewed, the regulatory provisions were
Authority Granted by        within the authority granted by the statutes. In those cases in which the
Statute                     underlying statutes gave the agency discretion to develop regulations, any
                            regulations in this area that the agency developed would be within the
                            authority granted by the statute. For example, in the above illustration in
                            which the statute gave FDIC the authority to prescribe the manner of
                            reporting on trust funds, any regulations specifying the reporting
                            requirements would be within the authority of the statute. In those cases
                            that we reviewed in which the underlying statute gave the agency no
                            discretion, the regulatory language closely mirrored the language in the
                            corresponding statute or specifically referenced the statutory
                            requirements. For example, in the above illustration concerning reports
                            from banks’ executive officers and principal shareholders, the language in
                            FDIC’s regulations is essentially the same as the language in 12 U.S.C.
                            1972(2)(G)(i).

Whether Less Burdensome     We could not determine whether FDIC could have eliminated or developed
                            less burdensome regulatory approaches without doing an in-depth analysis
Regulatory Approach Was     of each of the agency’s nonstatutory reporting requirements and how FDIC
Available                   uses the information collected. Such an analysis would have required
                            extensive time and resource commitments that were beyond the scope of
                            this assignment.

Statutory Purpose           The statutes underlying the 54 information collections that FDIC said were
                            statutorily mandated often did not contain statements of purpose.


Concern 8
Company Concern             A Bank C official said that the Real Estate Settlement Procedures Act
                            (RESPA or Regulation X), which is administered by HUD, requires
                            extensive disclosure documents that are not easily understood by
                            customers or relevant to their concerns. For example, the bank official
                            said the loan package for a no-fee, no-point home equity loan contains
                            about 10 pages of federally required paperwork, only 2 pages of which
                            (dealing with the settlement statement of the loan) directly affect and are
                            of interest to the customer. The official said the other eight pages consist
                            of forms that are of little concern to the customer, such as the Servicing
                            Disclosure Statement and the Controlled Business Arrangement
                            Disclosure.




                             Page 73                                             GAO/GGD-99-20 Regulatory Burden
                           Appendix III
                           Concerns for Which Agencies Appeared to Have Some Rulemaking Discretion




Agency Response           HUD officials said that Congress established the RESPA disclosure
                          requirements (12 U.S.C. 2601 et seq.) to which the bank official referred.
                          They said those requirements consist of a Good Faith Estimate of
                          Settlement Costs; an information booklet delivered to all home purchasers;
                          and, in the case of first lien loans, a disclosure of the lender’s mortgage
                          servicing practices. In the event the lender is referring the borrower to
                          one or more of its affiliated companies to provide settlement services, they
                          said RESPA requires disclosure of their relationship and that the borrower
                          has the option to choose other providers (except for appraisers, credit
                          reporting agencies, and lender’s counsel). At settlement, they said the
                          statute requires the settlement agent to provide the borrower with a
                          standardized accounting of the transaction, familiarly known as the HUD-1
                          or HUD-1A.

Amount of Discretion      The issue that we focused on in this concern is HUD’s assertion that
                          RESPA establishes the disclosure requirements that the bank official found
Permitted by Statute in   burdensome.
Drafting Regulatory
Requirements              We believe that RESPA gave HUD some discretion in drafting regulations
                          regarding the disclosure requirements at issue in this concern. The
                          documents that lenders are required to disclose and many of the specific
                          elements in those documents are explicitly required in the statute. For
                          example, 12 U.S.C. 2605 says that the lender of a federally related
                          mortgage loan must disclose to the applicant whether the servicing of the
                          loan may be assigned, sold, or transferred to any other person at any time
                          while the loan is outstanding. Also, 12 U.S.C. 2603(a) states that HUD
                          must develop and prescribe a standard real estate settlement form (with
                          regional variations, as necessary) for use in all transactions in the United
                          States that involve federally related mortgaged loans. The statute also says
                          that the form must clearly itemize all charges imposed upon the borrower
                          and the seller in connection with the settlement; and it must indicate
                          whether any title insurance premium included in such charges covers or
                          insures the lender’s, borrower’s, or both parties’ interest in the property.

                          Another provision of RESPA (12 U.S.C. 2604) requires HUD to prepare and
                          distribute informational booklets and also requires lenders to provide a
                          copy of the booklet to each person from whom they receive, or for whom
                          they prepare, a written application to finance a mortgage for a residential
                          property. The statute says that the booklet must be delivered or placed in
                          the mail not later than 3 business days after the lender receives the
                          application. Therefore, HUD had no discretion with regard to these
                          requirements.




                           Page 74                                             GAO/GGD-99-20 Regulatory Burden
                             Appendix III
                             Concerns for Which Agencies Appeared to Have Some Rulemaking Discretion




                            However, other parts of RESPA gave HUD discretion in how it could write
                            its regulations. For example, 12 U.S.C. 2604 says that the above-mentioned
                            informational booklets “shall be in such form and detail as the Secretary
                            may prescribe . . . .” Therefore, HUD had considerable discretion
                            regarding the format in which the information had to be presented and had
                            the authority to require additional information in the booklet beyond what
                            was stipulated in the statute.

