Exclusive: New bill aims to give DFC watchdog law enforcement power

The watchdog for the U.S. International Development Finance Corporation, which finances private sector development, has been somewhat limited in its ability to investigate any fraud, waste, or abuse at the agency, largely due to its lack of law enforcement authority. But lawmakers want to change that with new legislation about to be introduced. While other inspectors general for United States government agencies have the power to subpoena people and documents, for example, DFC’s do not. This problem seems to be the result of an omission in the legislation that created the agency; the Better Utilization of Investment Leading to Development Act, or BUILD Act. Now lawmakers want to fix the problem. Rep. Joaquin Castro, a Democrat from Texas, will introduce a bill, the Enhancing Development Finance Corporation Oversight Act — likely on Thursday — that would make a simple change in the law governing inspectors general and grant the DFC’s watchdog law enforcement authority. The bill is co-sponsored by Rep. Brian Fitzpatrick, a Republican from Pennsylvania. “Across the federal government, strong Inspectors General play an essential role in rooting out fraud and maintaining trust in government programs. As U.S. global development projects continue to expand, Congress needs to ensure that DFC’s OIG [Office of Inspector General] has the tools to maintain the highest level of integrity in DFC’s operations,” Castro said in a statement. Fitzpatrick echoed that sentiment, saying the DFC OIG needs authority to provide proper control. The legislation “would improve oversight and accountability of U.S. foreign aid programs by granting the DFC OIG further authority to reduce unnecessary misuse of resources,” he said in a statement. When Congress created DFC in 2019, it determined the agency should have its own independent watchdog. But lawmakers failed to add language that would guarantee it had full authority. Oversight for DFC’s predecessor, the Overseas Private Investment Corporation, or OPIC, was handled by USAID’s inspector general who still works with DFC to support some investigations, specifically on projects that were started during OPIC’s time, a Castro staffer told Devex. The DFC watchdog has asked the U.S. attorney general to delegate law enforcement authority to it but that effort has stalled, the staffer said. Instead, the watchdog has partnered with other agencies to find workarounds to the problem but the lack of authority has slowed and made it harder to conduct investigations, the staffer said. “Having law enforcement authority will enable the DFC OIG to fulfill its oversight mandate” over the $60 billion that DFC can potentially invest, he said. “And with this authority, the OIG will finally be able to recruit and retain experienced law enforcement officers.” A previous effort to grant the DFC law enforcement authority passed the House as part of the National Defense Authorization Act of 2023 but was not included in the final version of the bill. The goal is to get the bill passed in any way possible, hopefully before the broader reauthorization of DFC next year, Castro’s staffer said. The agency has bipartisan support, and Castro wants to ensure continued trust in the institution. Having the right oversight tools to uncover waste, fraud, or abuse to avoid opening itself up to criticism is part of doing that, the staffer said. “The scale of what the DFC is doing and its role in our foreign assistance is growing,” the staffer said, adding that the bill addresses the OIG’s limited authorities “before that becomes an issue.” Update, April 10, 2024: This article has been updated to clarify that the staffer was identifying the OIG’s limited authorities as the issue the legislation is looking to address.