oversight

Regulatory Flexibility Act: Agencies' Interpretations of Review Requirements Vary

Published by the Government Accountability Office on 1999-04-02.

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

                United States General Accounting Office

GAO             Report to the Chairman
                Committee on Small Business
                U.S. Senate


April 1999
                REGULATORY
                FLEXIBILITY ACT
                Agencies’
                Interpretations of
                Review Requirements
                Vary




GAO/GGD-99-55
GAO   United States
      General Accounting Office
      Washington, D.C. 20548

      General Government Division



      B-282127

      April 2, 1999

      The Honorable Christopher S. Bond
      Chairman, Committee on Small Business
      United States Senate

      Dear Mr. Chairman:

      Section 610 of the Regulatory Flexibility Act (RFA) of 1980 requires each
      federal agency to develop a plan for the review of its existing rules that
      have or will have a “significant economic impact on a substantial number
                                    1
      of small entities” (SEISNSE). The purpose of the reviews is to determine
      whether the rules should be continued without change or should be
      amended or rescinded to minimize their impact on small entities.
      Subsection 610(c) of the RFA requires agencies to provide an annual
      Federal Register notice of rules they have designated for section 610
      reviews within the succeeding 12 months. Subsection 610(c) is basically a
      notice provision that is designed to facilitate public input into the
      mandated agency reviews of existing rules.

      A number of agencies have used the Unified Agenda of Federal Regulatory
      and Deregulatory Actions to publish these notices, although subsection
      610(c) does not refer to or require the use of the Agenda. The Unified
      Agenda is published in the Federal Register twice each year by the
      Regulatory Information Service Center (RISC) and provides for uniform
      reporting of data on regulatory activities under development throughout
      the federal government. In April 1997 and February 1998, we reported that
      relatively few agencies had entries in the November 1996 and October 1997
      editions of the Unified Agenda that they characterized as section 610
      reviews, and that relatively few of these agencies’ entries met the
                                          2
      requirements of subsection 610(c).

      This report responds to your request that we update and expand our
      previous reports and testimony on this issue. Our specific objectives were
      to determine, with regard to the April 1998 and November 1998 editions of
      the Unified Agenda, (1) how many agencies had no Agenda entries that
      1
       Section 601 of the RFA defines a “small entity” as including small businesses, small governmental
      jurisdictions, or other small organizations.
      2
       Regulatory Flexibility Act: Agencies' Use of the November 1996 Unified Agenda Did Not Satisfy
      Notification Requirements (GAO/GGD/OGC-97-77R, Apr. 22, 1997); Regulatory Flexibility Act:
      Agencies' Use of the October 1997 Unified Agenda Often Did Not Satisfy Notification Requirements
      (GAO/GGD-98-61R, Feb. 12, 1998); and Regulatory Reform: Agencies’ Section 610 Review Notices
      Often Did Not Meet Statutory Requirements (GAO/T-GGD-98-64, Feb. 12, 1998).




      Page 1                                                 GAO/GGD-99-55 Regulatory Flexibility Act
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                   were characterized as section 610 reviews, whether agencies are
                   interpreting the review requirements consistently, and why certain
                   agencies that appeared subject to the requirements had no entries; (2) how
                   many of the section 610 review entries in these Agendas appeared to meet
                   the notification requirements in subsection 610(c); (3) if the section 610
                   review entries did not appear to meet the statutory requirements, why
                   certain agencies’ entries were characterized as section 610 reviews; and (4)
                   whether any federal agencies had revised their section 610 review plans.

                   The April 1998 and November 1998 editions of the Unified Agenda each
Results in Brief   contained about 4,500 entries that were submitted by 61 federal
                   departments, agencies, and commissions. The April 1998 edition of the
                   Agenda identified 22 entries from 7 agencies as section 610 reviews. The
                   November 1998 edition of the Agenda identified 31 entries from 8 agencies
                   as section 610 reviews. Six of the more than 50 agencies with no section
                   610 review entries in either edition of the Agenda indicated in these and 19
                   previous editions of the Agenda that many of their regulatory actions
                   would have a SEISNSE, thereby indicating that the agencies may need to
                   review these rules under section 610. Officials in three of these agencies
                   offered different reasons why their agencies had no section 610 review
                   entries in the April or November editions of the Agenda. However, we
                   could not determine with certainty whether any of the agencies without
                   section 610 review entries in these editions of the Agenda should have had
                   such entries. The absence of section 610 review entries may indicate that
                   the agency does not have any rules that would be potential candidates for
                   review—that is, rules issued within the previous 10 years that have a
                   SEISNSE that had not already been reviewed. Also, no data are readily
                   available to identify such rules and agencies differ in their interpretation of
                   the section 610 review requirements.

                   Of the 22 entries in the April 1998 Unified Agenda that were characterized
                   as section 610 reviews, only 2 appeared to satisfy all of the public
                   notification requirements of subsection 610(c) of the RFA. Of the 31
                   section 610 review entries in the November 1998 edition of the Agenda,
                   only 1 appeared to satisfy all of the requirements of subsection 610(c). The
                   entries frequently indicated that the underlying rules would not have a
                   SEISNSE and/or that the rules had already been reviewed.

                   The Department of Transportation (DOT) and the Environmental
                   Protection Agency (EPA) had the most section 610 review entries in the
                   April 1998 and November 1998 editions of the Unified Agenda. Many of
                   their section 610 review entries did not appear to meet the notice
                   requirements of subsection 610(c) because they used the “Section 610



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                 Review” notation to inform the public about the results of previously
                 conducted reviews, and because of the way in which they interpreted
                 certain entry elements in the Agenda.

                 One agency—DOT—indicated in the November 1998 edition of the Unified
                 Agenda that it had updated its 1981 section 610 review plan “to accomplish
                 a more systematic review of all of its regulations.” DOT said it would
                 review all of its rules between 1998 and 2008 to determine whether any
                 rule published within the previous 10 years had a SEISNSE. For any such
                 rule, DOT said it would then determine whether the impact of the rule
                 could be lessened.

                 The RFA (5 U.S.C. 601-612) requires federal agencies to examine the
Background       impact of proposed and existing rules on small businesses, small
                 organizations, and small governmental jurisdictions and to solicit the ideas
                 and comments of such entities for this purpose. Specifically, whenever
                 agencies are required to publish a notice of proposed rulemaking (NPRM),
                 sections 603 and 604 of the RFA require agencies to prepare an initial and a
                 final regulatory flexibility analysis when publishing a proposed and final
                 rule. However, subsection 605(b) of the RFA says that sections 603 and 604
                 do not apply to any proposed or final rule if the head of the agency
                 certifies that the rule will not have a SEISNSE.

Unified Agenda   Section 602(a) of the RFA requires each agency to publish a “regulatory
                                                                                     3
                 flexibility agenda” in the Federal Register every April and October,
Requirements     including the following:

                 “(1) a brief description of the subject area of any rule which the agency expects to propose
                 or promulgate which is likely to have a significant economic impact on a substantial
                 number of small entities;

                 “(2) a summary of the nature of any such rule under consideration for each subject area
                 listed in the agenda pursuant to paragraph (1), the objectives and legal basis for the
                 issuance of the rule, and an approximate schedule for completing action on any rule for
                 which the agency has issued a general notice of proposed rulemaking; and

                 “(3) the name and telephone number of an agency official knowledgeable concerning the
                 items listed in paragraph (1).”

                 A number of agencies use the Unified Agenda of Federal Regulatory and
                                                                             4
                 Deregulatory Actions to satisfy this and other requirements. The Unified

                 3
                  Although the RFA requires agencies to publish regulatory flexibility agendas in April and October of
                 each year, RISC has not published some of the Unified Agendas until May or November.




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Agenda is compiled by RISC for the Office of Management and Budget’s
(OMB) Office of Information and Regulatory Affairs (OIRA), and has been
published twice each year since 1983. Section 4(b) of Executive Order
12866 requires that each agency’s agenda contain certain elements and that
it be prepared in a manner specified by the Administrator of OIRA. RISC
instructs the agencies on how the entries are to be prepared, but does not
review agencies’ entries to determine compliance with statutory or other
requirements before they are printed.

Each agency presents its entries in the Unified Agenda under one of five
headings according to the rulemaking stage of the entry, which the Agenda
defines as follows:

“1. Prerule Stage—actions agencies will undertake to determine whether or how to initiate
rulemaking. Such actions occur prior to a Notice of Proposed Rulemaking (NPRM) and
may include Advance Notices of Proposed Rulemaking (ANPRMs) and reviews of existing
regulations.

“2. Proposed Rule Stage—actions for which agencies plan to publish a Notice of Proposed
Rulemaking as the next step in their rulemaking process or for which the closing date of
the NPRM Comment Period is the next step.

“3. Final Rule Stage—actions for which agencies plan to publish a final rule or an interim
final rule or take other final action as the next step in their rulemaking process.