Whether Regulatory          We believe that the HUD regulatory provisions related to the above-
                            mentioned RESPA disclosure requirements are within the authority
Provisions Are Within the   granted to the agency by the statute. Several of these regulatory
Authority Granted by        provisions paraphrase the wording in the associated statutory
Statute                     requirements. For example, the language in 24 C.F.R. 3500.6(a) and (1)
                            mirrors the language in RESPA regarding the lender’s responsibility to
                            provide the information booklet and when the booklet must be provided.
                            Also, 24 C.F.R. 3500.7(a) mirrors the language in the statute regarding the
                            lender’s responsibility to provide good faith estimates. Other regulatory
                            provisions do not mirror the statutory language but appear to be
                            substantively the same as the statutory provisions. For example, 24 C.F.R.
                            3500.21(b)(1) says that lenders must disclose to each person who applies
                            for a loan whether the servicing of the loan may be assigned, sold, or
                            transferred to any other person at any time while the loan is outstanding.
                            Section 3500.8(a) of the regulation says that unless specifically exempted,
                            the HUD-1 or HUD-1A settlement statement must be used in every
                            settlement involving federally related mortgage loans in which there is a
                            borrower. Section 3500.15(b) states that affiliated business arrangements
                            are not violations of 12 U.S.C. 2607 as long as certain conditions are met.
                            The conditions set out in the regulation are substantively the same as
                            those in 12 U.S.C. 2607(c); affiliated business arrangements or agreements
                            are not prohibited as long as (A) the person making the referral has
                            provided a written disclosure on the existence of such an arrangement to
                            the person referred, (B) such person is not required to use any particular
                            provider of settlement services, and (C) the only thing of value that is
                            received from the arrangement (other than payments, such as fees or
                            salaries) is a return on the ownership interest or franchise relationship.

Whether Less Burdensome     We could not determine whether HUD could have developed less
                            burdensome disclosure requirements while still meeting the underlying
Regulatory Approach Was     requirements of RESPA. To make that determination we would have had
Available                   to conduct a detailed examination of HUD’s disclosure requirements that
                            were not statutorily mandated and determine whether HUD could have
                            eliminated them or used an alternative approach that regulated entities
                            would have perceived as less burdensome. Such an examination of each



                             Page 75                                             GAO/GGD-99-20 Regulatory Burden
                     Appendix III
                     Concerns for Which Agencies Appeared to Have Some Rulemaking Discretion




                    nonstatutory requirement would have demanded extensive time and
                    resource commitments that were beyond the scope of this assignment.

Statutory Purpose   According to 12 U.S.C. 2601, the purpose of RESPA is to (1) simplify and
                    improve the disclosures applicable to the transactions under these acts
                    including the timing of the disclosures; and (2) provide a single format for
                    the disclosures that will satisfy the requirements of each of the acts with
                    respect to the transactions.


Concern 9
Company Concern     An official from Bank A said that FDIC requires banks to complete call
                    reports, a quarterly statistical summary of bank operations, that are very
                    detailed (28 pages for the bank) and require a significant amount of time
                    for bank employees to complete. She said one employee spends 1 week
                    during each quarter preparing the report.

Agency Response     FDIC officials said that Section 7(a) of the Federal Deposit Insurance Act
                    requires each FDIC-insured depository institution to submit quarterly
                    “reports of condition,” also known as “call reports,” to the appropriate
                    federal banking agency. The officials said that bank call reports generally
                    consist of a balance sheet; an income statement; a statement of changes in
                    equity capital; and supporting schedules that provide additional
                    information on specific categories of assets and liabilities, off-balance
                    sheet items, past due and nonaccrual assets, loan charge-offs and
                    recoveries, and risk-based capital. FDIC officials said that the call report
                    also includes the information used by FDIC to calculate each institution’s
                    premiums for deposit insurance. An individual bank files one of four
                    versions of the call report, depending upon whether it has foreign offices
                    and on its size in total assets. The officials said the call report for banks
                    with foreign offices is the most detailed, and the report for small banks is
                    the least detailed.

                    Officials from OCC and FRB also commented on this concern. They said
                    that 12 U.S.C. 161(a) and 12 U.S.C. 324 require all banks to file call reports.
                    They said call reports provide financial information for public disclosure,
                    and regulators use them to evaluate the safety and soundness of the
                    banking system. The officials said the reports enable them to make a
                    proper assessment of a bank’s condition and are a critical element of the
                    supervisory process.




                     Page 76                                             GAO/GGD-99-20 Regulatory Burden
                             Appendix III
                             Concerns for Which Agencies Appeared to Have Some Rulemaking Discretion




Amount of Discretion        The issue that we focused on in this concern is the agencies’ assertion that
                            the call reports at issue in the concern are statutorily required.
Permitted by Statute in
Drafting Regulatory         We believe that the various statutes that require or authorize the banking
Requirements                agencies to collect information through the call reports gave the agencies
                            some discretion in drafting the relevant regulatory provisions. Some of the
                            provisions in the relevant statutes, such as in the Federal Deposit
                            Insurance Act and the Federal Deposit Insurance Corporation
                            Improvement Act of 1991, are very specific and therefore gave the banking
                            agencies no discretion in how the regulatory provisions could be drafted.
                            For example, 12 U.S.C. 1817(a) requires each institution to submit reports
                            of conditions four times each year, stipulates that the reports include the
                            total amount of the institution’s liability for deposits, and specifies that
                            time and savings deposits and demand deposits be listed separately.

