Report No. 10-S-97 Title: Semiannual Report to the Congress: April 1, 1997 - September 1997 Date: November 26, 1997 **********DISCLAIMER********** This file contains an ASCII representation of an OIG report. No attempt has been made to display graphic images or illustrations. Some tables may be included, but may not resemble those in the printed version. A printed copy of this report may be obtained by referring to the PDF file or by calling the Office of Inspector General, Division of Acquisition and Management Operations at (202) 208-4599. ****************************** MESSAGE FROM THE INSPECTOR GENERAL When I became the Inspector General approximately 2 1/2 years ago, one of my goals was to introduce an element of "proactivity" into our traditionally reactive approach to the performance of our mission. An organization such as ours, whose statutory mission includes not only detection but also prevention of fraud, waste, and abuse, and which is also charged with promoting economy, efficiency, and effectiveness in Government operations, cannot, in my view, simply sit and wait for things to happen and react to those things, but must take affirmative steps to make things happen. Therein, I believe, lies the essence of being an agent of, or a catalyst for, positive change. I am pleased to report that several accomplishments from this new era of "proactivity" now exist. For example, our "Fraud Awareness" outreach presentations have reached several thousand Department of the Interior employees and have earned the distinction of being requested by individual bureaus and offices within the Department from one coast of the United States to the other. These presentations, which focus on letting Department employees know who we are and what we are about, have helped to sensitize program personnel to indicia of fraud and to enlist their support and assistance in the fight against fraud. The already increasing referrals to the Office of Inspector General (OIG) demonstrate that the "shared commitment" that we seek to foster within the Department will prove to be a powerful force in helping to improve program operations at the Department of the Interior. Similarly, our Affirmative Civil Enforcement (ACE) program, in which civil actions are used as an adjunct to criminal enforcement, has resulted in several new proactive initiatives, including in the areas of underpayment of royalties, coal reclamation fees, Outer Continental Shelf Lands Act violations, the Government purchase card program, and workers' compensation fraud. These initiatives already have started to bear fruit in the form of civil recoveries. We believe that continued law enforcement in these areas will also have an important deterrent effect. On the audit side, our proactive efforts are continuing to blossom with tangible benefits to the Department and insular area governments. These activities are beginning to cover a broader scope of operations, as we are asked with increasing frequency to lend our expertise in a variety of areas. From financial accounting and management, to pilot programs, to Government reinvention and task force efforts, the OIG's presence is clearly being sought and felt. Our newly established Evaluations and Special Projects unit will provide added capability and flexibility to address these types of proactive and other activities. Our proactive activities in both the audit and investigative areas demonstrate that we are indeed attempting, with notable success, to make positive things happen within the Department of the Interior. We are committed to continuing our efforts, through both our proactive and other activities, to contribute to the improvement of Government operations. Wilma A. Lewis Inspector General Subject: Semiannual Report to the Congress: April 1, 1997 - September 1997 (No. 10-S-97) CONTENTS Page Statistical Highlights . . . . . . . . . . . . . . . . . . . . .v Introduction . . . . . . . . . . . . . . . . . . . . . . . . . .1 Department Profile. . . . . . . . . . . . . . . . . . . . . .1 OIG Organization. . . . . . . . . . . . . . . . . . . . . . .2 Audit Activity . . . . . . . . . . . . . . . . . . . . . . . . .4 Investigative Matters. . . . . . . . . . . . . . . . . . . . . .6 Legislative Review . . . . . . . . . . . . . . . . . . . . . . .8 Significant Audits and Investigations. . . . . . . . . . . . . .9 Financial Statement Audits. . . . . . . . . . . . . . . . . 9 Bureau of Indian Affairs. . . . . . . . . . . . . . . . . . 11 Bureau of Land Management . . . . . . . . . . . . . . . . . 15 Bureau of Reclamation . . . . . . . . . . . . . . . . . . . 17 Insular Areas . . . . . . . . . . . . . . . . . . . . . . . 18 Minerals Management Service . . . . . . . . . . . . . . . . 20 Multi-Office. . . . . . . . . . . . . . . . . . . . . . . . 20 National Biological Service . . . . . . . . . . . . . . . . 22 National Park Service . . . . . . . . . . . . . . . . . . . 22 Office of the Secretary . . . . . . . . . . . . . . . . . . 24 Office of the Special Trustee for American Indians. . . . . 24 Office of Surface Mining Reclamation and Enforcement. . . . 26 U.S. Fish and Wildlife Service. . . . . . . . . . . . . . . 26 U.S. Geological Survey. . . . . . . . . . . . . . . . . . . 28 Appendices 1 - Summary of Audit Activities From April 1, 1997, Through September 30, 199729 2 - Audit Reports Issued or Processed and Indirect Cost Proposals Negotiated During the 6-Month Period Ended September 30, 1997 . . . 30 - Internal Audits. . . . . . . . . . . . . . . . . . . . 30 - Contract and Grant Audits. . . . . . . . . . . . . . . 32 - Single Audits. . . . . . . . . . . . . . . . . . . . . 34 - Indirect Cost Proposals. . . . . . . . . . . . . . . . 49 3 - Monetary Impact of Audit Activities From April 1, 1997, Through September 30, 199758 4 - Non-Federal Funding Included in Monetary Impact of Audit Activities During the 6-Month Period Ended September 30, 1997. . . . 59 5 - Audit Resolution Activities. . . . . . . . . . . . . . . . 60 - Table I - Inspector General Audit Reports With Questioned Costs60 - Table II - Inspector General Audit Reports With Recommendations That Funds Be Put To Better Use. . . . . . . . . . . . . . 61 - Table III - Inspector General Audit Reports With Lost or Potential Additional Revenues62 6 - Summary of Audit Reports Over 6 Months Old Pending Management Decisions63 - Internal Audits. . . . . . . . . . . . . . . . . . . . 63 - Contract and Grant Audits. . . . . . . . . . . . . . . 65 - Single Audits. . . . . . . . . . . . . . . . . . . . . 66 7 - Summary of Internal Audit Reports Over 6 Months Old Pending Corrective Action69 8 - Statutory and Administrative Responsibilities. . . . . . . 73 9 - Cross-References to the Inspector General Act. . . . . . . 75 STATISTICAL HIGHLIGHTS Audit Activities Audit Reports Issued or Processed . . . . . . . . . . . . .441 - Internal Audits . . . . . . . . . . . . 35 - Contract and Grant Audits . . . . . . . 23 - Single Audits . . . . . . . . . . . . 383 Indirect Cost Proposals Negotiated . . . . . . . . . . . .179 Impact of Audit Activities - (Dollar Amounts in Millions) Total Monetary Impact. . . . . . . . . . . . . . . . . .$27.9 - Questioned Costs. . . . . . . . . . .$4.0 - Recommendations That Funds Be Put To Better Use$23.4 - Lost or Potential Additional Revenues $.5 Internal Audit Recommendations Made. . . . . . . . . . . .146 Internal Audit Recommendations Resolved. . . . . . . . . . 41 Investigative Activities Total Reports Issued. . . . . . . . . . . . . . . . . . . .117 Cases Closed . . . . . . . . . . . . . . . . . . . . . . .141 Cases Opened . . . . . . . . . . . . . . . . . . . . . . . 55 Cases Pending. . . . . . . . . . . . . . . . . . . . . . .443 Hotline Complaints Received. . . . . . . . . . . . . . . . 66 Hotline Complaint Matters Opened . . . . . . . . . . . . . .0 Hotline Complaint Matters Closed. . . . . . . . . . . . . .7 Hotline Complaint Matters Pending. . . . . . . . . . . . . 66 General Information Matters Received . . . . . . . . . . .150 Impact of Investigative Activities Indictments/Informations . . . . . . . . . . . . . . . . . 20 Convictions. . . . . . . . . . . . . . . . . . . . . . . . 23 Sentencings. . . . . . . . . . . . . . . . . . . . . . . . 25 - Jail. . . . . . . . . . . . . . . . . . . . . . .77 months - Probation . . . . . . . . . . . . . . . . . . . 974 months - Community Service . . . . . . . . . . . . . . . 1740 hours - Criminal Judgments/Restitutions . . . . . . . . .$282, 247 Cases Pending Prosecutive Action as of April 1, 1997 . . .148 Cases Referred for Prosecution This Period . . . . . . . . 20 Cases Declined . . . . . . . . . . . . . . . . . . . . . . .9 Cases Pending Prosecutive Action as of September 30, 1997.132 Administrative Actions . . . . . . . . . . . . . . . . . . 32 Civil Referrals. . . . . . . . . . . . . . . . . . . . . . .9 Civil Declinations . . . . . . . . . . . . . . . . . . . . .0 Civil Judgments (3). . . . . . . . . . . . . . . . . $314,451 Cases Pending Civil Action as of September 30, 1997. . . . 41 Administrative Actions Taken by Bureaus Matters Referred for Administrative Action . . . . . . . . 56 Removals/Resignations. . . . . . . . . . . . . . . . . . . .5 Employee Suspensions (Totaling 16 days). . . . . . . . . . .3 Downgrades . . . . . . . . . . . . . . . . . . . . . . . . .2 Reprimands/Counseling. . . . . . . . . . . . . . . . . . . 