Bureau of Land Management: Improper Charges Made to Mining Law	 
Administration Program (29-MAR-01, GAO-01-491T).		 
								 
Accurate cost information is crucial for proper program 	 
management and is especially important for the Bureau of Land	 
Management's (BLM) Mining Law Administration Program (MLAP) since
this program is partially funded through mining fees that the	 
Congress has designated to be used only for mining law		 
administration operations. The cost of some labor and a number of
contracts and services were improperly charged to MLAP, resulting
in other subactivities benefiting from funds intended for MLAP	 
operations. Therefore, fewer funds have been available for actual
MLAP operations. Although BLM has taken steps to make correcting 
adjustments for some of these improper charges, it has not	 
established specific guidance or procedures to prevent improper  
charging of MLAP funds from recurring in the future. Until	 
additional procedures for MLAP are developed and effectively	 
implemented, the Congress and program managers can only place	 
limited reliance on the accuracy of MLAP cost information.	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-01-491T					        
    ACCNO:   A00695						        
    TITLE:   Bureau of Land Management: Improper Charges Made to      
             Mining Law Administration Program                                
     DATE:   03/29/2001 
  SUBJECT:   Fees						 
	     Internal controls					 
	     Labor costs					 
	     Mining						 
	     Contract costs					 
	     BLM Mining Law Administration Program		 

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GAO-01-491T

Ordering Information

Ordering Information

For Release on Delivery Expected at 2 p. m. Thursday, March 29, 2001

GAO- 01- 491T

BUREAU OF LAND MANAGEMENT

Improper Charges Made to Mining Law Administration Program

Statement of Linda M. Calbom Director, Financial Management and Assurance
Testimony

Before the Subcommittee on Energy and Mineral Resources, Committee on
Resources, House of Representatives

United States General Accounting Office

GAO

Page 1 GAO- 01- 491T

Madam Chairman and Members of the Subcommittee: I am pleased to be here
today to discuss our review of certain charges made to the Bureau of Land
Management's (BLM) Mining Law Administration Program (MLAP). Accurate cost
information is crucial for proper program management and is especially
important for MLAP since this program is partially funded through mining
fees that the Congress has designated to be used only for mining law
administration operations.

We last reported on this program a year ago when we briefed your office on
BLM's administration and use of mining maintenance fees. That work resulted
in BLM undertaking a review of its contracts and services charged to MLAP in
the previous 2 fiscal years and identifying some improper charges to that
program. Our prior work also led to your request that we

(1) review labor charges to MLAP during the first 10 months of fiscal year
2000,

(2) review the methodology that BLM used in its review of MLAP charges for
contracts and services during fiscal years 1998 and 1999 and evaluate its
approach for correcting improper charges, and

(3) determine whether BLM employees were aware of the sources of MLAP
funding.

My statement will focus on the results of our work in these three areas. A
detailed discussion of our findings is contained in our report Bureau of
Land Management: Improper Charges Made to Mining Law Administration Program
(GAO- 01- 356), which is being released today.

In brief, BLM employees we surveyed disclosed that many of the hours charged
to MLAP during the first 10 months of fiscal year 2000 did not accurately
reflect hours actually worked on MLAP. Based on our survey sample, we
estimate a net overcharge of almost 11 percent for the 10 month audit
period, resulting in a potential overcharge of about

Page 2 GAO- 01- 491T

$1.2 million 1 for the nine BLM administrative states 2 and offices included
in our review.

BLM's review of contracts and services over $1,500 that were charged to MLAP
during fiscal years 1998 and 1999 employed a methodology that was
appropriate and identified the majority of the contracts and services that
were improperly charged to MLAP operations during that time period.
Specifically, BLM determined that about $716, 000 in contracts and services
should not have been charged to MLAP.

Finally, in response to our survey, approximately 70 percent of BLM
employees stated they were either not aware of the source of MLAP funding or
did not know that the program is partially funded by fees collected from
miners and designated for MLAP operations.

To address the weaknesses identified through our work, we have made
recommendations to BLM intended to create more specific criteria and clearer
policies related to the use of MLAP funds.

BLM's MLAP is responsible for managing the exploration and development of
locatable minerals on public lands. Locatable minerals include the socalled

“hardrock minerals,” such as copper, lead, gold, silver, and
uranium. MLAP operations include activities such as

reviewing and approving plans and notices of mining operations,

conducting inspections and enforcement to ensure compliance with the terms
of plans and notices of operation and related state and local regulations,
and

identifying and eliminating cases of unauthorized occupancy of mining
claims.

MLAP operations do not include work on nonlocatable or common variety
minerals, such as sand or gravel, or oil and gas work.

1 Since this figure is derived from sample data, it is subject to sampling
error. Taking this random variation due to sampling into account, we are 95
percent confident that the actual overcharge ranges between $0. 6 and $1. 9
million. This result offers assurance that a net overcharge for MLAP
occurred for the survey period.