                            Other provisions in the statutes gave the banking agencies at least some
                            rulemaking discretion. For example, 12 U.S.C. 1817(a) requires financial
                            institutions to submit call reports four times each year and specifies that
                            two of those reports must be submitted between January and June and
                            two between July and December. However, the statute allows the banking
                            agencies to determine exactly when these reports must be filed. Also, 12
                            U.S.C. 161(a) says that financial institutions must file call reports with
                            OCC in accordance with the Federal Deposit Insurance Act (codified at 12
                            U.S.C. 1811 et seq.). That act (12 U.S.C. 1817(a)(1)), in turn, says that
                            certain banks (e.g., insured state nonmember banks) must submit those
                            reports in such form and containing such information as FDIC may
                            require. Therefore, although the relevant statutes require call reports to
                            include some specific types of information, the statutes also give agencies
                            the flexibility to require other information that they deem necessary and to
                            specify the format of the reports.

Whether Regulatory          We believe that the regulatory provisions implementing these statutory
                            requirements (codified at 12 C.F.R. 304.4(a)) are within the authority
Provisions Are Within the   granted by the relevant statutes. The regulation (1) requires that the call
Authority Granted by        reports be prepared in accordance with instructions from the Federal
Statute                     Financial Institutions Examination Council; (2) lists a number of items that
                            must be reported in, or taken into account during the preparation of, the
                            call reports; and (3) requires that the reports be submitted on March 31,
                            June 30, September 30, and December 31 of each year. These provisions
                            are consistent with specific requirements in the statute (e.g., that the
                            reports be submitted four times each year) or fall within the general
                            rulemaking authority granted by the statutes.




                             Page 77                                             GAO/GGD-99-20 Regulatory Burden
                           Appendix III
                           Concerns for Which Agencies Appeared to Have Some Rulemaking Discretion




Whether Less Burdensome   We could not determine whether FDIC, OCC, and FRB could have
                          developed less burdensome call report requirements while still meeting the
Regulatory Approach Was   requirements of the relevant statutes. In order to make such a
Available                 determination, we would need to do a detailed review of each of the
                          nonstatutory data elements of the call reports. This type of detailed
                          analysis would require significant time and resource commitments that
                          were beyond the scope of this review.

Statutory Purpose         The Federal Deposit Insurance Act and the Federal Deposit Insurance
                          Corporation Improvement Act of 1991 do not contain statements of
                          purpose.


Concern 10
Company Concern           An official from Bank A said that the information requirements for the call
                          report keep changing, which she said makes it difficult for the bank to plan
                          ahead.

Agency Response           Officials from OCC, FDIC, and FRB said the events that make call report
                          changes necessary include changes in statutes, regulations, accounting
                          rules, technology, and the nature of the business of banking. They said
                          existing items are deleted when they are no longer considered sufficiently
                          useful.

Amount of Discretion      The issue that we focused on in this concern is the agencies’ assertion that
                          changes in the call report requirements are, at times, required by changes
Permitted by Statute in   in statutes.
Drafting Regulatory
Requirements              We believe that the relevant statutes gave OCC, FDIC, and FRB some
                          discretion in how frequently they have made changes to the regulations
                          requiring information in the call reports. In general, the banking agencies
                          are required to review and make changes to the information required in the
                          call reports that they believe are necessary. According to 12 U.S.C.
                          4805(c), each federal banking agency must review the information required
                          by the schedules supplementing the core information on the call reports
                          and “eliminate requirements that are not warranted for reasons of safety
                          and soundness or other public purposes.”

                          However, to determine the extent to which specific changes to the
                          reporting requirements were driven by statutory changes, we reviewed the
                          annual Revisions to the Reports of Condition and Income for 1993, 1994,
                          and 1995—the 3-year period immediately prior to our 1996 study. During
                          that period, the agencies added, deleted, or modified a total of 280 items



                           Page 78                                             GAO/GGD-99-20 Regulatory Burden
                           Appendix III
                           Concerns for Which Agencies Appeared to Have Some Rulemaking Discretion




                          from the call report requirements. Of these 280 changes, OCC officials
                          said that 44 (16 percent) were driven by statutory requirements in the
                          Federal Deposit Insurance Corporation Improvement Act of 1991
                          (FDICIA). We reviewed the statutory provisions in FDICIA that OCC
                          officials said mandated the 44 changes to the call report requirements to
                          determine how much discretion the statute permitted the banking agencies
                          to make those changes. We concluded that the agencies had some
                          discretion in what they could require with regard to 37 of the 44 changes.
                          The statute often required agencies to collect general types of information,
                          but left to the agencies’ discretion the specific information that banks were
                          required to submit and/or whether the information had to be in the call
                          reports. For example, 1 of the changes that OCC officials said resulted in
                          the addition of 30 items to the call reports in 1993 involved the collection
                          of information on loans to small businesses and small farms. Section 122
                          of FDICIA states that the agency must annually collect information on
                          small business and small farm lending in the call reports and provides
                          suggestions of the type of information that may be collected. Therefore,
                          the statute gave the banking agencies no discretion about collecting this
                          information and specifically required that the call reports serve as the
                          reporting mechanism. However, the statute gave the agencies discretion
                          regarding the specific information that banks had to report. In the
                          remaining 7 of the 44 changes, we believe the banking agencies had no
                          discretion with regard to changing the call report requirements. For
                          example, in one of the seven changes, the statute required the agencies to
                          collect information on all assets and liabilities in all banking reports.
                          Therefore, the information had to be collected and had to be in all banking
                          reports, including the call reports.

Whether Regulatory        We believe the banking agencies’ actions to change the call reports’
                          requirements were within the authority granted by the statutes. All of the
Provisions Are Within     changes that the agencies made to the call report requirements appeared
Authority Granted by      to be either specifically required by FDICIA or were within the discretion
Statute                   that the statutes gave the agencies to make such changes.

