This is the accessible text file for GAO report number GAO-06-228T 
entitled 'Federal Rulemaking: Past Reviews and Emerging Trends Suggest 
Issues That Merit Congressional Attention' which was released on 
November 1, 2005. 

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as part 
of a longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the printed 
version. The portable document format (PDF) file is an exact electronic 
replica of the printed version. We welcome your feedback. Please E-mail 
your comments regarding the contents or accessibility features of this 
document to Webmaster@gao.gov. 

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

Testimony: 

Before the Subcommittee on Commercial and Administrative Law, Committee 
on the Judiciary, House of Representatives: 

For Release on Delivery Expected at 10:00a.m. EST Tuesday, November 1, 
2005: 

Federal Rulemaking: 

Past Reviews and Emerging Trends Suggest Issues That Merit 
Congressional Attention: 

Statement of J. Christopher Mihm: 
Managing Director, Strategic Issues: 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-228T] 

GAO Highlights: 

Highlights of GAO-06-228T, a testimony before the Subcommittee on 
Commercial and Administrative Law, Committee on the Judiciary, House of 
Representatives: 

Why GAO Did This Study: 

Federal regulation is one of the basic tools of government used to 
implement public policy. Agencies publish thousands of regulations each 
year to achieve goals such as ensuring that workplaces, air travel, and 
food are safe; that the nation’s air, water, and land are not polluted; 
and that the appropriate amount of taxes are collected. Because 
regulations affect so many aspects of citizens’ lives, it is crucial 
that rulemaking procedures and practices be effective and transparent. 

GAO, at the request of Congress, has prepared over 60 reports and 
testimonies during the past decade that review aspects of federal 
rulemaking procedures and practices. This testimony summarizes some of 
the general findings and themes that have emerged from GAO’s body of 
work on federal regulatory processes and procedures, including areas on 
which Congress might consider taking legislative action or sponsoring 
further study. GAO’s prior reports and testimonies contain a variety of 
recommendations to improve various aspects of rulemaking procedures and 
practices. 

What GAO Found: 

GAO’s prior evaluations highlighted both benefits and weaknesses of 
rulemaking procedures and practices in areas such as (1) regulatory 
analysis and accountability requirements, (2) presidential and 
congressional oversight of agency rulemaking, and (3) notice and 
comment rulemaking procedures under the Administrative Procedure Act 
(APA). 

GAO’s reviews identified at least four overall benefits associated with 
existing regulatory analysis and accountability requirements: 
encouraging and facilitating greater public participation in 
rulemaking; improving the transparency of the rulemaking process; 
increasing the attention directed to rules; and increasing expectations 
regarding the analytical support for proposed rules. On the other hand, 
GAO identified at least four recurring reasons why such requirements 
have not been more effective: unclear key terms and definitions; 
limited scope and coverage; uneven implementation by agencies; and a 
predominant focus on just one part of the regulatory process. 

With regard to executive branch and congressional oversight of 
agencies’ rulemaking, GAO has noted that efforts to increase 
presidential influence and authority over the regulatory process, 
through mechanisms such as the Office of Management and Budget’s 
reviews of agencies’ rulemaking, have become more significant over the 
years. However, mechanisms intended to increase congressional 
influence, such as procedures for disapproval of regulations under the 
Congressional Review Act, appear to have been less able to influence 
changes in agencies’ rules to date. 

GAO’s reviews of agencies’ compliance with rulemaking requirements 
under APA pointed out that agencies often did not published notices of 
proposed rulemaking (to solicit public comments) before issuing final 
rules, including some major rules with an impact of $100 million or 
more on the economy. APA provides exceptions to notice and comment 
requirements for “good cause” and other reasons, but GAO noted that 
agencies’ explanations for use of such exceptions were sometimes 
unclear. Also, several analytical requirements for proposed rules do 
not apply if an agency does not publish a proposed rule. However, some 
of the growth in final rules without proposed rules appeared to reflect 
increased use of “direct final” and “interim final” procedures intended 
for noncontroversial and expedited rulemaking. 

The findings and emerging issues reported in GAO’s body of regulatory 
work suggested four areas on which Congress might consider taking 
action or studying further: (1) generally reexamining rulemaking 
structures and processes, (2) addressing previously identified 
weaknesses of existing statutory requirements, (3) promoting additional 
improvements in the transparency of agencies’ rulemaking actions, and 
(4) opening a broader examination of how developments in information 
technology might affect the notice and comment rulemaking process. 

www.gao.gov/cgi-bin/getrpt?GAO-06-228T. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact J. Christopher Mihm at 
(202) 512-6806 or mihmj@gao.gov. 

[End of section] 

Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today to contribute to your overview of 
administrative law, process, and procedure, including issues associated 
with federal rulemaking. In my statement today, I will summarize some 
of the general findings and themes that have emerged from our body of 
work on federal regulatory processes and procedures, including areas on 
which the subcommittee might consider taking legislative action or 
sponsoring further study. 

In brief, our prior work identified important benefits of laws and 
executive orders designed to enhance federal rulemaking, such as 
enhanced transparency of the process. But we have also pointed out 
potential weaknesses and impediments to realizing expected improvements 
in the process, such as a lack of clarity in key terms and definitions 
associated with some regulatory analysis and accountability 
requirements. In addition, some trends and changes in the rulemaking 
environment that have emerged over the years might merit closer 
congressional attention and consideration of whether adjustments in 
federal rulemaking procedures and practices are needed to keep pace. 

Prior GAO Work Identified Benefits and Weaknesses of Rulemaking 
Procedures and Practices: 

Federal regulation, like taxing and spending, is one of the basic tools 
of government used to implement public policy. Agencies publish 
thousands of regulations each year to achieve goals such as ensuring 
that workplaces, air travel, and food are safe; that the nation's air, 
water, and land are not polluted; and that the appropriate amounts of 
taxes are collected. Because regulations affect so many aspects of 
citizens' lives, it is crucial that rulemaking procedures and practices 
be effective and transparent. Over the last decade, at the request of 
Congress, we have prepared over 60 reports and testimonies reviewing 
crosscutting aspects of those rulemaking procedures and 
practices.[Footnote 1] 

I would like to focus my remarks on topics or themes emerging from this 
work that are most relevant to this subcommittee's oversight agenda. 
These include: (1) regulatory analysis and accountability requirements, 
(2) presidential and congressional oversight of agency rulemaking, and 
(3) notice and comment rulemaking procedures under the Administrative 
Procedure Act (APA).[Footnote 2] 

Regulatory Analysis and Accountability Requirements: 

Congress has frequently asked us to evaluate the effectiveness of 
requirements that were initiated over the past 25 years to improve the 
federal regulatory process. Among the goals of these requirements are 
reducing regulatory burdens, requiring more rigorous regulatory 
analysis, and enhancing oversight of agencies' rulemaking. We have paid 
repeated attention to agencies' compliance with some of these 
requirements, such as ones in the Paperwork Reduction Act 
(PRA),[Footnote 3] Regulatory Flexibility Act (RFA),[Footnote 4] 
Unfunded Mandates Reform Act (UMRA),[Footnote 5] Congressional Review 
Act (CRA),[Footnote 6] and Executive Order 12866 on regulatory planning 
and review.[Footnote 7] 

Our reviews identified at least four overall benefits associated with 
existing regulatory analysis and accountability requirements: 

* Encouraging and facilitating greater public participation in 
rulemaking--Some initiatives have encouraged and facilitated greater 
public participation and consultation in rulemaking. Opportunities for 
the public to communicate with agencies by electronic means have 
expanded and requirements imposed by some regulatory reform initiatives 
encouraged additional consultation with the parties that might be 
affected by rules under development by federal agencies. 

