GAO-04-676T, Paperwork Reduction Act: Agencies report Slight Decreases in Burden Estimates and Violations

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Testimony:

Before the Subcommittee on Energy Policy, Natural Resources and
Regulatory Affairs, Committee on Government Reform, House of
Representatives:

For Release on Delivery Expected at 2:00 p.m. EDT Tuesday, April 20,
2004:

PAPERWORK REDUCTION ACT:

Agencies' Paperwork Burden Estimates Due to Federal Actions Continue to
Increase:

Statement of Patricia A. Dalton, Director
Strategic Issues:

GAO-04-676T:

GAO Highlights:

Highlights of GAO-04-676T, a testimony before the Subcommittee on
Energy Policy, Natural Resources and Regulatory Affairs, Committee on
Government Reform, House of Representatives

Why GAO Did This Study:

The Paperwork Reduction Act (PRA) requires federal agencies to minimize
the paperwork burden they impose on the public. The act also requires
agencies to obtain approval from the Office of Management and Budget
(OMB) before collecting covered information. At the Subcommittee’s
request, GAO examined changes during the past fiscal year in federal
agencies’ paperwork burden estimates and their causes, focusing on the
Internal Revenue Service (IRS). GAO also examined changes in the
number of violations of the PRA.

What GAO Found:

As of September 30, 2003, federal agencies estimated that there was
about 8.1 billion “burden hours” of paperwork governmentwide. While it
may appear that the paperwork burden decreased by about 116 million
burden hours from last year, it is important to note that most of the
reduction was achieved through adjustments—actions occurring outside of
the agencies’ control or as a result of reestimates of current
paperwork requirements—and not through agency-initiated actions. In
fact, the total paperwork burden, exclusive of adjustments, actually
increased by about 72 million burden hours. IRS alone accounted for
about 6.5 billion burden hours (81 percent) of the governmentwide
burden-hour estimate as well as for most of the burden-hour reduction
attributable to adjustments.

OMB and the federal agencies identified 223 violations of the PRA that
occurred during fiscal year 2003—a slight reduction in the number of
violations that were reported last year, but still progress from fiscal
year 1998, when there were over 850 violations. OMB continues to take
several actions to address PRA violations since last year’s hearing.
Still, 223 violations of the law during a single year continue to be
troubling and should not be tolerated. OMB and the agencies can do more
to ensure that the PRA is not violated.

IRS Accounted for Most of the Federal Paperwork Burden-Hour Estimate
as of September 30, 2003:

[See PDF for image]

[End of figure]

What GAO Recommends:

GAO is not making any recommendations. However, because IRS accounts
for most of the federal paperwork and therefore has a determining
impact on the governmentwide burden-hour estimate, OMB could focus
more of its burden reduction efforts on that agency. Also, OMB and the
agencies could do more to reduce violations. For example, OMB could
promote the use of “best practices” used in agencies with good
compliance records.

www.gao.gov/cgi-bin/getrpt?GAO-04-676T.

To view the full product, including the scope and methodology, click on
the link above. For more information, contact Patricia A. Dalton at
(202) 512-6806 or daltonp@gao.gov.

[End of section]

Mr. Chairman and Members of the Subcommittee:

I am pleased to be here today to discuss the implementation of the
Paperwork Reduction Act (PRA) of 1995, as amended. As you requested, I
will discuss changes in the estimated federal paperwork burden during
the past year, with a particular focus on the Internal Revenue Service
(IRS). I will also revisit an issue that we have discussed during
previous hearings before this Subcommittee--violations of the PRA in
which either information collections were not authorized by the Office
of Management and Budget (OMB) or those authorizations had expired.

In brief, federal agencies' estimate of federal paperwork at the end of
fiscal year 2003 stood at about 8.1 billion burden hours. While it may
appear that the overall paperwork burden decreased by about 116 million
burden hours from last year, the estimate does not tell the complete
story. First, the agencies' estimates are not precise and the changes
from year to year may not be meaningful. It is equally important to
understand how this reduction took place. Most of this reduction was
achieved through adjustments--caused by factors such as changes in the
population responding to a requirement or agency reestimates of the
burden associated with a collection of information compared to previous
paperwork estimates--and not through agency actions. In fact, the total
paperwork burden, exclusive of adjustments, actually increased by about
72 million burden hours to about 8.3 billion burden hours. Most of the
burden-hour reduction due to adjustments could be attributed to IRS.
IRS alone reduced its paperwork burden by 166.7 million burden hours
due to adjustments. For example, one IRS information collection
resulted in a reduction of 127 million burden hours, of which over 93
million burden hours were reduced as a result of adjustments to the
agency's burden-hour estimate for Form 1120 which is for U.S.
corporations reporting income taxes.

Also, our review of OMB's and federal agencies' information collection
budgets (ICB) identified 223 violations of the PRA that occurred during
fiscal year 2003--only a slight reduction in the number of violations
that were reported last year, but still progress from the more than 850
violations reported during fiscal year 1998. OMB deserves credit for
the reductions that have occurred in the past year. However, the
existence of 223 violations of the law during fiscal year 2003
continues to be troubling and should not be tolerated. We continue to
believe that OMB and the agencies can do more to ensure that the PRA is
not violated.

Background:

Before discussing these issues in detail, it is important to recognize
that a large portion of federal paperwork is necessary and most often
serves a useful purpose. Information collection is one way that
agencies carry out their missions. For example, IRS needs to collect
information from taxpayers and their employers to know the correct
amount of taxes owed. The U.S. Census Bureau collected information that
was used to reapportion congressional representation and is being used
for a myriad of other purposes. On several occasions, we have
recommended that agencies collect certain data to improve operations
and evaluate their effectiveness.[Footnote 1]

However, under the PRA, federal agencies are required to minimize the
paperwork burden they impose. The original PRA of 1980 established the
Office of Information and Regulatory Affairs (OIRA) within OMB to
provide central agency leadership and oversight of governmentwide
efforts to reduce unnecessary paperwork and improve the management of
information resources. In September 2003, the administration introduced
its six-point plan for the economy that was labeled "a full agenda for
the creation of jobs in America." One of the six points is the
streamlining of regulations and reporting requirements. This is seen by
the administration as a critical part of creating jobs and is
reiterated in the President's 2005 budget.

