The Future Looks Busy for U.S. Inspectors General

The Future Looks Busy for U.S. Inspectors General

With the recent passage of two major pieces of legislation governing health care compliance and Wall Street reform, the Office of the Inspector General is expected to play a larger role in overseeing federal agencies and interacting with private parties to guide behavior. Since the founding of this nation, when General George Washington was informed of the combat readiness of his Continental Army, inspectors general have played an important role in the federal government. The modern inspectors general trace their roots to the late 1970s, a response to the growing size of the administrative state and the Watergate scandal. Their intended purpose was relatively straightforward – root out waste, fraud, and abuse within their assigned agency. Since the 1970s, their duties and numbers have increased with the size and scope of government.

Originally, there were only 12 inspectors general. Today, there are more than 70 such offices, employing more than 11,000 employees (including investigators and auditors). In addition, inspectors general were once relatively focused on the internal workings of their assigned agency. Today, they monitor not only the agency implementing Congress’ legislative instructions and programs, but also the participants of these federal programs. As Pamela J. Marple noted in her recent Bloomberg column, “IG offices now are increasingly focused outward, beyond the walls of their assigned agencies, and into corporate America.” Inspectors general investigate “anyone who has received — or applied for — federal benefit or funds,” including companies as well as their investors, trusts, and board members. The result? “[A]n increasing number of private [parties] receive IG subpoenas and are subject to IG audits, investigation, or unfavorable IG reports.”

By investigating the private participants of federal programs, inspectors general are supporting and in some cases perhaps duplicating efforts of the agencies themselves. After all, agencies are traditionally understood as the regulators of private parties. However, inspectors general have increasingly interacted closely with the participants of administrative programs – raising questions about compliance, subpoenaing and auditing corporate documents, and negotiating resolutions. While inspectors general do not have the corresponding power, enjoyed by many agencies, to compel testimony or impose civil sanctions, their actions can have a significant impact.

Inspectors general often will refer matters to a federal agency or to the Department of Justice (DOJ). In many instances, an inspector general does not simply refer a matter to the DOJ; rather, as Ms. Marple explains, “the IG office[] become[s] the foundation for investigating a DOJ case.” The augmented enforcement role played by inspectors general is underscored by the fact that certain inspectors measure success, at least in part, by the resulting number of civil and criminal actions.

The expanding role of inspectors general is unlikely to be limited in the near future. Recently, the federal government enacted substantial pieces of legislation that will increase its involvement in large sectors of the economy. The Affordable Care Act expanded the rights of inspectors general to access claims and payment databases, as well as to investigate health insurance exchanges. For its part, the Dodd-Frank Wall Street Reform and Consumer Protection Act creates a new inspector general to oversee the Consumer Financial Protection Bureau – itself a creation of Dodd-Frank. As has happened with past expansions in government services, these enactments will make more acute the challenge and necessity of accountability. We should expect the duties and numbers of internal watchdogs to continue to increase as well.

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