GAO Report Highlights High-Risk Areas
The Government Accountability Office (GAO) released its latest report to Congress Jan. 22 highlighting the wide range of high-risk areas in government that it urges the new Congress and administration to address. The report updates the areas already on GAO's list and adds three new high-risk areas: the outdated financial regulatory system, medical product oversight and regulation, and toxic chemical assessment.
Since 1990, GAO has regularly issued reports in its high-risk series, usually at the beginning of each new Congress. The new report, issued as the 111th Congress was still organizing itself, includes 30 areas that GAO has identified as either being susceptible to high levels of waste, fraud, and abuse or in need of transformational change to achieve greater efficiency, effectiveness, and accountability. Some of the areas on the current list were designated high-risk as early as 1990, while three new areas were added to this version of the report.
The three new areas added to the list are modernizing the outdated U.S. financial regulatory system, protecting public health through enhanced oversight of medical products, and transforming the U.S. Environmental Protection Agency's (EPA) processes for assessing and controlling toxic chemicals. Each of these critical regulatory issues has been addressed in earlier GAO reports. (Reports are available on GAO's website.)
Modernizing the Outdated U.S. Regulatory System.
The U.S. is currently facing the worst economic crisis since the Great Depression, with widespread failures of important financial institutions, home foreclosures nationwide, and massive job losses. GAO writes that several factors "have revealed limitations in the existing financial regulatory system." Among them:
- The current structure is limited in its ability to oversee large conglomerates and especially their risk management activities.
- Financial problems have originated from large, important market institutions that are under-regulated or are not regulated at all. For example, part of the subprime mortgage crisis was caused by nonbank mortgage lenders not subject to direct oversight.
- As new and more complex investment products were developed and marketed by financial institutions, the regulatory system has been unable to keep up with the rapid changes.
- The various boards and agencies responsible for setting the accounting standards regulators rely on have not always been able to keep up with the pace of change in the investment products.
- As financial markets have become increasingly global, "the current fragmented" U.S. regulatory structure has made it more difficult to coordinate with international regulators.
In the high-risk report, GAO urges Congress to consider a report the office issued Jan. 8 that suggests a framework for evaluating new proposals to revamp the existing regulatory system. It contains "key elements that any new regulatory system should include regardless of the structure it takes, such as ensuring systemwide risks are identified and mitigated and that consumers are protected."
Protecting Public Health through Enhanced Oversight of Medical Products.
The Food and Drug Administration (FDA), part of the Department of Health and Human Services, is responsible for ensuring that medical products used in the U.S are safe and effective. FDA oversees drugs, medical devices used in over 100 million surgical procedures each year, and biologics, a class of biologically-produced medicines. Many of these products are manufactured in other countries and fall under FDA's approval and inspection programs.
GAO's report supports numerous other analyses of FDA's "significant challenges that compromise its ability to protect Americans from unsafe and ineffective products." Demands on the agency to oversee an increasing number of complex products, increased globalization, new statutory responsibilities, and significant declines in its resources have all factored into FDA's inability to respond effectively. (See, for example, an OMB Watch article on new statutory responsibilities and FDA's Science Board report entitled FDA Science and Mission at Risk.)
Among GAO's recommendations is the need to improve FDA's data management for its foreign drug inspection program and to conduct more foreign inspections, improve its monitoring of post-market product safety, better manage its oversight of promotional materials developed by drug companies and others aimed at both the medical profession and consumers, and vastly improve its oversight of clinical trials of new drugs. Taken together, these problems create a significant need for FDA to "enhance its oversight of medical products to better protect public health."
Transforming EPA's Processes for Assessing and Controlling Toxic Chemicals.
According to GAO, EPA "lacks adequate scientific information on the toxicity of many chemicals that may be found in the environment — as well as on tens of thousands of chemicals used commercially" in the U.S. This information is critical to sound regulatory decisions EPA needs to make under several environmental statutes.
EPA's Integrated Risk Information System (IRIS) is a database of information on the health effects of exposure to many chemicals. EPA has only assessed nine chemicals in the last three fiscal years and has a substantial backlog of assessments. The program "is at serious risk of becoming obsolete," according to GAO. IRIS assessments have been halted or delayed due to several factors GAO outlines, including 1) new review processes by the Office of Management and Budget (OMB) and other federal agencies; 2) EPA's decisions to delay many assessments pending collection of new scientific information; and 3) the compounding impact of delaying assessments. "Thus EPA's decisions to wait for new research on key chemicals rather than relying on the best available scientific data at the time of [sic] the assessment is conducted — as had been EPA's general approach in the 1990s — can have a significant impact on assessment completion dates."
OMB's effort to allow federal agencies to review the IRIS assessment process has undercut EPA's ability to manage the process and allows agencies potentially affected by the chemical assessments to have a virtual veto over assessments.
GAO notes that in its several reports on EPA's handling of scientific information regarding the toxicity of chemicals, "Neither Congress nor EPA has implemented the most important recommendations aimed at providing EPA with the information needed to support its assessment of industrial chemicals. Without greater attention … the nation lacks assurance that human health and the environment are adequately protected."