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. Agency guidance documents, even though they are not generally legally  binding as regulations or statutes are, can have a significant effect, both  because of their volume and because of their potential to prompt changes  in the behavior of regulated parties and the general public. Guidance  generally serves different purposes than those of regulations. Agencies  also issue regulatory guidance that sets forth a policy on a statutory,  regulatory, or technical issue, or an interpretation of a statutory or  regulatory issue—as illustrated in figure 1 below. The processes by which  agencies issue guidance and regulations are governed by statutes,  executive orders, and agencies’ policies and procedures, with the aim of  greater transparency and public participation, enhanced oversight, and  reduced regulatory burdens. Agencies Weighed Various  Factors When Deciding  Whether to Issue  Regulations or Guidance Agency officials considered a number of factors before deciding whether  to issue guidance or undertake rulemaking. Among these factors at the  four agencies included in our analysis, a key criterion was whether  officials intended for the document to be binding (in which case they  issued a regulation). OMB’s Office of Information and Regulatory Affairs  (OIRA) staff concurred that agencies understood what types of direction  to regulated entities must go through the regulatory process. Officials from all four agencies also told us that they understood when guidance  was inappropriate and when regulation was necessary. They said that  they consulted with legal counsel when deciding whether to initiate  rulemaking or issue guidance. For example, HHS’s Administration for Community Living officials told us  that they considered a number of factors, including whether the  instructions to be disseminated were enforceable or merely good practice.  Specifically, when Administration for Community Living officials noticed  that states were applying issued guidance related to technical assistance  and compliance for the state long-term care ombudsman program  differently, they decided it would be best to clarify program actions  through a regulation. Officials believed that a regulation would ensure  consistent application of program requirements and allow them to enforce  those actions. They issued the proposed rule in June 2013 and the final  rule in February 2015. In another example, officials at USDA’s Food and  Nutrition Service told us that the decision to issue guidance or undertake  rulemaking depended on (1) the extent to which the proposed document  was anticipated to affect stakeholders and the public, and (2) what the  subagency was trying to accomplish with the issued document. The agencies used guidance for multiple purposes and differed in the  amount of guidance they issued. The purposes of guidance included  explaining or interpreting regulations, clarifying policies in response to  questions or compliance findings, disseminating suggested practices or  leadership priorities, and providing grant administration information.  Guidance documents provide agencies valuable flexibility to help  regulated agencies comply with agency regulations, and address new  issues and circumstances more quickly than may be possible using  rulemaking. Guidance documents that meet OMB’s definition of “significant” are  subject to the regulatory practices and requirements established by OMB.  OMB defines a significant guidance document as guidance with a broad  and substantial impact on regulated entities. An economically significant  guidance document is a significant guidance document that may  reasonably be anticipated to lead to an annual effect on the economy of  $100 million or more, among other factors. Guidance that does not fall  under the definition of “significant” is not subject to the OMB Bulletin, and  those guidance procedures are left to agency discretion. The four  agencies we reviewed considered few of their guidance documents to be  significant. As of February 2015, agencies listed the following numbers of  significant guidance documents on their websites: Education, 139; DOL,  36; and USDA, 34. We were unable to determine the number of  significant guidance documents issued by HHS. All four agencies told us  that they did not issue any economically significant guidance. OIRA staff  told us they accepted departments’ determinations of which types of  guidance meet the definition of significant guidance. Agencies also varied  in the amount of guidance they issued, ranging from 10 to more than 100  documents issued in a single year. Agency officials said that mission or the types of programs administered  can affect the number of guidance documents issued. For example,  officials from DOL’s Bureau of Labor Statistics told us they rarely issue  guidance—about 10 routine administrative memorandums each year  related to the operation of two cooperative agreement statistical  programs. In contrast, DOL’s Occupational Safety and Health  Administration officials told us they have regularly issued guidance to  assist with regulatory compliance, and could easily produce 100 new or  updated products each year to provide guidance to regulated entities. Agencies Should Increase  Adherence with OMB  Requirements and Internal  Controls We found opportunities for agencies to improve regulatory guidance  processes by strengthening compliance with OMB requirements for  significant guidance and the use of management controls for producing  their guidance documents. 