The National Defense Authorization Act for Fiscal Year 2023 houses a notable provision for legal professionals which enforces a new notice requirement for Offices of Inspectors General (OIG). By the act, nongovernmental organizations and business entities have been given a right to respond to OIG reports where they are specifically identified. This significant change provides business entities a platform and voice previously inaccessible to them.
Under Section 5274 of the Act, there’s a requirement for OIGs to notify nongovernmental organizations and business entities whenever an audit, evaluation, inspection, or other non-investigative report prepared by the OIG directly identifies the entity. This requirement applies regardless of whether the entity is the subject of the report or not. Post notification, the entity is allotted 30 days to submit a written response which is to be attached to the report and posted on the OIG’s public-facing website.
For the first time, business entities retain the right to contribute towards the narrative around their references or characterizations in an OIG report. Every time a business entity finds itself unfavorably depicted in an OIG report, the value of this opportunity is clarified. But seizing this opportunity should be strategic and aligned with improving their business interests. Businesses should consider to:
- Assess the processes of the notifying OIG to garner insights into their policies and procedures.
- Thoroughly read the full report to completely understand potential business, legal, and reputational risks.
- Offer additional factual or contextual information necessary to ensure accuracy and thoroughness in the report.
On another note, two caveats may put a damper on how exciting this opportunity might seem. Firstly, Section 5274’s right to respond could be forfeited by an entity if it is found to have refused to provide information or assistance sought by the OIG during the report’s creation. Secondly, entities mentioned in an attached document to an OIG report but not within the body of the report, are not to be notified if the document was not prepared on behalf of the OIG. Some OIGs might also choose not to send notice directly to the identified entity and instead, post a notice online indicating a report could be subject to Section 5274 and detail the process to provide a written response.
The full impact of these obligations remains uncertain until the sufficiency of the notice requirement in Section 5274 can be firmly settled. In the meantime, entities would do well to proactively identifying OIG reports featuring their references by setting up internet alerts inclusive of their names and the phrase “inspector general”. Recognizing and capitalizing on this legislative change can certainly provide an edge and offer a chance at having the final word.
Written by Diana Shaw, partner in Wiley’s white collar defense and government investigations practice.