OIRA also has overall responsibility for determining whether agencies'
proposals for collecting information comply with the PRA.[Footnote 2]
Agencies must receive OIRA approval for each information collection
request before it is implemented. Section 3514(a) of the PRA requires
OIRA to keep Congress "fully and currently informed" of the major
activities under the act, and to submit a report to Congress at least
annually on those activities. The report must include, among other
things, a list of all PRA violations and a list of any increases in
burden. To satisfy this reporting requirement, OIRA develops a
governmentwide ICB by gathering data from executive branch agencies. In
December 2003, the OMB Director sent a bulletin to the heads of
executive departments and agencies requesting information to be used in
preparation for the fiscal year 2004 ICB (reporting on actions during
fiscal year 2003).

OIRA published its ICB for fiscal year 2003 (showing changes in
agencies' burden-hour estimates during fiscal year 2002) in April 2003.
OIRA officials told us that they did not expect to publish the ICB for
fiscal year 2004 until today's hearing. Therefore, we obtained
unpublished data from OIRA to identify changes in governmentwide and
agency-specific burden-hour estimates and PRA violations during fiscal
year 2003. We then compared the data to agencies' burden-hour estimates
and violations in previous ICBs to determine the changes in the data
over time.

"Burden hours" has been the principal unit of paperwork burden for more
than 50 years and has been accepted by agencies and the public because
it is a clear, easy-to-understand concept. However, it is important to
recognize that these estimates have limitations. Estimating the amount
of time it will take for an individual to collect and provide the
information or how many individuals an information collection will
affect is not a simple matter.[Footnote 3] Therefore, the degree to
which agency burden-hour estimates reflect real burden is unclear. IRS-
-which accounts for about 80 percent of the governmentwide burden--is
sufficiently concerned about the methodology it uses to develop burden
estimates that it is in the process of developing and testing
alternative means of measuring its paperwork burden. Nevertheless,
these are the best indicators of paperwork burden available, and we
believe they can be useful as long as their limitations are kept in
mind.

Scope and Methodology:

In conducting our review, we obtained from OIRA the individual
agencies' submissions to the ICB. These submissions contain the agency-
reported changes to the individual paperwork inventories, as well as
those violations of the PRA they identified as having occurred during
fiscal year 2003. We assessed the data reliability of the individual
agencies' burden-hour estimates and violations by (1) performing
electronic testing for obvious errors in accuracy and completeness, (2)
reviewing relevant documents such as OMB guidance in reporting burden-
hour estimates and violations and the dockets for selected information
collections, and (3) interviewing knowledgeable OMB officials. We
determined that the data were sufficiently reliable for the purpose of
this statement. We conducted our review from February through April
2004 in accordance with generally accepted government auditing
standards.

Small Decrease in the Governmentwide Paperwork Burden Reported for
2003, but Burden Due to Federal Actions Increases:

At the end of fiscal year 1995--just before the PRA of 1995 took
effect--federal agencies estimated that their information collections
imposed about 7 billion burden hours on the public. The amendment and
recodification of the PRA that year made several changes in federal
paperwork reduction requirements. One such change required OIRA to set
a goal of at least a 10 percent reduction in the governmentwide burden-
hour estimate for each of fiscal years 1996 and 1997, a 5 percent
governmentwide burden reduction goal in each of the next 4 fiscal
years, and annual agency goals that reduce burden to the "maximum
practicable opportunity." Therefore, if federal agencies had been able
to meet each of these goals, the 7 billion burden-hour estimate in 1995
would have decreased about 35 percent to about 4.6 billion hours by
September 30, 2001.

However, this reduction in paperwork burden did not occur. As of
September 30, 2001, the target date in the act, the federal paperwork
estimate had increased by about 9 percent to 7.6 billion burden hours.
Last year we reported that the federal paperwork estimate stood at 8.2
billion hours as of September 30, 2002. The increase from the previous
year (about 570 million burden hours) was the largest 1-year increase
since the act was recodified in 1995.

This year, the story, while on the surface may appear encouraging, is
not. The data we obtained from OIRA indicate that the governmentwide
paperwork estimate as of September 30, 2003, stood at 8.1 billion
burden hours. First, this is about 1.1 billion burden hours larger than
it was when the PRA took effect in 1995. In addition, while it appears
that there was a drop of about 116 million burden hours from the
previous year, were it not for adjustments to the burden estimate, the
federal government actually experienced an increase of about 72 million
burden hours in paperwork burden. However, even at 8.1 billion burden
hours, the governmentwide paperwork estimate is 3.5 billion burden
hours higher than the act's target estimate at the end of September 30,
2001.

The overall burden-hour estimate does not tell the complete story
however. First, the agencies' estimates are not precise and the changes
from year to year may not be meaningful. It is equally important to
understand how the reduction took place. As table 1 shows, were it not
for the burden-hour reduction of about 182 million due to adjustments,
there was an increase in the paperwork burden of 72 million burden-
hours. Table 1 also shows that only a few agencies' paperwork estimates
changed substantially during fiscal year 2003. The Department of
Homeland Security (DHS) was created during fiscal year 2003 and by the
end of the fiscal year had an estimated 78.2 million burden hours of
paperwork. Most of the DHS paperwork burden was the result of
requirements associated with the paperwork inventories that were
combined in establishing DHS.[Footnote 4] Three departments--Defense,
Labor, and the Treasury--exhibited substantial decreases in their
estimated burdens, with Treasury's decrease far outstripping the
others. However, much of the Treasury's burden-hour reduction was due
to adjustments.

Table 1: Reported Changes in Federal Agencies' Burden-Hour Estimates
during Fiscal Year 2003:

Burden hours in millions.

