A lack of oversight at more than three dozen small federal agencies could be carrying a hefty price tag.

All told, at least 41 different agencies — mostly small entities, such as boards and commissions — do not have dedicated inspectors general on site, according to Sen. Claire McCaskill (D-Mo.), chairman of a Senate subcommittee on agency financial oversight.

“Each of these agencies has a budget that sounds small when you compare it to the federal government’s budget of $3.5 trillion,” McCaskill said during a hearing Thursday on strengthening oversight efforts at small agencies “But if you add it all up then we’re talking about well over $1 billion in budget authority every year that has virtually no oversight — and $1 billion isn’t small even by Washington’s standards.

In the absence of IGs, many of these small agencies either contract with outside firms to conduct financial audits or call on larger agencies to help investigate allegations of misconduct.

“So, that’s a problem, because I haven’t noticed in this business that your phone rings off the hook from people calling saying, ‘Please come look at us,'” McCaskill said.

McCaskill drafting new IG bill

McCaskill told a panel of agency IGs that she’s currently drafting legislation that would pool together resources and establish an IG office specifically for the dozens of small agencies that fall outside the scope of the 1978 IG Act that established spending watchdogs at most large federal agencies.

McCaskill’s proposal also aims to help small agencies that do have IG offices, but which are often overworked, understaffed and hampered by a lack of resources.

“I think most of the folks at these agencies are hardworking people, just trying to do their jobs. But when there’s no independent inspector general asking any questions, problems can be missed or ignored,” she said. “And when there’s no oversight, those problems have a tendency to fester, and build and never get resolved.”

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McCaskill circulated her draft bill among the witnesses at Thursday’s hearing, but her office declined to provide a copy to Federal News Radio.

Most of the IGs who testified supported the general concept of a consolidated IG office for small agencies.

“You get economies of scale, you get functional depth and you get a critical mass of oversight that really allows for effective oversight of smaller agencies,” said Michael Carroll, the U.S. Agency for International Development’s IG, who also oversees four other smaller agencies, including Overseas Private Investment Corporation and the Millennium Challenge Corporation.

Now, many small-agency IGs lack proper administrative support and funding and often become dependent on the agencies they oversee for human-resources and IT functions.

“I think we’d all agree that effective oversight is independent oversight, and it is difficult, I realize, for the small IGs getting their administrative services from their agencies to be as independent as they would like to be,” Carroll said.

Critics worry about workloads, lack of expertise

But the IGs who testified also cautioned that a governmentwide IG for small agencies would likely face difficulties managing its workload.

“It is a challenge to stay focused on the smaller organizations when you have large organizations that you’re overseeing. … It’s not impossible; it’s certainly doable. But the IGs really have to stay focused on their entire portfolio,” Carroll said.

Carroll, who oversees a total of five agencies — four of them small agencies — said already he’s “at about the edge of the span of control that you would want for an IG.”

Also coming up for criticism is the fact that McCaskill’s proposed bill would phase out individual agency IGs at the handful of small agencies that currently have them in favor of the umbrella organization.

Nine of these “designated federal entities” would lose their current dedicated IG, according to Hubert Sparks, the Appalachian Regional Commission’s IG and a 45-year veteran of government auditing shops.

“Expertise gained over many years and the experience of running a small OIG and the challenges of dealing independently with agency heads and senior officials on a regular basis would be reduced,” Sparks said.

Sparks also took umbrage at a proposal in McCaskill’s draft bill that would allow the heads of the newly created umbrella office to determine its staff makeup.

“This basically results in smaller IGs, most of whom are long-term career employees, who earned their positions through demonstrated performance, not only having their organizations abolished but also being subject to termination if the acquiring IG does not pick them up,” Sparks said.

McCaskill said she’s still crafting the bill and wants to “come up with a proposal that makes the most sense without disrupting the IG community too much.”

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