“4. Long-Term Actions—items under development but for which the agency does not
expect to have a regulatory action within the next 12 months after publication of this
edition of the Unified Agenda. Some of the entries in this section may contain abbreviated
information.

“5. Completed Actions—actions or reviews the agency has completed or withdrawn since
publishing its last agenda. This section also includes items the agency began and
completed between issues of the Agenda.”

Within each entry, agencies are required to provide certain information,
including (1) the title of the regulation; (2) a brief description of the
problem the regulation will address; (3) the section(s) of the Code of
Federal Regulations that will be affected by the action; (4) the dates and
citations of the regulatory action’s past steps, and a projected date for at



4
 Agencies also use the Unified Agenda to satisfy the requirement in the Office of Federal Procurement
Policy Act Amendments of 1988 (41 U.S.C. 421[g]) that the Office of Federal Procurement Policy
publish a Procurement Regulatory Activity Report. Also, section 4(b) of Executive Order 12866
requires agencies to “prepare an agenda of all regulations under development or review.”




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                           least the next step; and (5) whether an analysis is required by the RFA
                           because the rule is likely to have a SEISNSE.

Section 610 Requirements   Subsection 610(a) of the RFA required each federal agency to publish in
                           the Federal Register a plan for the periodic review of its rules that “have or
and Our Previous Reports   will have” a SEISNSE within 180 days after the effective date of the statute
                           (Jan. 1, 1981). The plans were to require agencies to review all existing
                           rules within 10 years of the effective date of the statute, and any new rules
                           within 10 years of their publication as a final rule. Subsection 610(b)
                           specifies the factors that agencies should consider when conducting
                           reviews of existing rules. Subsection 610(c) requires agencies to provide
                           an annual Federal Register notice of rules designated for section 610
                           reviews. Specifically, this subsection says the following:

                           “Each year, each agency shall publish in the Federal Register a list of the rules which have a
                           significant economic impact on a substantial number of small entities, which are to be
                           reviewed pursuant to this section during the succeeding twelve months. The list shall
                           include a brief description of each rule and the need for and legal basis of such rule and
                           shall invite public comment upon the rule.”

                           Therefore, it is clear that Congress intended subsection 610(c) to be an
                           advance notice requirement.

                           The Unified Agenda primarily lists regulatory and deregulatory actions that
                           agencies have decided to take, such as the issuance of upcoming proposed
                           and final rules, or actions the agencies have completed. However, Agenda
                           entries describing regulatory actions that have already been decided or
                           completed cannot satisfy the subsection 610(c) requirement that agencies
                           list existing rules that they will review within the next 12 months to
                           determine whether action is necessary. Similarly, Agenda entries that
                           indicate the rules being reviewed are not likely to have a SEISNSE cannot
                           satisfy the subsection 610(c) requirement that agencies list rules for review
                           that will have such an impact.

                           For the past several years, agencies have been able to indicate that they
                           are reviewing rules as part of their periodic reviews of existing rules under
                           the RFA by including the notation “Section 610 Review” after the title of
                                                                 5
                           the entries. In our April 1997 letter, we concluded that none of the 21
                           entries that 3 agencies identified as section 610 reviews in the November
                           1996 edition of the Unified Agenda satisfied all of the requirements of
                           subsection 610(c). Most of the entries (1) announced regulatory actions
                           the agencies were taking or planned to take and did not identify existing
                           5
                               GAO/GGD/OGC-97-77R.




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rules that the agencies were reviewing to assess their impact on small
entities or (2) appeared to involve rules that did not have a SEISNSE, or
that had an “undetermined” impact. Also, we said that the size of the
Agenda and the lack of any index or special section in the document made
it difficult for the public to find and comment on the entries identified as
section 610 reviews. We recommended that, in fulfilling her responsibilities
under Executive Order 12866 to specify how agencies should prepare their
agendas, the OIRA Administrator instruct agencies that choose to use the
Unified Agenda to satisfy the requirements of subsection 610(c) of the RFA
on how to do so. Specifically, we said the Administrator should remind
agencies using the Agenda for that purpose that their entries must (1)
identify existing rules with a SEISNSE that the agencies expect to review
during the next 12 months, (2) describe the rules and note the need for and
legal bases of the rules, and (3) invite public comment on the rules.

On June 10, 1997, the OIRA Administrator sent a memorandum to
regulatory policy officers at executive branch departments and agencies
containing guidelines and procedures for the October 1997 Unified
Agenda. In those guidelines and procedures, the Administrator pointed out
that recent editions of the Agenda have permitted agencies wishing to use
the Agenda to publish subsection 610(c) notices to append the notation
“Section 610 Review” to their titles. She also quoted the text of subsection
610(c), noted that agencies should include in the entries a description of
the rule and the need for the rule, and pointed out that the agencies’
preambles should invite public comment upon the rules. Finally, she noted
the issuance of our April 1997 letter on this topic. However, the
Administrator’s instructions did not specifically note that agencies’ section
610 entries should only (1) involve rules that have a SEISNSE and (2)
reflect reviews of existing rules that the agencies intend to initiate within
the next 12 months.

We also recommended in our April 1997 letter that the Executive Director
of RISC develop an index or special section in the Unified Agenda that
specifically identifies the rules that agencies plan to review under section
610 to provide the public with adequate notice and opportunity to
comment on those rules. The October 29, 1997, edition of the Agenda
contained such an index that listed, for each of seven agencies, the entries
for which the agencies included a “Section 610 Review” designation. The
April 1998 and November 1998 editions of the Agenda also contained such
an index.




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                                                                       6
                           In our February 1998 letter and testimony, we concluded that most of the
                           entries in the October 1997 edition of the Unified Agenda that the agencies
                           identified as section 610 reviews did not meet the public notification
                           requirements of subsection 610(c). Of the 34 such entries that 7 agencies
                           identified, only 3 satisfied all of the requirements of subsection 610(c). As
                           was the case in the November 1996 edition of the Agenda, most of the
                           section 610 review entries either (1) involved rules that did not appear to
                           have a SEISNSE or had an “undetermined” impact or (2) did not involve
                           rules that the agencies indicated they would be reviewing pursuant to
                           section 610 during the next 12 months.

                           We recommended in our February 1998 letter that the Executive Director
                           of RISC, in consultation with OIRA and other agencies, ensure that entries
                           characterized as section 610 reviews in future editions of the Unified
                           Agenda meet the requirements of subsection 610(c) of the RFA.
                           Specifically, we said those entries should (1) involve rules that the
                           agencies expect will have a SEISNSE; (2) involve existing rules that are to
                           be reviewed pursuant to section 610 in the succeeding 12 months; (3)
                           describe the rules, the need for the rules, and their legal bases; and (4)
                           invite public comment on the rules. To date, RISC has not taken action on
                           this recommendation.

Review  Requirements       The objectives of our review were to determine, with regard to the April
Objectives,   Scope,Are
                     and   1998 and November 1998 editions of the Unified Agenda, (1) how many
Unclear
Methodology                agencies had no entries that were characterized as section 610 reviews,
                           whether agencies are interpreting the review requirements consistently,
                           and why certain agencies that appeared subject to the requirements had no
                           entries; (2) how many of the section 610 review entries in these Agendas
                           appeared to meet the notification requirements in subsection 610(c); (3) if
                           the section 610 review entries did not appear to meet the statutory
                           requirements, why certain agencies’ entries were characterized as section
                           610 reviews; and (4) whether any federal agencies had revised their section
                           610 review plans.

                           To address our first objective, we reviewed the April 1998 and November
                           1998 editions of the Unified Agenda and determined which of the 61
                           agencies with at least 1 Agenda entry did not have entries in the Agendas’
                           index cataloging agencies’ section 610 reviews. However, the absence of
                           section 610 review entries in those indexes does not necessarily mean that
                           an agency is not complying with section 610. For example, an agency may
                           not have any rules that would be potential candidates for review—that is,
                           6
                               GAO/GGD-98-61R and GAO/T-GGD-98-64.




                           Page 7                                    GAO/GGD-99-55 Regulatory Flexibility Act
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rules issued within the previous 10 years with a SEISNSE that it had not
already reviewed. No data are readily available to identify which rules
should have been reviewed at a particular point in time, so we were unable
to determine which agencies should have had section 610 review entries in
the April 1998 and November 1998 editions of the Agenda.

We interviewed officials at EPA and DOT (agencies with the most section
610 review entries in the April 1998 and November 1998 Agendas) to
determine whether agencies are interpreting the section 610 review
requirements consistently. We also interviewed officials at SBA’s Office of
Advocacy because of the SBA Chief Counsel for Advocacy’s responsibility
under section 612 of the RFA to monitor agencies’ compliance with the act.