Governmentwide;
FY 2002: estimate: 8,221.7;
Program changes: New statutes: 122.3;
Program changes: Lapses in OMB approval: (53.8);
Program changes: Agency action: 3.6;
Program changes: Total: 72.1;
Adjustments: (181.7);
Total change: (116.3);
FY 2003 estimate: 8,105.4.

Non-Treasury;
FY 2002: estimate: 1,471.8;
Total change: 44.8;
FY 2003 estimate: 1,516.6.

Department: Agriculture;
FY 2002: estimate: 88.6;
Program changes: New statutes: 0.7;
Program changes: Lapses in OMB approval: (0.1);
Program changes: Agency action: 9.7;
Program changes: Total: 10.3;
Adjustments: (1.5);
Total change: 8.8;
FY 2003 estimate: 97.4.

Department: Commerce;
FY 2002: estimate: 11.7;
Program changes: New statutes: 0.0;
Program changes: Lapses in OMB approval: 0;
Program changes: Agency action: 4.6;
Program changes: Total: 4.6;
Adjustments: 1.0;
Total change: 5.6;
FY 2003 estimate: 17.3.

Department: Defense;
FY 2002: estimate: 92.4;
Program changes: New statutes: 0;
Program changes: Lapses in OMB approval: (54.7);
Program changes: Agency action: 12.1;
Program changes: Total: (42.6);
Adjustments: 0.0;
Total change: (42.6);
FY 2003 estimate: 49.8.

Department: Education;
FY 2002: estimate: 38.4;
Program changes: New statutes: 2.8;
Program changes: Lapses in OMB approval: 0.0;
Program changes: Agency action: 0.6;
Program changes: Total: 3.4;
Adjustments: (1.3);
Total change: 2.1;
FY 2003 estimate: 40.5.

Department: Energy;
FY 2002: estimate: 3.8;
Program changes: New statutes: 0.1;
Program changes: Lapses in OMB approval: (0.1);
Program changes: Agency action: (0.4);
Program changes: Total: (0.4);
Adjustments: 0.0;
Total change: (0.4);
FY 2003 estimate: 3.4.

Department: Health and Human Services;
FY 2002: estimate: 224.8;
Program changes: New statutes: 4.1;
Program changes: Lapses in OMB approval: 3.7;
Program changes: Agency action: (5.3);
Program changes: Total: 2.5;
Adjustments: 26.4;
Total change: 28.9;
Department: FY 2003 estimate: 253.7.

Department: Homeland Security;
FY 2002: estimate: 0;
Program changes: New statutes: (0.5);
Program changes: Lapses in OMB approval: (2.0);
Program changes: Agency action: 37.5;
Program changes: Total: 35.1;
Adjustments: 43.0;
Total change: 78.2;
FY 2003 estimate: 78.2.

Department: Housing and Urban Development;
FY 2002: estimate: 21.9;
Program changes: New statutes: 0.0;
Program changes: Lapses in OMB approval: 1.0;
Program changes: Agency action: (0.1);
Program changes: Total: 0.9;
Adjustments: 2.9;
Total change: 3.8;
FY 2003 estimate: 25.7.

Department: Interior;
FY 2002: estimate: 7.7;
Program changes: New statutes: 0.0;
Program changes: Lapses in OMB approval: 0.0;
Program changes: Agency action: (0.1);
Program changes: Total: (0.1);
Adjustments: (0.1);
Total change: (0.2);
FY 2003 estimate: 7.5.

Department: Justice;
FY 2002: estimate: 46.6;
Program changes: New statutes: 0.7;
Program changes: Lapses in OMB approval: (0.1);
Program changes: Agency action: 0.1;
Program changes: Total: 0.1;
Adjustments: (32.0);
Total change: (31.2);
FY 2003 estimate: 15.3.

Department: Labor;
FY 2002: estimate: 189.2;
Program changes: New statutes: 0.2;
Program changes: Lapses in OMB approval: 0;
Program changes: Agency action: (0.1);
Program changes: Total: 0.1;
Adjustments: (29.8);
Total change: (29.7);
FY 2003 estimate: 159.5.

Department: State;
FY 2002: estimate: 29.2;
Program changes: New statutes: 0;
Program changes: Lapses in OMB approval: 0.0;
Program changes: Agency action: 0.3;
Program changes: Total: 0.3;
Adjustments: (0.1);
Total change: 0.2;
FY 2003 estimate: 29.4.

Department: Transportation;
FY 2002: estimate: 244.7;
Program changes: New statutes: 2.9;
Program changes: Lapses in OMB approval: (1.4);
Program changes: Agency action: 4.9;
Program changes: Total: 6.4;
Adjustments: (1.5);
Total change: 4.9;
FY 2003 estimate: 249.6.

Department: Treasury;
FY 2002: estimate: 6,750.4;
Program changes: New statutes: 105.4;
Program changes: Lapses in OMB approval: 0;
Program changes: Agency action: (70.0);
Program changes: Total: 35.4;
Adjustments: (197.0);
Total change: (161.6);
FY 2003 estimate: 6,588.8.

Department: Veterans Affairs;
FY 2002: estimate: 7.4;
Program changes: New statutes: 0.1;
Program changes: Lapses in OMB approval: 0;
Program changes: Agency action: (0.1);
Program changes: Total: 0.0;
Adjustments: 0;
Total change: 0.0;
FY 2003 estimate: 7.4.

Agency: Environmental Protection Agency;
FY 2002: estimate: 140.5;
Program changes: New statutes: 2.7;
Program changes: Lapses in OMB approval: 0 ;
Program changes: Agency action: 7.4;
Program changes: Total: 10.1;
Adjustments: (1.8);
Total change: 8.3;
FY 2003 estimate: 148.3.

Agency: Federal Acquisition Regulations;
FY 2002: estimate: 24.5;
Program changes: New statutes: 0;
Program changes: Lapses in OMB approval: 0;
Program changes: Agency action: (0.8);
Program changes: Total: (0.8);
Adjustments: 6.9;
Total change: 6.1;
FY 2003 estimate: 30.6.