10 Reassignments/Transfers. . . . . . . . . . . . . . . . . . .1 Other Personnel Actions. . . . . . . . . . . . . . . . . . .1 Restitutions (Totaling $5, 221). . . . . . . . . . . . . . .3 General Policy Actions . . . . . . . . . . . . . . . . . . .3 Contractor Debarments. . . . . . . . . . . . . . . . . . . .4 INTRODUCTION Department Profile The Congress created the Department of the Interior (DOI) on March 3, 1849, to manage the Nation's internal affairs. As the Nation's principal conservation agency, DOI has responsibility for most of our nationally owned public lands and natural resources. This includes fostering the use of our land and water resources; protecting our fish, wildlife, and biological diversity; preserving the environmental and cultural values of our national parks and historic places; and providing for the enjoyment of life through outdoor recreation. DOI assesses our mineral resources and works to ensure that their development is in the best interests of all our people by encouraging stewardship and citizen participation in the care of these resources. DOI has about 70,000 employees, spends about $9 billion a year, collects revenues of about $6 billion a year, and is geographically dispersed to over 2,000 locations. The jurisdiction of DOI includes: Administration of over 500 million acres of Federal land and trust responsibilities for approximately 50 million acres of land, mostly Indian reservations; Conservation and development of mineral and water resources; Conservation, development, and utilization of fish and wildlife resources; Management of Federal recreation programs; Preservation and administration of the Nation's scenic and historic areas; Operation of Job Corps Conservation Centers and Youth Conservation Corps Camps and coordination of other manpower and youth training programs; Reclamation of arid lands in the West through irrigation; and Management of hydroelectric power systems. DOI is also concerned with the social and economic development of the insular areas and administers programs providing services to Indians and Alaska Natives. OIG Organization To cover DOI's many and varied activities, the Office of Inspector General (OIG) has a budget of $24 million and has 251 full-time employees. Employees are under the direction of the Assistant Inspectors General for Audits, Investigations, and Management and Policy and are assigned to the headquarters office in Washington, D.C., and field offices in: Agana, Guam; Rapid City, South Dakota; Albuquerque, New Mexico; Sacramento, California; Arlington, Virginia; St. Paul, Minnesota; Billings, Montana; St. Thomas, U.S. Virgin Islands; Lakewood, Colorado; Tulsa, Oklahoma; and Phoenix, Arizona. OIG provides policy direction for and conducts, supervises, and coordinates audits, investigations, and other activities in DOI to promote economy, efficiency, and effectiveness and to prevent and detect fraud, waste, abuse, and mismanagement. The Inspector General is DOI's focal point for independent and objective reviews of the integrity of DOI operations and is the central authority concerned with the quality, coverage, and coordination of the audit and investigative services between DOI and other Federal, state, and local governmental agencies. The Inspector General reports directly to the Secretary of the Interior on these matters and is required to keep the Secretary and the Congress fully and currently informed about problems and deficiencies relating to the administration of DOI programs and operations and the necessity for corrective actions. In addition to the Inspector General's requirement for semiannual reporting to the Secretary of the Interior and the Congress in accordance with the Inspector General Act of 1978 (Public Law 95-452), as amended, OIG's mission encompasses a wide array of statutory and administrative audit and investigative responsibilities. These responsibilities include OIG's review of various programs and activities within DOI in accordance with numerous public laws, Office of Management and Budget (OMB) circulars, and criminal and civil investigative authorities (see Appendix 8). The semiannual reporting requirements of the Inspector General Act are cross-referenced to applicable portions of this report in Appendix 9. In the insular areas of Guam, American Samoa, the U.S. Virgin Islands, and the Commonwealth of the Northern Mariana Islands, OIG is responsible for "establishing an organization which will maintain a satisfactory level of independent audit oversight" for these insular areas, in accordance with the Insular Areas Act of 1982 (48 U.S.C. 1422). OIG has additional audit responsibilities in the Federated States of Micronesia, the Republic of the Marshall Islands, and the Republic of Palau pursuant to the Compact of Free Association Act of 1985 (Public Law 99-239). OIG's organizational chart is included on the following page. AUDIT ACTIVITY Summary of Audit Results OIG auditors issued or processed 441 audit reports during the 6-month period ended September 30, 1997. Appendix 1 summarizes audit activities, and Appendix 2 lists the audit reports issued or processed and the 179 indirect cost proposals negotiated. Monetary findings in the audit reports and indirect cost proposals totaled $27.9 million, which was composed of questioned costs, funds to be put to better use, and lost or potential additional revenues, as summarized in Appendix 3. Appendix 4 identifies the non-Federal funds (from audits of insular area governments) included in the monetary impact of audit activities. During this 6-month period, OIG resolved $107.1 million of monetary findings from prior and current reporting periods. Appendix 5 provides summary information on the resolution of the monetary impact, Appendix 6 provides a listing of audit reports over 6 months old pending management decisions on recommendations and/or monetary impact, and Appendix 7 provides a summary of resolved internal audits over 6 months old pending final action by management (implementation) on recommendations and on monetary impacts. Inspector General Establishes Evaluations and Special Projects Unit The Inspector General Act, as amended, requires the Inspector General to establish audit and investigation organizations and authorizes the Inspector General "to make such investigations and reports relating to the administration of the programs and operations of the applicable establishment as are, in the judgement of the Inspector General, necessary or desirable." Consistent with this authority, during this semiannual reporting period, OIG established an Evaluations and Special Projects (ESP) unit within the Office of the Assistant Inspector General for Audits. The ESP unit will assist in meeting OIG mission and strategic objectives by providing proactive independent and objective evaluations of the economy, efficiency, and effectiveness of the programs and operations of DOI. The President's Council on Integrity and Efficency's "Quality Standards for Inspections" defines an inspection (evaluation) as "a process, other than an audit or an investigation, that is aimed at evaluating, reviewing, studying, and/or analyzing the programs and activities of a Department or Agency for the purpose of providing information to managers for decision making, for making recommendations for improvements to programs, policies or procedures, and for administrative action." The ESP unit will also provide increased capability and flexibility for OIG to provide more timely coverage of unplanned requests for OIG assistance, of which we receive several during any given year. Furthermore, the establishment of the ESP unit is consistent with a number of Office of Inspectors General at cabinet-level departments and agencies that already have such a unit, as well as the National Performance Review's suggestion that the focus of Inspectors General should be broadened to include evaluating and improving management control systems to prevent fraud, waste, abuse, and mismanagement. INVESTIGATIVE MATTERS During the past 6 months, the Office of Investigations has conducted investigations that have resulted in 20 indictments/informations, 23 convictions, and financial recoveries of $282,247 in criminal judgments/restitutions and $314,451 in civil judgments. Update on Proactive Initiatives In our last Semiannual Report, we reported that OIG was pursuing a series of proactive initiatives in several areas, including the underpayment of coal reclamation fees, Government purchase card fraud, and workers' compensation fraud. During the 6-month period ended September 30, 1997, these initiatives began to show results in terms of successful prosecutions in these areas. (Details are presented in this report.) We continue to pursue proactive initiatives designed to further our fraud awareness, prevention, detection, and suppression efforts. Examples of these initiatives are as follows: Environmental Initiative We have been participating in an Environmental Crimes Working Group formed by the Attorney General's Office of the State of Oklahoma, which has conducted inspections of oil production sites in various counties in Oklahoma. In addition to OIG, other members of this working group include the Federal Bureau of Investigation (FBI), the U.S. Environmental Protection Agency's OIG, the Defense Criminal Investigative Service, U.S. Fish and Wildlife Service (FWS) and Bureau of Land Management (BLM) law enforcement, and cognizant State of Oklahoma agencies. The inspections, organized by FWS, involved the physical inspection of oil sites to identify possible violations of the Migratory Bird Treaty Act and other environmental laws. The inspections identified 291 oil production sites that had problems ranging from improperly maintained sites to sites where actual violations of environmental laws had occurred. Joint Initiatives With DOI Agencies To Achieve Savings in DOI Programs An OIG investigation determined that a $1.95 million economic development loan to a company to assist a Midwestern Indian tribe was fraudulent. The Bureau of Indian Affairs (BIA) had guaranteed 90 percent of the loan amount, or $1,755,000. As a result of the OIG investigation, BIA learned that the funds had been used to pay unrelated debts of the company and that the loan had been obtained by fraudulent means. Therefore, BIA refused to honor the loan guarantee made to the lender, which resulted in a savings of $1,755,000 to the BIA Loan Guarantee Program. Joint