* Improving the transparency of the rulemaking process--The initiatives 
implemented over the past 25 years have helped to make the rulemaking 
process more open by facilitating public access to information, 
providing more information about the potential effects of rules and 
available alternatives, and requiring more documentation and 
justification of agencies' decisions. Although we have often 
recommended that more could be done to increase transparency, we have 
also highlighted the valuable contribution made when agencies had 
particularly clear and complete documentation supporting their 
rulemaking. 

* Increasing the attention directed to rules and rulemaking--Our 
reports have pointed out that oversight of agencies' rulemaking from 
various sources--including Congress, the administration, and GAO, among 
others--can result in useful changes to rules. Furthermore, we noted 
that agencies' awareness of this added scrutiny may provide an 
important indirect effect, potentially leading to less costly, more 
effective rules. 

* Increasing expectations regarding the analytical support for proposed 
rules--The analytical requirements that have been added over the years 
have raised the bar regarding the information and analysis needed to 
support policy decisions underlying regulations. Such requirements have 
also prompted agencies to provide more data on the expected benefits 
and costs of their rules and encouraged the identification and 
consideration of available alternatives. 

On the other hand, we also identified at least four recurring reasons 
why the requirements imposed by such initiatives have not been more 
effective: 

* Lack of clarity and other weaknesses in key terms and definitions-- 
Unclear terms and definitions can affect the applicability and 
effectiveness of certain requirements. For example, we have frequently 
cited the need to clarify key terms in RFA. RFA's analytical 
requirements, which are intended to help address concerns about the 
impact of rules on small entities, do not apply if an agency head 
certifies that a rule will not have a "significant economic impact on a 
substantial number of small entities." However, RFA neither defines 
this key phrase nor places clear responsibility on any party to define 
it consistently across the government. Not surprisingly, we found that 
agencies' compliance with RFA varied widely from one agency to another 
and agencies had different interpretations of RFA's requirements. In 
another example, our review of agencies' compliance with a requirement 
to adjust civil monetary penalties for inflation under the Federal 
Civil Penalties Inflation Adjustment Act (Inflation Adjustment 
Act),[Footnote 8] indicated that both a lack of clarity and apparent 
shortcomings in some of the Act's provisions appeared to have prevented 
agencies from keeping their penalties in pace with inflation.[Footnote 
9] Although we recommended changes to address these shortcomings, to 
date Congress has not acted on our recommendations. 

* Limited scope and coverage of various requirements--Simply put, some 
rulemaking requirements apply to few rules or require little new 
analysis for the rules to which they apply. For example, we pointed out 
last year that the relatively small number of rules identified as 
containing mandates under UMRA could be attributed in part to the 14 
different exemptions, exclusions, and other restrictions on the 
identification of regulatory mandates under the Act. We also observed 
unintended "domino" effects of making certain requirements contingent 
on other requirements. For example, some requirements only apply to 
rules for which an agency published a notice of proposed rulemaking, 
but, as I will discuss later, we found that agencies issue many final 
rules without associated proposed rules. In addition, the requirement 
for "look back" reviews of existing regulations under section 610 of 
RFA only applies if the agency determined that its rule would have a 
significant economic impact on a substantial number of small entities. 
When RFA was amended in 1996 by the Small Business Regulatory 
Enforcement Fairness Act (SBREFA)[Footnote 10] to require additional 
actions, such as preparing compliance guides and convening advocacy 
review panels for certain rules, this appeared to prompt a reduction in 
the number of rules that the Environmental Protection Agency identified 
as affecting small entities (and would therefore trigger the new 
requirements). 

* Uneven implementation of the initiatives' requirements--Sometimes, 
agencies' implementation of various requirements serves to limit their 
effectiveness. For example, a recurring message in our reports over the 
years is that some agencies' economic analyses need improvement. Our 
reviews have found that economic assessments that analyze regulations 
prospectively are often incomplete and inconsistent with general 
economic principles.[Footnote 11] Moreover, the assessments are not 
always useful for comparisons across the government, because they are 
often based on different assumptions for the same key economic 
variables.[Footnote 12] In our recent report on UMRA, we noted that 
parties from various sectors expressed concerns about the accuracy and 
completeness of agencies' cost estimates, and some also emphasized that 
more needed to be done to address the benefits side of the 
equation.[Footnote 13] Our reviews have found that not all benefits are 
quantified and monetized by agencies, partly because of the difficulty 
in estimation. In our recent report on the Paperwork Reduction Act, we 
noted that the Act requires chief information officers (CIO) to review 
and certify information collections to help minimize collection 
burdens, but our analysis of case studies showed that CIOs provided 
these certifications despite often missing or inadequate support from 
the program offices sponsoring the collections.[Footnote 14] 

* A predominant focus on just one part of the regulatory process--More 
analytical and procedural requirements have focused on agencies' 
development of rules than on other phases of the regulatory process, 
from the underlying statutory authorization, through effective 
implementation and monitoring of compliance with regulations, to the 
evaluation and revision of existing rules. While rulemaking is clearly 
an important point in the regulatory process, these other phases also 
help determine the effectiveness of federal regulation. 

Oversight of Agency Rulemaking: 

Closely related to regulatory analysis and accountability requirements 
are efforts to enhance the oversight of agencies' rulemaking by 
Congress, the President, and the judiciary. In general, efforts to 
increase presidential influence and authority over the regulatory 
process, primarily through the mechanism of Office of Management and 
Budget (OMB) review of agencies' rulemaking, have become more 
significant and widely used over the years. However, our reviews 
suggest that mechanisms to increase congressional influence, such as 
procedures for Congress to disapprove proposed rules, appear to have 
been less able to influence changes in agencies' rules to date. We have 
not done work that directly addresses issues regarding judicial review 
of agencies' rulemaking. 