Agency: Federal Communications Commission;
FY 2002: estimate: 26.8;
Program changes: New statutes: 0.1;
Program changes: Lapses in OMB approval: (0.2);
Program changes: Agency action: 1.1;
Program changes: Total: 1.0;
Adjustments: (1.1);
Total change: (0.1);
FY 2003 estimate: 26.7.

Agency: Federal Deposit Insurance Corporation;
FY 2002: estimate: 9.9;
Program changes: New statutes: 0;
Program changes: Lapses in OMB approval: 0;
Program changes: Agency action: 0.0;
Program changes: Total: 0.0;
Adjustments: 0.1;
Total change: 0.1;
FY 2003 estimate: 10.0.

Agency: Federal Energy Regulatory Commission;
FY 2002: estimate: 4.4;
Program changes: New statutes: 0;
Program changes: Lapses in OMB approval: 0.0;
Program changes: Agency action: 0.0;
Program changes: Total: 0;
Adjustments: 0;
Total change: 0;
FY 2003 estimate: 4.4.

Agency: Federal Trade Commission;
FY 2002: estimate: 69.7;
Program changes: New statutes: 0.5;
Program changes: Lapses in OMB approval: 0;
Program changes: Agency action: 0.7;
Program changes: Total: 1.2;
Adjustments: (4.0);
Total change: (2.8);
FY 2003 estimate: 66.9.

Agency: National Aeronautics and Space Administration;
FY 2002: estimate: 6.0;
Program changes: New statutes: 0;
Program changes: Lapses in OMB approval: 0;
Program changes: Agency action: (0.2);
Program changes: Total: (0.2);
Adjustments: 0.0;
Total change: (0.2);
FY 2003 estimate: 5.8.

Agency: National Science Foundation;
FY 2002: estimate: 4.5;
Program changes: New statutes: 0;
Program changes: Lapses in OMB approval: 0;
Program changes: Agency action: 0;
Program changes: Total: 0;
Adjustments: 0.0;
Total change: 0.0;
FY 2003 estimate: 4.5.

Agency: Nuclear Regulatory Commission;
FY 2002: estimate: 8.3;
Program changes: New statutes: 0;
Program changes: Lapses in OMB approval: 0;
Program changes: Agency action: 0.0;
Program changes: Total: 0.0;
Adjustments: 0.5;
Total change: 0.5;
FY 2003 estimate: 8.8.

Agency: Securities and Exchange Commission;
FY 2002: estimate: 136.6;
Program changes: New statutes: 0.7;
Program changes: Lapses in OMB approval: 0;
Program changes: Agency action: 0.9;
Program changes: Total: 1.6;
Adjustments: 7.1;
Total change: 8.7;
FY 2003 estimate: 145.3.

Agency: Small Business Administration;
FY 2002: estimate: 2.8;
Program changes: New statutes: 0;
Program changes: Lapses in OMB approval: 0.0;
Program changes: Agency action: 0;
Program changes: Total: 0.0;
Adjustments: 0.0;
Total change: 0.0;
FY 2003 estimate: 2.8.

Agency: Social Security Administration;
FY 2002: estimate: 24.9;
Program changes: New statutes: 2.0;
Program changes: Lapses in OMB approval: 0 ;
Program changes: Agency action: 0.8;
Program changes: Total: 2.8;
Adjustments: 0.6;
Total change: 3.4;
FY 2003 estimate: 28.3.

Sources: OMB and agencies' ICB submissions.

Note: The General Services Administration submitted data on the Federal
Acquisition Regulatory Council. Data from the 27 departments and
agencies may not equal the governmentwide figure because smaller
agencies' requirements are also included. Cells with "0.0" values were
nonzero values rounded to zero. Cells with "0" entries were zero
values. Addition of individual elements may not equal totals due to
rounding.

[End of table]

It is important to understand how the agencies accomplish these
results. OIRA classifies modifications--either increases or decreases-
-in agencies' burden-hour estimates as either "program changes" or
"adjustments.":

* Program changes are the result of deliberate federal government
action (e.g., the addition or deletion of questions on a form) and can
occur as a result of new statutory requirements or agency-initiated
actions or through the expiration or reinstatement of OIRA-approved
collections.

* Adjustments are not the result of direct federal government action
but rather are caused by factors such as changes in the population
responding to a requirement or agency reestimates of the burden
associated with a collection of information. For example, if the
economy declines and more people complete applications for food stamps,
the resulting increase in the Department of Agriculture's paperwork
estimate is considered an adjustment because it is not the result of
deliberate federal action.

The agencies' ICB submissions identified what drove the changes in the
agencies' bottom-line burden-hour estimates during fiscal year 2003.
Some of the changes in the agencies' burden-hour estimates are the
results of legislative actions and are partially outside the agencies'
control. However, much of the burden-hour decrease experienced during
fiscal year 2003 was driven by agencies' adjustments to their
inventories of paperwork requirements and not through agency-initiated
actions. As table 2 shows, the number of burden hours attributable to
program changes has increased every fiscal year from 1998 to 2002.
During fiscal year 2003 the total paperwork burden, exclusive of
adjustments, increased again by about 72 million burden hours.

Table 2: Increases in Burden Hours due to Program Changes Between
Fiscal Years 1998 and 2003:

In millions.

2003; Total governmentwide burden-hour estimate: 8,105.4;
Number of burden hours due to program changes: 72.1.

2002; Total governmentwide burden-hour estimate: 8,223.2;
Number of burden hours due to program changes: 294.1.

2001; Total governmentwide burden-hour estimate: 7,651.4;
Number of burden hours due to program changes: 158.7.

2000; Total governmentwide burden-hour estimate: 7,361.0;
Number of burden hours due to program changes: 188.0.

1999; Total governmentwide burden-hour estimate: 7,183.9;
Number of burden hours due to program changes: 189.0.