Whether Less Burdensome   We could not determine whether FDIC, OCC, or FRB could have avoided
                          making changes to the call report requirements while still meeting the
Regulatory Approach Was   requirements of the underlying statutes. In order to make such a
Available                 determination, we would need to do a detailed review of each change to
                          the call reports that was not specifically required by statute. This type of
                          detailed analysis would require significant time and resource commitments
                          that were beyond the scope of this review.




                           Page 79                                             GAO/GGD-99-20 Regulatory Burden
                              Appendix III
                              Concerns for Which Agencies Appeared to Have Some Rulemaking Discretion




Statutory Purpose         FDICIA does not contain a statement of purpose.


Concern 11
Company Concern           The officials from Bank A and the glass company raised concerns about
                          staying current with and understanding the changing and increasingly
                          complex regulatory requirements related to ERISA.

Agency Response           IRS officials said the companies’ concerns fail to distinguish between the
                          complexity of and burden that results from the statutes governing
                          retirement plans and the effect of regulations promulgated by IRS and the
                          Department of the Treasury. The officials said the relevant statutes have
                          been amended frequently since ERISA was enacted, and have become
                          increasingly complex. They said the companies’ concerns about the
                          complexity of the statutes governing retirement plans are properly
                          addressed to Congress, not IRS or other administrative agencies.

Amount of Discretion      The issue that we focused on in this concern is IRS’ assertion that the
                          complexity and frequent changes in ERISA regulations are traceable to
Permitted by Statute in   changes in the statute.
Drafting Regulatory
Requirements              We believe that IRS had some discretion with regard to how ERISA
                          regulations could be drafted and how frequently those regulatory
                          requirements could be changed. To determine the extent to which specific
                          changes to ERISA regulatory requirements were driven by statutory
                          changes, we asked IRS to identify all of the changes it had made in the
                          relevant regulations between January 1994 and December 1995—the 2-year
                                                                                     6
                          period prior to the issuance of our December 1996 report. IRS officials
                          identified 37 such regulatory changes, 24 of which were based on
                          amendments made to ERISA by 4 different statutes. For example, the Tax
                          Reform Act of 1986 amended ERISA provisions (codified at 26 U.S.C.
                          414(r)) relating to pension plans of employers operating separate lines of
                          business. Subparagraph (2) of 26 U.S.C. 414(r) states that an employer
                          should be treated as operating separate lines of business if, among other
                          things, it meets “guidelines prescribed by the Secretary or the employer
                          receives a determination from the Secretary that such line of business may
                          be treated as separate.” Therefore, we believe that IRS had discretion in
                          how it drafted regulations implementing these amendments. IRS made 15
                          changes to regulatory provisions in 26 C.F.R. 1.410 and 1.414 to interpret
                          the separate line of business provisions.

                          6
                           We focused on published changes to the CFR, not revenue rulings or notices that also affect
                          companies’ ERISA responsibilities.




                              Page 80                                                     GAO/GGD-99-20 Regulatory Burden
                             Appendix III
                             Concerns for Which Agencies Appeared to Have Some Rulemaking Discretion




                            Also, statutory provisions in the Omnibus Budget Reconciliation Act of
                            1993 changed the compensation limit of an employee in a qualified trust
                            and amended the formula for increasing the cost-of-living adjustment. The
                            provision (codified at 26 U.S.C. 401(a)(17)) imposed a $150,000 limit on the
                            amount of annual compensation of each employee in a qualified trust. It
                            also required the Secretary of the Treasury to annually adjust the $150,000
                            limit for increases in the cost-of-living at the same time and in the same
                            manner as adjustments are made pursuant to another subsection.
                            However, the provision stipulated that a different base period be used and
                            that any increase that is not a multiple of $10,000 must be rounded to the
                            next lowest multiple of $10,000. We concluded that IRS had no discretion
                            in how it drafted its implementing regulations for these provisions. IRS
                            drafted a regulatory provision that reflects the statutorily prescribed
                            adjustment process and the statutory change in the $150,000 limit.

Whether Regulatory          We believe that IRS’ ERISA regulations are within the authority granted by
                            statute. The regulations did not appear to exceed the amount of
Provisions Are Within the   rulemaking authority provided by the statutes. In each instance in which
Authority Granted by        the relevant statutory provision gave IRS latitude in how its regulation
Statute                     could be written, the regulations appeared substantively consistent with
                            the statutory intent and within the agency’s authority. In each instance in
                            which the relevant statutory provision gave IRS no discretion in how its
                            regulations could be changed, the regulations mirrored the statutory
                            provisions. For example, the IRS regulation on the ERISA annual
                            compensation limit (26 C.F.R. 1.401(a)(17)-1) states that the annual
                            compensation limit is $150,000 and that the limit is adjusted for changes in
                            the cost of living at the same time and in the same manner as in another
                            subsection. The regulation also mirrors the statutory requirements
                            regarding the base period to be used to calculate the annual adjustments
                            and the rounding of adjustments to the nearest $10,000.

Whether Less Burdensome     We could not determine whether IRS could have developed less
                            burdensome regulations that would have met the requirements of the
Regulatory Approach Was     underlying statutes. To do so we would have had to initiate a separate
Available                   analysis of each provision for which IRS had rulemaking discretion—
                            analyses that would have required extensive time and resource
                            commitments that were beyond the scope of this assignment.

Statutory Purpose           Many of the statutes amending ERISA did not contain a statement of
                            purpose.