In our September 2003 report on OMB's role in reviews of agencies' 
rules, we recounted the history of centralized review of agencies' 
regulations within the Executive Office of the President.[Footnote 15] 
We noted the expansion of OMB's role in the rulemaking process over the 
past 30 years under various executive orders. Although not without 
controversy, this expansion of a centralized regulatory review function 
has become well established. OMB's role in the rulemaking process has 
been further enhanced by provisions in various statutes (such as the 
Information Quality Act,[Footnote 16] PRA, and UMRA) that placed 
additional oversight responsibilities on OMB. The formal process by 
which OMB currently reviews agencies' proposed and final rules has 
essentially remained unchanged since Executive Order 12866 was issued 
in 1993, but we reported on several changes in OMB policies in recent 
years that affected the process, such as increased emphasis on economic 
analysis, stricter adherence to the 90-day time limit for reviews of 
agencies' draft rules, and improvements in the transparency of the OMB 
review process (although some elements of the transparency of that 
process are still unclear). Based on our review of OMB and agency 
dockets on 85 rules reviewed by OMB during a 1-year period, we also 
showed that OMB's reviews sometimes result in significant changes to 
agencies' draft rules. 

The Congressional Review Act was enacted as part of SBREFA in 1996 to 
better ensure that Congress has an opportunity to review, and possibly 
reject, rules before they become effective. CRA established expedited 
procedures by which members of Congress may disapprove agencies' rules 
by introducing a resolution of disapproval that, if adopted by both 
Houses of Congress and signed by the President, can nullify an agency's 
rule. However, this disapproval process has only been used once, in 
2001, when Congress disapproved the Department of Labor's rule on 
ergonomics.[Footnote 17] CRA also requires agencies to file final rules 
with both Congress and GAO before the rules can become effective. Our 
role under CRA is to provide Congress with a report on each major rule 
(for example, those with a $100 million impact on the economy) that 
includes GAO's assessment of the issuing agency's compliance with the 
procedural steps required by various acts and executive orders 
governing the rulemaking process. Although we reported that agencies' 
compliance with CRA requirements was inconsistent during the first 
years after its enactment, compliance improved.[Footnote 18] 

Congress also passed the Truth in Regulating Act[Footnote 19] (TIRA) in 
2000 to provide a mechanism for it to obtain more information about 
certain rules. TIRA contemplated a 3-year pilot project during which 
GAO would perform independent evaluations of "economically significant" 
agency rules when requested by a chairman or ranking member of a 
committee of jurisdiction of either House of Congress. However, during 
the 3-year period contemplated for the pilot project, Congress did not 
enact any specific appropriation to cover TIRA evaluations, as called 
for in the Act, and the authority for the 3-year pilot project expired 
on January 15, 2004. Therefore, we have no information on the potential 
effectiveness of this mechanism. 

Rulemaking Procedures under the Administrative Procedure Act: 

Some of our reviews have touched on agencies' compliance with APA. APA 
established the most long-standing and broadly applicable federal 
requirements for informal rulemaking, also known as notice and comment 
rulemaking.[Footnote 20] Among other things, APA generally requires 
that agencies publish a notice of proposed rulemaking (NPRM) in the 
Federal Register.[Footnote 21] After giving interested persons an 
opportunity to comment on the proposed rule, and after considering the 
public comments, the agency may then publish the final rule. However, 
APA provides exceptions to these requirements, including cases when, 
for "good cause," an agency finds that notice and comment procedures 
are "impracticable, unnecessary, or contrary to the public interest," 
and interpretive rules.[Footnote 22] When agencies use the "good cause" 
exception, APA requires that they explicitly say so and provide a 
rationale for the exception's use when the rule is published in the 
Federal Register. An agency's claim of an exception to notice and 
comment procedures is subject to judicial review. The legislative 
history of APA, and associated case law, generally reinforce the view 
that the "good cause" exception should be narrowly construed. In 
addition, the Administrative Conference of the United States (ACUS) 
encouraged agencies to use notice and comment procedures where not 
strictly required by APA and recommended that Congress eliminate or 
narrow several of the exceptions in APA. 

In various reports over the years, we noted that agencies had not 
issued NPRMs before publishing certain final rules.[Footnote 23] When 
we reported on this issue in 1998, we estimated that about half of all 
final actions published in 1997 had been issued without an associated 
NPRM.[Footnote 24] Although many of those final actions without 
proposed rules were minor actions, 11 of the 61 major rules (for 
example, those with an impact of $100 million or more) did not have 
NPRMs.[Footnote 25] While we have not studied this issue in depth since 
1998, we continued to find the prevalence of final rules without 
proposed rules during our reviews. For example, during our review of 
the identification of federal mandates under UMRA in 2001 and 2002, we 
found that 28 of the 65 major rules that imposed new requirements on 
nonfederal parties did not have NPRMs.[Footnote 26] 

We have also reported that agencies' explanations for use of APA's 
"good cause" exception were sometimes unclear, for example, simply 
stating that notice and comment would delay rules that were, in some 
general way, in the public interest. We noted that, when agencies 
publish final rules without NPRMs, the public's ability to participate 
in the rulemaking process is limited. Also, several regulatory reform 
requirements that Congress has enacted during the past 25 years--such 
as RFA's and UMRA's analytical requirements--use as their trigger the 
publication of an NPRM. Therefore, it is important that agencies 
clearly explain why notice and comment procedures are not followed. 

At the same time, the number of final rules without proposed rules 
appears to reflect, at least in part, agencies' acceptance of 
procedures for noncontroversial and expedited rulemaking actions known 
as "direct final" and "interim final" rulemaking that were previously 
recommended by ACUS.[Footnote 27] Although we observed some differences 
in how agencies implement direct final rulemaking, it generally 
involves publication of a rule with a statement that the rule will be 
effective on a particular date unless an adverse comment is received 
within a specified period of time (such as 30 days). For example, the 
Federal Aviation Administration (FAA) has used direct final rulemaking 
procedures nearly 40 times this year to modify the legal descriptions 
of controlled airspace at various airports across the country. FAA 
issued these modifications as direct final rules because it anticipated 
no adverse or negative comments. FAA also noted that these regulations 
only involve an established body of technical regulations for which 
frequent and routine amendments are necessary to keep them 
operationally current. If an adverse comment is received on a direct 
final rule, the agency withdraws the direct final rule and may publish 
the rule as a proposed rule under normal notice and comment procedures. 
For interim rulemaking, an agency issues a final rule without an NPRM 
that is generally effective immediately, but with a postpromulgation 
opportunity for the public to comment. Public comments may persuade the 
agency to later revise the interim rule. Although neither direct nor 
interim final rulemaking are specifically mentioned in APA, both may be 
viewed as an application of the "good cause" exception in APA. 

Direct and interim final rules appear to account for hundreds of the 
final regulatory actions published each year. In our report on final 
rules without proposed rules, we identified 718 interim and direct 
final regulatory actions published by agencies during 1997. A quick 
search of recent Federal Register notices showed that agencies 
published over 550 notices in 2004 for which the subject rulemaking 
action was identified as a direct final, interim final, or interim 
rule. Through October 21 of this year, agencies had published nearly 
400 such notices. Direct final rules accounted for almost 60 percent of 
these notices. 

