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Rating the Watchdogs: Are Our Inspectors General Effective?

Illustration by POGO.

A press story this week by Federal News Radio raised pointed questions about the effectiveness of the Department of Health and Human Services Office of Inspector General, one of the federal government’s largest Inspector General offices. A separate piece by Government Executive focuses on the work of the Department of Defense Inspector General, and describes billions of dollars in potential savings if the Pentagon and military Services implements audit and examination recommendations.

These two independent government watchdogs have enormous responsibilities. The HHS Inspector General oversees Medicare, Medicaid, the Food and Drug Administration, and many other critical programs that are within the Department. The Department of Defense Inspector General oversees hundreds of billions of dollars in military and national security spending.

Federal News Radio questioned the productivity of the Health and Human Services Inspector General in overseeing the Department, detailing a decrease in performance results. The metrics described in the article showed a reduction in the financial return-on-investment of the Inspector General’s oversight work. This is a calculation showing the ratio of federal dollars saved, for example by eliminating improper payments or other wasteful spending, to money spent by the Inspector General. The most recent semiannual report to Congress showed that the Inspector General’s work reviewing and investigating Medicare and Medicaid returned, on average, five dollars for every dollar spent on oversight. However, the article pointed out that the Health and Human Services Inspector General return-on-investment was higher in 2014, at eight dollars. Overall, the return-on-investment ratio for inspectors general across the federal government is between fourteen and twenty-one dollars to one.

Is the lower reported return-on-investment figure for the Health and Human Services watchdog a sign of a systemic problem? Perhaps, but the issue needs some context.

Each agency Inspector General decides for itself how to calculate return-on-investment. For example, one agency Inspector General may calculate that an audit resulted in an amount of total savings by estimating the reduction in waste or fraud based on one year of reduced costs. Alternatively, another Inspector General may calculate savings based on a five year timeframe. There is no consistent methodology.

POGO recently released a report recommending improvements to strengthen the effectiveness and independence of our federal inspectors general that focused, in part, on these issues. The Watchdogs After 40 Years: Recommendations for Our Nation’s Federal Inspectors General includes a specific recommendation to create a more standardized return-on-investment metric. This would allow Congress and others to have a more clear understanding of performance.

The report details additional opportunities for improvement for the inspector general community, such as amending the statutorily required semiannual reporting requirements. Current law includes twenty-two specific reporting requirements that largely focus on easily quantifiable data rather than alternatives that are more indicative of the work the office is conducting. For example, each inspector general must state the number of reports completed in a given time period. This type of metric can be misleading, and does not, on its own, say anything about whether the work is effective. A major, year-long study would be given the same weight in this type of metric as a simple compliance audit looking at a relatively minor problem. Alternatively, an inspector general office could arbitrarily cut an audit subject in two, and produce two audits instead of one—for no reason other than to have a higher number to report to Congress.

Instead, as POGO recommends in its report, Congress should incentivize federal watchdogs to focus on more qualitative reporting. It could do so by revising the Inspector General Act, “. . . with the goal of substantially reducing the number of reporting requirements and highlighting the more important work.” This would include more qualitative reporting on issues concerning public health, safety, and individuals’ constitutional rights that aren’t being adequately captured in existing reporting requirements. For example, the work of the Health and Human Services Inspector General often reveals harm to health and safety, such as that from inadequate or fraudulent Medicare services for patients. By contrast, merely quantitative numbers showing financial savings that were gained because the services were inadequate would be misleading or incomplete.

The Government Executive article focuses on a key issue relevant not only to the Department of Defense Inspector General, but across federal agencies. Too many recommendations by our inspectors general remain unimplemented, representing unrealized opportunities to improve government programs. POGO agrees, and in our report we suggest that adopting practices for improved tracking and reporting of an agency’s responses to inspector general recommendations would lead to better implementation. Some, but not all inspectors general are beginning to establish these practices, but more work is required, and Congress has a role to facilitate the change.

The Federal News Radio and Government Executive articles underscore that strong leadership within the inspector general community is essential to ensure that our government is held accountable. Congress also needs to do its part by updating reporting and other requirements to help focus the government watchdogs on high-priority issues. They should also create new statutory authorities through improvements to the Inspector General Act to ensure agency responsiveness to recommendations.