Testimony of John D. Graham

STATEMENT OF JOHN D. GRAHAM, PH.D.
ADMINISTRATOR
OFFICE OF INFORMATION AND REGULATORY AFFAIRS
OFFICE OF MANAGEMENT AND BUDGET
EXECUTIVE OFFICE OF THE PRESIDENT OF THE UNITED STATES

BEFORE THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES HOUSE OF REPRESENTATIVES

May 1, 2003

Good morning, Mr. Chairman, and Members of this Committee. I am John D. Graham, Ph.D., Administrator, Office of Information and Regulatory Affairs (OIRA), Office of Management and Budget. I appreciate this opportunity to discuss OIRA’s responsibilities under the Paperwork Reduction Act (PRA) and our efforts to alleviate the paperwork burdens that Federal agencies impose on small businesses.

In your letter of invitation, you specifically requested that my testimony address OIRA’s interpretation of the term “collection of information” and describe the actions OIRA can take to enforce agency compliance with the PRA and the Regulatory Flexibility Act (RFA). Before discussing these issues, I would like to reiterate for the Committee OMB’s deep commitment to reducing the regulatory and paperwork burdens that America’s small businesses deal with every day. Both the PRA and RFA are vitally important to efforts by OMB, the Small Business Administration (SBA), and agencies such as the Department of the Treasury to eliminate unnecessary compliance burdens for small business.

The PRA Definition of Collection of Information

The PRA defines collection of information quite broadly. There are three specific types of information that are covered by the PRA: information that the public transmits to Federal agencies, recordkeeping requirements, and third party reporting requirements.

The first type of information collection is perhaps the first one that comes to mind for most individuals and businesses. This type involves requests for information from the public for transmission to the Federal government. These collections include tax returns, grant application forms, written report forms, telephone surveys, and electronic data collections. The second category of information—recordkeeping requirements—involve compilation and maintenance of specified records, either alone or in conjunction with the reporting of information to an agency or a third party. The final type of information collection involves what are referred to as “third-party” disclosure requirements, in which the Federal Government requires an entity or individual to disclose information to another entity or individual (an example is a Federal requirement for the disclosure of information on labels, such as the nutritional labels that are found on food packages).¹

Information collections, recordkeeping requirements, and third-party disclosure requirements can be contained in or authorized by regulations as monitoring or enforcement tools. They can also appear in forms and their accompanying instructions. Subject to certain exemptions, all agency collections of information are subject to OMB review and approval, regardless of the format a collection may take (e.g., paper, telephone, in-person, automation, electronic).²

In 1996, in the Small Business Regulatory Enforcement Fairness Act, Congress amended the Regulatory Flexibility Act in several ways. One of these amendments included, within the coverage of the RFA, those “interpretative rules” that involve “the internal revenue laws of the United States” and are “published in the Federal Register for codification in the Code of Federal Regulations, but only to the extent that such interpretative rules impose on small entities a collection of information requirement.” The 1996 amendments to the RFA incorporated into the RFA, verbatim, the PRA’s definition of what is a “collection of information.” In other words, the term “collection of information” has the same meaning in both the PRA and the FRA.

OIRA and the Paperwork Reduction Act

The Paperwork Reduction Act directs OMB to work with Chief Information Officers—the officials designated by the PRA as responsible for the management of information resources within their agencies—to reduce information collection burdens on the public that “represent[s] the maximum practicable opportunity in each agency” and improve “agency management of the process for review of collections of information.” OIRA exercises its PRA oversight authority in a number of ways, the two most important of which are our day-to-day reviews of agency information collection requests and the annual development of the Information Collection Budget (ICB).

For all collections of information subject to the PRA, agencies must obtain OMB approval before implementing them. After the initial approval, agencies must receive extensions of OMB approval at least once every three years. OIRA’s reviews of agency requests involve an assessment of the “practical utility” of the information to agency and associated burden that collecting this information imposes on the public.