                             Page 81                                             GAO/GGD-99-20 Regulatory Burden
                               Appendix III
                               Concerns for Which Agencies Appeared to Have Some Rulemaking Discretion




Concern 12
Company Concern               Officials from the fish farm said that pesticide manufacturers were either
                              not renewing the aquatic use of certain pesticides or were not seeking EPA
                              approval of the products for use in aquaculture because of the expense
                              associated with EPA’s reregistration program.

Agency Response               EPA officials said that the Federal Insecticide, Fungicide, and Rodenticide
                              Act (FIFRA) (codified at 7 U.S.C. 136 et seq.) requires EPA to determine
                              that the use of pesticides does not cause unreasonable adverse effects on
                              humans or the environment. In 1988, Congress required (FIFRA section 4,
                              7 U.S.C. 136a-1) EPA to certify that all pesticides meet current testing
                              standards for safety, including products that were first approved many
                              years ago. These older pesticides were originally approved when the data
                              requirements were less stringent and the associated costs of testing for
                              safety were substantially less than they are today. Since much of the data
                              on older pesticides may not meet current standards, the cost of conducting
                              studies to support approval for use today may be substantial.

Amount of Discretion          The issue that we focused on in this concern is EPA’s assertion that the
                              cost associated with the requirement that pesticide manufacturers
Permitted in the Statute in   reregister pesticides is traceable to FIFRA. Although the requirement in
Drafting Regulatory           question has a direct effect only on manufacturers of covered pesticides,
Requirements                  the fish farm is affected secondarily by the decision of manufacturers to
                              not seek reregistration of the pesticides because of the cost of
                              reregistration.

                              We believe that FIFRA gave EPA some discretion regarding the
                              requirements that manufacturers must satisfy in the pesticide
                              reregistration process. In some areas, EPA appears to have had little
                              discretion. For example, 7 U.S.C. 136a-1 states that the Administrator of
                              EPA must reregister “each registered pesticide containing any active
                              ingredient contained in any pesticide first registered before November 1,
                              1984.” This section describes in some detail the approach EPA is to use in
                              the reregistration process. For example, the statute requires the
                              reregistration to be carried out in five separate phases and requires those
                              seeking reregistration of a covered pesticide to submit a summary of each
                              study the registrant considers adequate to meet the requirements of the
                              statute, as well as the data underlying each such study. However, the
                              statute gives the Administrator discretion regarding the specific data that
                              manufacturers must submit. The statute (7 U.S.C. 136a-1(d)(3)) requires
                              each registrant to submit all data required by regulations “issued by the
                              Administrator under section 136a of this title . . . .” Section 136a requires



                               Page 82                                             GAO/GGD-99-20 Regulatory Burden
                             Appendix III
                             Concerns for Which Agencies Appeared to Have Some Rulemaking Discretion




                            the Administrator to publish guidelines specifying the kinds of information
                            that will be required to support the registration of a pesticide. Although
                            the statute provides general standards that the Administrator must
                            consider when establishing data requirements for “minor uses” (e.g.,
                            considering “the impact of the cost of meeting the requirements on the
                            incentives for any potential registrant to undertake the development of the
                            required data”), the Administrator appears to have considerable discretion
                            in establishing registration (and therefore reregistration) data
                            requirements. These requirements can have a direct impact on the
                            expense incurred by manufacturers in the reregistration process.

Whether Regulatory          An EPA official said there are no EPA regulations requiring reregistration
                            of pesticides first registered before November 1, 1984. He said that the
Provisions Are Within the   statute was so specific in delineating this requirement that they did not
Authority Granted by the    believe it was necessary to draft regulations that would mirror the
Statute                     statutory language. However, 40 C.F.R. Part 152 delineates the regulatory
                            requirements for registration of pesticides under section 3 of FIFRA,
                            including the data requirements that are referenced in the reregistration
                                                                      7
                            requirements of section 4 of the statute. Because FIFRA gave the EPA
                            Administrator considerable discretion in establishing those data
                            requirements, we concluded that the data requirements in the regulation
                            pertinent to the reregistration process are within the authority granted by
                            the statute.

Whether Less Burdensome     We could not determine whether EPA could have developed less
                            burdensome data requirements that would have accomplished the
Regulatory Approach Was     underlying requirements of FIFRA. To do so, we would have had to
Available                   examine each data requirement and determine whether the information
                            was necessary to prevent unreasonable adverse effects on the
                            environment. Conducting such an analysis would have required extensive
                            time and resource commitments that were beyond the scope of this
                            assignment.

Statutory Purpose           FIFRA does not contain a statement of purpose.




                            7
                              The regulation (40 C.F.R. 152.1) says that Part 152 “sets forth procedures, requirements and criteria
                            concerning the registration and reregistration of pesticide products under FIFRA sec. 3 . . . .”
                            (Emphasis added.) However, the reregistration requirements are in section 4 of FIFRA, not section 3.




                             Page 83                                                          GAO/GGD-99-20 Regulatory Burden
Appendix IV

Concerns For Which Agencies Appeared to
Have Broad Rulemaking Discretion

                  One of the objectives of our review was to determine, for each of 27
                  company concerns, the amount of discretion the underlying statutes gave
                  rulemaking agencies in drafting the regulatory requirements that the
                  agencies said were attributable to the underlying statutes. The agencies
                  that issued those requirements indicated in two of our 1996 reports that
                  the concerns could, at least in part, be traced to statutory requirements
                                               1
                  underlying their regulations. In this review we concluded that the
                  statutory provisions underlying 2 of the 27 concerns gave the rulemaking
                  agencies broad discretion in how the related regulatory requirements
                  could be drafted. We coded statutory provisions as allowing agencies
                  “broad discretion” if the provisions contained few specific requirements or
                  imposed few to no constraints on whether, and if so how, an agency’s
                  regulations could be drafted.