Audits-Investigative Initiatives The Office of Investigations continues to work closely with OIG Audits staff to ensure the financial integrity of DOI programs. An OIG audit survey of a quasi-governmental agency revealed that an official appointed to the organization was also a Federal employee and that the former employee may have received dual compensation for part of calendar year 1994 before resigning from Federal employment. Such dual compensation is prohibited by law. The quasi-governmental agency was created by the Congress and funded in part by DOI. The audit information was referred for investigative review. The resultant OIG investigation determined that the individual had received dual compensation. The matter was referred to the Department of Justice, and, in a resultant civil settlement agreement, the former employee agreed to make restitution of $10,701.14 to the Government. LEGISLATIVE REVIEW During this reporting period, OIG reviewed several hundred legislative items and, where appropriate, provided comments. OIG performed two reviews to monitor legislative proposals and evaluate their potential for promoting economy and efficiency and preventing fraud, waste, and mismanagement in the programs and operations of DOI, as required by Section 4(a)(2) of the Inspector General Act of 1978, as amended. OIG provided comments on S 261, the Biennial Budgeting and Appropriations Act. The purpose of the proposed Act was to provide for a biennial budget process and a biennial appropriations process. OIG supported passage of the Act, noting that the Act would enable agencies to engage in more effective and efficient financial management and planning. OIG commented that a biennial cycle would avoid the problems connected with year-end spending, allow for better decision making when funds are tight, and provide more flexibility for an agency to meet special funding needs. Finally, OIG noted that the Act would eliminate some of the uncertainty, such as agency shutdowns, which can occur during the annual appropriations process. OIG also provided comments on Department of Justice Draft Bill # 9, the Internet Gaming Act. OIG pointed out that the definition of "State" contained in the proposed Bill did not include Federally recognized Indian tribes. Thus, the proposed legislation was silent as to whether Indian tribal gaming needs to be identified as a state or other entity. SIGNIFICANT AUDITS AND INVESTIGATIONS Financial Statement Audits Department of the Interior Consolidated Principal Financial Statement Audits for Fiscal Years 1995 and 1996 We concluded that DOI's consolidated principal financial statements for fiscal years 1995 and 1996 were presented fairly except that BIA did not provide adequate documentation or reliable accounting information to support, for fiscal year 1996, the amounts of $170 million for other structures and facilities, $17 million in accounts receivable, $136 million of revenues, and $19 million of bad debt expense. Also, for fiscal year 1995, BIA did not provide adequate documentation or reliable accounting information to support amounts for four accounts ($3.5 billion for property, plant, and equipment; $12 million in accounts receivable; $14 million in deferred revenue; and $175 million in revenues). Furthermore, we found that the internal accounting control structure of DOI's 11 operating entities meets the established internal control objectives except for the controls relating to four accounts (property, plant, and equipment; accounts receivable; revenue; and bad debt expense) at BIA, two accounts (property, plant, and equipment and construction in progress) at the National Park Service (NPS), and one account (construction in progress) at FWS. In addition, we found weaknesses in the internal controls at the administrative service centers operated by the U.S. Geological Survey (USGS) and the Bureau of Reclamation (BOR) and at BIA's Operations Service Center. Finally, DOI's 11 operating entities have complied in all material respects with applicable laws and regulations except that the title to the completed portions of the Navajo Indian Irrigation Project, which cost $334 million, had not been transferred to BIA from BOR. This transfer was to have been made pursuant to the agreement made by these bureaus under Public Law 87-483, which authorized the construction of the project. Since our reports on the individual bureaus' financial statements and the administrative service centers include recommendations to correct the reported deficiencies, we did not make any additional recommendations to DOI in our report on the consolidated financial statements. Bureau Financial Statement Audits During this semiannual period, OIG issued audit reports on the financial statements of 5 of DOI's 10 bureaus and offices. We expressed a qualified opinion on BIA's financial statements for fiscal year 1996 and unqualified opinions on the fiscal year 1996 financial statements of BOR, FWS, NPS, and USGS. These financial statement audits are required by the Chief Financial Officers Act of 1990. A qualified opinion was expressed on BIA's financial statements because BIA did not provide adequate documentation or reliable accounting information to support the balances reported in the fiscal year 1996 financial statements for other structures and facilities, accounts receivable, revenue, and bad debt expense and the effect that these accounts had on the net position. We believe that these deficiencies occurred because BIA had not implemented the recommendations related to these areas in our prior report. Although OIG was able to issue unqualified opinions on the financial statements of BOR, FWS, NPS, and USGS, we reported internal control deficiencies for each bureau and reported an instance of noncompliance with selected provisions of laws and regulations at BOR. Specifically: - BOR internal controls were not sufficient to provide reasonable assurance that: (1) costs were fully recovered in its working capital fund and (2) amounts reported in its general ledger were supported by subsidiary records. We also found that system integrity weaknesses existed in the general controls of the Federal Financial System at BOR's Administrative Service Center. Furthermore, BOR had not transferred title to BIA for the Navajo Indian Irrigation Project, as required by provisions of a 1962 law (Public Law 87-483) that authorized the construction of the project. These conditions were considered to be reportable weaknesses in BOR's internal control structure and its compliance with laws and regulations. - FWS had not fully implemented recommendations to improve internal controls over its accounting for buildings, structures, and construction-in-progress accounts. This condition was considered to be a reportable weakness in the internal control structure that needed to be corrected. - NPS internal controls were not sufficient to provide reasonable assurance that: (1) the property and equipment subsidiary ledgers will be maintained in agreement with the related general ledger control account; (2) delinquent accounts receivable will be collected in a timely manner; (3) completed projects in the construction-in-progress account will be timely and appropriately transferred to the buildings and the other structures and facilities accounts; and (4) effective and periodic financial information integrity reviews will be made of the financial information contained in the general ledger control accounts and in their related subsidiary ledgers, listings, and reconciliations. In addition, NPS had not established an adequate process to allow it to obtain, in a timely manner, reliable information on the number and the balances of the "special concession accounts" or on the financial activities in these accounts. These conditions were considered to be reportable weaknesses in NPS's internal control structure that needed to be corrected. - USGS internal controls were not sufficient to provide reasonable assurance that: (1) the amounts reported in the general ledger accounts Advances From Others (incorporated into the account Deferred Revenue in the financial statements), Accounts Receivable Unbilled, and Accounts Payable were properly supported by subsidiary ledgers; (2) costs related to Federal-state cooperative projects were reported accurately and in accordance with applicable agreements; (3) delinquent accounts receivable were collected in a timely manner; (4) monies were disbursed from the investment plan, a component unit of the working capital fund, in accordance with established policies; and (5) Biological Resources Division property was accounted for and reported correctly. These conditions were considered to be reportable weaknesses in USGS's internal control structure that needed to be corrected. In addition, system integrity weaknesses existed in the general controls of the Federal Financial System at the Reston General Purpose Computer Center and in the accounting for costs of projects conducted under the Federal-State Cooperative Program. Bureau of Indian Affairs General Controls Over Automated Information Systems Needed Improvement BIA's general controls over its automated information systems at the Operations Service Center were not fully effective. Specifically, an effective security program had not been implemented; controls over access, software development and changes, segregation of duties, and system software were inadequate; and a service continuity plan had not been developed and implemented. These deficiencies occurred because BIA had not complied with the criteria in OMB Circular A-130, "Management of Federal Information Systems," and National Institute of Standards and Technology Federal Information Processing Standards publications in that it had not developed a formal, up-to-date, comprehensive system security program or established formal policies, standards, and procedures for computer