Survey responses showed that the size of  DFE governing bodies ranges from 1 to 24 members. Thirteen of the 31  DFEs had at least one vacancy in their governing body. Based on the responses of the remaining 18 DFEs, the  applicability of the 12 statutes varied, with 1 DFE—the Corporation for  Public Broadcasting—stating that it is not subject to any of the 12 key  governance and accountability statutes. In recent  years, Amtrak and the Federal Election Commission have also had  significant vacancies. Not All DFEs Said They Are Required to Comply with Key Governance and Accountability Statutes

In order to improve governance and accountability at federal agencies, a  variety of laws covering a range of management and administrative  practices and processes have been enacted. Since the IG is responsible for preventing and  detecting fraud and abuse, conducting audits and investigations, and  recommending policies to promote economy, efficiency, and effectiveness,  the work of an IG at an entity can benefit the governing body, particularly  governing body and committee efforts to focus on issues and provide  oversight of the entity. A Majority of DFEs Have New Member Orientation Programs, While 9 DFEs Have Ongoing Training Programs

Nineteen of the 29 DFEs responding to our survey reported having  orientation programs for new governing body members, and at least 15 of  the 19 programs reportedly provide key information on oversight and  governance issues, such as governing body policies and communications  with management. Most of the  DFE IGs we surveyed report to the highest levels in their entities, a  structure that helps to safeguard IG independence in accordance with the  IG Act and generally accepted government auditing standards. The IG surveys also showed  that most DFE IGs had limited control over their resources and that their  budgets and staffing were not always adequate to perform audits or  investigations related to the missions or management challenges of their  entities. Only 10 DFEs reported that their  governing bodies have written policies for monitoring the implementation  of IG recommendations. Nine of those 10 have policies that require the  governing body to respond in writing acknowledging the  recommendations and to develop a plan to address them. Three DFE IGs have a separate appropriation  account or line item in the Budget of the U.S. Government (Legal Services  Corporation, National Science Foundation, and Federal Reserve Board). For entities using funding from taxpayers and donors,  effective governance, accountability, and internal control are keys to  maintaining trust and credibility. We are not making specific recommendations in this report, but are  providing this information for consideration in future oversight of DFEs  and their IGs. The information on governance structures and practices  provided in this report can help inform continuing work to improve the  effectiveness of government, such as the new IG Council established  under the 2008 Reform Act, which can also use this information in its role  of promoting and supporting the effectiveness of the IG community and  fostering governmentwide efforts to improve management. Of the entity heads and IGs responding, a number provided  technical comments that we incorporated as appropriate. GAO staff who made key contributions to this report are  listed in Appendix V.

Appendix I: Objectives, Scope and Methodology

Our reporting objectives were to describe (1) the statutory structure of the  governing body for each designated federal entity (DFE) organization and  (2) the inspector generals’ (IG) roles within the governance structure and  management of their respective entities. To obtain the information needed for our two reporting objectives, we  reviewed and summarized information from a variety of sources, including  the enabling legislation of each DFE; the IG Act, as amended; the 2007  Performance and Accountability Report (PAR) or 2007 Annual Report of  each DFE; the Office of Management and Budget’s (OMB) FY 2007 list of  designated federal entities and federal entities; and prior GAO reports on  inspectors general, accountability, and governance at the DFEs. A-123, Management’s Responsibility for Internal Control (rev. 2. 3. 7. 8. 13. 14. Pension Benefit Guaranty Corporation: Governance Structure Needs  Improvements to Ensure Policy Direction and Oversight.
Why GAO Did This Study

For entities that rely on others for funding, effective governance, accountability, and internal control are keys to maintaining trust and credibility. In recent years, corporate governance and accountability have received increased scrutiny and emphasis in the nonprofit, federal government, and public company sectors. Governance and accountability problems have also been identified at designated federal entities (DFE) such as the Smithsonian Institution, the Legal Services Corporation, and the Pension Benefit Guaranty Corporation. This report responds to a congressional request that GAO describe (1) the statutory structure of the governing bodies for each DFE organization and (2) the role of the inspectors general (IGs) in the governance structure. To accomplish this, GAO surveyed the DFE heads and IGs on governance issues and reviewed information from a variety of sources, including the IG Act and subsequent amendments; enabling legislation for the DFEs; and legislative and regulatory standards and requirements for financial reporting and internal control. GAO is not making specific recommendations in this report, but is providing this information for consideration in future efforts to update the governance of DFEs, oversee the entities and their IGs, and continue work to improve the effectiveness of government. GAO received technical comments, which were incorporated as appropriate.

What GAO Found

The DFEs vary in structure and requirements for governance. At the time of GAO's review, the designated size of the governing bodies of the 31 DFEs ranged from 1 to 24 members. Fifteen had at least one vacancy and 2 had more vacancies than sitting members. The frequency of DFE multimember governing-body meetings ranged from daily to rarely or not at all. In GAO's survey of DFEs, 13 indicated that they are required to comply with 12 key statutes that cover management and accountability. The remaining 18 reported varying requirements, with one not subject to any of the statutes. Only 7 DFE governing bodies have a structure that includes governance or oversight committees for ensuring oversight of management decisions, results of operations, and emerging risks. While 19 DFEs reported having orientation programs for new governing body members, only 9 reported ongoing training. IG effectiveness is influenced by an entity's governance structure and practices. Within DFEs, IGs vary in their role and relationship with management. IGs are charged with preventing and detecting fraud and abuse; conducting audits and investigations; and recommending policies to promote economy, efficiency, and effectiveness. To accomplish these objectives, IGs must be able to establish and maintain independence; have control of their resources to plan and perform work; recruit, retain, and manage sufficient professional staff; and be able to resolve audit and investigation recommendations. GAO's survey of IGs showed that most report to the highest levels in their entities, a legislative requirement that is a key element of independence. At the same time, the IGs had limited control over their resources, and their budgets and staffing were not always adequate to perform needed audits and investigations. Only 3 IGs had the transparency that a separate line item in their entity's budget provides, and 8 needed management approval for spending. Audit resolution varied, with some IGs reporting a lack of entity responsiveness to recommendations. Only 10 DFEs reported that their governing bodies have written policies for monitoring the implementation of IG recommendations. Nine of the 10 have policies that require the governing body to respond in writing and to develop a plan to address recommendations. During the course of GAO's work, Congress passed and the President signed into law on October 14, 2008, the Inspector General Reform Act of 2008, which was intended to enhance IG independence. Its implementation may mitigate some of the issues GAO found.