IGs Are a Taxpayer Bargain, Study Finds

Scholars show watchdogs save the government far more money than they cost.

The government’s 72 inspectors general—whose offices generate headlines but draw their share of attacks and budget reductions—also generate a large return on taxpayer investment, according to a study published Thursday by the Brookings Institution.

Governance studies scholars John Hudak and Grace Wallack call the watchdogs “among the most underappreciated and overly criticized institutions” in the federal government, despite their feats at “improving the effectiveness of government agencies while detecting and deterring instances of waste, fraud, and abuse,” they write.

The paper, titled “Sometimes cutting budgets raise deficits: The curious case of inspectors’ general return on investment,” offers data measuring the financial value of 19 agency IGs, plus an in-depth case study of the Internal Revenue Service’s enforcement operations.

From 2010-14, almost every IG office had a positive return on investment in most years, the paper found. During that period, the mean annual return on investment for IGs was 13.41, meaning for every dollar invested in the office’s operations, it recovered $13.41 for taxpayers. The median ROI was 6.38. The top revenue-returning IGs were at the Social Security Administration ($44 for every dollar invested); the Veterans Affairs Department ($38); and the Housing and Urban Development Department ($30).

Acknowledging that agency missions differ, and that some IG investigations and audits pay off only in the long term, the scholars note that IGs at the Justice and Treasury departments, for example, have ROIs that “are less than one, indicating that those offices cost more than they recover. This is not necessarily a reflection of an OIG that is not functioning well, but it may reflect an institution whose investigations focus more on management, personnel, or other nonmonetary operations.”

The case study of the IRS showed that it returned $9 to the U.S. Treasury for every dollar invested.

“Despite vitriol directed at the IRS by Congress, presidential candidates, and taxpayers, the public should love the IRS,” the scholars conclude. “The IRS is at the forefront of ‘keeping taxpayers honest’ and certainly saving the government tremendous sums of money.”

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