Inspectors General: Improvements Needed in the Office of Inspector General's Oversight of the Denali Commission
Highlights
What GAO Found
The Denali Commission (Commission) Office of Inspector General (OIG) received budgetary resources of approximately $1 million from fiscal years 2011 through 2013. OIG budgetary resources increased approximately 7 percent from fiscal years 2011 through 2013, from approximately $310,000 to $331,000. During this period, the OIG consisted of one full-time employee, the Inspector General (IG), who obtained additional support through contracts with auditors and others. The OIG issued six semiannual reports to the Congress and conducted 12 inspections during fiscal years 2011 through 2013.
The OIG provided limited oversight of the Commission's major programs (energy, transportation, health facilities, and training) and operations. GAO's analysis of the 12 inspections completed by the OIG found that the OIG provided oversight for $150,000 of the $167 million in grant funds disbursed during fiscal years 2011 through 2013. The $150,000 of grant funds inspected by the OIG represented less than 1 percent of total grants awarded by the Commission during this period. The $167 million in disbursed grant funds are subject to the Single Audit Act, as applicable. While the OIG oversaw the Commission's annual financial statement audit, it did not conduct any performance audits or investigations related to the Commission's major programs and operations.
The OIG did not have documented policies and procedures for its office operations and management that adhered to the Council of the Inspectors General on Integrity and Efficiency's Quality Standards for Federal Offices of Inspector General . The OIG did not implement the following four quality standards that are critical for the management and operations of the OIG: planning and coordinating; maintaining quality assurance; ensuring internal control; and receiving and reviewing allegations of potential fraud, waste, and abuse. For example, the OIG did not conduct any investigations for potential criminal prosecution. Also, the OIG did not prepare an annual work or strategic plan to document the office's planned activities. Additionally, the OIG's work products were not fully consistent with applicable professional standards, its own policies and procedures for inspections, or section 5 of the Inspector General Act of 1978, as amended (IG Act). For example, there was insufficient evidence in the OIG's inspection case files to support the conclusions and recommendations reported, and the semiannual reports prepared by the OIG did not provide information on the status of OIG recommendations as required by the act.
If corrective actions are taken to mitigate the challenges faced by a one-person office, the current structure of the Commission OIG is one option for OIG oversight. GAO has also identified three alternative OIG oversight structures that could be applied to the Commission: (1) consolidation into a larger OIG; (2) consolidation into a regional commission OIG; and (3) division of OIG oversight responsibilities between two separate federal OIGs, such as a regional commission OIG or a larger OIG.
The Commission IG resigned on December 28, 2013. On May 28, 2014, the Commission entered into an agreement with the Department of Commerce's OIG to provide oversight services pursuant to the IG Act. The agreement expires on September 30, 2014, but may be extended or amended by mutual written consent of the parties.
Why GAO Did This Study
The Commission was established to promote sustainable infrastructure improvement, job training, and other economic development services in Alaska. The Commission is a designated federal entity under the IG Act and is required to have an IG. IG oversight includes assessing the effectiveness and efficiency of agency programs and operations; providing leadership and coordination to detect fraud and abuse; and making recommendations to management to promote the economy, efficiency, and effectiveness of program and agency operations. GAO was asked to review the management and operations of the Commission's OIG. GAO's objectives were to (1) identify the resources appropriated to and expensed by the OIG and the OIG's work products reported for fiscal years 2011 through 2013, (2) assess the extent to which the OIG provided oversight of the Commission's programs and operations, (3) determine the extent to which the design and implementation of the OIG's policies and procedures and its work products were consistent with professional standards, and (4) identify alternatives for OIG oversight of the Commission.
Recommendations
GAO is making nine recommendations to the OIG to improve the operating effectiveness and efficiency of the OIG, including steps that the OIG should take to develop and implement policies and procedures consistent with professional standards to provide oversight of Commission programs and operations.
