Senator: Even Small Agencies Need Watchdogs

. “I don’t know how you can be independent… if you owe your job to the head of the agency,” Sen. Claire McCaskill, D-Mo., said. . “I don’t know how you can be independent… if you owe your job to the head of the agency,” Sen. Claire McCaskill, D-Mo., said. Pablo Martinez Monsivais/AP

The 41 small federal agencies with no statutory inspector general are placing at risk more than $1 billion a year in budget authority, said Sen. Claire McCaskill, D-Mo., on Thursday.

In convening a hearing to lay the groundwork for a bill to add watchdogs, the chairwoman of the Homeland Security and Governmental Affairs Subcommittee on Financial and Contracting Oversight said, “When there is no oversight and no accountability, money gets wasted and mismanagement goes unaddressed.”

A bill McCaskill is preparing would consolidate the IG offices that have five or fewer full-time employees and assign larger IG offices to oversee other agencies that do not currently receive independent oversight.

McCaskill also suggested that agencies that occasionally hire an outside IG present a conflict of interest. “I don’t know how you can be independent… if you owe your job to the head of the agency,” she said. “It never made sense to me that you’d have an IG hired by the person they’re supposed to be overseeing.”

Witnesses appeared divided over the extent to which a full-time IG is worth the cost. Beryl Davis, director of financial management and assurance at the Government Accountability Office, said in prepared testimony that while “significant federal programs and agencies” need IG oversight, small IG offices “with limited resources might not have the ability to obtain the technical skills and expertise needed to provide adequate, cost-effective oversight.” GAO has recommended a case-by-case approach of hiring outside IGs from agencies with similar missions.

Hubert Sparks, IG for the Appalachian Regional Commission, said he didn’t believe “a full-time OIG presence at very small agencies is cost effective or necessary. Intermittent/part time presence by another OIG or one OIG responsible for several small entities can be effective and cost beneficial with the degree of service or need based on assessment of risk based on entity size, budget, programs and mandated audit requirements.”

The Overseas Private Investment Corp. has borrowed an IG, and the set-up is not ideal, said Michael Carroll, acting IG for the U.S. Agency for International Development, which has provided OPIC with services.

“OPIC has regarded oversight as negotiable,” he testified. “It has delayed related discussions with the predictable effect of limiting the amount of time available to perform oversight activities and possibly also increasing the costs of those activities….In addition to delaying the execution of agreements, OPIC has sought to limit the scope of those activities, sometimes ruling out support for oversight activities without understanding the requirements associated with them or consulting with our office.”

Osvaldo Gratacós, inspector general at the Export-Import Bank of the United States, said it is difficult to find a “one-size-fits-all” solution.

He suggested several options, including creating one IG office to provide oversight services to agencies with similar missions; developing shared services agreements between IG offices; centralizing administrative support services for different small agency IGs through larger IG offices and the Office of Personnel Management or the Council of the Inspectors General on Integrity and Efficiency; or placing small agencies that lack IGs “under the purview” of larger IG offices.

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