Some Issues and Emerging Trends Merit Attention: 

The findings and emerging issues reported in our body of work on 
federal rulemaking suggest a few areas on which the subcommittee might 
consider taking legislative action or sponsor further study: 

* generally reexamine rulemaking structures and processes, including 
the APA; 

* address previously identified weaknesses of existing statutory 
requirements; 

* promote additional improvements in the transparency of agencies' 
rulemaking actions; and: 

* open a broader examination of how developments in information 
technology might affect the notice and comment rulemaking process. 

Generally Reexamine Rulemaking Structures and Processes, Including the 
APA: 

As we have noted in several products this year, we believe that it is 
appropriate and necessary to begin taking a broad reexamination of what 
the federal government does and how it does it, especially given the 
fiscal challenges facing the country.[Footnote 28] Although the federal 
rulemaking process does not have much direct impact on the federal 
budget--given that most costs of regulation fall on regulated parties 
and their customers or clients--we have testified that it nevertheless 
should be part of that reexamination. We recognize that a successful 
reexamination of the base of the federal government will entail 
multiple approaches over a period of years. No single approach or 
reform can address all of the questions and program areas that need to 
be revisited. However, as we have previously stated, federal regulation 
is a critical tool of government, and regulatory programs play a key 
part in how the federal government addresses many of the country's 
needs. This subcommittee has already begun such a reexamination through 
its current oversight agenda, and ACUS, if funded, might well play a 
valuable role in carrying out the detailed research that will be 
needed. 

One emerging trend that any such reexamination should take into account 
is the evolution of the markets and industries that federal agencies 
regulate. Changes in the regulatory environment, especially the growing 
influence of the global economy, have implications for federal 
rulemaking procedures and practices. For example, agency officials 
pointed out to us in 1999 the growing importance of international 
standards and standard-setting bodies, alongside the role of 
international agreements, in producing certification standards of 
interest and importance to American businesses. More recently, 
international developments regarding global harmonization of regulatory 
standards, chemical risk-assessment requirements, Internet governance 
issues, and compliance with capital standards and requirements for 
financial institutions have attracted attention in the regulatory 
arena. 

More specifically, Congress might want to revisit APA in view of 
changes in agencies' practices over time, such as greater use of 
interim and direct final rulemaking for certain regulations. For 
example, we observed that some agencies differed in their policies and 
practices regarding direct final rulemaking. Whether there should be 
one standard approach to such rulemaking by federal agencies is an open 
question. In addition, although direct final rulemaking had been viewed 
by ACUS as permissible under the APA, ACUS nevertheless suggested that 
Congress may wish to expressly authorize the process to alleviate any 
uncertainty and reduce the potential for litigation. With regard to 
interim final rulemaking, ACUS had similarly recommended that, when APA 
is reviewed, Congress amend the Act to mandate use of postpromulgation 
comment procedures for rules issued under the "good cause" exception. 

Address Previously Identified Weaknesses of Existing Statutory 
Requirements: 

Our prior reviews have identified many opportunities to revisit and 
refine existing regulatory requirements. Although progress has been 
made to implement recommendations we raised in past reports, there are 
still unresolved issues. We still believe, for example, that the 
promise of RFA may never be realized until key terms and definitions, 
such as "substantial number of small entities," are clarified and/or an 
entity with the authority and responsibility to do so is established. 
Similarly, we believe that civil penalties are an important element of 
regulatory enforcement and deterrence, but we found that agencies are 
unable to fully adjust their penalties for inflation under the 
provisions of current law. Congressional action is needed to address 
these issues. 

Promote Additional Improvements in the Transparency of Agencies' 
Rulemaking Actions: 

As pointed out earlier, we have identified many positive developments 
regarding the transparency of the regulatory process, but more could be 
done. For example, additional attention could be paid to agencies' 
explanations for statements or certifications that certain requirements 
do not apply. This is another area that might merit additional study of 
available options. Some uses of exemptions, such as agencies' claims 
that a rule does not contain a federal mandate as defined by UMRA or 
that a proposed rule has no federalism impacts, do not require the 
agency to provide any more support than the certification itself. Other 
uses, such as claims of "good cause" to publish final rules without 
proposed rules, require agencies to provide a clear statement and 
explanation (although even here we noted that sometimes agencies' 
explanations were vague). This raises the question of whether there 
should be a more demanding requirement for agencies to essentially 
"show their work" behind such certifications, and, if so, what form 
such requirements might take. 

Open a Broader Examination of How Developments in Information 
Technology Might Affect the Rulemaking Process: 

One emerging trend we have observed in our work is the expanded role of 
technology-based innovations in enhancing the regulatory process. 
Agencies' use of the Internet and other technologies to enhance the 
regulatory process has rapidly increased in importance. In about 5 
years, we have gone from reporting on and encouraging the early 
development of some innovative technologies in support of rulemaking to 
reporting on the implementation of governmentwide e-government 
initiatives, such as Regulations.gov and the centralized electronic 
docket for executive branch agencies.[Footnote 29] The increased use of 
technology-based innovations may provide opportunities to transform the 
rulemaking process, not simply to replace "paper" processes with 
electronic versions. Continued study is therefore warranted of how such 
initiatives can open additional opportunities for public participation 
in and access to information about federal rulemaking, as well as how 
information technology can be used to improve the federal government's 
ability to analyze public comments. 

Mr. Chairman, this concludes my prepared statement. Once again, I 
appreciate the opportunity to testify on these important issues. I 
would be pleased to address any questions you or other members of the 
committee might have at this time. 

If additional information is needed regarding this testimony, please 
contact J. Christopher Mihm, Managing Director, Strategic Issues, at 
(202) 512-6806 or [Hyperlink, mihmj@gao.gov]. 

[End of section] 

Related GAO Products: 

Electronic Rulemaking: Progress Made in Developing Centralized E- 
Rulemaking System. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-777] 
Washington, D.C.: September 9, 2005. 

Regulatory Reform: Prior Reviews of Federal Regulatory Process 
Initiatives Reveal Opportunities for Improvements. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-939T] 
Washington, D.C.: July 27, 2005. 

Economic Performance: Highlights of a Workshop on Economic Performance 
Measures. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-796SP] 
Washington, D.C.: July 2005. 

Paperwork Reduction Act: New Approach May Be Needed to Reduce 
Government Burden on Public. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-424] 
Washington, D.C.: May 20, 2005. 

Unfunded Mandates: Views Vary About Reform Act's Strengths, Weaknesses, 
and Options for Improvement. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-454] 
Washington, D.C.: March 31, 2005. 

21ST Century Challenges: Reexamining the Base of the Federal 
Government. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-325SP] 
Washington, D.C.: February 2005. 