The Commission concurred with the report's conclusions and recommendations.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| The Denali Commission | In order to ensure that the Commission receives effective oversight of its major programs and operations, the Commission IG, or the individual or entity that ultimately assumes IG oversight responsibilities for the Commission under an alternate structure, should develop and implement a risk-based approach that adheres to professional standards to help ensure effective oversight of the major Commission programs and operations in the form of audits and investigations. |
Closed – Implemented
In May 2014, the Acting Inspector General issued an action plan stating, that the Denali Commission entered into an agreement with the Department of Commerce's Office of Inspector General (DOC-OIG) to provide the Commission with a full range of inspector general services. With the agreement of the DOC-OIG, the Denali Commission subsequently named the DOC-OIG's Regional Inspector General in Seattle, to be Acting Inspector General for the Denali Commission. The Acting Inspector General conducted a risk assessment to ensure that high-risk programs, funded entities, and administrative operations are identified and considered for audit and evaluation. The DOC-OIG's Office of Inspections will receive allegations through its hotline, as well as referrals that come as a result of referrals that come as a result of risk assessments, audits, evaluations, inspections and other intake sources. As of September 14, 2014, the DOC-OIG Office of Investigations included Denali Commission complaints within its hotline intake menu. The Acting IG further developed Audit and Evaluation Directives, dated October 2014, that include guidance for internal and external quality assurance reviews to help ensure that OIG operations are consistent with professional standards and are carried out economically, efficiently, and effectively.
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| The Denali Commission | In order to ensure that the Commission receives effective oversight of its major programs and operations, the Commission IG, or the individual or entity that ultimately assumes IG oversight responsibilities for the Commission under an alternate structure, should implement the OIG's policies and procedures developed in accordance with CIGIE's Quality Standards for Federal Offices of Inspector General to ensure that the OIG's management and operation of its office includes annual work and strategic plans that identify goals, objectives, and performance measures to be accomplished by the OIG within a specific period. |
Closed – Implemented
The Denali Commissions' office's directives include policies and procedures to address planning for, conduct of, and reporting on audits, evaluations, and inspections. The directives also include a section on annual planning, risk assessments, and internal and external quality control processes and procedures. The Denali OIG stated that they will use the services of the DOC-OIG's Office of Investigations and will therefore adopt the processes and procedures used by DOC-OIG in dealing with allegations, the conduct of investigations, and reporting on investigations. In October 2014, the Denali Acting IG developed Audit and Evaluation Directives and a Fiscal Year 2015 Work Plan to provide improved audit oversight coverage of Denali. Also, in May 2015 the Denali OIG issued a performance audit that covered specific Denali operations. We reviewed the Directives, the Work Plan, and the performance audit and believe that the Denali IG has addressed our recommendation.
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| The Denali Commission | In order to ensure that the Commission receives effective oversight of its major programs and operations, the Commission IG, or the individual or entity that ultimately assumes IG oversight responsibilities for the Commission under an alternate structure, should implement the OIG's policies and procedures developed in accordance with CIGIE's Quality Standards for Federal Offices of Inspector General to ensure that the OIG's management and operation of its office includes a quality assurance framework that includes both internal and external quality assurance reviews. |
Closed – Implemented
In May 2014, the Department of Commerce Office of Inspector General (OIG) entered into an agreement with the Denali Commission to provide a full range of OIG services. The Acting IG for the Denali Commission developed Audit and Evaluation Directives, dated October 2014, that included guidance for internal and external quality assurance reviews to help ensure that OIG operations are consistent with professional standards and are carried out economically, efficiently, and effectively.
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| The Denali Commission | In order to ensure that the Commission receives effective oversight of its major programs and operations, the Commission IG, or the individual or entity that ultimately assumes IG oversight responsibilities for the Commission under an alternate structure, should implement the OIG's policies and procedures developed in accordance with CIGIE's Quality Standards for Federal Offices of Inspector General to ensure that the OIG's management and operation of its office includes an internal control structure that includes all elements of internal control, such as the control environment, risk assessment, control activities, information and communication, and monitoring. |
Closed – Implemented
The Acting Denali OIG established Audit and Evaluation Directives, dated October 2014, to address the OIG's internal control structure through directives for documenting and managing the OIG's work. These directives include policies and procedures to address planning for, conduct of, and reporting on audits, evaluations, and inspections. We believe that these directives satisfy the intent of our recommendation.