operations. As a result, the deficient general controls significantly increased the risk of unauthorized access; unauthorized modifications to and disclosure of sensitive data maintained in the Center's mainframe computers; theft or destruction of hardware, software, and sensitive data; and the loss of critical systems and functions in the event of a disaster. In addition, the deficient controls decreased the reliability of the data maintained on the Center's computers. We made 13 recommendations for improving management and internal controls for BIA's automated information systems at the Center. In its responses to the draft and final reports, BIA agreed with all of the recommendations and stated that physical security, user access, segregation of duties, and system software controls would be implemented as a result of the conversion of the mainframe data processing to USGS's host computer. Based on BIA's response, we considered 1 recommendation resolved and implemented and 12 recommendations resolved but not implemented. Agricultural Leasing Effectively Managed by the Colorado River Indian Tribes We concluded that the Colorado River Indian Tribes effectively managed agricultural leasing on their reservation. The Tribes managed the leasing under Public Law 93-638, the Indian Self-Determination and Education Assistance Act. Based on a contract with BIA issued under the Act, the Tribes: (1) identified lands that were suitable for agriculture; (2) ensured that lands available for leasing were known to prospective lessees; (3) initiated actions in a timely manner to ensure that expiring leases were reissued without a loss of revenue to the landowners; (4) ensured that fair annual rentals were realized for the leased lands; (5) required direct rental payments to individual allottee landowners and assignees by the lessees; (6) assessed interest when rents were paid late; (7) took appropriate actions to cancel leases when warranted by the circumstances; and (8) enforced bonding requirements stipulated in the leases. The report did not contain any recommendations. Operation and Maintenance of Government Furnished Quarters Not Adequate We found that while the Eastern Navajo Agency complied with requirements for the maintenance and rental of quarters, the Fort Defiance Agency did not. We also found that neither agency complied with the requirements governing the occupancy of Government furnished quarters. Specifically, we found that: (1) quarters were poorly maintained and were deteriorating; (2) bills of collection for delinquent rents either were not prepared or were not prepared timely; and (3) agreements for the temporary use of housing either were not prepared or were not properly executed by the Fort Defiance Agency. In addition, personnel records to support that occupancy was required for BIA employees were not prepared by either agency, and neither agency performed annual quarters needs assessments to determine the number of quarters necessary for BIA operations. As a result, some quarters had unsafe and unhealthy conditions, such as broken windows and loose or missing floor tiles; rents due of approximately $41,300 had not been collected; and ineligible employees may have been designated as requiring occupancy. On a positive note, we also found that revenues from the rental of Government furnished quarters were deposited into a special fund and were used for the operation, maintenance, and repair of housing units within the quarters program of the two agency offices. BIA agreed with the report's five recommendations to correct the deficiencies in the report, including collecting the delinquent rents and planning and performing routine maintenance. Based on BIA's response, we considered three recommendations resolved and implemented and two recommendations resolved but not implemented. Student Bank Funds Adequately Accounted for by Institute Despite Internal Control Weaknesses In our audit of the Southwestern Indian Polytechnic Institute, we found that the Institute adequately accounted for funds in its student bank, which processed transactions exceeding $1.9 million for fiscal years 1995 and 1996. For example, the commercial checking account was properly supported by subsidiary accounts; recorded transactions were supported by proper documents such as deposit receipts, withdrawal slips, and payment vouchers; withdrawal slips and requests for payment were approved by authorized individuals; and interest earned from the Institute's commercial bank account was used for authorized purposes. While bank funds were adequately accounted for, we noted that the Institute had inappropriately transferred unclaimed student deposits and fees of $12,486 to the Institute's nonprofit foundation. According to the BIA Manual and the United States Code, these funds should have been refunded to the students or credited to BIA's appropriation. Our report contained five recommendations designed to ensure that student deposits and fees were properly handled and that internal controls were enhanced to ensure compliance with BIA's Manual and the Institute's plan of operations. In response to the recommendations, BIA agreed to return the funds to the appropriate accounts and to institute improved controls over fees collected from students. Based on the response, we considered four recommendations resolved and implemented and one recommendation resolved but not implemented. Tribal Employees Prosecuted, Terminated for Embezzlement A joint OIG-FBI investigation revealed that from 1994 to 1996, five employees of a New Mexico Indian tribal organization diverted more than $200,000 in Federal funds to their personal use. BIA and other Federal agencies funded a nonprofit organization that was set up to provide social and economic assistance to 19 Indian tribes in New Mexico. The monies were diverted through a scheme whereby payroll advances were provided to participants but not documented in the accounting system, thereby allowing participants to avoid repayment. One of the employees admitted to the theft of $2,560 and is paying restitution through an agreement with the Department of Justice. The remaining employees were charged criminally in March 1997 with conspiracy and embezzlement by a Federal grand jury in Albuquerque, New Mexico, and subsequently pled guilty. In September 1997, one of these four individuals, a staff accountant, was sentenced to 4 months of imprisonment and 3 years of supervised probation and was ordered to pay restitution of $33,800. Sentencing of the remaining three individuals is pending. All five of these employees were terminated from their positions at the nonprofit organization. Tribal Officials Convicted of Embezzling Tribal Funds A joint OIG-FBI investigation into allegations of theft of tribal monies by elected officials of a California Indian tribe resulted in the indictment of two individuals and their subsequent conviction in a trial in U.S. District Court in September 1997 on charges of embezzlement. The two individuals, who had served as tribal chairman and as vice-chairman, used their positions to divert more than $39,000 of tribal monies to their own use. Sentencing is pending. Two Indicted in $203,000 Embezzlement On June 11, 1997, a Federal grand jury for the Central District of California returned an indictment charging a former tribal chairperson and a former secretary-treasurer with 29 counts of embezzlement from an Indian tribal organization. The subjects allegedly conspired to divert $203,000 in tribal funds to their personal use. A trial is pending. This was a joint OIG-FBI investigation. Employee Removed for Waste and Abuse of Funds The superintendent of a BIA agency in the Southwest was removed from Federal employment following an OIG investigation that revealed waste and abuse in the employee's use of approximately $44,000 in BIA funds to make improvements to his government-owned quarters. The misused monies constituted the agency's total funding for improvements to all of its government-owned housing for the year. The investigation also revealed that the employee made numerous personal calls using a Government cellular telephone service. Government Employee Pleads Guilty to Payroll Fraud A BIA employee in New Mexico falsified her own time and attendance records during a 4-year period to obtain more than $36,000 in overtime compensation for hours that she did not work. The employee resigned during the investigation. In May 1997, a Federal grand jury in Albuquerque, New Mexico, charged the former employee with filing false claims and mail fraud. In September 1997, the former employee pled guilty to filing false claims. Sentencing is pending. Eighteen Individuals Convicted in Bingo Scheme A 2-year investigation of a bingo enterprise run by a Montana Indian tribe has thus far resulted in convictions and guilty pleas by 18 individuals charged with embezzlement and theft. Most of the individuals involved were current or former tribal employees of the bingo operation, including the president of the bingo operation's management firm. The individuals defrauded the tribe through various schemes to embezzle and steal monies from the tribal business, including manipulating gambling machines to produce counterfeit winning tickets, making false pay-outs, and stealing cash. Sentences of the 18 individuals have resulted in orders for $124,615 in restitution, 34 months of incarceration, 696 months of probation, 1,520 hours of community service, $780 in fines, and $1,200 in special assessments. Tribal Official Sentenced for Theft of Funds The chairman and the treasurer of a committee formed by a Montana Indian tribe to promote ceremonial events converted more than $50,000 of tribal funds to their personal use. The individuals were indicted by a Federal grand jury in Billings, Montana, in 1996. They subsequently entered guilty pleas to charges of theft from an Indian tribal organization. As