The US Government is to establish a new agency handling background investigations on federal employees and contractors.

The National Background Investigations Bureau will work directly under the US Department of Defense (DoD).

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The White House said in a statement: "This approach will leverage DoD’s significant national security, IT, and cybersecurity expertise, incorporating security into the fundamental design of the systems, strengthening the security of the data environment, and providing robust privacy protections.

"To support this work, the President’s Fiscal Year (FY) 2017 Budget will include $95m in additional resources that will be dedicated to the development of these IT capabilities."

"This approach will leverage DoD’s significant national security, IT, and cybersecurity expertise."

The agency will replace the Office of Personnel Management’s (OPM) Federal Investigative Services (FIS), which currently conducts more than two million background investigations for federal agencies every year.

The move follows the exposure of personal data, including names, addresses and social security numbers, of millions of people last year due to cyber attack.

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The existing functions of the FIS will be transferred to the new agency after a transition team has developed a new strategy.

The House Oversight and Government Reform Committee chairman representative Jason Chaffez (R-Utah) said: "Simply creating a new government entity doesn’t solve the problem.

"Today’s announcement seems aimed only at solving a perception problem rather than tackling the reforms needed to fix a broken security clearance process."