GAO Report Calls for Action to Improve Conflict Mineral Compliance

GAO Report Calls for Action to Improve Conflict Mineral Compliance

The United States Government Accountability Office (GAO) has released a Report to Congressional Committees detailing its findings concerning the current implementation of Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The report, titled SEC Conflict Minerals Rule: Companies Face Continuing Challenges in Determining Whether Their Conflict Minerals Benefit Armed Groups, highlights the struggles companies face in identifying the source of their conflict minerals. It also highlights shortcomings in the U.S. Department of Commerce and Security and Exchange Commission’s (SEC) implementation of the rules.

The report finds that although an estimated 99 percent of filing companies completed reasonable country of origin inquiries (RCOIs), the vast majority have been unable to confirm the origin of conflict minerals in their products or whether the minerals financed or benefited armed groups in the Democratic Republic of Congo (DRC) and other covered countries. The GAO report cites the lack of independent private sector audits (IPSAs) or declarations of conflict free status in the most recent rounds of filings as key evidence that additional work and time are needed to accomplish the goals of the regulation.

The GAO report also found that an estimated 94 percent of companies who performed due diligence reported using the Organisation for Economic Co-operation and Development (OECD) Due Diligence Framework. However, their efforts “varied widely,” lacking the consistency expected with that number of publicly-traded companies relying on a single due diligence framework.

The findings in the report suggest companies are falling short on their due diligence efforts and additional investigation and governmental scrutiny is likely warranted. Moreover, the report found the Department of Commerce lacks the expertise needed to assess or advise on conflict minerals audits and is falling short of their obligations under the Act.

“Actions undertaken by U.S. agencies to address their requirements under the [Dodd-Frank Wall Street Reform and Consumer Protection Act] could facilitate the reporting companies’ ability to comply with the SEC rule,” it reads. “…The agency [Department of Commerce] has, so far, not assessed or submitted a report on any [independent private sector audits], despite acknowledging that 29 companies have filed IPSAs with tier disclosures between 2014 and 2016.”

As a result, Congress lacks information on the accuracy of IPSAs and other due diligence processes, and filing companies lack information about best practices for responding to the conflict minerals rule.

In their recommendations to Congress, the GAO put forth an action plan for the Department of Commerce to follow in order to meets its obligations. This should prove beneficial for companies seeking additional resources to support their due diligence efforts, and lead to a ramp up of government action and oversight concerning conflict minerals disclosures.

For more insights into the GAO report and what it means for conflict mineral due diligence under Dodd-Frank, contact our regulatory experts at