previously reported, in February 1997, the committee's treasurer was sentenced to 6 months of electronically monitored home detention and 60 months of supervised probation and was ordered to pay restitution of $23,048.54 and a $100 special assessment. In May 1997, the committee chairman was sentenced to 5 years of supervised probation and 3 months of electronically monitored home confinement and was ordered to pay restitution of $27,488. Tribal Chairman and Gambling Consultant Guilty of Bribery An OIG investigation disclosed that the tribal chairman of a Midwestern Indian tribe accepted $127,000 in bribes from a gambling consultant to facilitate the placement and operation of illegal video gambling devices in the tribe's casino facilities. The tribal chairman also did not report the income to the Internal Revenue Service. On June 27, 1997, the tribal chairman was found guilty of one count of accepting a bribe as the agent of an Indian tribal government and three counts of willfully making and subscribing false individual U.S. income tax returns. The gambling consultant was found guilty of one count of conspiring to bribe an agent of an Indian tribal government and one count of bribing an agent of an Indian tribal government. Sentencing is pending. Bureau of Land Management Wild Horse and Burro Population Management Needs Improvement B LM had not achieved appropriate management levels of wild horse and burro populations on public lands. The appropriate levels are needed to maintain a thriving natural ecological balance of animals on public lands. From fiscal year 1986, when BLM first established appropriate management levels, through fiscal year 1996, the number of wild horses and burros on public lands exceeded the appropriate management levels by about 58 percent. Further, BLM's Strategic Plan for the management of the wild horses and burros, which was established in fiscal year 1992, had not resulted in BLM's reaching appropriate management levels. BLM's inability to achieve appropriate management levels occurred because BLM: (1) was unable to place sufficient numbers of animals with private organizations and individuals through its Adopt-A-Horse Program; (2) was prevented from disposing of excess healthy animals by legislative restrictions included in its appropriation acts; and (3) had not aggressively pursued other options for controlling herd sizes, such as the use of birthrate controls. As a result, approximately 15,226 more horses and burros were on public lands than BLM determined the lands could sustain at the end of fiscal year 1996. We made two recommendations to address the deficiencies. Based on BLM's response to our draft report, we considered one recommendation resolved but not implemented and requested additional information on the remaining recommendation. Recreation Management Needs To Be More Effective BLM did not make effective use of its authority to designate special areas and to collect special recreation permit fees at those areas. In addition, BLM did not collect recreation use permit fees at all sites eligible for fee collection or establish adequate controls over fee collection activities. BLM did not maximize its revenue-producing capability because it did not sufficiently emphasize the benefits of using special area designations or ensure that its state offices charged recreation fees where appropriate. As a result of these deficiencies, we estimated, based on fiscal year 1995 visitation data and historical BLM revenue averages for recreation use permit fees, that additional revenues of about $15 million could have been collected for fiscal year 1996 and used for resource protection. We made four recommendations to address the deficiencies. Based on BLM's response to our draft report, we considered all of the recommendations resolved but not implemented. Mineral Patents Processes Need Improvement We identified deficiencies in the mineral validity examination process which we believe BLM needs to correct to ensure that mineral patents are not granted improperly. We also noted that BLM was not recovering the costs of conducting mineral validity examinations, which BLM estimated to average about $80,000 per application. In a related matter, we found that BLM had not completed its initial reviews of patent applications within the 10-month time frame established in its Manual. The deficiencies in BLM's mineral validity examination process occurred primarily because of weaknesses in BLM's mineral report quality control process. We made seven recommendations to address the weaknesses identified. Based on BLM's response to our draft report, we considered three recommendations resolved but not implemented and requested BLM to reconsider its responses to three recommendations and to provide additional information on one recommendation. Employee Resigns After Embezzlement Investigation An OIG investigation of monies missing from the imprest fund of a BLM district office in Oregon resulted in a BLM employee's admission to the theft of $3,479.46 from the fund. The employee, a cashier for the fund, later resigned from BLM after receiving a notice of proposed removal. The employee has made restitution to BLM and will perform 40 hours of community service and obtain counseling under a supervision agreement with the Department of Justice. Bureau of Reclamation Better Monitoring of Grants for Water Reuse Projects Needed BOR did not adequately monitor the costs claimed by grantees for four construction projects under 10 grant agreements valued at $544 million, including Federal funds estimated at $135 million. BOR procedures require that BOR technical and accounting personnel audit or review grant agreements annually to ensure compliance with the terms of the agreement. BOR officials stated that the required reviews were not performed because: (1) Mid-Pacific Regional program officials were not aware of the procedures and (2) Lower Colorado Regional officials believed that the procedures were optional and that the Region was precluded from performing the annual reviews because grantees were subject to annual audits under the Single Audit Act. Lower Colorado Regional officials also stated that they did not have sufficient staff to perform the reviews. Furthermore, BOR officials in both regions stated that they believed that relying on the single audit process and on reviews of summary billings submitted by the grantees was sufficient to adequately monitor the costs claimed under the grant agreements. Despite BOR's statement, we found that BOR did not follow up on conditions identified in the single audit reports and information in the summary billings was not sufficient to allow adequate monitoring. As a result, BOR did not have assurance that Federal funds of $25 million paid to the grantees were for construction costs that were allowable under the terms of the grant agreements. We made two recommendations to correct these conditions. In response to these recommendations, BOR agreed to begin conducting annual reviews of grantees to ensure compliance with grant requirements and agreed to follow up on findings in single audit reports. Based on BOR's response to our draft report, we considered both recommendations resolved but not implemented. Costs of $691,702 Questioned on BOR Construction Contract During 1995, BOR awarded a contract for construction of a fish passage and protective facilities on the Lemhi River as a part of the Columbia and Snake River Salmon Recovery Project. After modifications, the contract totaled $1,005,292. The contractor submitted a request for reimbursement of additional costs of $691,702, citing site easement conflicts and inaccurate contract documents that resulted in a defective design for PVC pipe and additional erosion control planting. Based on our audit of these costs, we questioned the allowability of the entire $691,702 because the contractor did not separately account for claimed costs, as required by the contract. Of these costs, we also questioned costs of $472,546 because of differences between actual and estimated costs or rates and duplicate charges and costs of $125,706 that were not supported by the contractor's accounting records. The contracting officer's response to the report was not due until after the end of this semiannual reporting period. Insular Areas GUAM Personnel and Payroll Practices Not Corrected A followup review of the recommendations contained in a February 1991 report entitled "Personnel and Payroll Practices, Legislative Branch and Other Elected Officials, Government of Guam" (No. 91-I-372) found that only 1 of the report's 10 recommendations was implemented. Specifically, we found that the following conditions still existed: (1) elected officials were permitted to accrue annual leave, even though elected officials were not required to take leave when they took off from work; (2) contrary to the Guam Code, legislative employees were permitted to accrue annual leave at the maximum rate of 8 hours per pay period regardless of their length of service; (3) senators and legislative employees continued to receive lump-sum payments for their unused annual leave balance at the end of each legislative term, even if the senator was reelected or the employee continued to work for the Guam Government; (4) the Guam Code permitted elected officials to collect retirement annuities while still employed by the Guam Government; (5) contrary to Guam law, elected officials of the executive branch accrued sick leave, which we found had enabled some elected officials to receive increased retirement pay; and (6) elected officials continued to exempt themselves from Guam contracting regulations and issued personal services contracts that had vague terms and requirements. As a result of these conditions, the Government of Guam incurred additional unnecessary personnel costs of about $3.6 million (including $2.1 million for lump-sum annual