To determine which agencies may have issued rules with a SEISNSE that
could be candidates for review, we used the RISC Unified Agenda database
to determine which agencies had at least 10 entries in both the April 1998
and November 1998 editions of the Agenda that indicated the associated
rules would have a SEISNSE. To determine whether the April 1998 and
November 1998 editions were anomalous for those agencies, we also
obtained data from the RISC database on the number of such entries from
19 previous editions of the Agenda. We then interviewed officials at three
agencies—the Departments of Health and Human Services (HHS) and the
Treasury and the Small Business Administration (SBA)—to determine why
they had no section 610 entries in the 1998 Agendas. We selected these 3
agencies because they were among 6 agencies that each had at least 10
entries in virtually all 21 editions of the Agenda, and time constraints
prevented interviews at all 6 agencies.

To address our second objective, we examined each of the entries in the
April 1998 and November 1998 editions of the Unified Agenda that were
characterized as section 610 reviews to determine whether the entries met
all of the statutory requirements in subsection 610(c) of the RFA.
Specifically, we determined whether each of the entries had the following
characteristics:

(1) The entry indicated that it involved a rule that had a SEISNSE. The
introduction to the April 1998 edition of the Unified Agenda stated that the
“Small Entities Affected” field within Agenda entries indicated whether the
agencies believed that the associated rule was likely to have a SEISNSE.
The introduction to the November edition indicated agencies were to use
the field labeled “Regulatory Flexibility Analysis Required” for this
purpose. If an entry in the April edition indicated that certain types of
small entities would be affected or if an entry in the November edition



Page 8                                   GAO/GGD-99-55 Regulatory Flexibility Act
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indicated that a regulatory flexibility analysis was required, we considered
the entry to have met this requirement. However, if an entry did not
indicate that small entities would be affected or that a regulatory flexibility
analysis was required, we considered the entry not to involve a rule with a
SEISNSE and, therefore, not to have met the requirements of subsection
610(c).

 (2) The entry described a review of an existing rule within the next 12
months. For example, if an entry indicated that a review of an existing
review would begin 2 months after the date the Agenda was published in
the Federal Register, we considered the entry to have met this
requirement. However, if the entry indicated that the section 610 review
was complete, we did not consider the entry to have met the statutory
requirements.

(3) The entry described the rule, stated why it was needed, and provided
its legal basis. If the narrative portion of the entry contained this
information, we considered the entry to have met this requirement.
However, if the entry did not contain this information, we did not consider
the entry to have met the requirement.

To address our third objective, we interviewed officials in the two agencies
that had the largest number of section 610 review entries in the April 1998
and November 1998 editions of the Unified Agenda—EPA and DOT. We
also interviewed officials in OIRA and SBA’s Office of Advocacy regarding
their interpretation of the statutory requirements and the instructions in
the Agenda.

To address our fourth objective, we reviewed the preambles to each of the
agencies’ sections of the April 1998 and November 1998 editions of the
Unified Agenda. We also asked officials at RISC, OIRA, and SBA’s Office of
Advocacy whether they were aware of any agencies that had updated their
subsection 610(a) review plans. We did not review previous editions of the
Agenda and did not attempt to survey or otherwise contact all agencies
regarding revisions to their review plans. Therefore, other agencies may
have revised their plans but those efforts are not reflected in this report.

We conducted our work between January 1999 and March 1999 at OMB,
EPA, DOT, SBA, Treasury, and HHS headquarters in Washington, D.C., in
accordance with generally accepted government auditing standards. We
provided a draft of this report to the Director of OMB and the Acting
Executive Director of RISC for their review and comment. We also
provided relevant portions of the draft report to officials in the



Page 9                                    GAO/GGD-99-55 Regulatory Flexibility Act
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                             Departments of HHS, Transportation, and the Treasury; EPA; and SBA for
                             their review and comment. Their views are presented at the end of this
                             letter, along with our evaluation. Appendixes I and II contain reprints of
                             the written comments from RISC and EPA.

                             More than 50 of the 61 federal departments, agencies, and commissions
Most Agencies Did Not        that had entries in the April 1998 and November 1998 editions of the
Have Section 610             Unified Agenda did not have any section 610 review entries. Six of these
Entries in the April         agencies indicated in these and previous editions of the Agenda that some
                             of their rules would have a SEISNSE, thereby indicating that they issue
1998 or November             rules that could be subject to the section 610 review requirement. Officials
1998 Unified Agendas         in three of these agencies offered different reasons why their agencies had
                             no section 610 review entries in the April 1998 or November 1998 editions
                             of the Agenda. However, because of the absence of readily available data
                             and because the RFA’s requirements are subject to varying interpretations,
                             we could not determine with certainty whether any of the agencies without
                             section 610 review entries should have had such entries.

Eight Agencies Had Section   The April 1998 edition of the Unified Agenda was published in the Federal
                             Register on April 27, 1998, and included agendas from 61 federal
610 Review Agenda Entries                                               7
                             departments, agencies, and commissions. Those agendas contained 4,504
                             entries printed on nearly 1,400 pages of the Federal Register. An index in
                             the Agenda identified 22 entries from 7 agencies with the “Section 610
                             Review” notation following the title. These seven agencies were the
                             Departments of Agriculture (USDA) (1 entry), Education (2 entries), Labor
                             (DOL) (6 entries), and Transportation (DOT) (6 entries); EPA (4 entries);
                             the Federal Reserve System (2 entries); and the Federal Trade Commission
                             (FTC) (1 entry). Therefore, 54 federal departments, agencies, and
                             commissions did not have any section 610 review entries in the April 1998
                             edition of the Agenda.

                             The November 1998 edition of the Unified Agenda was published in the
                             Federal Register on November 9, 1998, and included agendas from 61
                             federal departments, agencies, and commissions. Those agendas contained
                             4,560 entries printed on nearly 1,400 Federal Register pages. An index in
                             the Agenda identified 30 entries from 8 agencies with the “Section 610
                             Review” notation following the title. The 8 agencies were USDA (1 entry),
                             the Departments of Education (2 entries), and Justice (1 entry), DOL (5
                             entries), DOT (7 entries), EPA (11 entries), the Federal Reserve System (2
                             entries), and the FTC (1 entry). One additional EPA entry that had the
                             7
                             The April 1998 and November 1998 editions of the Unified Agenda each contained 62 agendas, 1 of
                             which was from 3 agencies with joint authority.




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                            notation “Section 610 Rule” after the title should have been included in the
                            index, thereby raising the total number of section 610 review entries in the
                            November 1998 edition of the Agenda to 31. Twenty-one of these 31 entries
                            had appeared in the April 1998 edition of the Agenda and were updated for
                            this edition. Therefore, 53 federal departments, agencies, and commissions
                            did not have any section 610 review entries in the November 1998 edition
                            of the Agenda.

Agencies Interpret Review   Under sections 603, 604, and 605 of the RFA, agencies must prepare a
                            regulatory flexibility analysis for any proposed or final rule for which they
Requirements Differently    are required to publish an NPRM unless the head of the agency certifies
                            that the rule will not have a SEISNSE. Under subsection 610(a), agencies
                            are required to publish a plan for the periodic review of agency rules that
                            “have or will have” a SEISNSE. Under subsection 610(c), agencies must
                            publish notices in the Federal Register of rules that they plan to review in
                            the next 12 months that “have” a SEISNSE.

                            All agencies are not interpreting the subsection 610(c) review requirement
                            in the same manner. For example, EPA officials told us that they interpret
                            the requirement in subsection 610(c) to mean they must review any rule
                            for which the agency prepared a final regulatory flexibility analysis—that
                            is, that had a SEISNSE at the time the final rule was promulgated.
                            Therefore, if EPA issued a final rule on December 31, 1988, that the agency
                            concluded had a SEISNSE and for which it prepared a final regulatory
                            flexibility analysis, the agency would have had to review that rule pursuant
                            to section 610 by December 31, 1998. Alternatively, if EPA issued a rule on
                            December 31, 1988, that it did not believe had a SEISNSE and for which it
                            did not prepare a final regulatory flexibility analysis, the agency would not
                            have to review the rule within 10 years.

                            However, DOT officials said they interpret the statute’s use of the present
                            tense “have” in subsection 610(c) to mean that they must review all rules
                            that have a SEISNSE at the time the agency conducts the review, not rules
                            that had a significant impact years before when they were promulgated.
                            They said a rule that did not have a SEISNSE at the time it was issued
                            might currently have a significant impact due to changes in the regulatory
                            requirements or changes in the external environment. Conversely, a rule
                            that had a SEISNSE at the time of its promulgation may no longer have the
                            same impact. Under this interpretation of section 610, the officials said
                            DOT must review all of its rules within 10 years of their issuance to
                            determine whether they have a SEISNSE at the time of the review. If DOT
                            determines that a rule has a SEISNSE, DOT would then publish a notice of




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                             a section 610 review for those rules, inviting the public to comment on
                             whether the rules should be continued, revised, or eliminated.