1998; Total governmentwide burden-hour estimate: 6,951.1;
Number of burden hours due to program changes: 41.1.

Sources: OMB and agencies' ICBs.

[End of table]

IRS Burden-Hour Estimates Greatly Influence the Governmentwide
Paperwork Estimate:

We have previously reported that the increases in paperwork burden
experienced by the federal government were largely attributable to the
increases in IRS paperwork. For example, last year, when the government
reported an increase of 570 million burden hours, IRS accounted for
almost 60 percent (about 330 million burden hours) of the reported
increase. For fiscal year 2003, the decrease in the governmentwide
paperwork burden is also attributable to changes in IRS paperwork that
resulted in a decrease in burden. IRS reported a decrease of 131.4
million burden hours that was more than enough to offset the increases
experienced by the other federal agencies. Therefore, although all
agencies must ensure that their information collections impose the
least amount of burden possible, it is clear that the key to
controlling federal paperwork governmentwide lies in understanding the
influence of increases and decreases at IRS.

As of September 30, 2003, IRS accounted for about 99 percent of the
Department of the Treasury's burden-hour estimate--nearly 6,539.7
billion burden hours. In fact, as figure 1 shows, IRS accounted for
about 81 percent of the governmentwide burden-hour estimate (up from
about 75 percent in September 1995). Other agencies with burden-hour
estimates of 100 million hours or more as of that date were the
Departments of Health and Human Services (HHS), Labor (DOL), and
Transportation (DOT), the Environmental Protection Agency (EPA); and
the Securities and Exchange Commission. Still, because IRS constitutes
such a significant portion of the governmentwide burden-hour estimate,
changes in IRS's estimate can have a significant--and even
determinative--effect on the governmentwide estimate.

Figure 1: IRS Accounted for Most of the Federal Paperwork Burden-Hour
Estimate as of September 30, 2003:

[See PDF for image]

Note: The governmentwide burden-hour estimate as of September 30, 2003,
was about 8.1 billion burden hours.

[End of figure]

Treasury's ICB submission indicated that the decrease in the
department's estimate during fiscal year 2003 (about 162 million burden
hours) was largely achieved through adjustments. Decreases of 70
million burden hours due to agency actions and 190 million burden hours
due to adjustments were reported, while there was an increase of 105
million burden hours due to statutory requirements. According to the
ICB submission, this adjustment was largely driven by adjustments
associated with the Forms 1040 and 1040A that are used by individual
taxpayers to report their taxable incomes, and Form 1120, which is used
by corporations to compute their taxable income and tax liability.

During fiscal year 2003, IRS's paperwork burden decreased by about 70
million burden hours due to agency actions. As table 3 shows, five
information collections resulted in a reduction of about 64 million
burden hours as a result of implementing burden reduction initiatives
developed in previous fiscal years. Another 17 million burden-hour
reduction was achieved as a result of IRS changing paperwork
requirements not directed by a burden reduction initiative. However,
four of these information collections resulted in a burden-hour
decrease of over 190 million hours due to adjustments to the
collections. Since OMB does not require agencies to report on the
reasons for changes in paperwork burden due to adjustments in their ICB
submissions, we are unable to identify the underlying factors that
resulted in these decreases in IRS paperwork burden.

Table 3: IRS Information Collections with Burden-Hour Reductions of
500,000 or More Due to Agency Actions:

OMB control number: 1545-0074;
Title: 2003 Form 1040 and Schedules, U.S. Individual Income Tax
Returns;
Due to statutory changes: +15,974,817;
Due to agency actions: -9,875,098;
Due to adjustments: - 87,978,659;
Reason(s) for decrease: IRS made changes-- deletions of lines--to the
Form 1040 and its instructions and schedules. (9,664,549);
The number of new filers for Form 1040-V should have been an
adjustment instead of a program change. (210,549).

OMB control number: 1545-0074;
Title: 2003 Form 1040, U.S. Individual Income Tax Returns;
Due to statutory changes: +2,840,101;
Due to agency actions: -15,616,147;
Due to adjustments: [Empty];
Reason(s) for decrease: As part of the Burden Reduction Initiatives,
the Department of the Treasury decided to increase the threshold for
filing Schedule B (Form 1040) to $1,500. As a result, this changed the
number of filers. (15,616,147).

OMB control number: 1545-0085;
Title: 2002 Form 1040A and Schedules, U.S. Individual Income Returns;
Due to statutory changes: +4,219,190;
Due to agency actions: -992,751;
Due to adjustments: [Empty];
Reason(s) for decrease: IRS removed two check boxes on the Social
Benefits Worksheet for clarification purposes to reduce burden and
provide consistency with various products. (992,721).

OMB control number: 1545-0085;
Title: 2002 Form 1040 A and Schedules, U.S. Individual Income Tax
Returns;
Due to statutory changes: [Empty];
Due to agency actions: - 1,612,553;
Due to adjustments: [Empty];
Reason(s) for decrease: As part of the Burden Reduction Initiatives,
the Department of the Treasury decided to increase the threshold for
filing Schedule 1 (Form 1040A) from $400 to $1,500. As a result, this
changed the number of filers. (1,612,553).

OMB control number: 1545-0092;
Title: U.S. Income Tax Return for Estates and Trusts;
Due to statutory changes: 2,272,477;
Due to agency actions: -1,492,190;
Due to adjustments: [Empty];
Reason(s) for decrease: IRS deleted lines from the Schedule D worksheet and from Schedule I that offset an increase from added lines to Schedule D. (1,492,190).

OMB control number: 1545-0123;
Title: Form 1120 and Schedules, U.S. Corporation Income Tax Return;
Due to statutory changes: -4,439,447;
Due to agency actions: -29,316,584;
Due to adjustments: -93,263,395;
Reason(s) for decrease: As part of the Burden Reduction Initiatives,
the Department of the Treasury decided that corporations with total
receipts and assets of less than $250,000 are not required to complete
Schedules L, M-1, and M-2. (26,211,719);
IRS also made changes throughout Form 1120, schedules, and
instructions. (3,104,865).