leave payments) from January 1, 1993, through September 30, 1995. The Government also did not ensure that full value was received from the $4.6 million of personal services contracts awarded during that time. We made five new recommendations to correct the conditions noted. The Guam Legislature advised us in comments to our draft followup report that it had implemented two of the recommendations by legislation: (1) to discontinue annual leave accrual by elected officials and (2) to establish requirements for personal services contracts. We considered two of the three remaining recommendations resolved but not implemented. We revised the remaining recommendation in the final report based on the Legislature's comments and requested a response to this revised recommendation. Unnecessary Personnel Costs Cited We concluded that the Bus Operations Division of the Government of Guam's Department of Public Works used its buses effectively in providing transportation to the students of Guam. However, we found that the Division: (1) did not adequately control overtime and other personnel costs; (2) expended bus charter revenues without an appropriation from the Guam Legislature; (3) did not adequately control bus charter fee billings and collections; and (4) did not establish school bus charter rates sufficient to recover the costs of providing bus charter services. These conditions occurred because the Division had not established alternative work schedules to reduce overtime and personnel costs. In addition, the Division was not aware that an appropriation was needed before bus charter revenues could be spent and had not developed written procedures for controlling bus charter fee billings and collections and for establishing bus charter rates. As a result of these deficiencies, the Division incurred unnecessary overtime costs of about $2.8 million between fiscal years 1994 and 1996 and incurred other unnecessary personnel costs of $132,368 during two pay periods we reviewed for fiscal year 1996. In addition, the Division: (1) improperly spent bus charter revenues of $187,519; (2) had little assurance that all bus charter fees were eventually billed and collected; and (3) had bus charter costs that exceeded collections by at least $490,000. We recommended that the Governor of Guam require the Director, Department of Public Works, to: (1) perform an operational study of the Bus Operations Division to identify methods, such as the use of split shifts and part-time bus drivers, to minimize overtime and personnel costs; (2) cease the practice of spending bus charter revenues without an appropriation; (3) develop and implement written procedures to ensure that adequate controls are established over bus charter billings and collections; (4) develop and implement written procedures to require the Division to perform annual analyses of all school bus operational costs to serve as a basis for establishing new bus charter rates; and (5) use the newly established bus charter rates when billing customers for bus charter services. During the audit, we noted that the Governor of Guam's "Vision 2001" statement addressed the issue of public transportation systems on Guam. In that regard, the Director of Policy, Development and Operations and the Director of the Guam Mass Transit Authority told us that the administration was considering a strategy which would consolidate Guam's six public transportation systems. Because of the deficiencies we identified during the audit, we believe that this strategy will provide for a more efficient public transportation system on Guam. Accordingly, we stated in the report that the Governor should consider studying operational alternatives for school bus operations, such as merging these operations with those of the Guam Mass Transit Authority. The Governor of Guam did not provide a response to our draft report. Therefore, all of the report's six recommendations were considered unresolved. Minerals Management Service Improvements Needed for Royalty Management Program's Automated Information Systems Our audit of the Minerals Management Service (MMS) Royalty Management Program's automated information systems showed that the systems were not operating efficiently but that these inefficiencies had not adversely affected the Program's ability to perform its mission. Specific inefficiencies were that the Program did not ensure that application software for its automated systems was adequately tested or that supporting documentation was complete and current. To overcome these inefficiencies, Program personnel developed supplemental systems on personal computers, or manual workarounds, to assist in meeting the Program's royalty management responsibilities. The systems were not operating efficiently because current database structures were antiquated and difficult to modify and enhance. As a result, the Program unnecessarily incurred, at a minimum, contractor costs of $2 million annually for operating and maintaining these automated systems that did not efficiently meet users' needs, and the Program expended about $1.2 million annually to detect and correct data errors and problems in processing data to ensure the accurate collection and distribution of rents, bonuses, and royalties. We made seven recommendations to address these deficiencies. Based on MMS's response to the final report, we considered one recommendation resolved and implemented and six recommendations, including those to redesign the automated systems and to improve application software testing and documentation procedures, resolved but not implemented. Multi-Office Automated Law Enforcement Systems Capable of Meeting Applicable Reporting Requirements In three separate audits of the automated law enforcement systems of NPS, FWS, and BIA, we determined that the systems, once completed, will be capable of reporting crime statistics in 22 offense categories to the FBI's automated system. This reporting is required by the Uniform Federal Crime Reporting Act of 1988 (Public Law 100-690). We also determined, however, that controls within each of the bureaus' systems needed to be improved to ensure that crime statistics are reported accurately and that overall systems operations are effective. For example, NPS needed to develop written policies that describe data input or modification procedures, data backup or archival requirements, hardware and software security, system processes, and specific data submission procedures; FWS needed to include additional data elements to meet all reporting requirements of the FBI system and to meet management information items required by DOI for law enforcement case files; and BIA needed to activate the security features of the system software and develop and implement system rules for security, recovery, and operations. The three audit reports contained a total of 18 recommendations to address the needed improvements. Based on the responses to the draft reports, we considered 3 recommendations resolved and implemented, 5 recommendations resolved but not implemented, and 10 recommendations unresolved. Further Improvements in Travel by Principal Officials Needed A followup audit of five recommendations contained in the February 1993 audit report entitled "Travel Activity of Principal Officials" determined that three recommendations had been fully implemented and two recommendations had been partially implemented. As part of the followup audit, we reviewed 518 vouchers, totaling $477,244, for travel that occurred during the period of October 1, 1994, and April 30, 1996, and found that travelers: (1) claimed the cost of air transportation for personal travel which was paid for by the Government ($1,400) and used contract airfare rates or Government contract credit cards to pay for personal travel; (2) received per diem and/or reimbursement for rental cars while they were on personal leave or on personal time ($956); (3) received payment for costs that they did not incur ($1,151); (4) claimed, without approval or justification, actual costs for lodging and meals that exceeded per diem rates ($4,344); (5) did not receive approval for non-Federal funding of travel costs ($3,958); and (6) were not fully reimbursed for allowable travel costs ($1,201). As a result of these findings, we made four new recommendations, which focused on the need for DOI to recover reimbursement for unallowable travel costs, to provide training on the Federal Travel Regulation to principal officials, and to periodically review the officials' travel vouchers to ensure compliance with the Federal Regulation. DOI managers agreed to implement these recommendations. Implementation of the Value Engineering Program Needs Improvement DOI did not fully implement new requirements imposed by the May 1993 revision to OMB Circular A-131, "Value Engineering Program." Specifically, DOI did not perform value engineering studies of all potential construction projects and the nonconstruction areas set forth in the Circular. In addition, DOI's method of funding its program did not appear to encourage bureaus and offices to perform value engineering studies. The program was not fully implemented because DOI had not enforced requirements that annual value engineering plans should be prepared and implemented; that files should be maintained on all projects, programs, systems, and products which meet the criteria for the use of value engineering; and that nonconstruction areas should be included in DOI's value engineering program. In addition, DOI had not adequately staffed or funded the program. Although it was not possible for us to estimate the full impact on DOI, we believe that if the program had been fully implemented in all potential areas, DOI could have realized millions of dollars more in cost savings and other benefits for fiscal year 1995. We made four recommendations to address these deficiencies. Since comments to the report