                             The RFA’s legislative history does not indicate whether the statute’s use of
                             the present tense “have” in subsection 610(c) was intended to require
                             agencies to review all of their rules within 10 years of their issuance, even
                             if the agencies had determined that the rules did not have a SEISNSE at
                             the time they were issued. SBA’s Office of Advocacy issued an RFA
                             implementation guide for federal agencies in 1998 to help them determine
                             what is required under the act’s provisions, but the Office also noted that
                             the guide “is not the definitive interpretation of the law.” However, the
                             guidance does not clarify whether section 610 requires agencies to review
                             rules that had a SEISNSE at the time they were issued or rules that have a
                             SEISNSE at the time of the review. Officials in the Office of Advocacy told
                             us that they had not previously considered this issue, and said either
                             interpretation of section 610 was defensible.

Agencies Offered Different   It is difficult if not impossible for us to determine which rules an agency
                             should be reviewing pursuant to section 610 of the RFA at a particular
Reasons for No Section 610   point in time. Therefore, we could not determine with certainty whether
Review Entries               any of the agencies without section 610 review entries in the April 1998 or
                             November 1998 editions of the Unified Agenda should have had such
                             entries. For example, an agency may not have issued any final rules within
                             the previous 10 years that had a SEISNSE at the time they were published
                             or at the time they were reviewed, depending on which interpretation of
                             section 610 is followed. Alternatively, the agency may have issued final
                             rules with a SEISNSE during that time frame, but published the required
                             review notices elsewhere in the Federal Register during 1998 or at any
                             time after the date the rule was issued. No database exists delineating the
                             rules that agencies issued within the previous 10 years that have or had a
                             SEISNSE or, if so, had already been reviewed. Reviewing thousands of
                             Federal Register notices to determine which rules had a SEISNSE at the
                             time they were issued in more than 50 agencies would require time and
                             resource commitments that were beyond the scope of this review.
                             Determining which rules currently have a SEISNSE would be even more
                             difficult.

                             Because of these difficulties, we instead attempted to determine which of
                             the more than 50 agencies that had no section 610 review entries in the
                             1998 editions of the Unified Agenda appeared to develop, propose, or issue
                             rules with a SEISNSE. We asked RISC to identify the agencies that had at
                             least 10 entries in both the April and November editions of the Agenda in
                             which the agencies had indicated that the related rules would have a



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                                         SEISNSE. As table 1 shows, RISC indicated that 12 agencies had at least 10
                                         such entries in both editions of the Agenda. Of these 12 agencies, the
                                         following 7 had no section 610 review entries in the April and November
                                         editions of the Agenda: the Departments of Commerce, HHS, the Interior,
                                         and the Treasury; the Federal Communications Commission (FCC); the
                                         Securities and Exchange Commission (SEC); and SBA. Three of these 7
                                         agencies (HHS, Treasury, and FCC) had 50 or more entries in both the
                                         April 1998 and November 1998 editions of the Agenda that they indicated
                                         would have a SEISNSE, but the 3 agencies did not have section 610 review
                                         entries in those editions of the Agenda.

Table 1: Twelve Agencies Had at Least
10 Entries With a SEISNSE in the April                                                Number of Unified Agenda
                                                                                         entries with a SEISNSE
1998 and November 1998 Editions of the
Unified Agenda                           Department                                        April 1998                   November 1998
                                         or agency                                   Unified Agenda                     Unified Agenda
                                         USDA                                                      67                               50
                                         Commerce                                                  43                               48
                                         HHS                                                      107                               58
                                         Interior                                                  34                               30
                                         Justice                                                   27                               14
                                         DOL                                                       38                               42
                                         DOT                                                       39                               33
                                         Treasury                                                  61                               64
                                         EPA                                                      193                               21
                                         FCC                                                       74                               81
                                         SBA                                                       20                               20
                                         SEC                                                       22                               22
                                         Note: Bolded agencies had no section 610 review entries in the April 1998 or November 1998 editions
                                         of the Unified Agenda.
                                         Source: RISC.


                                         We also reviewed previous editions of the Unified Agenda to determine if
                                         the previously mentioned seven agencies had published section 610 review
                                         notices. Because agencies did not identify their section 610 reviews with
                                         the “Section 610 Review” notation after the entry title until October 1996,
                                         our review was limited to the October 1996, April 1997, and October 1997
                                         editions of the Agenda. Of the seven agencies, only SBA had any section
                                         610 review entries—three in the October 1996 edition of the Agenda that
                                         were repeated in the April 1997 edition. However, SBA’s Chief Counsel for
                                         Legislation and Regulation told us during this review that those entries
                                         should not be considered section 610 review notices. Therefore, none of
                                         these seven agencies had section 610 review entries in the October 1996
                                         through November 1998 editions of the Agenda.




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                                          To ensure that the April 1998 and November 1998 editions of the Unified
                                          Agenda were not atypical, we also obtained RISC data on how frequently
                                          these 7 agencies indicated that the rules related to their entries would have
                                          a SEISNSE from 19 previous editions of the Agenda during the previous 10
                                          years: from the fall of 1988 (when agencies first were required to indicate
                                          in their entries whether the related rules would have a SEISNSE) to the fall
                                          of 1997. As table 2 shows, during the first half of this 10-year period, the
                                          Department of the Interior frequently had fewer than 10 entries that met
                                          this standard. However, the other 6 agencies almost always had 10 or more
                                          such entries, averaging more than 30 Agenda entries each year, in which
                                          they indicated that the rules would have a SEISNSE. Therefore, it seems
                                          likely that these six agencies would have issued a number of rules during
                                          the previous 10 years with a SEISNSE that could have been subject to the
                                          section 610 review requirement during 1998.

Table 2: Six Agencies Generally Had at
Least 10 Entries With a SEISNSE in                              Number of SEISNSE entries by department or agency
                                          Unified Agenda
Previous Editions of the Unified Agenda
                                          edition        Commerce   HHS      Interior Treasury     SBA       FCC                           SEC
                                          Fall 1988            10      41        <10      <10       31        56                             17
                                          Spring 1989          17      43        <10        12      32        57                             11
                                          Fall 1989            16      51        <10        20      27        54                             19
                                          Spring 1990          29      63        <10        56      22        54                             19
                                          Fall 1990            32      68        <10        60      34        61                             28
                                          Spring 1991          37      70         14        65      43        61                             17
                                          Fall 1991            35      84         12        75      50        57                             23
                                          Spring 1992          26      70        <10        65      50        51                            <10
                                          Fall 1992            39      76        <10        87      56        52                             23
                                          Spring 1993          38      91        <10        83      55        56                             34
                                          Fall 1993            33      86         12        75      61        48                             29
                                          Spring 1994          40      82         25        78      47        45                             35
                                          Fall 1994            47      85         27        73      44        47                             32
                                          Spring 1995          35      49         18        49      47        48                             35
                                          Fall 1995            38      74         23        52      60        43                             34
                                          Spring 1996          37      90         30        59      49        65                             33
                                          Fall 1996            46    103          22        53      17        75                             48
                                          Spring 1997          37    111          20        58      15        68                             41
                                          Fall 1997            29    113          32        54      13        70                             34
                                          Note: The "<10" character indicates the agency had less than 10 entries with a SEISNSE in that
                                          edition of the Unified Agenda.
                                          Source: RISC.


                                          We contacted officials at SBA, Treasury, and HHS to determine why they
                                          did not have section 610 review entries in the April 1998 or November 1998
                                          editions of the Unified Agenda (or in the three previous editions) despite
                                          consistently having many Agenda entries during the previous 10 years that
                                          indicated the related rules had or would have a SEISNSE. SBA’s Chief
                                          Counsel for Legislation and Regulation told us that SBA had reviewed and



                                          Page 14                                              GAO/GGD-99-55 Regulatory Flexibility Act
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revised all of its rules in the mid-1990s as part of the Clinton
                                                8
Administration’s regulatory reform initiative, and she said that effort met
the spirit and intent of the section 610 review requirement. As a result of
that effort, she said SBA clarified, simplified, and shortened its sections of
the Code of Federal Regulations but did not change the substantive
requirements of the rules. Because any rules issued after the initiative
would have been less than 10 years old in 1998, the Chief Counsel said SBA
had no rules with a SEISNSE that required section 610 review
announcements in the April 1998 or November 1998 editions of the
Agenda. The Chief Counsel said SBA announced its intention to “reinvent”
all of its rules in its October 1995 regulatory plan on the basis of public
input from meetings with small business owners and trade associations.
However, the October 1995 regulatory plan announcement indicated that
SBA had already conducted its review and that, as a result, the agency had
already decided to reinvent its regulations. Also, SBA subsequently
published NPRMs that invited public comments on the results of its review
and its decision to rewrite its regulations. Therefore, although SBA
believes that it met the spirit of the section 610 review requirement, neither
SBA’s regulatory plan announcement or these Federal Register notices met
the specific requirement of subsection 610(c) of the RFA that the agency
publish a list of rules with a SEISNSE that it planned to review in the next
12 months to determine whether they should be continued without change,
amended, or rescinded.