OMB control number: 1545-0130;
Title: 2002 Form 1120S and Schedules, U.S. Income Tax Returns for an S
Corporation;
Due to statutory changes: [Empty];
Due to agency actions: -14,262,930;
Due to adjustments: [Empty];
Reason(s) for decrease: As part of the Burden Reduction Initiatives,
the Department of the Treasury decided that corporations with total
receipts and assets of less than $250,000 are not required to complete
Schedules L and M-1. (14,262,930).

OMB control number: 1545-0130;
Title: 2002 Form 1120S and Schedules, U.S. Income Tax Returns for an S
Corporation;
Due to statutory changes: +5,035,690;
Due to agency actions: -585,430;
Due to adjustments: [Empty];
Reason(s) for decrease: IRS deleted Schedule D (Part III-Capital Gains
Tax) because it was no longer relevant and added one line to Schedule
B. (585,430).

OMB control number: 1545-0890;
Title: 2002 Form 1120-A, U.S. Corporation Short-Form Income Tax Return;
Due to statutory changes: - 427,645;
Due to agency actions: -2,950,743;
Due to adjustments: - 11,045,000;
Reason(s) for decrease: As part of the Burden Reduction Initiatives,
the Department of the Treasury decided that corporations with total
receipts and assets of less than $250,000 are not required to complete
Parts III and IV. (2,576,794);
IRS also deleted lines from the form and deleted a form attachment.
(373,949).

OMB control number: 1545-0975;
Title: 2002 Form 1120-W and Schedules, Estimated Tax for Corporations;
Due to statutory changes: [Empty];
Due to agency actions: -549,735;
Due to adjustments: [Empty];
Reason(s) for decrease: IRS deleted 3 code references to Form 1120-W.
(549,000);
IRS deleted a line to Schedule A. (735).

OMB control number: 1545-1696;
Title: Political Organization Report of Contributions and Expenditures;
Due to statutory changes: [Empty];
Due to agency actions: 37,600;
Due to adjustments: -408,400;
Reason(s) for decrease: In its ICB submission, the Department of the
Treasury originally reported this as a net reduction of 370,800 burden
hours due to agency action. Our review of the information collection
request submission to OMB indicates that the majority of the reduction
should have been classified as an adjustment since IRS said it was
correcting a previous burden computation..

OMB control number: 1545-1722;
Title: Extraterritorial Income Inclusion, Form 8873;
Due to statutory changes: [Empty];
Due to agency actions: -520,000;
Due to adjustments: [Empty];
Reason(s) for decrease: IRS deleted 3 lines from the form. (520,000).

Sources: OMB and the Department of the Treasury.

[End of table]

While IRS achieved paperwork burden decreases through agency actions
and adjustments, it experienced a paperwork burden increase of about
105 million burden hours due to statutory requirements. According to
Treasury's ICB, the implementation of the Jobs and Growth Tax Relief
Reconciliation Act of 2003 resulted in an increase in IRS's paperwork
burden of about 55 million burden hours--about 51 percent of the IRS's
total increase due to statutory requirements.[Footnote 5] The ICB
indicates another 24 million burden-hour increase was due to changes to
sections of the Internal Revenue Code.[Footnote 6] Another 17 million
burden-hour increase resulted from implementation of the Community
Renewal Tax Relief Act of 2000.

Furthermore, IRS is responsible for over 80 percent of the
governmentwide information collection burden; therefore, its paperwork
estimate is often the driver of increases or decreases in the
governmentwide burden estimate. Without the 166.7 million burden-hour
reduction due to adjustments reported by IRS, governmentwide paperwork
would have increased during fiscal year 2003.

IRS Continues to Develop Program Initiatives to Reduce Its Burden
Estimate:

In our previous testimony, we reported that Treasury had indicated in
its ICB that it had taken a number of initiatives to reduce paperwork
burden. In fiscal year 2002, IRS decided to increase the threshold for
taxpayers having to file Schedule B (Form 1040) from $400 to $1,500.
Treasury estimated that more than 10 million fewer taxpayers would have
to file the schedule, about one-third of those who previously had to
file. In its recent ICB submission, Treasury reported that this
initiative resulted in a reduction of about 17.2 million burden hours.

Treasury also indicated in its ICB submission that it had taken
additional initiatives to reduce paperwork burden. For example, it has
decided to require certain employers to submit Form 941 annually,
instead of quarterly, in order to:

* reduce taxpayer burden,

* maintain current payment compliance levels, and:

* encourage the use of paperless filing.[Footnote 7]

Once Treasury, in consultation with other stakeholders (e.g., the
Social Security Administration, the U.S. Census Bureau, and the Small
Business Administration) has identified a group of taxpayers who would
be allowed to provide the required information annually, rather than
quarterly, it would experience a further reduction in its paperwork
burden. However, Treasury does not expect to implement this annual
reporting option until January 2006, and it could not estimate how many
burden hours would be reduced as a result of this action.

More Needs to Be Done to Reduce Paperwork Burden:

In summary, the agencies' information collection estimates for the
governmentwide ICB indicate that federal paperwork experienced its
first reduction since 1996, and that IRS continues to be a determining
factor in whether the federal government experiences a decrease or an
increase in its paperwork burden. While there is a small decrease in
the reported paperwork burden for fiscal year 2003, it is important to
note that most of the reduction was achieved through adjustments to
information collections and not through program changes, including
agency actions. Therefore, this reduction appears to be achieved as a
result of external factors, or as a result of reestimations of current
paperwork requirements. These adjustments are not actual reductions
experienced by the affected parties, rather, they are reestimations of
the number of people or businesses required to provide the information
or the time it takes to complete the form(s) used to collect the
information. In some cases these adjustments may be corrections of
mathematical errors. Exclusive of these adjustments, the paperwork
burden actually increased during fiscal year 2003.