                  This appendix provides our detailed analysis of these two company
                  concerns. Specifically, for each such concern it provides the following
                  information: (1) the portion of the concern in our 1996 reports that the
                  agency or agencies indicated was statutorily based, (2) the portion of the
                  agency response in our 1996 reports that indicated the concern was
                  statutorily based, (3) our analysis of the amount of rulemaking discretion
                  the relevant statutory provisions gave the agencies (the first objective of
                  our review), (4) our analysis of whether the regulatory requirements at
                  issue in the concern were within the authority granted by the underlying
                  statutes (the second objective of our review), (5) our analysis of whether
                  the rulemaking agencies could have developed regulatory approaches that
                  would have been less burdensome to the regulated entities while
                  accomplishing the underlying statutory objectives (the third objective of
                  our review), and (6) the main purpose of the underlying statutes (where
                  such purpose statements were available). Appendix I of this report
                  contains a detailed discussion of our scope and methodology.


Concern 1
Company Concern   An official from Bank A said EEOC’s record retention standard is
                  inconsistent with how EEOC pursues cases. He said EEOC requires the
                  retention of personnel files for former employees for only 1 year after
                  employees leave a company. The bank official said that if the bank had
                  followed the EEOC guidelines and kept employees' files for only 1 year, it
                  would have had a "major problem" on the several occasions when EEOC
                  staff questioned bank officials about employees who had left several years
                  ago.
                  1
                      GAO/GGD-97-2 (Nov. 18, 1996); and GAO/GGD-97-26R (Dec. 11, 1996).




                  Page 84                                                       GAO/GGD-99-20 Regulatory Burden
                          Appendix IV
                          Concerns for Which Agencies Appeared to Have Broad
                          Discretion




Agency Response           According to EEOC, the specific record retention standards in its
                          regulations are tied to the periods in each statute during which
                          discrimination complaints can be filed. For example, Title VII of the Civil
                          Rights Act of 1964 and the Americans with Disabilities Act (ADA)
                          recordkeeping regulations (29 C.F.R. 1602.14) require that personnel
                          records be kept for 1 year because charges can be filed up to 300 days after
                          the alleged discrimination. Similarly, the Age Discrimination in
                          Employment Act (ADEA) requires that employers retain employment
                          records for a period of 1 year from the effective date of the personnel
                          actions to which they relate because ADEA charges can be filed up to 300
                          days after the alleged age discrimination. However, ADEA recordkeeping
                          regulations (29 C.F.R. 1627.3) also require employers to keep basic payroll
                          information for 3 years because the Commission can investigate suspected
                          age discrimination based on an untimely charge or even absent a charge.
                          Finally, Equal Pay Act lawsuits must be filed within either 2 or 3 years of
                          the alleged discrimination, so the related regulations (29 C.F.R. 1620.32)
                          contain 2 and 3 year record retention periods.

                          EEOC officials said that under all of the statutes, when a claim of
                          discrimination is pending, the employer is required to preserve all relevant
                          personnel records until final disposition of the charge or action. If the
                          bank has complied with these requirements, destruction of records in the
                          normal course of business when there is no pending charge of
                          discrimination would not violate the law or give rise to an adverse
                          inference.

Amount of Discretion      The issue that we focused on in this concern is EEOC’s assertion that its
                          record retention requirements are tied to the filing periods in various civil
Permitted by Statute in   rights statutes.
Drafting Regulatory
Requirements              We believe that the statutes underlying EEOC’s record retention
                          requirements give the agency broad discretion in drafting the regulations
                          concerning those requirements. The statutory provisions do not specify
                          how long employers must retain records and give EEOC broad authority to
                          establish retention periods. For example, Title VII of the Civil Rights Act
                          of 1964 (42 U.S.C. 2000e-8(c)) requires every employer, employment
                          agency, and labor organization subject to this subchapter to “(1) make and
                          keep such records relevant to the determinations of whether unlawful
                          employment practices have been or are being committed, (2) preserve
                          such records for such periods, and (3) make such reports therefrom as the
                          Commission shall prescribe by regulation or order . . . .” (Emphasis
                          added.) ADA (42 U.S.C. 12117(a)), ADEA (29 U.S.C. 626(a)), and the Equal
                          Pay Act (29 U.S.C. 211(c)) give similarly broad discretion to the



                          Page 85                                              GAO/GGD-99-20 Regulatory Burden
                            Appendix IV
                            Concerns for Which Agencies Appeared to Have Broad
                            Discretion




                            Commission to impose recordkeeping requirements. For example,
                            according to the Equal Pay Act,

                            “every employer subject to any provision of this chapter or of any order issued under this
                            chapter shall make, keep, and preserve such records of the persons employed by him and
                            of the wages, hours, and other conditions and practices of employment maintained by him,
                            and shall preserve such records for such periods of time, and shall make such reports
                            therefrom to the Administrator as he shall prescribe by regulation or order as necessary or
                            appropriate for the enforcement of the provisions of this chapter or the regulations or
                            orders thereunder.” (Emphasis added.)