Officials from the Department of the Treasury told us that Treasury did not
have section 610 review entries in the April 1998 or November 1998
editions of the Unified Agenda because the Department has issued only
two final rules during the previous 10 years with a SEISNSE—a rule issued
by the Bureau of Alcohol, Tobacco and Firearms (BATF) in 1990 and
another BATF rule issued in 1996. They said Treasury announced its
intention to review the 1990 rule in the January 10, 1997, edition of the
                  9
Federal Register. As a result of that review, the officials said Treasury
plans to issue proposed amendments to the rule in June 1999. The officials
said Treasury has not announced its intention to review the 1996 BATF
rule, but said the review will be completed within the 10-year time limit
prescribed in section 610.


8
 SBA’s initiative was part of a governmentwide initiative by many federal agencies, not just SBA. For
an analysis of that initiative, see Regulatory Reform: Agencies’ Efforts to Eliminate and Revise Rules
Yield Mixed Results (GAO/GGD-98-3, Oct. 2, 1997).
9
As previously noted, agencies are not required to publish section 610 review notices in the Unified
Agenda and the Department of the Treasury did not do so for this action.




Page 15                                                 GAO/GGD-99-55 Regulatory Flexibility Act
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                             Treasury officials said that most of the Department’s regulations subject to
                             the RFA do not have a SEISNSE because they generally (1) amend and
                             fine-tune existing rules (and therefore have only an incremental effect, not
                             a “significant” effect on a “substantial number” of small entities) or (2)
                             interpret statutory requirements and do not impose any significant new
                             requirements themselves. The officials said they now realize that Treasury
                             had mischaracterized a number of its Agenda entries during the previous
                             10 years as involving rules with a SEISNSE. They said some Treasury
                             components thought the “Small Entities Affected” field should be used to
                             indicate rules that had any impact on small entities, not just a SEISNSE (as
                             RISC’s instructions indicated).

                             HHS officials said that the Department issues a number of rules each year
                             that have a SEISNSE (e.g., most of the rules issued by the Health Care
                             Financing Administration). However, they said HHS did not have section
                             610 review entries in the April 1998 or November 1998 editions of the
                             Unified Agenda because they had not interpreted the guidance to require a
                             separate listing. The officials said they believed that HHS had satisfied the
                             requirements of subsection 610(c) by listing rules to be promulgated or
                             revised in the Unified Agenda and explicitly indicating which of these rules
                             were expected to have a SEISNSE. The HHS officials said they now
                             understand that this interpretation may not have been correct and will
                             make an effort in future editions of the Agenda to delineate which rules
                             they plan to review pursuant to section 610 of the RFA within the
                             succeeding 12 months.

                             Only a few of the section 610 review entries in the April 1998 and
Few Agenda Entries           November 1998 editions of the Unified Agenda appeared to satisfy all of
Appeared to Satisfy          the notification requirements of subsection 610(c). As was the case in the
Subsection 610(c)            two previous editions of the Agenda that we reviewed, the entries
                             frequently indicated that (1) the reviews did not involve rules that would
Requirements                 have a SEISNSE or (2) the rules had already been reviewed.

Only Two Entries in the      On January 7, 1998, the OIRA Administrator sent a memorandum to
                             regulatory policy officers at executive departments and agencies
April 1998 Agenda Appeared   describing guidelines and procedures for publishing the April 1998 edition
to Meet Subsection 610(c)    of the Unified Agenda. In the attachment to that memorandum, she
Requirements                 repeated the observations in her June 10, 1997, memorandum regarding
                             the use of the Agenda to satisfy the subsection 610(c) requirement.
                             Specifically, she noted that some agencies have chosen to use the Agenda
                             to publish subsection 610(c) notices, and quoted the text of subsection
                             610(c) in the attachment. She also noted that agencies should include in
                             the entries a description of the rule and the need for the rule, and pointed



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  out that the agencies’ preambles should invite public comment on the
  rules. Finally, she again noted the issuance of our April 1997 letter on this
  topic. However, as was the case in the June 1997 memorandum, she did
  not specifically note that agencies’ section 610 entries should involve rules
  with a SEISNSE and should describe forthcoming reviews, not reviews
  that the agencies had already completed.

  As previously mentioned, the April 1998 edition of the Unified Agenda
  contained 4,504 entries that were printed on nearly 1,400 pages of the
  Federal Register. The Agenda’s index identified 22 entries from 7 agencies
  with the “Section 610 Review” notation following the title. We examined
  these 22 entries and concluded that only 2 of them appeared to satisfy all
  of the notification requirements in subsection 610(c). In 12 of the entries,
  the “Small Entities Affected” field was coded “No” (7 entries) or
                               10
  “Undetermined” (5 entries). Because this field was intended to identify
  rules with a SEISNSE, and because section 610 reviews are, by definition,
  reviews of existing rules, we concluded that (1) the existing rules being
  reviewed did not have a SEISNSE (either at the time the rule was issued or
  at the time of the review) and (2) these entries should not have been
  identified as subsection 610(c) entries.

  Seven of the 10 remaining “Section 610 Review” entries in the April 1998
  Unified Agenda did not appear to satisfy the notification requirements in
  subsection 610(c) because they announced regulatory actions the agencies
  had taken, were taking, or planned to take (sometimes as a result of a
  previous review), not a review to determine what actions to take.
  Therefore, we concluded that these entries did not involve an existing rule
  that was “to be reviewed” pursuant to section 610 during the succeeding 12
  months. These entries included the following examples:

• A USDA Agenda entry indicated that the Department’s Agricultural
  Marketing Service planned to issue a final rule consolidating federal milk
  marketing orders. The entry indicated that an NPRM was published in
  January 1998 and that the comment period for the proposed rule ended on
  March 31, 1998—nearly a month before the “Section 610 Review” entry
  was published in the April 1998 edition of the Agenda.
• A DOT entry indicated that the Department’s Office of the Secretary of
  Transportation (OST) planned to issue an NPRM in July 1998 regarding its

  10
     The agencies indicated that the remaining 10 entries involved rules that would have a significant
  economic impact on a substantial number of small businesses (5 entries); businesses and governments
  (2 entries); businesses and other organizations (1 entry); or businesses, governments, and other
  organizations (2 entries).




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  drug and alcohol procedural rules “that will not include major substantive
  changes to how we test but rather to update and clarify provisions of the
  rules.” The entry also noted that the comment period for a previously
  published advance notice of proposed rulemaking (ANPRM) that
  announced the review had ended in July 1996.
• Another DOT/OST entry indicated that the Department was reexamining
  its regulations on computer reservation systems to “see whether they
  should be readopted and, if so, whether they should be changed.”
  However, the entry indicated that the extended comment period for the
  ANPRM announcing the review had ended in February 1998, and that an
  NPRM was planned in April 1998.
• Another entry indicated that DOT’s Research and Special Programs
  Administration (RSPA) planned to issue a proposed rule in September
  1998 amending the Hazardous Materials Regulations in several specific
  ways. For example, the entry said RSPA would (1) provide for the
  manufacture of compressed gas cylinders to certain new DOT
  specifications; (2) revise requirements applicable to the maintenance,
  requalification, and repair of all DOT specification cylinders; and (3)
  simplify the requirements for filling cylinders. Although the entry said that
  a small entities review under section 610 would be included as part of this
  action, the entry indicated that the agency had already decided what
  actions it would take and was not soliciting public comments to determine
  whether the existing rule should be continued, eliminated, or revised.
• An FTC entry indicated that the agency was conducting a review of a rule
  related to imitation political and imitation numismatic items, and that it
  had requested comments on the rule “with particular emphasis on the
  effect on small businesses.” However, the entry also indicated that the
  comment period for the review ended on May 27, 1997—11 months before
  the date this “Section 610 Review” notice was printed in the Agenda.


  One of the three remaining “Section 610 Review” entries in the April 1998
  Unified Agenda did not appear to satisfy the subsection 610(c) requirement
  that the agency describe the rule to be reviewed and state why it was
  needed. The Federal Reserve System indicated in one of its Agenda entries
  that it was reviewing its regulations in response to the requirements of
  section 303 of the Riegle Community Development and Regulatory
  Improvement Act of 1994. The entry also indicated that the Board was
  reviewing “Regulation B, Equal Credit Opportunity” and “Regulation Z,
  Truth in Lending.” However, the entry did not otherwise describe these
  regulations or explain why they were needed.




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                           The two remaining entries—one each from DOL and EPA—appeared to
                           satisfy all of the subsection 610(c) notification requirements. For example,
                           the EPA entry indicated that the agency was initiating a review of its 1988
                           rule on standards of performance limiting emissions of particulate matter
                           from new residential wood heaters. EPA said the review would be
                           completed by March 1999 and was intended to “determine if the rule
                           should be continued without change, or should be amended or rescinded,
                           to minimize adverse economic impacts on small entities.” EPA also
                           described why the rule was necessary (wood heaters were said to cause or
                           contribute significantly to air pollution) and said that it had determined
                           that the rule would have a significant impact on a substantial number of
                           small entities. Finally, EPA said that it was soliciting comments on a
                           number of factors, including the rule’s complexity, overlap with other
                           rules, and the degree to which technology or other factors have changed.

