	Agencies Can Better Ensure Effectiveness of Guidance through Consistent Adherence with OMB Requirements and Internal Controls

First, I will discuss our 2015 report on guidance processes at USDA,  Education, HHS, and DOL, specifically (1) how these agencies decide  whether to issue regulations or guidance and (2) the extent to which they  adhere to OMB requirements and internal controls when developing  guidance. OMB defines a significant guidance document as guidance with a broad  and substantial impact on regulated entities. In 2015, we made 11 recommendations to  USDA, HHS, DOL and Education to better ensure the adherence to OMB  requirements for approval and public access of regulatory guidance, to  strengthen the use of internal controls in guidance processes, and to  improve the usability of websites with online guidance, three of which  remain open. Adherence to OMB Requirements for Significant Guidance

We found that agencies did not always adhere to OMB requirements for  significant guidance. Education and USDA had written  procedures for the approval of significant guidance as directed by OMB. HHS did not have any written procedures. We found that  Education, USDA, and DOL consistently applied OMB’s public access  and feedback requirements for significant guidance, while HHS did not. We also found opportunities for agencies to improve access to their  guidance. Application of Internal Controls for Guidance Processes

For guidance that does not meet OMB’s definition of significant, we found  opportunities for agencies to improve guidance development, review,  evaluation, and dissemination processes by strengthening their  adherence to internal controls. Maintaining Written Policies and Procedures for the Production  of Nonsignificant Guidance: Most subagencies we reviewed did not  have written procedures for the production of non-significant  guidance. Regularly Evaluating Whether Issued Guidance is Effective and  Up to Date: Almost half of the subagencies we reviewed regularly  evaluated whether issued guidance was effective and up-to-date. Compliance with the Congressional Review Act Could Be Strengthened

Prior studies have indicated that agencies typically issue a larger number  of regulations during the transition from the end of one presidential  administration to the beginning of the next administration, relative to  comparable periods earlier in the administration, a phenomenon often  referred to as “midnight rulemaking.” The Edward “Ted” Kaufman and  Michael Leavitt Presidential Transitions Improvements Act of 2015  included a provision requiring us to review final significant regulations  promulgated by executive departments during the 120-day presidential  transition periods (September 23 through January 20) at the end of  Presidents Clinton, Bush, and Obama’s administrations and compare  them to each other and to regulations issued during the same 120-day  period in nontransition years since 1996. In particular,  the Clinton, Bush, and Obama administrations published on average  roughly 2.5 times more economically significant regulations during  transition periods than during nontransition periods. But agencies more  often, relative to nontransition periods, provided the public an opportunity  to influence the development of the transition-period regulations by  providing advanced notice of their issuance in the Unified Agenda, and  opportunities to comment on proposed regulations before they were  finalized. Some Regulations Did Not Comply with the Congressional Review Act

In their published regulations, agencies generally reported complying with  four of five procedural requirements for promulgating regulations during  both transition and nontransition periods–the Regulatory Flexibility Act  (RFA), the Small Business Regulatory Enforcement Fairness Act  (SBREFA), the Paperwork Reduction Act (PRA), and the Unfunded  Mandates Reform Act of 1995 (UMRA). These laws require agencies to  consider the impact of regulations on small entities, impose additional  requirements on the Environmental Protection Agency and the  Occupational Safety and Health Administration to obtain input from small  entities for rulemaking efforts that are expected to have a significant  economic impact on a substantial number of small entities, require all  agencies to minimize the burden on the public of information collections,  and require agencies to prepare an assessment of the anticipated costs  and benefits for any regulation that includes a federal mandate requiring  nonfederal parties to expend resources without being provided funding to  cover the costs, respectively. Agencies less often complied with one or  more CRA requirements. The most common CRA deficiency for economically significant  regulations was agencies’ failure to provide Congress the required time to  review and possibly disapprove regulations, which we had also identified  as a deficiency in previous work. We recommended that OMB, as part of its  regulatory review process, identify economically significant regulations at  potential risk of not complying with CRA and work with agencies to  ensure compliance. OMB staff did not take a position agreeing or  disagreeing with the recommendation. One of the common themes in our work over several decades is the need  for transparency of the regulatory review process and opportunities for  increasing public participation and congressional oversight.
Why GAO Did This Study