2 Administrative states are BLM's administrative offices, which in some
cases have jurisdiction over areas beyond the boundaries of the state named.
Our work examined 9 of BLM's 18 administrative states and offices.
Background

Page 3 GAO- 01- 491T

The program is funded through mining fees and by appropriations to the
extent that the fees are inadequate to fund the program. 3 Since 1993,
mining fees have included an annual $100 mining maintenance fee on
unpatented mining claims and sites and a $25 location fee on new claims and
sites. The maintenance fees are collected in lieu of the annual $100 worth
of labor or improvements (also called “assessment work”)
required by the Mining Law of 1872. The authorization for these fees expires
on September 30, 2001.

Our survey of BLM employees showed that the number of hours charged to MLAP
were not a reliable record of the number of hours actually worked on the
program. According to employees, the number of hours charged to MLAP were
often in excess of the number of hours worked on MLAP issues, or were
charged for work unrelated to mining. In addition, some employees received
bonuses or awards from MLAP funds although they charged no hours to the
program.

Our survey population consisted of BLM employees who charged labor hours to
MLAP during the first 10 months of fiscal year 2000. The 9 administrative
states and offices included in our review reported MLAP obligations of over
$23 million in fiscal year 2000, representing approximately 72 percent of
total reported MLAP obligations. In this survey population, about one- half
of the employees reported working and charging the same amount of time to
the program. However, almost 39 percent reported that they charged more time
to MLAP than was actually worked, while only about 11 percent reported
charging less time to MLAP than was actually worked. These results are
summarized in attachment 1.

These improper charges to MLAP mean that BLM's financial records do not
reflect the true cost of the program. They are also in conflict with BLM's
policy, which stresses that “Charging work tasks, employee salaries,
procurement or contract items, or equipment purchases to any subactivity
other than the benefiting subactivity violates the terms of the
Appropriations Act.” BLM's policy also emphasizes that “records
of actual costs and accomplishments must be (as) accurate as
possible.” Based on our survey sample, we estimate a net overcharge to
MLAP of almost 11

3 BLM has general statutory authority to use receipts from mining fees for
MLAP operations. Annual appropriations acts establish an amount of BLM's
appropriation for Management of Land and Resources (MLR) to be used for MLAP
operations. The appropriations acts require, however, that the mining fees
that BLM collects be credited against the MLR appropriation until all MLR
funds used for MLAP are “repaid.” To the extent that fees are
insufficient to fully credit the MLR appropriation, the MLR appropriation
absorbs the difference and therefore partially funds MLAP. Some Labor Costs

Were Improperly Charged to MLAP

Page 4 GAO- 01- 491T

percent for the 10- month audit period, resulting in a potential overcharge
of about $1.2 million for the 9 BLM administrative states and offices
included in our review.

Many employees reported that the improper charges to MLAP were driven by
BLM's funding allocations 4 rather than the actual work performed. In other
words, charges were improperly made to MLAP because that subactivity had
funds available for obligation. Based on our survey, approximately 56
percent of the employees who charged more time than worked to MLAP said they
did so because funds were available in that program. Employees also stated
that they charged MLAP based on directions from their supervisor or a budget
officer. Approximately 50 percent 5 of the employees who charged more time
than worked to MLAP reported that they did so based on the directions of a
supervisor or budget officer. Again, this is in direct conflict to BLM's
policy that indicates charging a subactivity simply because “money is
available there” is a violation of the appropriations act. These
results are summarized in attachment 2.

Of the employees who stated that they charged more time to MLAP than they
actually worked, some reported charging time for such non- MLAP related
tasks as processing applications to drill oil and gas wells; working on
environmental remediation projects; doing recreation management; preparing
mineral reports for land exchanges; and conducting work on common variety
minerals, such as sand and gravel. BLM officials characterized these tasks
as generally not appropriate for MLAP.

Our analysis of BLM records also showed that certain BLM employees received
bonuses and awards from MLAP funds for work unrelated to mining. In
clarifying BLM's policy, BLM's Director of Budget stated that any bonuses
and awards received as a result of the labor performed should be charged to
the subactivity that benefited from that labor. However, awards were given
to individuals for tasks unrelated to MLAP operations, 6 such as assisting
in the moving of a BLM office to a new

4 OMB Circular A- 34 defines allocation as one method of restricting federal
funds available for obligation. It is used broadly to include any
subdivision of funds below the suballotment level, such as subdivisions made
by agency financial plans or program operating plans, or other agency
restrictions.