Only One of the November   On July 8, 1998, the Acting Administrator of OIRA sent a memorandum to
                           regulatory policy officers at executive departments and agencies
1998 Agenda Entries        describing guidelines and procedures for publishing what eventually
Appeared to Satisfy        became the November 1998 edition of the Unified Agenda. In the
Subsection 610(c)          memorandum attachment, he repeated the observations in OIRA’s June
Requirements               1997 and January 1998 memorandums regarding the use of the Agenda to
                           satisfy the subsection 610(c) requirement. Although the memorandum
                           referenced our April 1997 report, it did not specifically note that agencies’
                           section 610 entries should involve rules with a SEISNSE and should
                           describe forthcoming reviews, not reviews that the agencies had already
                           completed.

                           As previously mentioned, the November 1998 edition of the Unified
                           Agenda contained 4,560 entries that were printed on nearly 1,400 pages of
                           the Federal Register. We identified 31 entries from 8 agencies with the
                           “Section 610 Review” or “Section 610 Rule” notation after the title. We
                           examined these 31 entries and concluded that only 1 of them appeared to
                           satisfy all of the notification requirements in subsection 610(c). In 24 of the
                           entries, the “Regulatory Flexibility Analysis Required” field was coded
                                                                              11
                           “No” (17 entries) or “Undetermined” (7 entries). Because this field was
                           intended to identify rules with a SEISNSE, and because section 610
                           reviews are, by definition, reviews of existing rules, we concluded that (1)
                           the existing rules being reviewed did not have a SEISNSE (either at the
                           11
                              The agencies indicated that the other entries involved rules that would have a significant economic
                           impact on a substantial number of small businesses (2 entries); businesses and governments (1 entry);
                           businesses and other organizations (1 entry); or businesses, governments, and other organizations (2
                           entries). EPA indicated in one of its entries that the rule would affect small entities, but did not
                           indicate what type(s) of entities would be affected.




                           Page 19                                                GAO/GGD-99-55 Regulatory Flexibility Act
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  time the final rules were published or at the time of the review) and (2) the
  entries should not have been identified as subsection 610(c) entries.

  Six of the seven remaining “Section 610 Review” entries in the November
  1998 Unified Agenda did not appear to satisfy the notification requirements
  in subsection 610(c) because they did not involve an existing rule that was
  to be reviewed pursuant to section 610 during the succeeding 12 months.
  These entries announced regulatory actions the agencies had taken, were
  taking, or planned to take, not a review to determine what actions to take,
  and included the following examples:

• A USDA section 610 review entry indicated that the Department’s
  Agricultural Marketing Service would be issuing a final rule consolidating
  federal milk marketing orders. The entry was exactly the same as it was in
  the April 1998 edition of the Agenda except that the November entry
  indicated the comment period for the proposed rule ended on April 30,
  1998, not March 31, 1998.
• Similarly, an FTC section 610 review entry updated an April 1998 entry on
  imitation numismatic and imitation political items, noting that the
  Commission had completed its review of the rule and took final action on
  July 7, 1998—more than 4 months before the publication of the November
  1998 edition of the Agenda.
• A Department of Justice entry indicated that the Department’s Immigration
  and Naturalization Service (INS) was planning to issue a final rule
  implementing a section in the Illegal Immigration Reform and Immigration
  Responsibility Act of 1996 (IIRIRA) that requires a reduction in the number
  of documents that may be accepted in the employment verification
  process. The entry stated that INS had published the proposed rule in
  February 1998, and that the comment period for the proposal closed in
  April 1998. The entry also said that INS was conducting a section 610
  review “in conjunction with IIRIRA implementation.” However, section 610
  reviews are intended to focus on existing rules, not rules that are in the
  process of being promulgated.


  The remaining entry was EPA’s update of its April 1998 announcement of a
  review of its standards of performance limiting emissions of particulate
  matter from new residential wood heaters. As was true of its April 1998
  announcement, the entry appeared to satisfy all of the subsection 610(c)
  notification requirements. The entry indicated that EPA was initiating a
  review of the rule under section 610 of the RFA to determine whether it
  should be continued, amended, or rescinded and again indicated that the
  review would be completed in March 1999. Although the entry’s



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                           “Regulatory Flexibility Analysis Required” field was coded “No,” the
                           abstract portion of the entry said that EPA had performed the analysis and
                           determined that the rule would have a significant impact on a substantial
                           number of small entities.

                           We discussed our findings regarding the previous objective with officials in
EPA and DOT Officials      EPA and DOT—the two agencies that had the most section 610 review
Said Section 610           entries in the April 1998 and November 1998 editions of the Unified
Entries Were               Agenda. These agencies’ efforts are noteworthy in that their entries
                           indicate an attempt to review their existing rules with a SEISNSE as
Appropriate                required by the RFA. However, these agencies also had the most entries
                           that we determined had been incorrectly labeled as section 610 reviews.
                           Officials in both agencies said they used some of their section 610 review
                           entries to inform the public about the results of previously conducted
                           reviews. Although the intent behind this effort is laudable, labeling these
                           entries as section 610 reviews is inconsistent with OIRA’s guidance and
                           RISC’s instructions and could lead to misinterpretation by the public. The
                           officials also said that they viewed certain fields in the Agendas differently
                           than we did, but RISC’s instructions are not clear regarding how these
                           fields should be completed.

Agencies’ Officials Said   Officials in both EPA and DOT said that they did not view the “Section 610
                           Review” notations after the titles of their entries or the section 610 review
They Attempted to Inform   indexes in both editions of the Unified Agenda as being limited to the
Public of Results of       announcements of forthcoming reviews. They said they also used the
Reviews                    notations and the indexes to indicate the results of reviews that had
                           already been completed, thereby “closing the loop” and allowing the public
                           to determine whether previously announced reviews had led to a
                           subsequent regulatory action (e.g., a proposed or final rule) or no change
                           in the underlying requirement. They also said that their entries make clear
                           which entries announce reviews in advance and which entries carry out
                           the agency’s practice of informing the public that a previously announced
                           review is complete. DOT officials said the RFA does not preclude
                           conducting a section 610 review after an agency announces its plans to
                           issue, or after issuing, an NPRM. In fact, they said a section 610 review can
                           be very effective at this stage. They said it was RISC that decided to
                           characterize entries with the “Section 610 Review” notation after the titles
                           as subsection 610(c) notices, and that RISC’s instructions do not preclude
                           using these entries to describe the results of previous reviews. They also
                           said that the preamble to their section of the Agenda says that their agenda
                           “includes those regulations to be reviewed under the RFA or those for
                           which review has been concluded since the last agenda.” Similarly, EPA




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officials said RISC’s approach of indexing announcements of both EPA’s
forthcoming and completed reviews together has created confusion.

Although EPA’s and DOT’s intent to keep the public informed about the
results of previously conducted section 610 reviews is laudable, that
approach is not consistent with RISC’s instructions in the front of the April
1998 and November 1998 editions of the Unified Agenda. RISC’s
instructions clearly stated that “[t]he notation ‘Section 610 Review’
following the title indicates that the agency has selected the rule for its
periodic review of existing rules under the Regulatory Flexibility Act (5
U.S.C. 610[c]).” Subsection 610(c) of the RFA requires agencies to publish
a list of rules “which are to be reviewed.” Also, the introduction to the
section 610 indexes in these Agenda editions said an agency that uses the
“Section 610 Review” notation after the titles of certain entries indicates
“the rules that it plans to review in the next year.” The introduction also
said, “the following index lists the regulatory actions for which agencies
included this designation.” RISC has used the same approach in its
instructions and in the introduction to the index in several editions of the
Agenda. Also, OIRA’s June 1997, January 1998, and June 1998
memorandum attachments describing guidelines and procedures for
publishing the Unified Agenda have similarly indicated that “Section 610
Review” entries would be used to identify “rules that your agency has
selected for review under section 610(c).” Therefore, DOT and EPA
should have been aware of how the “Section 610 Review” notation would
be interpreted.

On the basis of RISC’s instructions, the introduction to the section 610
review index in the Unified Agenda, and the statute, a member of the
public could reasonably assume that entries with the “Section 610 Review”
notation after the title and the section 610 index in the back of the Unified
Agenda would identify forthcoming reviews on which the public could
comment regarding whether the underlying rule should be continued
without change, amended, or eliminated. We made the same assumption
when we reviewed the April 1998 and November 1998 editions of the
Agenda, as well as when we reviewed the October 1996 and November
1997 editions of the Agenda. However, many of the agencies’ section 610
review entries appeared to indicate that the agencies had already
determined whether the underlying rule should be continued, amended, or
eliminated. As a result, we concluded that many of the agencies’ section
610 review entries were incorrectly labeled and did not meet the
requirements of the statute.