Congress has often asked GAO to evaluate the implementation of procedural and analytical requirements that apply to agencies' rulemaking and guidance processes. The importance of improving the transparency of those processes, including providing public participation and sufficient oversight, is a common theme throughout GAO's body of work on federal regulation.
Based on GAO's prior work, this testimony addresses: (1) the extent to which USDA, Education, HHS, and DOL adhered to OMB requirements and internal controls when developing regulatory guidance, and (2) agencies' compliance with the CRA for regulations promulgated during presidential transitions.

What GAO Found

Agencies GAO reviewed—Departments of Agriculture (USDA), Education (Education), Health and Human Services (HHS), and Labor (DOL) did not consistently adhere to Office of Management and Budget (OMB) requirements and internal controls when developing regulatory guidance, as GAO reported in 2015. Unlike regulations, regulatory guidance is not generally legally binding and is subject to different requirements for regulatory oversight. Agencies weighed various factors when they determined whether to issue guidance. The agencies GAO reviewed issued different amounts of guidance for various purposes, such as explaining plans for implementing regulations. Agencies found few of their guidance documents to be “significant,” guidance with a broad and substantial impact on regulated entities. USDA and Education had written procedures for the approval of significant guidance as directed by OMB; DOL's procedures needed updating and to be distributed to appropriate agency officials; HHS did not have any. GAO found that USDA, Education, and DOL consistently applied OMB's requirements for public feedback and access, for example public access to guidance through websites, while HHS did not. Agencies can better ensure consistent application of review processes and public access to significant guidance through better adherence to OMB requirements. GAO also found opportunities for agencies to improve adherence to internal controls for guidance that did not meet OMB's definition of “significant.” For example, most subagencies GAO reviewed did not have written procedures for the production of guidance and about half did not regularly evaluate whether issued guidance was effective and up-to-date. Adherence to these internal controls could promote quality and consistency in guidance development processes.
GAO found that agencies did not consistently comply with the Congressional Review Act (CRA) for regulations promulgated during the 120-day presidential transition periods (September 23 through January 20), as defined by the Presidential Transitions Improvements Act of 2015. GAO reported that during the transition from the end of one presidential administration to the next, the Clinton, Bush, and Obama administrations published on average roughly 2.5 times more economically significant regulations during transition periods than during nontransition periods; increases are typical during transition periods. For these regulations, agencies more frequently provided advanced notice to the public, thus providing the public opportunities to influence the development of these transition period regulations before they were finalized. In their published regulations, agencies generally reported complying with four of five procedural requirements for promulgating regulations during both transition and nontransition periods. Agencies are required to 1) assess the impact of regulations on small entities, 2) minimize the burden that information collections impose on the public, 3) assess the costs and benefits of regulations that include federal mandates, and 4) for certain agencies, obtain direct input from small entities during rulemaking. Also, a fifth requirement, agencies must comply with CRA, which provides Congress an opportunity to review and possibly disapprove regulations before they take effect. Agencies less often complied with CRA, during both transition and nontransition periods. The most common deficiency was agencies' failure to provide Congress the required time to review regulations, which GAO has also identified as a deficiency in previous work.

What GAO Recommends

In the April 2015 report on regulatory guidance, GAO made eleven recommendations to USDA, Education, HHS, and DOL to ensure adherence to OMB requirements and applicable elements of internal controls. Three of these recommendations to HHS remain open: 1) to develop written procedures for the approval of significant guidance, 2) strengthen application of internal controls over guidance processes, and 3) improve its website.
In the March 2018 report on rulemaking at the end of presidents' terms, GAO recommended OMB, as part of its regulatory review process, identify economically significant regulations at risk of not complying with the CRA and work with agencies to ensure compliance. OMB staff did not agree or disagree with the recommendation.