Whether Regulatory          We believe that EEOC’s regulatory recordkeeping requirements are within
                            the broad authority granted by the relevant statutes. For example, EEOC’s
Provisions Are Within the   recordkeeping regulations for Title VII of the Civil Rights Act of 1964 and
Authority Granted by the    ADA (29 C.F.R. 1602.14) state that
Statute
                            “[a]ny personnel or employment record made or kept by an employer...shall be preserved
                            by the employer for a period of one year from the date of the making of the record or the
                            personnel action involved, whichever occurs later. . . [w]here a charge of discrimination has
                            been filed, or an action brought by the Commission or the Attorney General, against an
                            employer under title VII or the ADA, the respondent employer shall preserve all personnel
                            records relevant to the charge or action until final disposition of the charge or the action.”

                            Because the civil rights statutes do not specify how long employers must
                            retain records, and because those statutes permit EEOC to require that
                            records be kept for such periods as the Commission may prescribe, we
                            believe that EEOC’s recordkeeping requirements fall within the broad
                            discretion permitted in the statutes.

Whether Less Burdensome     We could not determine whether EEOC could have developed
                            recordkeeping requirements that would have been less burdensome to
Regulatory Approach Was     regulated entities than those that it developed while still accomplishing the
Available                   underlying statutory objectives. In a sense, EEOC’s recordkeeping
                            requirements appear to be the least burdensome approach in that they
                            closely relate to the filing periods in the antidiscrimination laws that EEOC
                            cited. For example, under Title VII, ADA, and ADEA employees have up to
                            300 days to file a discrimination charge. The relevant record retention
                            regulation states that records must be retained for 365 days. Filing periods
                            under the Equal Pay Act range from 2 to 3 years, and the record retention
                            requirements in EEOC’s regulations mirror those periods.

                            EEOC could have used its rulemaking discretion to establish uniform
                            record retention requirements (e.g., 5 or 10 years) for all of the statutes
                            instead of the variable periods for the different statutes. This approach
                            could have helped eliminate what the company viewed as an inconsistency



                            Page 86                                                   GAO/GGD-99-20 Regulatory Burden
                     Appendix IV
                     Concerns for Which Agencies Appeared to Have Broad
                     Discretion




                    between the requirements and the way EEOC pursues cases. However, it
                    is not clear whether regulated entities would view a record retention
                    requirement that is longer than the current requirement as being less
                    burdensome. To determine how regulated entities would have viewed
                    such a requirement (and therefore whether EEOC could have developed a
                    less burdensome regulatory approach), we would have had to conduct an
                    in depth review of those entities’ views regarding record retention. Such a
                    review would have required time and resource commitments that were
                    beyond the scope of this assignment.

Statutory Purpose   According to 42 U.S.C. 12101(b), the purpose of ADA is

                    “ (1) to provide a clear and comprehensive national mandate for the elimination of
                    discrimination against individuals with disabilities; (2) to provide clear, strong, consistent,
                    enforceable standards addressing discrimination against individuals with disabilities; (3) to
                    ensure that the [f]ederal [g]overnment plays a central role in enforcing the standards
                    established in this chapter on behalf of individuals with disabilities; and (4) to invoke the
                    sweep of congressional authority, including the power to enforce the fourteenth
                    amendment and to regulate commerce, in order to address the major areas of
                    discrimination faced day-to-day by people with disabilities.”

                    According to 29 U.S.C. 621, the purpose of ADEA is “to promote
                    employment of older persons based on their ability rather than age; to
                    prohibit arbitrary age discrimination in employment; to help employers
                    and workers find ways of meeting problems arising from the impact of age
                    on employment.”

                    Although it is not codified, section 2 of the Equal Pay Act is a declaration
                    of purpose and states:

                    “ [t]he Congress hereby finds that the existence in industries engaged in commerce or in the
                    production of goods for commerce of wage differentials based on sex—(1) depresses
                    wages and living standards for employees necessary for their health and efficiency; (2)
                    prevents the maximum utilization of the available labor resources; (3) tends to cause labor
                    disputes, thereby burdening, affecting, and obstructing commerce; (4) burdens commerce
                    and the free flow of goods in commerce; and (5) constitutes an unfair method of
                    competition.”

                    Title VII of the Civil Rights Act of 1964 contained no statement of purpose.


Concern 2
Company Concern     Bank B officials said some bank regulations give nonbanks (e.g.,
                    investment brokerage firms) an unfair competitive edge in the
                    marketplace. For example, they said one regulation requires banks to



                     Page 87                                                   GAO/GGD-99-20 Regulatory Burden
                  Appendix IV
                  Concerns for Which Agencies Appeared to Have Broad
                  Discretion




                  disclose the risks faced by consumers with certain investment products,
                  although investment firms are not required to make similar disclosures. In
                  a recent 60 second media advertisement for Bank B, the bank officials said
                  about a quarter of the airtime they bought had to be spent publicizing
                  regulatory issues (e.g., rates and term disclosures). They said a nonbank
                  could have spent the same advertising time simply selling its products and
                  services.

Agency Response   In our December 1996 report, OCC officials said that the examples of
                  competitive inequality cited by Bank B are due to the fact that banks and
                  nonbanks operate under different statutory schemes. During this review,
                  OCC officials said banks operate as federally insured financial institutions
                  and nonbanks do not. Therefore, they said it is appropriate for banking
                  agencies to adopt additional disclosure requirements that address the
                  unique features of the banking industry.