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Agency Officials Said They     In the April 1998 edition of the Unified Agenda, agencies were required to
                               complete a field within each entry entitled “Small Entities Affected.”
Identified Effect of Actions   RISC’s introduction to the Agenda said this field indicated “whether the
Being Announced, Not           rule is expected to have a significant economic impact on a substantial
Underlying Rules               number of ‘small entities’ as defined by the Regulatory Flexibility Act (5
                               U.S.C. 601 et seq.) and, if so, whether the small entities are businesses,
                               governmental jurisdictions, or organizations.” In the November 1998
                               edition of the Agenda, agencies had to complete a field entitled
                               “Regulatory Flexibility Analysis Required,” which the RISC instructions
                               said indicated whether an analysis is required by the RFA because “the
                               rule” is likely to have a SEISNSE.

                               EPA and DOT officials said they did not view the “Small Entities Affected”
                               or the “Regulatory Flexibility Analysis Required” fields as referring to the
                               underlying rule on which the agencies’ section 610 reviews were
                               conducted. They viewed these fields as referring to whatever regulatory
                               action was being announced by the Unified Agenda entry. Therefore, if an
                               entry announced a forthcoming review of an existing rule, they said the
                               “Small Entities Affected” or “Regulatory Flexibility Analysis Required”
                               field within that entry referred to the review being conducted. However,
                               DOT officials said that because the RFA does not require a regulatory
                               flexibility analysis at the review stage, the Agenda should allow agencies a
                               “not applicable” response.

                               Neither RISC’s instructions in the Unified Agendas nor OIRA’s
                               memorandums instructing agencies on how the Agendas should be
                               prepared were clear regarding how these fields should be completed.
                               Nevertheless, DOT and EPA’s interpretation of this field is confusing when
                               taken in combination with the agencies’ characterization of these entries
                               as announcing section 610 reviews. A section 610 review is, by definition, a
                               review of an existing rule that has or had a SEISNSE. A notice under
                               subsection 610(c) identifies an existing rule with a SEISNSE that the
                               agency intends to review within the next 12 months. However, many of the
                               EPA and DOT entries that were characterized as section 610 reviews were
                               also characterized as either not having a SEISNSE or having an
                               “Undetermined” impact on small entities. As a result, we concluded that
                               these entries did not meet the requirements of subsection 610(c).

                               Subsection 610(a) of the RFA required agencies to publish a plan in the
DOT Updated Its 1981           Federal Register for the review of rules issued by the agencies that “have
Review Plan                    or will have” a SEISNSE. The statute says the plan must provide for the
                               review of all such rules “existing on the effective date of this chapter” (Jan.
                               1, 1981) within 10 years of that date and for the review of such rules



                               Page 23                                   GAO/GGD-99-55 Regulatory Flexibility Act
              B-282127




              adopted after the effective date within 10 years of their publication as final
              rules. A congressional review of agencies’ actions regarding this
              requirement indicated that nearly all of the major agencies had established
              these review plans. The statute says that the plans “may be amended by
              the agency at any time by publishing the revision in the Federal Register,”
              but it does not require such amendments.

              Our review of the April 1998 and November 1998 editions of the Unified
              Agenda and our discussions with officials from RISC and OIRA indicated
              that one agency—DOT—had updated its review plan. DOT published its
              original plan on June 29, 1981, and published an updated plan in the
                                                                                     12
              preamble to its agenda in the November 1998 edition of the Agenda. DOT
              said it updated the plan “to accomplish a more systematic review of all of
              its regulations.” DOT officials told us that the update reflects their
              understanding of how the RFA should be interpreted—that is, that the RFA
              calls for a review of all agency rules issued within the past 10 years that
              “have” a SEISNSE.

              In the updated plan, DOT said that its OST and all but one of the
              Department’s operating administrations (e.g., the Federal Aviation
              Administration, Coast Guard, and the National Highway Traffic Safety
              Administration) developed a plan for the analysis and review of all their
              rules between 1998 and 2008, although some administrations with smaller
              regulatory programs expected to complete the reviews in less than 10
              years. Generally, the agencies divided their rules into 10 different groups
              and planned to analyze 1 group each year, requesting public comment on
              the timing of the reviews. The analysis is to first determine whether any
              rule published in the previous 10 years has a SEISNSE, and the results of
              the reviews will be published in each October’s Unified Agenda. For any
              rules that have a SEISNSE, DOT plans to indicate that it will do a section
              610 review to determine whether the impact of the rules can be lessened
              and will describe the review in detail.

              EPA officials said they do not believe that their 1981 review plan needs to
              be updated. They said they understand the RFA to require review of all
              rules that had a SEISNSE at the time the final rule was promulgated, and
              that their plan reflects that understanding. They also noted that the RFA
              does not require agencies to update their review plans.

              Only a few agencies had any entries in the April 1998 and November 1998
Conclusions   editions of the Unified Agenda that they characterized as section 610
              12
                   For a copy of the plan, see 63 FR 62030.




              Page 24                                         GAO/GGD-99-55 Regulatory Flexibility Act
                  B-282127




                  reviews. Our analysis of previous editions of the Agenda indicated that
                  some of the agencies that did not have section 610 entries appeared to
                  engage in rulemaking with a SEISNSE and therefore could be subject to
                  the review requirements. However, it is impossible to know whether
                  certain rules issued within the past 10 years with a SEISNSE still remain to
                  be reviewed. Agencies differ regarding which rules need to be reviewed—
                  those that had a SEISNSE at the time they were published as final rules or
                  those that have a SEISNSE at the time of the review. Also, no data are
                  readily available to identify which rules should be reviewed or have
                  already been reviewed.

                  For several years, RISC’s instructions in the front of the Unified Agenda,
                  its introduction to the Agenda’s section 610 index, and OIRA’s guidelines
                  have indicated that entries with “Section 610 Review” notations after the
                  titles will be viewed as announcements of forthcoming reviews of existing
                  rules on which the public can comment. However, RISC’s and OIRA’s
                  instructions have not prevented some Agenda entries from being
                  incorrectly labeled as section 610 reviews even though those entries did
                  not meet the requirements of subsection 610(c).

                  We do not believe that the agencies intentionally attempted to mislead the
                  public. Part of the problem appears to be that some agencies want to
                  inform the public about the results of previously conducted section 610
                  reviews. Although this intent is laudable, it contributes to confusion
                  regarding which of the agencies’ “Section 610 Review” entries are actually
                  subsection 610(c) notices of forthcoming reviews on which the public can
                  comment. Also, RISC instructions are unclear regarding whether the
                  “Regulatory Flexibility Analysis Required” field within the entries refers to
                  the underlying rule being reviewed or to the action described in the entry
                  (e.g., the section 610 review itself).

                  If Congress is concerned that section 610 of the RFA has been subject to
Matter for        varying interpretations, it may wish to consider specifying whether section
Congressional     610 reviews should be done of rules that had a SEISNSE at the time they
Consideration     were published as final rules or whether such reviews should be done of
                  rules that, at the time of the review, have a SEISNSE.

                  In fulfilling his responsibilities under Executive Order 12866 to specify
Recommendations   how agencies should prepare their agendas, we recommend that the Acting
                  OIRA Administrator instruct agencies that choose to use the Unified
                  Agenda to satisfy the requirements of subsection 610(c) of the RFA on how
                  to do so. Specifically, the Acting OIRA Administrator should require
                  agencies to indicate in the notation after the entry titles whether their



                  Page 25                                  GAO/GGD-99-55 Regulatory Flexibility Act
                      B-282127




                      section 610 review entries are forthcoming reviews (e.g., with the notation
                      “New Section 610 Review”) or report the results of previously conducted
                      reviews (e.g., with the notation “Results of Section 610 Review”).

                      We also recommend that the Acting Executive Director of RISC reflect this
                      difference between forthcoming and completed section 610 reviews in the
                      Unified Agenda’s index to entries that agencies have designated for section
                      610 review. Finally, we recommend that the Acting Executive Director
                      clarify whether the “Regulatory Flexibility Analysis Required” field in a
                      section 610 review entry refers to the underlying rule being reviewed or to
                      the effect of the review itself.

                      On March 8, 1999, we sent a draft of this report to the Director of OMB and
Agency Comments and   the Acting Executive Director of RISC for their review and comment. On
Our Evaluation        March 16, 1999, the Acting Administrator of OIRA provided OMB’s
                      comments on the draft report. He said that he agreed with the concerns we
                      raised in the report, and he also said OIRA is working with RISC and the
                      agencies so that the format of the Unified Agenda more clearly
                      differentiates between the subsection 610(c) notices and the results of
                      section 610 reviews.