5 Employees could provide more than one explanation, therefore the
percentages listed above do not total to 100 percent. 6 We also found
individuals who received awards from MLAP funds for MLAP- related work, even
though the hours and associated labor were not charged to MLAP. BLM
officials stated that charging these awards to MLAP was appropriate and that
the associated labor should also have been charged to the program. Not
charging the associated labor costs to MLAP resulted in program costs being
understated.

Page 5 GAO- 01- 491T

facility and as compensation for not using BLM's relocation service when
selling a private residence as part of a lateral transfer. When asked why
such bonuses and awards had been charged to MLAP, BLM officials either could
provide no explanation or stated that MLAP had been charged by mistake.

BLM's review of contracts and services over $1,500 that were charged to MLAP
during fiscal years 1998 and 1999 employed a methodology that was
appropriate and thorough and identified the majority of the contracts and
services improperly charged to MLAP operations during that time period. The
contracts reviewed represented over $8 million, or almost 90 percent, of the
contracts and services obligated to MLAP during that time period. BLM
determined that about $716,000 in contracts and services should not have
been charged to MLAP. The improper payments, as shown in attachment 3,
included

over $34,000 for janitorial services,

$30,000 for the appraisal of federal coal leaseholds,

$25,000 for an attorney in an Equal Employment Opportunity settlement for an
employee who had not worked on MLAP tasks, and

$2,000 for a habitat survey of a threatened and endangered species of
butterfly in an area with no active mining.

In addition, our review identified an additional $40, 000 for 2 contracts
and services that were improperly charged to MLAP. These contracts and
services were for a cooperative agreement for geographic information system
support and a biological survey. BLM officials agreed and stated that
correcting adjustments would be made to the proper appropriation for the
additional $40,000.

BLM prepared an instruction memorandum to provide guidance on correcting the
contracts and services charges that were improperly charged to MLAP in
fiscal years 1998 and 1999. BLM officials have told us that they are
identifying the appropriations for fiscal years 1998 and 1999 that should
have been charged for these costs and that there are sufficient funds to
make the correcting adjustments of about $716,000.

Although BLM is taking the appropriate steps to correct these past improper
charges of contracts and services to MLAP, it has not yet established
specific procedures to prevent the recurrence of similar improper charges in
the future. Until such procedures are established and BLM Effectively

Identified Contracts and Services Improperly Charged to MLAP but Needs
Additional Procedures to Prevent Recurrence

Page 6 GAO- 01- 491T

implemented, there continues to be a high risk of improper use of MLAP funds
for unrelated contracts and services.

Finally, as requested, in our survey we asked BLM employees whether they
were aware of the source of funding for MLAP. Approximately 70 percent of
BLM employees who responded were either not aware of the source of MLAP
funding or did not know that the program is partially funded by fees
collected from miners and designated for MLAP operations.

In summary, the costs of some labor and a number of contracts and services
were improperly charged to MLAP, resulting in other subactivities benefiting
from funds intended for MLAP operations. Therefore, fewer funds have been
available for actual MLAP operations. Although BLM has taken steps to make
correcting adjustments for some of these improper charges, it has not
established specific guidance or procedures to prevent improper charging of
MLAP funds from recurring in the future. Until additional procedures for
MLAP are developed and effectively implemented, the Congress and program
managers can only place limited reliance on the accuracy of MLAP cost
information.

We have included in our report the following four actions that the Director
of the Bureau of Land Management should take to address the issues I have
discussed here today:

make correcting adjustments for improper charges to appropriation accounts;

remind employees that time charges and other obligations are to be made to
the benefiting subactivity as stated in BLM's Fund Coding Handbook and
develop a mechanism to test compliance;

provide detailed guidance clarifying which tasks are chargeable to MLAP
operations, such as those listed in the background section of our report;
and

conduct training on this guidance for all employees authorized to charge
MLAP.

Madam Chairman, this concludes my statement. I would be happy to answer any
questions that you or the Members of the Subcommittee may have. Many
Employees Are

Unaware of Source of MLAP Funding

Conclusions Recommendations for Executive Action

Page 7 GAO- 01- 491T

For further information regarding this testimony, please contact Linda
Calbom, Director, Financial Management and Assurance, at (202) 512- 9508.
Individuals making key contributions to this testimony included Mark P.
Connelly, Edda Emmanuelli- Perez, Lisa M. Knight, W. Stephen Lowrey, Miguel
A. Lujan, Mark F. Ramage, Shannah B. Wallace, and McCoy Williams.

Attachments Contact and

Acknowledgments

Page 8 GAO- 01- 491T

Attachment 1 Mining Law Administration Program (MLAP) Time Worked Versus
Time Charged

Page 9 GAO- 01- 491T

Attachment 2 Explanations for Overcharging Labor to Mining Law
Administration Program (MLAP)

Page 10 GAO- 01- 491T

(190009) Attachment 3

Examples of Improperly Charged Contracts to Mining Law Administration
Program (MLAP)

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