Electronic Government: Federal Agencies Have Made Progress Implementing 
the E-Government Act of 2002. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-12] 
Washington, D.C.: December 10, 2004. 

Unfunded Mandates: Analysis of Reform Act Coverage. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-637] 
Washington, D.C.: May 12, 2004. 

Paperwork Reduction Act: Agencies' Paperwork Burden Estimates Due to 
Federal Actions Continue to Increase. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-676T] 
Washington, D.C.: April 20, 2004. 

Rulemaking: OMB's Role in Reviews of Agencies' Draft Rules and the 
Transparency of Those Reviews. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-929] 
Washington, D.C.: September 22, 2003. 

Electronic Rulemaking: Efforts to Facilitate Public Participation Can 
Be Improved. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-901] 
Washington, D.C.: September 17, 2003. 

Civil Penalties: Agencies Unable to Fully Adjust Penalties for 
Inflation Under Current Law. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-409] 
Washington, D.C.: March 14, 2003. 

Regulatory Flexibility Act: Clarification of Key Terms Still Needed. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-491T] 
Washington, D.C.: March 6, 2002. 

Regulatory Reform: Compliance Guide Requirement Has Had Little Effect 
on Agency Practices. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-172] 
Washington, D.C.: December 28, 2001. 

Federal Rulemaking: Procedural and Analytical Requirements at OSHA and 
Other Agencies. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-852T] 
Washington, D.C.: June 14, 2001. 

Regulatory Flexibility Act: Key Terms Still Need to Be Clarified. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-669T] 
Washington, D.C.: April 24, 2001. 

Regulatory Reform: Implementation of Selected Agencies' Civil Penalties 
Relief Policies for Small Entities. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-280] 
Washington, D.C.: February 20, 2001. 

Regulatory Management: Communication About Technology-Based Innovations 
Can Be Improved. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-232] 
Washington, D.C.: February 12, 2001. 

Regulatory Flexibility Act: Implementation in EPA Program Offices and 
Proposed Lead Rule. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-00-193] 
Washington, D.C.: September 20, 2000. 

Electronic Government: Government Paperwork Elimination Act Presents 
Challenges for Agencies. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/AIMD-00-282] 
Washington, D.C.: September 15, 2000. 

Regulatory Reform: Procedural and Analytical Requirements in Federal 
Rulemaking. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/T-GGD/OGC-00-157] 
Washington, D.C.: June 8, 2000. 

Certification Requirements: New Guidance Should Encourage Transparency 
in Agency Decisionmaking. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-99-170] 
Washington, D.C.: September 24, 1999. 

Federalism: Previous Initiatives Have Little Effect on Agency 
Rulemaking. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/T-GGD-99-131] 
Washington, D.C.: June 30, 1999. 

Regulatory Accounting: Analysis of OMB's Reports on the Costs and 
Benefits of Federal Regulation. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-99-59] 
Washington, D.C.: April 20, 1999. 

Regulatory Flexibility Act: Agencies' Interpretations of Review 
Requirements Vary. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-99-55] 
Washington, D.C.: April 2, 1999. 

Regulatory Burden: Some Agencies' Claims Regarding Lack of Rulemaking 
Discretion Have Merit. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-99-20] 
Washington, D.C.: January 8, 1999. 

Federal Rulemaking: Agencies Often Published Final Actions Without 
Proposed Rules. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-98-126] 
Washington, D.C.: August 31, 1998. 

Regulatory Management: Implementation of Selected OMB Responsibilities 
Under the Paperwork Reduction Act. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-98-120] 
Washington, D.C.: July 9, 1998. 

Regulatory Reform: Agencies Could Improve Development, Documentation, 
and Clarity of Regulatory Economic Analyses. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/RCED-98-142] 
Washington, D.C.: May 26, 1998. 

Regulatory Reform: Implementation of Small Business Advocacy Review 
Panel Requirements. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-98-36] 
Washington, D.C.: March 18, 1998. 

Congressional Review Act: Implementation and Coordination. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-T-OGC-98-38] 
Washington, D.C.: March 10, 1998. 

Regulatory Reform: Agencies' Section 610 Review Notices Often Did Not 
Meet Statutory Requirements. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/T-GGD-98-64] 
Washington, D.C.: February 12, 1998. 

Unfunded Mandates: Reform Act Has Had Little Effect on Agencies' 
Rulemaking Actions. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-98-30] 
Washington, D.C.: February 4, 1998. 

Regulatory Reform: Changes Made to Agencies' Rules Are Not Always 
Clearly Documented. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-98-31] 
Washington, D.C.: January 8, 1998. 

Regulatory Reform: Agencies' Efforts to Eliminate and Revise Rules 
Yield Mixed Results. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-98-3] 
Washington, D.C.: October 2, 1997. 

Regulatory Reform: Implementation of the Regulatory Review Executive 
Order. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-T-GGD-96-185] 
Washington, D.C.: September 25, 1996. 

Regulatory Flexibility Act: Status of Agencies' Compliance. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-94-105] 
Washington, D.C.: April 27, 1994. 

[End of section] 

Appendix I: 

GAO Highlights: 

Highlights of GAO-05-777, a report to the Chairman and Ranking Minority 
Member, Committee on Homeland Security and Governmental Affairs, U.S. 
Senate: 

Why GAO Did This Study: 

The E-Government Act of 2002 requires regulatory agencies, to the 
extent practicable, to ensure there is a Web site the public can use to 
comment on the numerous proposed regulations that affect them. To 
accomplish this, the Office of Management and Budget named the 
Environmental Protection Agency (EPA) as the managing partner for 
developing a governmentwide e-Rulemaking system that the public can use 
for these purposes. Issues GAO was asked to address include:
* EPA’s basis for selecting a centralized system, 
* how EPA collaborated with other agencies and agency views of that 
collaboration, and
* whether EPA used key management practices when developing the system. 

What GAO Found: 

E-Rulemaking officials and the e-Rulemaking Initiative Executive 
Committee considered three alternative designs and chose to implement a 
centralized e-Rulemaking system based on cost savings, risks, and 
security. Officials relied on an analysis of the three alternatives 
using two cost and risk assessment models and a comparison of the 
alternatives to industry best practices. Prior to completing this 
analysis, officials estimated the centralized approach would save about 
$94 million over 3 years. They said when they developed this estimate, 
there was a lack of published information about costs related to paper 
or electronic rulemaking systems. They used their professional judgment 
and information about costs for developing and operating EPA’s paper 
and electronic systems, among other things, to develop the estimate. 

E-Rulemaking officials extensively collaborated with rulemaking 
agencies and most officials at the agencies we contacted thought the 
collaboration was effective. E-Rulemaking officials created a 
governance structure that included an executive committee, advisory 
board, and individual work groups that discussed how to develop the e- 
Rulemaking system. We contacted 14 of the 27 agencies serving on the 
advisory board and most felt their suggestions affected the system 
development process. Agency officials offered several examples to 
support their views, such as how their recommendations for changes to 
the system’s design were incorporated. 