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. USDA, DOL and Education have addressed  recommendations concerning strengthening the application of  management controls—internal controls—and improving their websites to  ensure the public can easily find, access, and comment on online  guidance. These recommendations for HHS remain open as well as an  additional recommendation concerning developing written procedures for  agency approval of written guidance. These actions would help to ensure  appropriate review and use of these documents, and both could also  facilitate opportunities for affected parties and stakeholders to provide  feedback on those documents. Adherence to OMB  Requirements for Significant  Guidance We found that agencies did not always adhere to OMB requirements for  significant guidance. The OMB Final Bulletin for Agency Good Guidance  Practices establishes standard elements that must be included in  significant guidance documents and directs agencies to (1) develop  written procedures for the approval of significant guidance, (2) maintain a  website to assist the public in locating significant guidance documents,  and (3) provide a means for the public to submit comments on significant  guidance through their websites. Education and USDA had written  procedures for the approval of significant guidance as directed by OMB.  While DOL had written approval procedures, they were not available to  the appropriate officials, and DOL officials noted that they required  updating. 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. In April 2015, we found that subagencies used different  strategies to disseminate guidance and all relied primarily on posting the  guidance on their websites. USDA, DOL, and Education posted their  significant guidance on a departmental website as directed by OMB; at  that time HHS did not, but has since posted such a page on its website in  response to our recommendation. On their websites, agencies used  several approaches —including organizing guidance by audience or topic  and highlighting new or outdated guidance—to facilitate access.  However, we identified factors that hindered online access, including long  lists of guidance and documents dispersed among multiple web pages. Opportunities also exist for agencies to use the web metrics they already  collect to improve how guidance can be accessed. All agencies and their  subagencies that we studied collected web metrics, and many used them  to evaluate online guidance dissemination. However, many of these  subagencies did not use metrics to improve how they disseminated  guidance through their websites. Beyond their websites, subagencies  found other ways to disseminate and obtain feedback on issued  guidance, including focus groups, surveys, and direct feedback from the  public at conferences, webinars, and from monitoring visits. 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. Wider adoption of these practices could  better ensure that agencies have internal controls in place to promote  quality and consistency of their guidance development processes, and to  ensure that guidance policies, processes, and practices achieve desired  results, and prevent and detect errors. We recommended that agencies  strengthen their application of internal controls to guidance practices by  adopting practices, such as: Determining Appropriate Level of Review to Manage Risk: Most  subagencies in our study managed risk by determining appropriate  levels of review. Agencies face multiple risks when going through the  guidance production process, such as legal challenges that issued  guidance is asserting binding requirements without having gone  through the rulemaking process. Agencies can manage risk by  involving agency management in decisions to initiate guidance,  prioritize among proposed guidance, and determine the appropriate  level of review prior to issuance. 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. Written procedures for guidance initiation, development,  and review help ensure that actions are taken to address risks and  enforce management’s directives when an agency is developing  regulatory guidance. Documented procedures are an important  internal control activity to help ensure that officials understand how to  adequately review guidance before issuance. Ensuring Communication during the Guidance Development and  Review Process: Most subagencies we reviewed had methods to  ensure communication during the guidance development and review  process. Communication procedures provide an opportunity for  subagencies to get feedback from agency management, other federal  agencies, and the public before the guidance issues. For example,  officials told us that they conferred with other affected subagencies or  federal departments to ensure consistency of their guidance during  the development of 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.  