were not received, all of the report's recommendations were considered unresolved. National Biological Service Former Employee Sentenced in Drug-Related Case As the result of an OIG investigation, a secretary with the National Biological Service (NBS) resigned from her position after receiving written notice from NBS of a decision to terminate her employment for scheming to defraud a departmental imprest fund. The investigation revealed that the former employee submitted $3,122.10 in false claims for reimbursement to the imprest fund and used the money to purchase drugs. On May 23, 1997, the employee was sentenced to 3 years of probation and was ordered to pay restitution of $3,122.10 and to participate in a drug-testing program. National Park Service Greater Oversight Needed Over Reservation System Contractor NPS did not ensure that reservation system revenues collected on its behalf by a reservation system contractor were remitted to the U.S. Treasury promptly and that the Government's interests were protected against nonpayment of these revenues. These conditions existed because NPS had not adequately monitored the activities of the contractor to ensure that reservation revenues were remitted in a timely manner and had not enforced the contractual requirement that the contractor should maintain a performance bond. As a result, the contractor retained reservation system revenues that totaled about $609,000 for up to 120 days before remitting the revenues to the U.S. Treasury. The contractor also did not maintain a performance bond that would protect the Government's interests in case of default. The report contained four recommendations. NPS concurred with the recommendations and agreed to recover unpaid revenues, improve controls over the timely remittance of revenues, and enforce contract provisions to protect the Government's interests in the event of nonpayment. Based on NPS's response, we considered all of the recommendations resolved and implemented. NPS advised that it had recovered the $609,000 in reservation revenues oustanding at the time of our audit. However, after issuance of the final report, NPS informed us that it continued to experience delays in the receipt of contractor remittances of reservations system revenue and that it had been unable to get the contractor to obtain a performance bond. This matter has been referred to our Office of Investigations. Media Program Could Benefit From Cost-Saving Measures NPS could improve the efficiency and effectiveness of its Servicewide Media Program by strengthening administrative controls and implementing cost-saving measures at the Harpers Ferry Center. Specifically, the Center, which provides for the maintenance, repair, and replacement of audiovisual equipment and for the procurement of media products and services, needs to maintain accurate inventory records on audiovisual equipment, transfer custodial responsibility for audiovisual equipment to the parks, cancel its warehouse lease because the space is not needed, use competitive procurement procedures as appropriate when placing orders under indefinite-quantity contracts, and obtain better information on the distribution and inventories of park brochures before publishing additional copies. We estimated that NPS could save about $204,000 annually by transferring responsibility for audiovisual equipment to the parks and by canceling the warehouse lease. Also, the Center could reduce costs by soliciting competitive offers for items purchased under indefinite-quantity contracts and by producing park brochures based on replenishment requirements. The report contained seven recommendations to strengthen administrative controls over Center operations and to reduce Center operating costs. All of the recommendations were considered unresolved because we did not receive an official response from the Director to the draft report. Costs of $183,892 Questioned on Renovation Contract In 1994, NPS issued a 3-year, $11.1 million contract for the renovation of utilities at a historic location. The primary contractor issued a subcontract in the amount of $775,697 for electrical work. In our audit of costs of $768,268 billed by the subcontractor, we questioned $183,892, which consisted of costs of $169,005 for charges that were in excess of actual costs incurred and $14,887 for charges that were not supported by the subcontractor's accounting records. In responding to our report, NPS agreed with our finding and stated that it will offset the full amount of the questioned costs of $183,892 from the contractor's future billings. Therefore, we considered the questioned costs resolved but not implemented. Former Employee Convicted of Workmen's Compensation Fraud An OIG investigation revealed that a former NPS employee received disability payments totaling $73,000 from the Office of Workers' Compensation Programs (OWCP), which is administered by the Department of Labor (DOL), following a back injury that she claimed was work related but that was, in fact, sustained during a fall in 1992 while she was shoveling snow. While receiving OWCP payments, the former employee owned and operated a small business. During the period of disability, she submitted several forms to OWCP that reflected no active employment or work in any capacity since the date of the alleged injury. Following the investigation, a Federal grand jury in Montana charged the employee in a March 1997 indictment with fraud in connection with the application for OWCP benefits. In July 1997, the employee was convicted in a trial in U.S. District Court, Great Falls, Montana, of making a false statement to the Government to obtain the compensation. In September 1997, the employee was sentenced in Federal court in Great Falls to 6 months of incarceration and 36 months of supervised probation and was ordered to pay $24,104 in restitution and a $100 special assessment. Office of the Secretary Financial Management Activities of the National Indian Gaming Commission Need Improvement The National Indian Gaming Commission did not ensure that its revenues and expenditures were properly accounted for and reported in accordance with applicable laws and regulations. Specifically, the Commission did not develop and implement adequate internal controls for collecting fees, accounting for revenues and expenditures, billing for services, complying with travel regulations, maintaining time and attendance reports, and segregating duties. As a result, the Commission could not be assured that all of the Class II gaming operations reported and paid the appropriate fees. Also, the general ledger overstated assets of the Commission by approximately $5.5 million, understated liabilities by approximately $4.8 million, and included $650,000 collected in civil fines that were not returned to the U.S. Treasury. We made nine recommendations to the Commission to improve the internal controls over its fee assessment program; develop a plan to reduce expenditures and/or increase revenues; segregate duties in the areas of collections, procurement, and timekeeping; and establish policies and procedures for travel and time and attendance. Based on the Commission's response to our draft report, we considered five recommendations resolved and implemented and four recommendations resolved but not implemented. Employee Sentenced for Theft of Government Property An OIG investigation determined that a voucher examiner/principal cashier embezzled $12,532 from the Office of the Secretary imprest fund. The employee admitted embezzling the money to pay personal debts. The employee resigned and subsequently pled guilty to two misdemeanor counts of theft of Government property. On June 25, 1997, the employee was sentenced to 5 years of probation on each of the two misdemeanor counts (both sentences to run concurrently). The court also ordered the former employee to serve 4 months in an electronic monitoring program and to make full restitution of the $12,532 to the Office of the Secretary. Office of the Special Trustee for American Indians Judgment Award Funds Distributed Inappropriately In two of three audits of judgment award funds, we found that BIA distributed, to Indian tribes, judgment award principal and reserved investment interest and income of $9.8 million in violation of the public laws which specified how the awards should be used. The inappropriate distributions occurred because personnel responsible for reviewing and approving disbursements did not sufficiently analyze the use and distribution plans and did not ensure that disbursements were made in accordance with the plans. In addition, BIA's trust fund management system did not have sufficient automated controls to prevent disbursement from accounts that should have been restricted. The audit reports contained five recommendations for the Special Trustee for American Indians to ensure that: (1) the improper distributions were corrected in accordance with the Secretary's final recommendations for resolving disputed trust fund balances; (2) appropriate controls over judgment fund distribution were instituted; and (3) budget amendments for significant changes were submitted to the Secretary for approval. The responses to the recommendations in our reports from the Office of the Special Trustee for American Indians indicated concurrence with three recommendations. Based on the responses, we requested additional information for three recommendations and requested that the Office reconsider its responses to the remaining two recommendations, which were unresolved. The results of the three audits of judgment funds awarded to the Papago Tribe (currently known as the Tohono O'Odham Nation), the Navajo Nation, and the Turtle Mountain Band of Chippewa Indians are summarized as follows: - We concluded that the Tohono O'Odham Nation appeared to use the judgment funds in accordance with the uses authorized by Public Law 