While managing the development of the centralized system, e-Rulemaking 
officials followed all but a few of the key practices for successfully 
managing an initiative. For example, officials did not have written 
agreements with participating agencies that included system performance 
measures. The first agencies began migrating to the centralized system 
in May 2005 with the public scheduled to have access in September 2005. 
Eventually, all rulemaking agencies will migrate to the centralized 
system; however, the schedule is tentative due in part to funding 
issues. As agencies migrate, e-Rulemaking officials are planning 
changes to the system including adding capabilities that exist in 
electronic systems operated by some agencies. 

Centralized e-Rulemaking Process: 

[See PDF for image] 

[End of figure] 

What GAO Recommends: 

GAO recommends that, to build on the success of this initiative, the 
Administrator of EPA, as managing partner of the initiative, take steps 
to ensure there are written agreements between EPA and participating 
agencies that include performance measures that address issues such as 
system performance, maintenance, and cost savings. These measures are 
necessary to provide criteria for evaluating the effectiveness of the 
initiative. E-Rulemaking Initiative officials said they agree with 
GAO’s recommendation and they plan to implement it. 

www.gao.gov/cgi-bin/getrpt?GAO-05-777. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Orice Williams (202) 512- 
5837 or williamso@gao.gov. 

[End of section] 

GAO Highlights: 

Highlights of GAO-05-830T, a testimony before the Subcommittee on the 
Federal Workforce and Agency Organization, Committee on Government 
Reform, House of Representatives: 

Why GAO Did This Study: 

The daunting challenges that face the nation in the 21st century 
establish the need for the transformation of government and demand 
fundamental changes in how federal agencies should meet these 
challenges by becoming flatter, more results-oriented, externally 
focused, partnership-oriented, and employee-enabling organizations. 

This testimony addresses how the long-term fiscal imbalance facing the 
United States, along with other significant trends and challenges, 
establish the case for change and the need to reexamine the base of the 
federal government; how federal agencies can transform into high- 
performing organizations; and how multiple approaches and selected 
initiatives can support the reexamination and transformation of the 
government and federal agencies to meet these 21st century challenges. 

What GAO Found: 

Long-term fiscal challenges and other significant trends and challenges 
facing the United States provide the impetus for reexamining the base 
of the federal government. Our nation is on an imprudent and 
unsustainable fiscal path driven by known demographic trends and rising 
health care costs, and relatively low revenues as a percentage of the 
economy. Unless we take effective and timely action, we will face large 
and growing structural deficit shortfalls, eroding our ability to 
address the current and emerging needs competing for a share of a 
shrinking budget pie. At the same time, policymakers will need to 
confront a host of emerging forces and trends, such as changing 
security threats, increasing global interconnectedness, and a changing 
economy. To effectively address these challenges and trends, government 
cannot accept all of its existing programs, policies, functions, and 
activities as "givens." Reexamining the base of all major existing 
federal spending and tax programs, policies, functions, and activities 
offers compelling opportunities to redress our current and projected 
fiscal imbalances while better positioning government to meet the new 
challenges and opportunities of this new century. 

In response, agencies need to change their cultures and create the 
capacity to become high-performing organizations, by implementing a 
more results-oriented and performance-based approach to how they do 
business. To successfully transform, agencies must fundamentally 
reexamine their business processes, outmoded organizational structures, 
management approaches, and, in some cases, missions. GAO has hosted 
several forums to explore the change management practices that federal 
agencies can adopt to create high-performing organizations. For 
example, participants at a GAO forum broadly agreed on the key 
characteristics and capabilities of high-performing organizations, 
which can be grouped into four themes: 

* a clear, well-articulated, and compelling mission; 

* focus on needs of clients and customers; 

* strategic management of people; and: 

* strategic use of partnerships. 

A successful reexamination of the base of the federal government will 
entail multiple approaches over a period of years. The reauthorization, 
appropriations, oversight, and budget processes should be used to 
review existing programs and policies. However, no single approach or 
institutional reform can address the myriad of questions and program 
areas that need to be revisited. GAO has recommended certain other 
initiatives to assist in the needed transformations. These include (1) 
development of a governmentwide strategic plan and key national 
indicators to assess the government's performance, position, and 
progress; (2) implementing a framework for federal human capital 
reform; and (3) proposing specific transformational leadership models, 
such as creating a Chief Operating Officer/Chief Management Official 
with a term appointment at select agencies. 

www.gao.gov/cgi-bin/getrpt?GAO-05-830T. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact J. Christopher Mihm at 
(202) 512-6806 or mihmj@gao.gov. 

[End of section] 

GAO Highlights: 

Highlights of GAO-05-424, a report to congressional requesters: 

Why GAO Did This Study: 

Americans spend billions of hours each year providing information to 
federal agencies by filling out information collections (forms, 
surveys, or questionnaires). A major aim of the Paperwork Reduction Act 
(PRA) is to balance the burden of these collections with their public 
benefit. Under the act, agencies’ Chief Information Officers (CIO) are 
responsible for reviewing information collections before they are 
submitted to the Office of Management and Budget (OMB) for approval. As 
part of this review, CIOs must certify that the collections meet 10 
standards set forth in the act (see table). 

GAO was asked to assess, among other things, this review and 
certification process, including agencies’ efforts to consult with the 
public. To do this, GAO reviewed a governmentwide sample of 
collections, reviewed processes and collections at four agencies that 
account for a large proportion of burden, and performed case studies of 
12 approved collections. 

What GAO Found: 

Governmentwide, agency CIOs generally reviewed information collections 
and certified that they met the standards in the act. However, GAO’s 
analysis of 12 case studies at the Internal Revenue Service (IRS) and 
the Departments of Veterans Affairs, Housing and Urban Development, and 
Labor showed that CIOs certified collections even though support was 
often missing or partial (see table). For example, in nine of the case 
studies, agencies did not provide support, as the law requires, for the 
standard that the collection was developed by an office with a plan and 
resources to use the information effectively. Because OMB instructions 
do not ask explicitly for this support, agencies generally did not 
address it. Further, although the law requires agencies both to publish 
notices in the Federal Register and to otherwise consult with the 
public, agencies governmentwide generally limited consultation to the 
publication of notices, which generated little public comment. Without 
appropriate support and public consultation, agencies have reduced 
assurance that collections satisfy the standards in the act. 