OIRA is particularly sensitive to collections targeted at small businesses, and continually seeks to ensure that the paperwork burdens imposed are justified by the usefulness and timeliness of the information to the government. The Paperwork Reduction Act itself directs agencies to reduce the burdens that collections of information impose on small businesses. The PRA’s statement of “purposes” expressly mentions the minimization of “paperwork burden” on “small businesses” as one of the Act’s goals. Moreover, the 1995 amendments to the PRA require agencies to certify, when the agency submits a proposed collection to OMB for review, that the collection “reduces to the extent practicable and appropriate the burden” on small businesses and other small entities. As the PRA indicates, agencies should reduce the paperwork burden on small businesses through “such techniques as – (i) establishing differing compliance or reporting requirements or timetables that take into account the resources available to those who are to respond; (ii) the clarification, consolidation, or simplification of compliance and reporting requirements; or (iii) an exemption from coverage of the collection of information, or any part thereof.”³ OMB incorporated this certification requirement into OMB’s PRA regulations [at 5 C.F.R. 13209.9(c)] as well as in the form that agencies must submit to OMB requesting OMB approval of a proposed collection (the Form 83-I). In addition, this PRA submission form requires agencies to tell OMB whether or not “this information collection [will] have a significant economic impact on a substantial number of small entities.”

Finally, I should also note that Congress in last year’s Small Business Paperwork Relief Act reinforced the PRA’s focus on minimizing the paperwork burden that the Federal government imposes on small businesses. In addition to establishing a multi-agency task force on this issue, to which I will turn shortly, Congress amended the PRA to require agencies to “make efforts to further reduce the information collection burden for small business concerns with fewer than 25 employees.”⁴

OMB recently submitted to Congress its FY 2003 Information Collection Budget, the annual development of which is a key component of OMB’s oversight of agencies. Each year, through our efforts to prepare the ICB, we ask agencies to review their information collections, keeping in mind the PRA’s burden reduction goals and OMB’s commitment to burden reduction. Agency CIOs send their agencies’ annual submission to OMB, identifying the “maximum practicable” paperwork burden reduction they can achieve, consistent with the agency’s statutory and programmatic responsibilities. Based on this information, OMB is able to manage overall burden and seek information on priority burden reduction initiatives.

During my tenure as OIRA Administrator, OMB has also adopted a “zero-tolerance policy” for violations of the PRA, which involve the use by agencies of information collections without the required OMB approval. Accordingly, we have been working diligently with agency staff and policy officials throughout the last 18 months to eliminate all existing violations and put procedures into place to avoid any future violations. The success that OMB and the agencies have had in significantly reducing the number of agency violations of the PRA is recounted in the FY 2003 Information Collection Budget and was also discussed by the General Accounting Office in its recent testimony before the House Government Reform Committee, Subcommittee of Energy Policy, Natural Resources and Regulatory Affairs.⁵

OIRA and the Regulatory Flexibility Act

Mr. Chairman, your letter of invitation asked about actions that OIRA has taken to enforce the Regulatory Flexibility Act. The Reg Flex Act does not give OMB an enforcement role. Nonetheless, many of OIRA’s activities provide an opportunity to encourage agency compliance with the spirit of the RFA. For example, OMB is currently in the process of implementing the Small Business Paperwork Relief Act of 2002. This Act established a multi-agency task force on information collection and dissemination chaired by OMB. Mitch Daniels, the Director of OMB, appointed Mark Forman, OMB’s Associate Director for Information Technology and E-Government, and me, to co-chair the task force. The task force includes representatives from the following agencies:

Department of Labor (including the Bureau of Labor Statistics and the Occupational Safety and Health Administration)
Environmental Protection Agency
Department of Transportation
Small Business Administration’s Office of Advocacy
Small Business Administration
Department of Commerce
Internal Revenue Service
Department of Health and Human Services
Department of Agriculture
Department of Interior
General Services Administration