Clearly, there is much that needs to be done to reduce the
governmentwide paperwork burden. Currently, the government's paperwork
burden estimate is nearly double the PRA target estimate for fiscal
year 2001 of 4.6 billion burden hours. In addition, one component of
the President's initiative to promote job growth focuses on reducing
regulatory and reporting requirements. However, paperwork burden
reduction goals and the means of achieving these goals were not
articulated in the President's 2005 budget.

Because IRS constitutes such a significant portion of the federal
burden, one strategy to address agency-initiated decreases is to focus
more of OIRA's burden-reduction efforts on IRS. As we reported last
year, five IRS information collections represented nearly half of the
governmentwide paperwork burden estimate. A small reduction in the
burden associated with those five collections could have a major effect
on reducing the paperwork burden governmentwide.

Agencies Report a Slight Reduction in PRA Violations:

I would now like to turn another topic that you asked us to address--
PRA violations. The PRA prohibits an agency from conducting or
sponsoring the collection of information unless (1) the agency has
submitted the proposed collection and other documents to OIRA, (2) OIRA
has approved the proposed collection, and (3) the agency displays an
OMB control number on the collection. The act also requires each agency
to establish a process to ensure that each information collection is in
compliance with these clearance requirements. OIRA is required to
submit an annual report to Congress that includes a list of all
violations. Under the PRA, no one can be penalized for failing to
comply with a collection of information subject to the act if the
collection does not display a valid OMB control number. OIRA may not
approve a collection of information for more than 3 years, and there
are currently over 8,100 approved collections.

As table 4 shows, the agencies indicated in their ICB submissions that
223 PRA violations occurred during fiscal year 2003 (i.e., were either
carried over from the previous year or were new violations). As in
previous years, most of these violations were collections for which
OIRA approvals had expired and had not been reauthorized. Five cabinet
departments were responsible for 57 percent of the violations--the
Departments of Agriculture, Commerce, Defense, Health and Human
Services, and Housing and Urban Development.

Table 4: Reported Violations of the PRA during Fiscal Year 2003:

Department/agency: Agriculture;
Expired: information: collections: 25;
Other violations: 7;
Total: violations: 32.

Department/agency: Commerce;
Expired: information: collections: 10;
Other violations: 4;
Total: violations: 14.

Department/agency: Defense;
Expired: information: collections: 27;
Other violations: 0;
Total: violations: 27.

Department/agency: Education;
Expired: information: collections: 2;
Other violations: 3;
Total: violations: 5.

Department/agency: Energy;
Expired: information: collections: 3;
Other violations: 0;
Total: violations: 3.

Department/agency: Health and Human Services;
Expired: information: collections: 21;
Other violations: 2;
Total: violations: 23.

Department/agency: Homeland Security;
Expired: information: collections: 18;
Other violations: 0;
Total: violations: 18.

Department/agency: Housing and Urban Development;
Expired: information: collections: 26;
Other violations: 0;
Total: violations: 26.

Department/agency: Interior;
Expired: information: collections: 1;
Other violations: 4;
Total: violations: 5.

Department/agency: Justice;
Expired: information: collections: 16;
Other violations: 0;
Total: violations: 16.

Department/agency: Labor;
Expired: information: collections: 0;
Other violations: 0;
Total: violations: 0.

Department/agency: State;
Expired: information: collections: 7;
Other violations: 1;
Total: violations: 8.

Department/agency: Transportation;
Expired: information: collections: 5;
Other violations: 1;
Total: violations: 6.

Department/agency: Treasury;
Expired: information: collections: 0;
Other violations: 0;
Total: violations: 0.

Department/agency: Veterans Affairs;
Expired: information: collections: 3;
Other violations: 0;
Total: violations: 3.

Department/agency: Environmental Protection Agency;
Expired: information: collections: 0;
Other violations: 0;
Total: violations: 0.

Department/agency: Federal Acquisition Regulation;
Expired: information: collections: 0;
Other violations: 0;
Total: violations: 0.

Department/agency: Federal Communications Commission;
Expired: information: collections: 4;
Other violations: 0;
Total: violations: 4.

Department/agency: Federal Deposit Insurance Corporation;
Expired: information: collections: 0;
Other violations: 0;
Total: violations: 0.

Department/agency: Federal Energy Regulatory Commission;
Expired: information: collections: 4;
Other violations: 0;
Total: violations: 4.

Department/agency: Federal Trade Commission;
Expired: information: collections: 0;
Other violations: 0;
Total: violations: 0.

Department/agency: National Aeronautics and Space Administration;
Expired: information: collections: 1;
Other violations: 1;
Total: violations: 2.

Department/agency: National Science Foundation;
Expired: information: collections: 0;
Other violations: 0;
Total: violations: 0.

Department/agency: Nuclear Regulatory Commission;
Expired: information: collections: 0;
Other violations: 0;
Total: violations: 0.

Department/agency: Securities and Exchange Commission;
Expired: information: collections: 2;
Other violations: 0;
Total: violations: 2.

Department/agency: Small Business Administration;
Expired: information: collections: 17;
Other violations: 2;
Total: violations: 19.

Department/agency: Social Security Administration;
Expired: information: collections: 0;
Other violations: 7;
Total: violations: 7.

Department/agency: Total;
Expired: information: collections: 192;
Other violations: 31;
Total: violations: 223.

Sources: OMB and agencies' ICB submissions.

[End of table]

Number of Violations Continues to Decline:

As figure 2 shows, the number of PRA violations that the agencies
identified has continued to fall over the past 6 fiscal years--from 872
violations during fiscal year 1998 to 223 during fiscal year 2003. The
223 violations reported for fiscal year 2003 is slightly less than the
number of violations reported in the previous fiscal year (244), but
still progress from the more than 850 violations reported during fiscal
year 1998. However, the agencies' ICBs showed that there were an
additional 24 information collections in fiscal year 2003 that appear
to be violations but were reported by the agencies as nonviolations.
According to OMB, these nonviolations were instances in which the
agencies allowed information collections to expire, and then determined
that they still needed to collect the information, and therefore
requested reinstatements for the information collections. OMB states
that in these instances, the agencies did not collect information
during the time lapse between the expiration date and reinstatement
date, and therefore the agencies did not commit any violations.