                      On March 16, 1999, the Acting Executive Director of RISC provided written
                      comments on the draft report, which are reproduced in appendix I. The
                      Acting Executive Director agreed with our first recommendation that the
                      Unified Agenda’s index reflect the difference between forthcoming and
                      completed section 610 reviews. He suggested creating a separate field
                      within each agenda entry showing whether the entry is a section 610
                      review or the result of a previously completed review. We believe this
                      approach would address the underlying problem that we identified. The
                      RISC Acting Executive Director also agreed with our second
                      recommendation that he clarify whether the “Regulatory Flexibility
                      Analysis Required” field in a section 610 review entry refers to the
                      underlying rule being reviewed or to the effect of the review itself. He
                      proposed adding a general statement in the data call guidelines, the
                      instructions for submitting data, and the RISC preamble that the
                      information agencies provide in the Unified Agenda applies to the activity
                      being reported and not the underlying rule being reviewed or amended.
                      Again, we believe this approach would address the underlying problem we
                      identified.

                      On March 8, 1999, we also provided relevant portions of the draft report to
                      officials in the Departments of HHS, Transportation, and the Treasury;
                      EPA; and SBA for their review and comment. Each of the agencies



                      Page 26                                 GAO/GGD-99-55 Regulatory Flexibility Act
B-282127




provided suggestions to clarify particular sections of the report, which we
included in this report as appropriate. DOT officials offered a number of
substantive comments clarifying and elaborating their position regarding
the RFA’s requirements, which we incorporated as appropriate. For
example, we noted that DOT believes the RFA does not preclude
conducting a section 610 review after announcing its plans to issue, or
after issuing, an NPRM. We also added a sentence indicating that we did
not believe that the agencies intentionally misled the public regarding the
nature of their section 610 review announcements. After reviewing those
changes, the DOT officials said they agreed with the need to clarify how
the Unified Agenda should be used to reflect section 610 reviews, but had
no further comment. Officials in HHS, Treasury, and SBA generally agreed
with our characterizations of their section 610 review actions in the draft
report.

The Director of EPA’s Office of Regulatory Management and Information
provided written comments on the draft report, which are reproduced in
appendix II. The Director said our report documented that the
requirements of section 610 are open to several legitimate interpretations,
and that members of the public could be confused by the “distinct and
mutually inconsistent compliance procedures” that agencies have
established. He said the report reflects the elements of EPA’s
implementation of section 610, and he also said EPA agreed with its
general thrust that agencies need more consistent guidance and
coordination. Specifically, he said EPA (1) agrees with the
recommendation that RISC clarify the Agenda’s instructions concerning
labeling of section 610 reviews and (2) favors creating a new index that
would identify certain actions as the “Results of Section 610 Reviews.” He
said RISC’s current indexing procedure creates confusion by mixing
forthcoming and completed reviews together without distinguishing them
from one another.

Regarding our second recommendation, the Director said a section 610
review is not a regulation and therefore cannot have a SEISNSE.
Nevertheless, he said EPA would welcome a consistent policy from RISC
on whether the “Regulatory Flexibility Analysis Required” field refers to
the current action or the underlying rule.

However, the Director said he was concerned that relevant context is
missing from the discussion of many of EPA’s actions that would
fundamentally alter the reader’s evaluation of EPA’s procedures. He said
EPA’s entries make clear which ones comply with the agency’s
responsibility to announce section 610 reviews in advance and which ones



Page 27                                 GAO/GGD-99-55 Regulatory Flexibility Act
B-282127




carry out the agency’s practice of informing the public that a previously
announced review is complete. He suggested (1) editing the draft report to
eliminate “potentially misleading statements” that make it appear that EPA
makes unsubstantiated claims about its compliance with section 610 and
(2) eliminating EPA’s announcements of completed reviews from our
count of announcements of forthcoming reviews that comply with the
statute. He suggested that we recommend procedures to identify
rulemakings that are developed as a result of section 610 reviews or to
restrict such notations.

We agree that the text of EPA’s entries indicated that the agency had
completed its reviews. However, the “Section 610 Review” notations after
the titles of those entries and the placement of those entries in an index of
subsection 610(c) notice entries also indicated that EPA was announcing
forthcoming reviews. RISC and OIRA notified EPA and the other agencies
that any entries with “Section 610 Review” after the title and entries in the
Agenda’s section 610 review index would be regarded as subsection 610(c)
         13
notices. Therefore, EPA and the other agencies should have been aware
that these “Section 610 Review” entries could be interpreted as
announcements of forthcoming reviews. We do not believe that EPA or the
other agencies intended to mislead the public regarding these reviews, and
we have added a statement to that effect in our conclusions in the final
report. We also more clearly reflected EPA’s position regarding these
issues, but did not change our count of announcements of forthcoming
reviews that comply with the statute.

As agreed, unless you announce the contents of this report earlier, we plan
no further distribution until 30 days from the date of this letter. At that
time, we will send copies of this report to Senator John F. Kerry, Ranking
Minority Member of this Committee; and Representative James M. Talent,
Chairman, and Representative Nydia M. Velazquez, Ranking Minority
Member, House Committee on Small Business. We are also sending copies
to the Honorable Jacob Lew, Director of OMB; the Honorable Donna E.
Shalala, Secretary of HHS; the Honorable Rodney E. Slater, Secretary of
13
   For example, OIRA’s June 1997, January 1998, and June 1998 memorandum attachments describing
guidelines and procedures for publishing the Unified Agenda indicated that “Section 610 Review”
entries would be used to identify “rules that your agency has selected for review under section 610(c).”
For several editions of the Agenda, RISC’s instructions in the front of the Agendas clearly stated that
“[t]he notation ‘Section 610 Review’ following the title indicates that the agency has selected the rule
for its periodic review of existing rules under the Regulatory Flexibility Act (5 U.S.C. 610[c]).”
Subsection 610(c) of the RFA requires agencies to publish a list of rules “which are to be reviewed.”
Also, the introduction to the section 610 indexes in these Agenda editions said an agency that uses the
“Section 610 Review” notation after the titles of certain entries indicates “the rules that it plans to
review in the next year.” The introduction also said, “the following index lists the regulatory actions for
which agencies included this designation.”




Page 28                                                  GAO/GGD-99-55 Regulatory Flexibility Act
B-282127




Transportation; the Honorable Robert E. Rubin, Secretary of the Treasury;
the Honorable Carol M. Browner, Administrator of EPA; the Honorable
Aida Alvarez, Administrator, SBA; and Ronald C. Kelly, Acting Executive
Director, RISC. We will make copies available to others on request.

Major contributors to this report were Curtis Copeland, Assistant Director;
Theresa Roberson, Evaluator-in-Charge; and Alan N. Belkin, Assistant
General Counsel. Please contact me at (202) 512-8676 if you or your staff
have any questions.

Sincerely yours,




L. Nye Stevens
Director
Federal Management
   and Workforce Issues




Page 29                                 GAO/GGD-99-55 Regulatory Flexibility Act
Contents



Letter                                                                                             1


Appendix I                                                                                        32

Comments From the
Regulatory
Information Service
Center
Appendix II                                                                                       34

Comments From the
U.S. Environmental
Protection Agency
Tables                Table 1: Twelve Agencies Had at Least 10 Entries With a                     13
                        SEISNSE in the April 1998 and November 1998
                        Editions of the Unified Agenda
                      Table 2: Six Agencies Generally Had at Least 10 Entries                     14
                        With a SEISNSE in Previous Editions of the Unified
                        Agenda




                      Page 30                                GAO/GGD-99-55 Regulatory Flexibility Act
Contents




Abbreviations

ANPRM       Advance Notice of Proposed Rulemaking
DOL         Department of Labor
DOT         Department of Transportation
EPA         Environmental Protection Agency
FCC         Federal Communications Commission
FTC         Federal Trade Commission
HHS         Department of Health and Human Services
IIRIRA      Illegal Immigration Reform and Immigration Responsibility Act of 1996
INS         Immigration and Naturalization Service
NPRM        Notice of Proposed Rulemaking
OIRA        Office of Information and Regulatory Affairs
OST         Office of the Secretary of Transportation
RFA         Regulatory Flexibility Act
RISC        Regulatory Information Service Center
RSPA        Research and Special Programs Administration (Transportation)
SBA         Small Business Administration
SEISNSE     Significant Economic Impact on a Substantial Number of Small Entities


Page 31                                  GAO/GGD-99-55 Regulatory Flexibility Act
Appendix I

Comments From the Regulatory Information
Service Center




              Page 32       GAO/GGD-99-55 Regulatory Flexibility Act
Appendix I
Comments From the Regulatory Information Service Center




Page 33                                      GAO/GGD-99-55 Regulatory Flexibility Act
Appendix II

Comments From the U.S. Environmental
Protection Agency




              Page 34       GAO/GGD-99-55 Regulatory Flexibility Act
Appendix II
Comments From the U.S. Environmental Protection Agency




Page 35                                      GAO/GGD-99-55 Regulatory Flexibility Act
Appendix II
Comments From the U.S. Environmental Protection Agency




Page 36                                      GAO/GGD-99-55 Regulatory Flexibility Act
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