97-408. However, BIA inappropriately distributed to the Tohono O'Odham Nation about $5.8 million in judgment award principal ($1 million) and interest and investment income ($4.8 million). As a result of the improper distributions, we estimated that the Nation lost about $1.2 million in interest and investment income. - The audit found that the Navajo Nation used the funds from three judgment awards for the purposes specified in the respective approved use and distribution plans. However, we also found that BIA improperly distributed judgment funds of $4 million. Specifically, BIA improperly distributed to the Nation $1.9 million in 1987, which resulted in a $1.9 million overdraft to the Navajo Scholarship Trust Fund account. Subsequently, BIA improperly distributed the $4 million of principal: $1.9 million to reimburse the overdrafted cash balance and $2.1 million for the interest component of the account for local projects. However, the use and distribution plan specified that the principal funds were to be held in trust and invested and that only the interest income on the invested funds was to be disbursed for specified uses. As a result of the improper distribution, the Office of Trust Funds Management estimated that interest income of about $2.5 million was not earned. - During our audit of the Turtle Mountain Band of Chippewa Indians, we found that BIA held in trust at least 20 percent of the award funds, that it distributed judgment funds of $5.4 million to the Band in accordance with Public Law 97-403, and that the accounting records of the Band indicated that judgment funds were spent for administration or social and economic programs. However, we noted that the Band spent $1.7 million for activities which were not included in the BIA-approved budget or which were in excess of BIA-approved amounts and that future interest income from judgment funds was assigned by the Band as collateral on two loans totaling $1.5 million. Office of Surface Mining Reclamation and Enforcement Reclamation Fee Collection Process Could Be Expedited Overall, the Office of Surface Mining Reclamation and Enforcement (OSM) conducted its Fee Compliance Program in an efficient and effective manner and in compliance with authorizing legislation and regulations. Specifically, OSM had established adequate controls and procedures to ensure that reclamation fees were billed, recorded, and accounted for properly and that audits of coal mine operators were adequately planned and conducted. However, we found that OSM had an opportunity to process fee collections in a more cost-effective and timely manner by enabling and requiring certain coal mine operators to electronically transmit their quarterly Coal Reclamation Fee Reports. OSM agreed with the report's recommendation and said that it planned to determine how to implement the electronic data transfer while meeting Surface Mining Control and Reclamation Act requirements for a notary public to certify fee reports. Based on OSM's response, we considered the recommendation resolved but not implemented. Mining Company Official Sentenced in Reclamation Fee Fraud The president of a Pennsylvania mining company pled guilty to charges of conspiring with another official in the same mining company to fraudulently underreport and underpay mine reclamation fees to OSM. The OIG investigation determined that the company president prepared and submitted false OSM forms that understated the amount of coal sold and the mine reclamation fees due by $97,293. On September 19, 1997, the company president was sentenced to 3 years of probation. U.S. Fish and Wildlife Service Strengthened Oversight Needed in Administering North American Wetlands Conservation Act Grants Improvements are needed in the administration of FWS grants awarded under provisions of the North American Wetlands Conservation Act. We found that the FWS Waterfowl and Wetlands Office, which has responsibility for grants administration, did not adequately review or obtain sufficient information to verify the propriety of costs that were charged to the grants. Specifically, FWS did not extend the performance period prior to grant expiration to cover additional work performed (12 grants), credited partners with land that was bought or easements that were obtained outside the grant performance period (7 grants), and did not ensure that work was performed in accordance with the project agreements (5 grants). We also found that provisions of the Act were unclear with respect to the amount and source of required matching funds. In a review of 29 wetlands conservation grants, we identified 12 grants in which costs of $1 million may have been improperly reimbursed or credited to partners as their contribution to project costs as a result of inadequate administrative oversight. The report contained six recommendations. FWS concurred with the recommendations and agreed to strengthen controls over grant administration and to request an opinion from the Solicitor to clarify the funding provisions of the Act. Based on FWS's response to the draft report and subsequent correspondence, we considered three recommendations resolved and implemented, two recommendations resolved but not implemented, and one recommendation unresolved. Improvements Needed in Wildlife Habitat Restoration Program Overall, FWS was generally accomplishing its objectives of restoring and enhancing habitat sites under its Partners for Wildlife Habitat Restoration Program; however, improvements were needed in some areas. In a review of 101 Program project files, we found that some cooperative agreements lacked specific and/or standard provisions on the scope of the restoration work and/or the responsibilities of the Federal and non-Federal Program participants. We also found that guidance on cost-sharing arrangements was insufficient, documentation supporting project expenses was not adequate, and Program costs and accomplishments were not tracked and reported accurately and efficiently. As a result, FWS did not have sufficient controls to effectively administer Program activities. The report contained five recommendations. FWS concurred with the recommendations and agreed to improve controls over Program operations and activities. Based on FWS's response to the draft report, we considered the five recommendations resolved but not implemented. Claimed Costs of $1,692,644 Questioned on Construction Contract FWS entered into a contract in the amount of $3,176,024 with a contractor for construction of the Wichita Environmental Education Center, in Wichita, Kansas. The contractor requested reimbursement of an additional $1,704,215, citing increased costs that occurred because FWS's drawings and specifications were "inaccurate" and "confusing" and because untimely decisions by FWS slowed the construction process. We audited the contractor's request for equitable adjustment and questioned $1,692,644, consisting of costs of $1,340,411, which were unallowable under the Federal Acquisition Regulation or which were paid previously under the contract, and costs of $352,233, which were not supported by the contractor's accounting records. In its response to our report, FWS agreed to deny $1,692,104 of the contractor's costs that we questioned. Therefore, we considered the questioned costs resolved but not implemented. Former Employee Sentenced for Theft From Imprest Fund A former FWS budget clerk and imprest fund cashier, who had left her FWS position for employment with DOL, pled guilty to one count of felony embezzlement and theft of $23,113. The OIG investigation disclosed that while employed with the FWS, the employee embezzled $4,000 from the FWS imprest fund using duplicated and falsified vouchers. The employee also used her Government purchase card to make unauthorized purchases of personal items totaling $19,113. Some of the personal items purchased included a $1,000 riding lawnmower, a $1,000 10' x 16' outdoor shed to house the riding lawnmower, and a $1,500 large-screen television set. The employee also devised a scheme using her Government purchase card to purchase gift certificates at local department stores and to convert them to cash. On June 4, 1997, the former employee was sentenced to 5 years of probation and was ordered to pay $23,113 in restitution to FWS. As a result of the OIG investigation, the employee also resigned from DOL. U.S. Geological Survey Contractor Convicted and Debarred for False Certifications A joint investigation by OIGs of DOI and DOL determined that the president of a Colorado environmental engineering and consulting company issued false training certifications to numerous employees of private companies and USGS. Additionally, the corporate official misrepresented to USGS the extent of his academic qualifications to provide training. The training certifications are regulated by DOL's Mine Safety and Health Administration. The purpose of the training is to ensure that underground miners are current in safety and health topics designed to prepare them for the hazards inherent in mining. The false training certifications placed the victims in potential danger by falsely certifying that they could enter and work at mine sites when they had not received the proper designated training. As a result of the investigation, the company official was charged with making false certifications, a criminal violation of Federal law. After fleeing to avoid prosecution, the official pled guilty in U.S. District Court in Wyoming to making a false certification and was sentenced to 21 months of imprisonment and 2 years of probation. Additionally, in July 1997, the officer and the corporation were debarred from participating in all Federal procurement and nonprocurement programs for 15 years. The debarment cited the fact that the submission of false certifications demonstrated a deliberate disregard for the lives and safety of those who depended on the training.