Final answer:
Option 4) A hearing held to investigate misuse of funds within a federal agency is the best example of legislative oversight. It allows the legislative branch to monitor the executive branch's actions and ensure proper use of funds, embodying the checks and balances system.
Step-by-step explanation:
The best example of legislative oversight among the options provided is 4) A hearing is held to investigate misuse of funds within a federal agency. Legislative oversight involves monitoring and reviewing the actions of the executive branch and the federal agencies to ensure they are operating within the law and using funds appropriately. This is an essential part of the system of checks and balances in a democracy, where the legislative branch has the power to oversee the executive branch, thereby preventing the consolidation of too much power in one branch. During such oversight hearings, committees can gather information to ensure that an agency's actions align with the agency's mission, compliance with legislative directives, and responsible use of taxpayer dollars. Therefore, when a committee holds a hearing to investigate issues like misuse of funds, it is actively exercising its oversight role.