Agencies benefit from procedures to continually reassess and  improve guidance processes. Without a regular review of issued  guidance, agencies can miss the opportunity to revisit whether current  guidance could be improved and thereby provide better assistance to  regulated entities and grantees. 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. Among other objectives, we  assessed the extent to which there was variation in (1) the number of  regulations and their characteristics, such as the types of rulemaking  procedures agencies used; and (2) agencies’ reported compliance with  procedural requirements for promulgating the regulations, such as  requirements in the Congressional Review Act (CRA). CRA was  enacted to better ensure that Congress has an opportunity to review and  possibly disapprove regulations, in certain cases, before they take effect. Agencies Published More  Economically Significant  and Significant Final  Regulations and Provided  More Opportunity for  Public Participation During the transition periods at the end of each of the three  administrations we reviewed, agencies published more economically  significant and significant final regulations relative to comparable time  periods earlier in each administration (see figures 2 and 3). 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 reported complying for nearly all  economically significant regulations and the majority of significant  regulations with these four laws. Agencies less often complied with one or  more CRA requirements. Over 25 percent of economically significant  regulations did not comply with the CRA (see figure 4). We estimated that  15 percent of significant regulations published across all periods reviewed  failed to meet at least one of the CRA requirements we reviewed. 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. Among the most active regulatory  agencies for economically significant regulations, the Departments of  Health and Human Services and Transportation had higher rates of  noncompliance than the government-wide percentages for both the  transition and nontransition periods we reviewed. However,  noncompliance was not limited to these two agencies; 17 of the 23  agencies that published economically significant regulations during the  periods we reviewed had at least one noncompliant regulation. Though agencies are responsible for complying with CRA, OMB is  responsible under Executive Order 12866 for oversight of agencies’  rulemaking, consistent with law, and reviews regulations before  publication, which provides an opportunity to identify and help agencies  avoid potential noncompliance. Economically significant regulations for  which OMB completed its review within 3 months before the planned  effective date were at high risk of not complying with CRA, thus  increasing the risk that agencies would not provide Congress with the  required time for its reviews. 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. The potential  effects of guidance underscore the need for consistent and well- understood processes for the development, review, dissemination, and  evaluation of guidance. Further, we found that while there were increased  opportunities for public participation for regulations promulgated at the  end of Presidents’ terms, there are increasing instances of  noncompliance with delay requirements under the Congressional Review  Act. Ensuring that agencies consistently provide Congress with the  required time to review, and possibly disapprove regulations, is important  throughout a President’s term, and particularly following a presidential  transition when Congress typically has a larger number of regulations to  potentially review. Improvements made in transparency of the rulemaking  process benefit not only the public, but congressional oversight. Chairman Gowdy, Ranking Member Cummings, and Members of the  Committee, this concludes my prepared statement. Once again, I  appreciate the opportunity to testify on these important issues. I would be  pleased to address any questions you or other members of the  Committee might have at this time. GAO Contact and  Staff  Acknowledgments For questions about this statement, please contact me at (202) 512-2660  or nguyentt@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this  statement. Individuals making key contributions to this testimony were  Tim Bober, Tara Carter, Colleen Corcoran, Robert Cramer, Alix Edwards,  Shirley A. Jones, Heather Krause, Barbara Lancaster, Michael O’Neill,  and Andrew J. Stephens. Related GAO Products Federal Rulemaking: OMB Should Work with Agencies to Improve  Congressional Review Act Compliance during and at the End of  Presidents’ Terms. GAO-18-183. March, 13, 2018. Regulatory Guidance Processes: Treasury and OMB Need to Reevaluate  Long-standing Exemptions of Tax Regulations and Guidance.  GAO-16-720. September 6, 2016. Regulatory Guidance Processes: Selected Departments Could  Strengthen Internal Control and Dissemination Practices. GAO-15-368.  April 16, 2015. Regulatory Guidance Processes: Agencies Could Benefit from Stronger  Internal Control Practices. GAO-15-834T. September 23, 2015. Federal Rulemaking: Agencies Could Take Additional Steps to Respond  to Public Comments. GAO-13-21. December 20, 2012. This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately.
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. 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.