Processes outside the PRA review process, which are more rigorous and 
involve greater public outreach, have been set up by IRS and the 
Environmental Protection Agency (EPA), whose missions involve numerous 
information collections and whose management is focused on minimizing 
burden. For example, each year, IRS subjects a few forms to highly 
detailed, in-depth analyses, including extensive outreach to the public 
affected and the information users. IRS reports that this 
process—performed on forms that have undergone CIO review and received 
OMB approval—has reduced burden by over 200 million hours since 2002. 
In contrast, for the 12 case studies, the CIO review process did not 
reduce burden. Without rigorous evaluative processes, agencies are 
unlikely to achieve the PRA goal of minimizing burden while maximizing 
utility. 

Support Provided by Agencies for Paperwork Reduction Act Standards in 
12 Case Studies: 

[See table 2] 

What GAO Recommends: 

GAO recommends that OMB and the agencies take steps to improve review 
processes and compliance with the act. Also, the Congress may wish to 
consider mandating pilot projects to target some collections for 
rigorous analysis that includes public outreach. In commenting on a 
draft of this report, OMB and the agencies agreed with parts of the 
report and disagreed with others. 

www.gao.gov/cgi-bin/getrpt?GAO-05-424. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Linda Koontz at (202) 
512- 6240 or koontzl@gao.gov. 

[End of section] 

GAO Highlights: 

Highlights of GAO-05-454, a report to the Chairman, Subcommittee on 
Oversight of Government Management, the Federal Workforce and the 
District of Columbia, Committee on Homeland Security and Governmental 
Affairs, U.S. Senate: 

Why GAO Did This Study: 

The Unfunded Mandates Reform Act of 1995 (UMRA) was enacted to address 
concerns about federal statutes and regulations that require nonfederal 
parties to expend resources to achieve legislative goals without being 
provided federal funding to cover the costs. UMRA generates information 
about the nature and size of potential federal mandates on nonfederal 
entities to assist Congress and agency decision makers in their 
consideration of proposed legislation and regulations. However, it does 
not preclude the implementation of such mandates. 

At various times in its 10-year history, Congress has considered 
legislation to amend various aspects of the act to address ongoing 
questions about its effectiveness. Most recently, GAO was asked to 
consult with a diverse group of parties familiar with the act and to 
report their views on (1) the significant strengths and weaknesses of 
UMRA as the framework for addressing mandate issues and (2) potential 
options for reinforcing the strengths or addressing the weaknesses. To 
address these objectives, we obtained information from 52 organizations 
and individuals reflecting a diverse range of viewpoints. GAO analyzed 
the information acquired and organized it into broad themes for 
analytical and reporting purposes. 

GAO makes no recommendations in this report. 

What GAO Found: 

The parties GAO contacted provided a significant number of comments 
about UMRA, specifically, and federal mandates, generally. Their views 
often varied across and within the five sectors we identified 
(academic/think tank, public interest advocacy, business, federal 
agencies, and state and local governments). Overall, the numerous 
strengths, weaknesses and options for improvement identified during the 
review fell into several broad themes, including UMRA specific issues 
such as coverage and enforcement, among others, and more general issues 
about the design, funding, and evaluation of federal mandates. First, 
UMRA coverage was, by far, the most frequently cited issue by parties 
from the various sectors. Parties across most sectors that provided 
comments said UMRA’s numerous definitions, exclusions, and exceptions 
leave out many federal actions that may significantly impact nonfederal 
entities and should be revisited. Among the most commonly suggested 
options were to expand UMRA’s coverage to include a broader set of 
actions by limiting the various exclusions and exceptions and lowering 
the cost thresholds, which would make more federal actions mandates 
under UMRA. However, a few parties, primarily from the public interest 
advocacy sector, viewed UMRA’s narrow coverage as a strength that 
should be maintained. 

Second, parties from various sectors also raised a number of issues 
about federal mandates in general. In particular, they had strong views 
about the need for better evaluation and research of federal mandates 
and more complete estimates of both the direct and indirect costs of 
mandates on nonfederal entities. The most frequently suggested option 
to address these issues was more post-implementation evaluation of 
existing mandates or “look backs.” Such evaluations of the actual 
performance of mandates could enable policymakers to better understand 
mandates’ benefits, impacts and costs among other issues. In turn, 
developing such evaluation information could lead to the adjustment of 
existing mandate programs in terms of design and/or funding, perhaps 
resulting in more effective or efficient programs. 

Going forward, the issue of unfunded mandates raises broader questions 
about assigning fiscal responsibilities within our federal system. 
Federal and state governments face serious fiscal challenges both in 
the short and longer term. As GAO reported in its February 2005 report 
entitled 21st Century Challenges: Reexamining the Base of the Federal 
Government (GAO-05-325SP), the long-term fiscal challenges facing the 
federal budget and numerous other geopolitical changes challenging the 
continued relevance of existing programs and priorities warrant a 
national debate to review what the government does, how it does 
business and how it finances its priorities. Such a reexamination 
includes considering how responsibilities for financing public services 
are allocated and shared across the many nonfederal entities in the 
U.S. system as well. 

What GAO Recommends: 

www.gao.gov/cgi-bin/getrpt?GAO-05-454. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Orice M. Williams at 
(202) 512-5837, or williamso@gao.gov. 

[End of section] 

GAO Highlights: 

Highlights of GAO-03-409, a report to the Senate Committee on 
Governmental Affairs and the House Committee on Government Reform March 
2003: 

Why GAO Did This Study: 

Civil penalties are an important element of regulatory enforcement, 
allowing agencies to punish violators appropriately and to serve as a 
deterrent to future violations. In 1996, Congress enacted the Inflation 
Adjustment Act to require agencies to adjust certain penalties for 
inflation. GAO assessed federal agencies’ compliance with the act and 
whether provisions in the act have prevented agencies from keeping 
their penalties in pace with inflation. 

What GAO Found: 

As of June 2002, 16 of 80 federal agencies with civil penalties covered 
by the Inflation Adjustment Act had not made the required initial 
adjustments to their penalties. Nineteen other agencies had not made 
required subsequent adjustments, and several other agencies had made 
incorrect adjustments. The act does not give any agency the authority 
to monitor compliance or to provide guidance to agencies. More 
important, several provisions of the act have prevented some agencies 
from fully adjusting their penalties for inflation. One provision 
limited the agencies’ first adjustments to 10 percent of the penalty 
amounts, even if the penalties were decades old and hundreds of percent 
behind inflation. The resultant “inflation gap” can never be corrected 
under the statute and grows with each subsequent adjustment. (The 
figure below illustrates the effect of the cap on one agency’s $1,000 
penalty set in 1958.) Also, the act’s calculation and rounding 
procedures require agencies to lose a year of inflation each time they 
adjust their penalties, and can prevent some agencies from making 
adjustments until inflation increases by 45 percent or more (i.e., 15 
years or more at recent rates of inflation). Finally, the act exempts 
penalties under certain statutes from its requirements entirely. 
Consequently, more than 100 exempted penalties have declined in value 
by 50 percent or more since Congress last set them. 