                  OCC officials noted that the different disclosures provided by banks stem
                  not from a regulation but from a policy statement, issued jointly by OCC
                  and the other banking agencies in 1994, that provides guidance to the
                  industry concerning practices that are consistent with safe and sound
                  banking practices. Issuing the policy statement was an exercise of the
                  authority of the OCC and other banking agencies to determine what
                  constitutes safe and sound banking practices pursuant to 12 U.S.C. 1818.
                  OCC officials also said that because banks offer both insured and
                  uninsured investment products, it is important that banks inform
                  consumers whether a given product is insured. Failure to do so could
                  constitute an unsafe and unsound banking practice, resulting in liability to
                  the bank or, at a minimum, damage to the bank’s reputation. OCC officials
                  noted that OCC and other banking agencies issued the policy statement in
                  question to alert banks about the potential problems in this area and to
                  suggest practices—including providing the disclosures noted by Bank B
                  officials—that can help banks avoid these problems.

                  OCC officials concluded that it is appropriate to continue tailoring the
                  disclosures provided to purchasers of investment products according to
                  whether there is a significant risk of confusion over whether a product is
                  insured.




                  Page 88                                              GAO/GGD-99-20 Regulatory Burden
                            Appendix IV
                            Concerns for Which Agencies Appeared to Have Broad
                            Discretion




Amount of Discretion        The issue that we focused on in this concern is OCC’s assertion that
                            differences in “statutory schemes” between banks and nonbanks require
Permitted by Statute in     differences in their disclosure requirements.
Drafting Regulatory
Requirements                We believe that the statutes underlying the interagency policy statement
                            gave the banking agencies broad discretion in developing the disclosure
                            requirements. OCC officials indicated that the banking agencies issued the
                            policy statement under their authority in 12 U.S.C. 1818 to determine
                            whether a given practice is consistent with safe and sound banking. Given
                            the scope of this authority and because the disclosure requirements in the
                            policy statement appear related to the agency’s authority, we concluded
                            that the statutes gave OCC and the other the banking agencies broad
                            discretion to issue the policy statement requiring the disclosures at issue in
                            this concern. Also, because OCC’s and the other banking agencies’
                            statutory authority does not extend to nonbanks, the policy statement does
                            not apply to those institutions.

Whether Regulatory          We believe that the interagency policy statement requiring certain types of
                            disclosures for nondeposit investment products is within the broad
Provisions Are Within the   rulemaking authority granted to OCC and the other banking agencies by
Authority Granted by the    the underlying statutes. For example, the policy statement requires,
Statute                     among other things, that insured depository institutions disclose that
                            certain products (1) are not insured by FDIC; (2) are not a “deposit or
                            other obligation of, or guaranteed by, the depository institution;” and (3)
                            are subject to investment risk, including possible loss of the principal
                            amount invested. The policy statement also says that the disclosures
                            should be provided to customers during any sales presentation and in
                            advertisements and other promotional materials. Because the underlying
                            statutes give OCC and the other banking agencies the authority to take the
                            actions that they believe are necessary to remedy or prevent unsafe and
                            unsound banking practices, we believe the policy statement is within
                            OCC’s statutory authority.

Whether Less Burdensome     We could not determine whether OCC and the other banking agencies
                            could have developed disclosure requirements that would have been less
Regulatory Approach Was     burdensome to regulated entities while still accomplishing the underlying
Available                   purpose of the statutes. To do so we would have had to conduct a detailed
                            review of each disclosure requirement and determine how important it
                            was to consumers in understanding which products are insured and which
                            are not. Such a review would require significant time and resource
                            commitments that were beyond the scope of this review.




                            Page 89                                              GAO/GGD-99-20 Regulatory Burden
                    Appendix IV
                    Concerns for Which Agencies Appeared to Have Broad
                    Discretion




Statutory Purpose   The above-cited statutory provisions do not contain a statement of
                    purpose.




                    Page 90                                              GAO/GGD-99-20 Regulatory Burden
Appendix V

Major Contributors to This Report


                        Curtis Copeland, Assistant Director
General Government      Ellen Wineholt, Evaluator-in-Charge
Division                Theresa Roberson, Senior Evaluator
                        Thomas M. Beall, Technical Analyst
                        Kiki Theodoropoulos, Communications Analyst



                        Alan N. Belkin, Assistant General Counsel
Office of the General   James M. Rebbe, Senior Attorney
Counsel




                        Page 91                                     GAO/GGD-99-20 Regulatory Burden
Page 92   GAO/GGD-99-20 Regulatory Burden
Ordering Information

The first copy of each GAO report and testimony is free. Additional
copies are $2 each. Orders should be sent to the following address,
accompanied by a check or money order made out to the
Superintendent of Documents, when necessary. VISA and
MasterCard credit cards are accepted, also. Orders for 100 or more
copies to be mailed to a single address are discounted 25 percent.

Order by mail:

U.S. General Accounting Office
P.O. Box 37050
Washington, DC 20013

or visit:

Room 1100
     th                  th
700 4 St. NW (corner of 4 and G Sts. NW)
U.S. General Accounting Office
Washington, DC

Orders may also be placed by calling (202) 512-6000 or by using fax
number (301) 258-4066, or TDD (301) 413-0006.

Each day, GAO issues a list of newly available reports and testimony.
To receive facsimile copies of the daily list or any list from the past
30 days, please call (202) 512-6000 using a touch-tone phone. A
recorded menu will provide information on how to obtain these
lists.

For information on how to access GAO reports on the INTERNET,
send e-mail message with “info” in the body to:

info@www.gao.gov

or visit GAO’s World Wide Web Home Page at:

http://www.gao.gov
United States                       Bulk Rate
General Accounting Office      Postage & Fees Paid
Washington, D.C. 20548-0001           GAO
                                Permit No. G100
Official Business
Penalty for Private Use $300

Address Correction Requested




(410254)