Civil monetary penalties: gaps in public information make it difficult to determine the impact of agency inflation adjustments

Submitted by Stephanie J. Tatham on Thu, 03/13/2014 - 23:09

In December 2012, the Administrative Conference adopted Recommendation 2012-08, Inflation Adjustment Act.  This recommendation addresses three anomalous provisions of the Federal Civil Penalties Adjustment Act of 1990, which was amended in 1996 to require agencies to make initial inflation adjustments to civil monetary penalties as well as quadrennial adjustments thereafter.[1] Recommendation 2012-8 asks Congress to revisit the framework for agency adjustments to address three distortions that result in penalty adjustments that may not track the actual rate of inflation:

  1. A ten percent cap on initial penalty adjustments, which creates an “inflation gap” for some civil monetary penalties that grows over time and cannot be closed.
  2. The statute’s definition of “cost-of-living adjustment”, which directs federal agencies to base their adjustments on Consumer Price Index data that are at least seven month old and sometimes as much as eighteen months old, and thus lag behind the actual inflation rate.
  3. Rounding rules that tie rounding of penalty increases to the amount of the underlying civil penalty, rather than the increase in inflation, and that may result in significant periods of nonadjustment followed by abrupt and substantial increases.

This advice follows on the Conference’s earlier Recommendation 84-7, Administrative Settlement of Tort and Other Monetary Claims Against the Government, which urged Congress “to systematically raise ceilings on all agency authority to settle claims where inflation has rendered obsolete the present levels.”

Over the course of the project, several Conference members asked about the cumulative impact of the identified distortions on civil monetary penalties collected by the U.S. Government.[2]  Unfortunately, the fiscal impacts of distorted inflation adjustments under the Inflation Adjustment Act are difficult to determine.  This is true for two reasons: first, as discussed in this post, there are serious gaps in public information about agency civil monetary penalty assessments and collections; and second, as discussed in the next blog post, there is the trend towards agency discretion in assessment of civil monetary penalties

Gaps in public information:  The Inflation Adjustment Act of 1990, as originally enacted, required the Administration to annually report to Congress on civil penalty assessments and collections.[3]  This reporting requirement was subsequently repealed in the Federal Reports Elimination Act of 1998.[4]  Because there is no requirement for federal agencies to publicly report on penalty assessments and collections, many do not.   Agencies may track this information internally, however. 

In the summer of 2013, Conference staff informally surveyed the public websites of 80 agencies and sub-agencies that GAO has identified as being subject to the Inflation Adjustment Act[5] (taking into account some modernization and reorganization) and estimated that about half did not provide the public with online access to meaningful data on civil monetary penalty assessments and collections.[6] Major research findings include:

  • Agency online data on civil monetary penalties is often incomplete or outdated.  For example, the Food and Drug Administration’s (FDA’s) web page on Enforcement Activity offers annual reports on Enforcement Statistics for fiscal years 2009-2013 that contain no information on civil monetary penalties.  Its webpage on Enforcement Actions includes a defunct link to the Public Health Service’s Administrative Actions Listings (which was available in October 2013, but had not been updated since 2007).[7]  In contrast, the FDA’s web page to allow the public to browse compliance data for inspections of tobacco product retailers is up-to-date through 2014 and even offers access to most administrative complaints imposing civil penalties. This example demonstrates that reporting practices vary even within agencies, as they do among them.
  • Data presentation and reporting nomenclature is disparate across agencies.  Our survey revealed a remarkable lack of standardization in terminology and reporting practices across federal agencies.  Agencies might report information about administrative penalties, administrative fines, civil monetary penalties, civil judgments, fees, fines, etc. without clearly defining these terms or identifying differences between them.  Agencies may also report civil monetary penalties at various points in the collection process, including penalties: recommended, assessed, imposed, settled, and/or collected or paid.  For instance, the Federal Maritime Commission’s annual reports to Congress contain aggregate information about penalties collected in FY 2013, but not about penalties assessed in the same time period.[8]  These reporting discrepancies impede aggregation and analysis of agency penalty data.
  • Civil monetary penalty data is frequently not disaggregated from other types of fines and restitutions or by statutory and regulatory authority.  Some agencies report civil monetary penalties collections in the aggregate, together with fines, restitutions, forfeitures, or other miscellaneous receipts.  For example, the Treasury Department maintains information about civil monetary penalty General Fund receipts but tracks them together with fines and forfeitures, with Treasury Account Symbol (TAS) codes organized by area of substantive law (such as agricultural or immigration and labor laws) rather than by type of receipt.[9]  Similarly, some agencies publicly report total civil penalty assessments or collections rather than penalty data disaggregated by statutory or regulatory violation.  Civil monetary penalties are typically set in particular statutory or regulatory provisions, and are adjusted for inflation in this context.  Without more granular data, determining the fiscal impact of inflation adjustments is not possible.

Even with this data, and as discussed in the next blog post, agency discretion in assessing civil monetary penalties presents an additional analytical challenge.

[1] Pub. L. 101-410, 104 Stat. 890 (1990), codified as amended at 28 U.S.C. § 2461 note.

[2] While civil monetary penalties are not government revenue, they are ordinarily deposited into the General Fund of the U.S. Treasury under the Miscellaneous Receipts Act, 31 U.S.C. § 3302(b), and thereafter may be made available for congressional appropriations.  In 1993, the National Performance Review estimated that initial adjustments to civil monetary penalties made in accordance with actual inflation—rather than in the anomalous fashion eventually required by the amended Inflation Adjustment Act—would increase federal receipts by nearly $200 million between fiscal years 1994-1999.  Report of the National Performance Review, From Red Tape to Results: Creating a Government That Works Better and Costs Less 145 (Washington, D.C.: Sept. 1993).

[3] See, e.g., Office of Management and Budget, Civil Monetary Penalty Assessments, Collections, and Status of Recievables, FY 1992 (Washington, D.C.: Jan. 1993).

[4] Pub. L. 105-362, title XIII, § 1301(a), 112 Stat. 3293 (1998).

[5] U.S. General Accounting Office, Civil Penalties: Agencies Unable to Fully Adjust Penalties for Inflation Under Current Law 12 (Washington D.C.: March 2003).

[6] We conducted a general search of agency and sub-component websites using key terms such as penalties, enforcement, compliance, fines, etc.  We supplemented this search with additional review of specific agency web pages for Inspector Generals, General Counsels, and enforcement activity, as well as of agency reports to Congress.

[7] On file with author.

[8] Fed. Maritime Comm’n, 51st Annual Report for Fiscal Year 2012 112 (Washington, D.C.: Mar. 2013).

[9]  See U.S. Department of the Treasury, Federal Account Symbols and Titles (FAST) Book 1: Supplement 1 to to Volume I Treasury Financial Manual R-5 – R-6 (April 2013).