Figure 2: PRA Violations during the Past 6 Fiscal Years:

[See PDF for image]

Note: In fiscal year 2001, OMB reported the violations only for the
cabinet-level departments and EPA. Therefore, the data for that year do
not include information for 12 independent agencies included in the
other years.

[End of figure]

However, as figure 3 shows, our review of the violations reported by
the agencies indicates that while violations based on collections where
OIRA authorization had expired continue to decline, there was an
increase in the number of violations where the agencies had not
received OIRA approval prior to collecting the information. While OIRA
is able to track those violations where the authorization has expired,
it is unable to track, and control, those information collections that
had not received its approval.

Figure 3: Changes in Violations from Fiscal Years 2001 through 2003:

[See PDF for image]

[End of figure]

OIRA Continues to Emphasize Zero Tolerance for Violations:

In May 2003, the OIRA Administrator sent a memorandum to agency chief
information officers emphasizing the importance of "full compliance"
with the PRA. The Administrator said that "the recurring high level of
PRA violations, although decreasing over time, was unacceptable," and
that OIRA, together with the agencies, "can and must meet a goal of
full compliance." He continued to encourage agencies to review their
procedures for preventing future violations and the status of the
collections of the agencies' PRA inventories.

When OIRA issued its bulletin requesting data from the agencies for the
fiscal year 2004 ICB, it provided the agencies with three lists for
tracking violations in fiscal year 2003. The first list consisted of
all information collections in OIRA's inventory that expired and had
not been reinstated during fiscal year 2003. The second list consisted
of all information collections in its inventory that expired and were
reinstated during fiscal year 2003. For these lists, the agencies were
asked to verify the information and correct any missing or incorrect
information. In addition, for the list of expired and reinstated
collections, the agencies were asked to indicate if expirations were
intentional lapses (where the agencies did not collect information) or
violations. Thus, agencies were reminded of OIRA's efforts to reduce
the number of PRA violations.

OIRA Can Do More to Address Violations:

Although OIRA and the agencies have clearly made progress in reducing
the overall number of PRA violations in recent years, more progress is
needed. As I am sure that the Administrator would agree, 223 violations
of the law in 1 year is not acceptable. Agencies can and should achieve
OIRA's goal of zero violations.

As I noted earlier, OIRA has taken a number of steps during the past
year to try to address this problem. As we recommended last year, OIRA
has used its database to identify information collections that have
recently expired and attempted to determine whether the agencies are
continuing to collect the information. OIRA also continues to ask the
agencies to describe the procedures that they have in place to prevent
future violations. We believe that these actions resulted in the
improvements that occurred during fiscal year 2003 and will have
positive benefits for years to come.

However, OIRA still has not taken some of the actions that we
previously recommended to improve compliance with the PRA. For example,
OIRA could notify the budget side of OMB that an agency is collecting
information in violation of the PRA and encourage the appropriate
resource management office to use its influence to bring the agency
into compliance. OIRA could also encourage the use of "best practices"
in agencies with good records of PRA compliance. Agencies that have
recently eliminated their violations altogether (e.g., the DOL, DOT,
and Treasury) may have much to teach agencies that continue to violate
the act.

Although OIRA's current workload is clearly substantial, we do not
believe the kinds of actions that we suggest would require significant
additional resources. Primarily, the actions require a continued
commitment by OIRA leadership to improve the operation of the current
paperwork clearance process. However, we also recognize that OIRA
cannot eliminate PRA violations by itself. Federal agencies committing
these violations need to demonstrate a similar level of resolve.

Mr. Chairman, this completes my prepared statement. I would be pleased
to answer any questions.

Contacts and Acknowledgments:

For future information regarding this testimony, please contact
Patricia A. Dalton, Director, Strategic Issues, at (202) 512-6806, or
[Hyperlink, daltonp@gao.gov]. Other individuals who made key
contributions to this testimony were Leah Nash and Joseph Santiago.

(450298):

FOOTNOTES

[1] See U.S. General Accounting Office, Veterans' Health Care: VA Needs
Better Data on Extent and Causes of Waiting Times, GAO/HEHS-00-90
(Washington, D.C.: May 31, 2000); Public Housing: HUD Needs Better
Information on Housing Agencies' Management Performance, GAO-01-94
(Washington, D.C.: Nov. 9, 2000); and Environmental Information: EPA
Needs Better Information to Manage Risks and Measure Results, GAO-01-
97T (Washington, D.C:, Oct. 3, 2000).

[2] The act requires the director of OMB to delegate the authority to
administer all functions under the act to the administrator of OIRA,
but does not relieve the OMB director of responsibility for the
administration of those functions. Approvals are made on behalf of the
OMB director. In this testimony, we generally refer to OIRA or the OIRA
administrator wherever the act assigns responsibilities to OMB or the
director.

[3] See U.S. General Accounting Office, EPA Paperwork: Burden Estimate
Increasing Despite Reduction Claims, GAO/GGD-00-59 (Washington, D.C.:
Mar. 16, 2000), for how one agency estimates paperwork burden.

[4] For example, 10 information collections were contained within the
Immigration and Naturalization Service (INS) inventory. When the
President signed the Homeland Security Act of 2002 that transferred INS
into the newly established DHS, these information collections became
part of the new department's burden-hour estimate. These 10 information
collections accounted for almost 31 million burden hours--about 38
percent of the department's paperwork burden.

[5] Pub. L. No. 108-27.

[6] According to Treasury's ICB, changes were made to its paperwork
inventory as a result of requirements under sections 403(b), 457(b),
501(c), 679, and 3406 of the Internal Revenue Code.

[7] Form 941 is used by employers to report to IRS how much they paid
in employment taxes for their employees.