	Background

The State OIG, as currently constituted, was established by the Omnibus  Diplomatic Security and Antiterrorism Act of 1986, which expanded on  the 1985 amendments to the Inspector General Act of 1978 (IG Act), as  an independent office to prevent and detect fraud, waste, abuse, and  mismanagement in the department’s programs and operations; conduct  and supervise audits and investigations; and recommend policies to  promote economy, efficiency, and effectiveness. The State OIG is unique among federal inspectors general in its history and  responsibilities due to a statutory requirement for the OIG to provide  inspections of the department’s bureaus and posts worldwide. Importance of Auditor and IG Independence

Independence is a fundamental principle to the auditing profession and  the most critical element for IG effectiveness. Without independence, an  audit organization cannot conduct independent audits in compliance with generally accepted government auditing standards. Likewise,  Government Auditing Standards states: “in all matters relating to  work, the audit organization and the individual auditor, whether  government or public, must be free from personal, external, and  organizational impairments to independence and must avoid the  appearance of such impairments to independence. At the  same time the IGs are part of their respective agencies and must also keep  their agency heads, as well as the Congress, concurrently informed. Independence and Effectiveness Concerns We Reported in 2007

		Concerns Regarding the State OIG’s Independence

In March 2007, we reported on two areas of continuing concern regarding  the independence of the State OIG. These concerns involved the  appointment of management officials to head the State OIG in an acting  capacity for extended periods of time and the use of Foreign Service staff  to lead State OIG inspections. These Foreign Service  officers frequently move through the OIG on rotational assignments. In these areas the State OIG  was relying on inspections rather than audits for oversight. Inspections by the OIG’s Office of Information Technology Were Not Included in Quality Reviews

In our 2007 report we also found that inspections by the OIG’s Office of  Information Technology were not included in the internal quality reviews  that the OIG conducts of its own work. The State Department’s OIG Has Actions Under Way or Completed to Address Most of Our Recommendations

		Recommendations from Our 2007 Report

To address the concerns we raised in our March 2007 report we made five  recommendations. To help ensure the independence of the IG Office, which also impacts the  effectiveness of the office, we recommended that the IG work with the  Secretary of State to  (1) develop a succession-planning policy for the appointment of  individuals to head the State IG office in an acting capacity that  provides for independent coverage between IG appointments and also  to prohibit career Foreign Service officers and other department  managers from heading the State OIG in an acting capacity, and  (2) develop options to ensure that State OIG inspections are not led by  career Foreign Service officials or other staff who rotate to  assignments within State Department management. We also made the following three recommendations to the State IG to  address the effectiveness of the OIG:  (1) help ensure that the State IG provides the appropriate breath and  depth of oversight of the State Department’s high-risk areas and  management challenges, reassess the proper mix of audit and  inspection coverage for these areas;  (2) provide for more complete internal quality reviews of inspections,  include inspections performed by the State IG’s Office of Information  Technology in the OIG’s internal quality review process; and  (3) develop a formal written agreement with the Bureau of Diplomatic  Security to coordinate departmental investigations in order to provide  for more independent investigations of State Department management  and to prevent duplicative investigations. This use of temporarily  assigned State Department management staff to head the State OIG can  affect the perceived independence of the entire office in its oversight of  the department’s operations, and the practice is questionable when  compared to the independence requirements of Government Auditing  Standards and other professional standards followed by the IGs. In addition, with  the assistance of an independent public accountant, the State OIG has  completed an audit of a major issue in coordinating foreign assistance, the  Global HIV/AIDS Initiative related to the President’s emergency plan for  AIDS relief. We continue to believe that the  State OIG’s use of management staff who have the possibility of returning  to management positions, even if they are rehired annuitants or currently  report to civil service employees in the OIG, presents at least an  appearance of impaired independence and is not fully consistent with  professional standards. An IG who  lacks independence cannot effectively fulfill the full range of requirements  for this office. The State OIG has either implemented or is in the process of implementing  the recommendations from our 2007 report, with the exception of our  recommendation to discontinue the use of Foreign Service officers as  team leaders for inspections.
Why GAO Did This Study

In 2007 GAO reported on concerns with the independence and effectiveness of the Department of State Inspector General (State OIG). GAO was asked to provide testimony on the issues we raised and the status of recommendations made to the State OIG in that report. This testimony focuses on the importance of auditor and IG independence, GAO's prior concerns with the State OIG's independence and effectiveness, and the status of OIG actions to address GAO's recommendations. The testimony is primarily based on GAO's 2007 report conducted in accordance with generally accepted government auditing standards, as well as the activities conducted to follow up on the status of our previous recommendations.

What GAO Found

The State Department Office of Inspector General (State OIG) has a critical responsibility in preventing and detecting fraud, waste, abuse, and mismanagement; and in providing independent audits and investigations of the department's programs and operations. In addition, the Foreign Service Act of 1980 requires the State OIG to perform inspections of the department's bureaus and posts, which is a unique requirement for an IG office. Independence is a critical element to the quality and credibility of an IG's work under the IG Act and is fundamental to professional auditing standards as well as an essential element of IG effectiveness. An IG must be independent and free from personal, external, and organizational impairments to independence in order to effectively fulfill the full range of requirements for the office. GAO's 2007 report identified areas of concern regarding the State OIG's independence and effectiveness. Specifically, the appointment of management and Foreign Service officials to head the State OIG in an acting capacity for extended periods of time is not consistent with professional standards for independence. In addition, GAO reported that the use of Foreign Service officers at the ambassador level to lead OIG inspections resulted in, at a minimum, the appearance of independence impairment. GAO also reported that inspections, by design, are conducted under less in-depth requirements and do not provide the same level of assurance as audits. However, the OIG relied on inspections rather than audits to provide oversight coverage, resulting in gaps to the audit oversight of the department. GAO also reported that inspections performed by the OIG's Office of Information Technology (IT) were not part of an internal quality review process, and that the State OIG and the department's Bureau of Diplomatic Security (DS) lacked an agreement to coordinate their investigative activities. The State OIG implemented two of GAO's five recommendations and has actions under way related to the remaining three. Specifically, the OIG now includes IT-related inspections in its internal quality-review process and has completed an agreement to coordinate investigations with DS. Also, the OIG is implementing a change to the succession planning for acting IG positions to exclude Foreign Service officers and is in the process of increasing the level of audit coverage through the distribution of staff and audit planning. In addition, the State OIG continues to assign Foreign Service officers at the ambassador level as team leaders for inspections, however, four of the six officers are rehired annuitants unlikely to rotate to State Department Foreign Service positions. GAO remains concerned, however, about the OIG's use of Foreign Service officers and the State Department's need to rely on acting IGs for extended periods of time. GAO continues to reaffirm its recommendations, and encourages the State OIG, with the assistance of the Secretary, to fully address these recommendations to enhance the effectiveness of the OIG's oversight of the State Department's programs and operations. In the 2007 report, GAO recommended that the IG work with the Secretary of State to address two recommendations regarding concerns about the State OIG's independence, and to reassess the mix of audits and inspections to help provide effective audit coverage of the department. In addition, GAO recommended that the IG include inspections performed by the OIG's Office of Information Technology in its internal quality review process and that it work with the department's Bureau of Diplomatic Security (DS) on an agreement to coordinate their investigative efforts.