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| The Denali Commission | In order to ensure that the Commission receives effective oversight of its major programs and operations, the Commission IG, or the individual or entity that ultimately assumes IG oversight responsibilities for the Commission under an alternate structure, should implement the OIG's policies and procedures developed in accordance with CIGIE's Quality Standards for Federal Offices of Inspector General to ensure that the OIG's management and operation of its office includes an OIG hotline to receive and review anonymous tips, referrals, and allegations to help prevent and detect potential fraud, waste, and abuse. |
Closed – Implemented
In May 2014, the Department of Commerce (Commerce) OIG entered into an agreement with the Denali Commission to provide a full range of IG services. As a result, Denali now uses the Commerce OIG's hotline system and Commerce OIG investigations of any hotline complaints to better address potential fraud, waste, and abuse.
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| The Denali Commission | In order to ensure that the Commission receives effective oversight of its major programs and operations, the Commission IG, or the individual or entity that ultimately assumes IG oversight responsibilities for the Commission under an alternate structure, should update the OIG's policies and procedures for inspections to ensure that they are fully in accordance with CIGIE's Quality Standards for Inspection and Evaluation. |
Closed – Implemented
The Denali Commission's Acting IG issued Audit and Evaluation Directives, dated October 2014, to help ensure that the OIG's evaluation and inspection work complies with professional quality standards for inspections. These directives include policies and procedures to address planning for, conduct of, and reporting on audits, evaluations, and inspections, as well as a section on annual planning, risk assessments, and internal and external quality control processes and procedures.
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| The Denali Commission | In order to ensure that the Commission receives effective oversight of its major programs and operations, the Commission IG, or the individual or entity that ultimately assumes IG oversight responsibilities for the Commission under an alternate structure, should conduct inspections that are fully in accordance with CIGIE's Quality Standards for Inspection and Evaluation and the OIG's policies and procedures. |
Closed – Implemented
The Office of Inspector General (OIG) Denali Commission has taken corrective actions by (1) creating an inspection and evaluation template that helps to ensure it conducts inspections that are fully in accordance with the Council of Inspectors General on Integrity and Efficiency's Quality Standards for Inspection and Evaluation and OIG's policies and procedures, (2) including a requirement in its policies and procedures for OIG Denali Commission to use the inspection and evaluation template when conducting inspections, and (3) using the inspection and evaluation template for the first time when OIG Denali Commission conducted its inspection on Denali Commission's fiscal year 2016 compliance with reporting requirements for improper payments, which was issued in August 2017. We have reviewed OIG's inspection and evaluation template, its use of the template when conducting its inspection related to improper payments, and its policies and procedures contained in its Audit and Evaluation Directives and have concluded that OIG Denali Commission's corrective actions have met the intent of our recommendation.
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| The Denali Commission | In order to ensure that the Commission receives effective oversight of its major programs and operations, the Commission IG, or the individual or entity that ultimately assumes IG oversight responsibilities for the Commission under an alternate structure, should prepare semiannual reports to the Congress that fully comply with the reporting requirements of the IG Act. |
Closed – Implemented
The Acting Inspector General of the Denali Commission prepared and issued semiannual reports for the periods ending September 30, 2014, and March 31, 2015. We reviewed these reports as well as the March 2014 semiannual report which had been issued late. We examined the reports to ensure they included the information required by the IG Act as accurately as possible for the Congress. These improved semiannual reports will allow both Denali management and the Congress to receive more complete information on the oversight of Denali.
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| The Denali Commission | In order to ensure that the Commission receives effective oversight of its major programs and operations, the Commission IG, or the individual or entity that ultimately assumes IG oversight responsibilities for the Commission under an alternate structure, should develop policies and procedures for OIG office operations and management activities in accordance with the Council of the Inspectors General on Integrity and Efficiency's (CIGIE) Quality Standards for Federal Offices of Inspector General. |
Closed – Implemented
The Denali Commission's Acting IG issued Audit and Evaluation Directives, dated October 2014, that include a set of policies and procedures to address the audit, evaluation, and inspection side of the work done by the Denali Commission OIG. These will help ensure that the OIG's evaluation and inspection work complies with professional quality standards for inspections. Also, the Denali OIG stated that they plan to adapt the processes and procedures used by the Department of Commerce OIG in dealing with allegations, the conduct of investigations, and reporting on investigations In consultation with the audit team, we concluded that the new Directives satisfy the recommendation. The OIG's directives will help to ensure that OIG operations provide the quality results intended by the CIGIE standards.
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