The group’s efforts will support the goal of the Government-to-Business, E-Government Portfolio: reducing the burden on businesses by adopting processes that enable collecting data once for multiple uses. In fact, as the managing partner for the Business Compliance One Stop (one of the cross-agency E-gov initiatives), SBA has already demonstrated in its prototype savings of one hour per user in reporting burden. Given IRS estimates that 2.4 million businesses annually apply for an EIN, this application could save $96 million per year from streamlining, harmonizing, and automating these processes. The initiative will use three strategies to accomplish this, including reducing the information required from businesses through analyzing if information is needed; assessing whether definitions in different forms and forms in different agencies can be harmonized to reduce overlap; and increasing the effectiveness of data collections processes by collecting once and sharing data among programs and agencies. This initiative also represents the first Web service that fulfills both a state and a federal regulatory requirement at the same time. In addition, the BCOS team has developed a proof of concept for harmonizing coal miner reporting, where information is collected once and used several times, which is estimated to cut the reporting burden by 50 percent, from 50,000 hours annually to 25,000 hours.

Another related E-government project that reduces burden on businesses is the Expanding Electronic Tax Products for Businesses (EETPB) initiative. The objective of the EETPB is to reduce the tax-reporting burden on businesses while improving the efficiency and effectiveness of government operations. The initiative is comprised of seven projects that will deliver benefits by reducing the number of tax-related forms that businesses must file, providing timely and accurate tax information to businesses, increasing the availability of electronic tax filing, and modeling simplified Federal and state tax employment laws. These projects include Form 94x Series, Form 1120/1120S, Form 8850, Internet Employer Identification Number (EIN), and the Standardized EIN.

Further, the task force seeks to propose recommendations that will reduce the paperwork burden on small businesses and make it easier to find, understand and comply with government collections of information. Specifically, SBPRA charges the task force with examining five ideas:

Examine the feasibility and desirability of consolidating information collection requirements within and across Federal agencies and programs, and identify ways of doing so.
Examine the feasibility and benefits to small businesses of having OMB publish a list of information collections organized in a manner by which they can more easily identify requirements with which they are expected to comply.
Examine the savings and develop recommendations for implementing electronic submissions of information to the Federal government with immediate feedback to the submitter.
Make recommendations to improve the electronic dissemination of information collected under Federal requirements.
Recommend a plan to develop an interactive Government-wide Internet program to identify applicable collections and facilitate compliance.

The task force began its work with a meeting of the full membership to develop a common understanding of the law, project goals, scope, roles and responsibilities, resource requirements, strategy, timeline, and deliverables. A professionally facilitated brainstorming session followed, during which members began looking at the first three tasks for the 2003 report. After the initial meeting, the task force divided into three subcommittees to examine the three tasks in greater detail. The task force met again on April 4, 2003 to discuss the subcommittee findings and recommendations.

A report of findings and recommendations will be published for the first three ideas by June 2003, and the remaining two ideas by June 2004. The draft for this year's report is now under development in preparation for a public comment period during May 2003. SBA’s Office of Advocacy already held a public meeting on March 4, 2003 to solicit views of interested persons regarding the SBPRA.

In addition to these activities, we have taken steps to ensure that small business concerns are addressed in OIRA’s regular review of draft agency regulations. For example, on March 19, 2002, OIRA and SBA’s Office of Advocacy entered into a memorandum of understanding (MOU) to formalize OIRA’s long-standing practice of involving the Office of Advocacy in our review of agency regulations under Executive Order 12866. The MOU provides for consultations between OIRA and Advocacy on agency compliance with the RFA, and it authorizes OIRA to return rules to agencies for non-compliance with the RFA. We expect that the MOU will enhance our ability to ensure that agencies are meeting their RFA responsibilities.

That concludes my prepared testimony. I would be happy to answer any questions you may have.

¹ 44 U.S.C. 3502(3)

² 44 U.S.C. 3502(3); 5 CFR 1320.3(c)(1); 60 Fed. Reg. 44978-79 (August 29, 1995)

³ a name="3"> 44 U.S.C. 3506(c)(3)(C)

⁴ Section 2(c) of the Small Business Paperwork Relief Act, adding 44 U.S.C. 3506(c)(4)

⁵ GAO-03-691T, April 11, 2003