Watchdogs Not Immune from Sequestration Cuts

Inspectors General (IGs) face budget cuts of over $100 million in fiscal year 2013 due to sequestration, according to a recent Office of Management and Budget (OMB) report. The report shows that 24 IGs face direct budget reductions of anywhere from $1 million to $28 million this fiscal year. Other IGs not specifically itemized by OMB in the report may also be affected through agency-wide cuts. The indiscriminate cuts forced by sequestration subject IGs to the same budget reductions as the agencies they are charged with investigating and auditing. In a Federal Times article today, many IGs indicated that sequestration will impact their offices, resulting in furloughs, leaner staffing, or other cuts that may affect investigations.

The Department of Defense (DoD) IG will face the steepest reduction at $28 million, the Department of the Treasury Tax IG for Tax Administration (TIGTA) will need to cut $8 million, and both the Department of Homeland Security (DHS) IG and the Department of Housing and Urban Development IG face budget reductions of $7 million. Although these cuts are not as high as anticipated in September when OMB released preliminary sequestration figures, they will still significantly impact the ability of these offices to carry out their mission.

Additionally, it is possible that an IG may face cuts even if the agency on the whole will not be drastically affected by sequestration. For example, the General Services Administration (GSA) IG faces $3 million in cuts this year, while the rest of the agency must only cut $11 million. This is because GSA funds most agency operations with revenue from the products and services it provides, not congressional appropriations. The IG, however, relies on appropriations for funding. As a result, sequestration cuts will fall disproportionately on the IG, creating a situation where there will likely be continued waste and mismanagement at GSA, but a restricted ability on the part of the IG to investigate, audit, and make recommendations to the agency.

In fiscal year 2011 (the most recent data available) a budget of approximately $2.7 billion across 73 IGs yielded potential savings to the government of approximately $94 billion, according to the Counsel of Inspectors General on Integrity and Efficiency (CIGIE). Put another way, “potential savings represent about a $35 return on every dollar invested in the OIGs.” A 35:1 estimated return, even if not all the potential savings are realized by the government, makes a pretty sound investment.

Underscoring the important role of IGs, House Committee on Oversight and Government Reform Chairman Darrell Issa (R-Calif.) began a series of hearings March 5, 2013, that will focus on how unimplemented IG recommendations can be used to aid the sequestration budget reduction efforts. According to a staff report released by Chairman Issa’s office the same day as the hearing, these recommendations could save taxpayers an estimated $67 billion.

In his opening remarks, Chairman Issa noted that “in tough times, when you’re making budget cuts and you’re looking to find waste, you don’t lay off the people who find the waste for you. You don’t in a fraud situation get rid of your auditors.” He went on to state that it was the responsibility of his Committee to empower the IGs to “do more, not less.”

At the same hearing, Ranking Member Elijah Cummings (D-Md.) pointed out the irony of relying on IG recommendations to aid efforts to meet the sequestration threshold, while “[e]ven IG offices themselves will feel the negative effects of sequestration, hindering their ability to conduct the very oversight work we are praising them for today.” Both Chairman Issa and Ranking Member Cummings were right to recognize the critical role IGs play in identifying potential savings to the federal government. The next hearing in this series will take place at 10 a.m. today, and will focus on unimplemented recommendations made by the DoD and DHS IGs.

IGs help us hold government agencies accountable and make sure our tax dollars are being spent wisely, but sequestration of their funding will limit the range of future investigations and audits. As a result, it will be more challenging for the government to discern areas within agencies where there may be potential savings or even outright fraud, waste, or abuse. Additionally, the budget cuts might reduce referrals to enforcement agencies that have criminal, civil, or administrative tools at their disposal to protect taxpayers, including the Department of Justice and agency suspension and debarment offices. Watchdogs such as the IGs and the very effective Office of Special Counsel are important in any economic climate, and we should be investing in them because doing so pays dividends to taxpayers.