What GAO Recommends: 

Congress may wish to consider amending the act to (1) require or permit 
agencies to adjust their penalties for lost inflation; (2) make the 
calculation and rounding procedures more consistent with changes in 
inflation; (3) permit agencies with exempt penalties to adjust them for 
inflation; and (4) give some agency the responsibility to monitor 
compliance and provide guidance. The Department of Justice, the 
Department of the Treasury, and the Office of Management and Budget did 
not comment on the first three matters for congressional consideration. 
The agencies suggested changes to the fourth matter, but we did not 
make those changes. 

www.gao.gov/cgi-bin/getrpt?GAO-03-409. To view the full report, 
including the scope and methodology, click on the link above. For more 
information, contact Victor Rezendes (202) 512-6806 or 
rezendesv@gao.gov. 

[End of section] 

(450455): 

FOOTNOTES 

[1] Attached to this statement are the highlights pages from some of 
those reports and testimonies. We have also included a more extensive 
list of related GAO products at the end of this statement. 

[2] Pub. L. No. 404, 60 Stat. 237 (1946), codified in 1966 in scattered 
sections of title 5, United States Code. 

[3] 44 U.S.C. §§ 3501-3520. 

[4] 5 U.S.C. §§ 601-612. 

[5] Pub. L. No. 104-4, 109 Stat. 48 (1995), codified as amended in 
scattered sections of title 2, United States Code. 

[6] 5 U.S.C. §§ 801-808. 

[7] Exec. Order No. 12866, 58 Fed. Reg. 51,735 (Sept. 30, 1993). 

[8] 28 U.S.C. § 2461 note. 

[9] GAO, Civil Penalties: Agencies Unable to Fully Adjust Penalties for 
Inflation Under Current Law, GAO-03-409 (Washington, D.C.: Mar. 14, 
2003). We also addressed issues regarding civil penalties in GAO, Tax 
Administration: Systematic Information Sharing Would Help IRS Determine 
the Deductibility of Civil Settlement Payments, GAO-05-747 (Washington, 
D.C.: Sept. 15, 2005). 

[10] 5 U.S.C. § 601 note. 

[11] See GAO, Regulatory Reform: Agencies Could Improve Development, 
Documentation, and Clarity of Regulatory Economic Analyses, GAO/RCED- 
98-142 (Washington, D.C.: May 26, 1998), and Clean Air Act: 
Observations on EPA's Cost-Benefit Analysis of Its Mercury Control 
Options, GAO-05-252 (Washington, D.C.: Feb. 28, 2005). 

[12] See also GAO, Economic Performance: Highlights of a Workshop on 
Economic Performance Measures, GAO-05-796SP (Washington, D.C.: July 
2005). 

[13] GAO, Unfunded Mandates: Views Vary About Reform Act's Strengths, 
Weaknesses, and Options for Improvement, GAO-05-454 (Washington, D.C.: 
Mar. 31, 2005). 

[14] GAO, Paperwork Reduction Act: New Approach May Be Needed to Reduce 
Government Burden on Public, GAO-05-424 (Washington, D.C.: May 20, 
2005). 

[15] GAO, Rulemaking: OMB's Role in Reviews of Agencies' Draft Rules 
and the Transparency of Those Reviews, GAO-03-929 (Washington, D.C.: 
Sept. 22, 2003). 

[16] The Information Quality Act is also known as the Data Quality Act. 
Consolidated Appropriations--Fiscal Year 2001, Pub. L. No. 106-554, § 
515, 114 Stat. 2763A to 2763A-154 (2001). 

[17] Pub. L. No. 107-5, 115 Stat. 7 (Mar. 20, 2001). 

[18] As noted in GAO-04-637, our Office of General Counsel also takes 
several steps to assure the completeness of the list of major rules 
identified in GAO's compilation of reports on major rules. GAO's 
Federal Rules Database is publicly available at www.gao.gov under Legal 
Products. 

[19] Pub. L. No. 106-312, 114 Stat. 1248 (Oct. 17, 2000), 5 U.S.C. § 
801 note. 

[20] 5 U.S.C. § 553. 

[21] APA includes exceptions to notice and comment procedures for 
categories of rules such as those dealing with military or foreign 
affairs and also agency management and personnel. 5 U.S.C. § 553(a). 

[22] 5 U.S.C. § 553(b). 

[23] An earlier study concluded that NPRMs were not published for about 
one-third of final regulatory actions published in the Federal 
Register. See Juan J. Lavilla, The Good Cause Exemption to Notice and 
Comment Rulemaking Requirements Under the Administrative Procedure Act, 
3 Admin. L. J. 317 (1989). 

[24] GAO, Federal Rulemaking: Agencies Often Published Final Actions 
Without Proposed Rules, GAO/GGD-98-126 (Washington, D.C.: Aug. 31, 
1998). 

[25] Of the 122 major rules submitted to GAO during the first 2 years 
of the Congressional Review Act (April 1996 through March 1998), 23 
were issued without a previous NPRM. See GAO, Regulatory Reform: Major 
Rules Submitted for Congressional Review During the First 2 Years, 
GAO/GGD-98-102R (Washington, D.C.: Apr. 24, 1998). 

[26] GAO, Unfunded Mandates: Analysis of Reform Act Coverage, GAO-04- 
637 (Washington, D.C.: May 12, 2004). 

[27] See recommendation 95-4, 60 Fed. Reg. 43108 (Aug. 18, 1995). In 
1993, the National Performance Review also encouraged agencies to use 
direct final rulemaking for noncontroversial rules. 

[28] See GAO, 21ST Century Challenges: Reexamining the Base of the 
Federal Government, GAO-05-325SP (Washington, D.C.: Feb. 2005); 21ST 
Century Challenges: Transforming Government to Meet Current and 
Emerging Challenges, GAO-05-830T (Washington, D.C.: July 13, 2005); and 
Regulatory Reform: Prior Reviews of Federal Regulatory Process 
Initiatives Reveal Opportunities for Improvements, GAO-05-939T 
(Washington, D.C.: July 27, 2005). 

[29] See GAO, Federal Rulemaking: Agencies' Use of Information 
Technology to Facilitate Public Participation, GAO/GGD-00-135R 
(Washington, D.C.: June 30, 2000); Electronic Government: Government 
Paperwork Elimination Act Presents Challenges for Agencies, GAO/AIMD- 
00-282 (Washington, D.C.: Sept. 15, 2000); Regulatory Management: 
Communication About Technology-Based Innovations Can Be Improved, GAO- 
01-232 (Washington, D.C.: Feb. 12, 2001); Electronic Rulemaking: 
Efforts to Facilitate Public Participation Can Be Improved, GAO-03-901 
(Washington, D.C.: Sept. 17, 2003); and Electronic Rulemaking: Progress 
Made in Developing Centralized E-Rulemaking System, GAO-05-777 
(Washington, D.C.: Sept. 9, 2005).