Department of the Interior: Major Management Challenges 	 
(16-FEB-07, GAO-07-502T).					 
                                                                 
The Department of the Interior is responsible for managing much  
of the nation's vast natural resources. Its agencies implement an
array of programs intended to protect these precious resources	 
for future generations while also allowing certain uses of them, 
such as oil and gas development and recreation. In some cases,	 
Interior is authorized to collect royalties and fees for these	 
uses. Over the years, GAO has reported on challenges facing	 
Interior as it implements its programs. In addition to basic	 
program management issues, the department faces difficult choices
in balancing its many responsibilities, and in improving the	 
condition of the nation's natural resources and the department's 
infrastructure, in light of the federal deficit and long-term	 
fiscal challenges facing the nation. This testimony highlights	 
some of the major management challenges facing Interior today.	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-502T					        
    ACCNO:   A65928						        
  TITLE:     Department of the Interior: Major Management Challenges  
     DATE:   02/16/2007 
  SUBJECT:   Accountability					 
	     Agency evaluation					 
	     Agency missions					 
	     Appraisals 					 
	     Contract administration				 
	     Fees						 
	     Financial management				 
	     General management reviews 			 
	     Government collections				 
	     Grants						 
	     Indian lands					 
	     Internal controls					 
	     Land management					 
	     Native Americans					 
	     Natural resources					 
	     Program management 				 
	     Strategic planning 				 
	     Program implementation				 

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GAO-07-502T

   

     * [1]Summary
     * [2]Background
     * [3]Management of Resource Protection Efforts Needs to Be Improv

          * [4]Wildland Fire Management Challenges Persist
          * [5]Hardrock Mining Operations Lack Needed Financial Assurances
          * [6]Increases in Oil and Gas Permitting Activities Lessen BLM's
          * [7]FWS Oversight of Oil and Gas Activities in Wildlife Refuges

     * [8]Management Problems in Indian and Island Community Programs

          * [9]Indian Trust Funds and Assets Need to Be More Effectively Ma
          * [10]Improvements Needed in BIA's Processing of Land in Trust App
          * [11]Improve Effectiveness and Accountability for Island Programs

     * [12]Land Appraisals Continue to Fall Short of Standards
     * [13]Deferred Maintenance Backlog Needs to Be Addressed
     * [14]Revenue Collection Needs More Management Attention

          * [15]Substantial Revenue May Be Forgone Because of Royalty Relief
          * [16]Revenue from Geothermal Leases May Change
          * [17]Interior Has Not Maximized Revenue Collections from Recreati
          * [18]Additional Revenue Could be Generated Through an Adjustment

     * [19]Contract and Grant Management Lack Needed Controls

          * [20]Interior's Management of Interagency Contracting Activities
          * [21]Chesapeake Bay Gateways Grant Program Lacks Needed Controls

     * [22]Concluding Observations
     * [23]GAO Contact
     * [24]Related GAO Products

          * [25]Performance and Accountability Series
          * [26]Resource Protection Efforts

               * [27]Wildland Fires
               * [28]Other Resource Protection Products

          * [29]Managing Indian Trust Responsibilities and Island Communitie

               * [30]Indian Trust Funds
               * [31]Indian Land Management
               * [32]Island Communities

          * [33]Managing Federal Land Appraisals
          * [34]Deferred Maintenance Backlog
          * [35]Revenue Collection Opportunities
          * [36]Weaknesses in Contracts and Grants Management

               * [37]Order by Mail or Phone

Testimony

Before the Committee on Natural Resources, House of Representatives

United States Government Accountability Office

GAO

For Release on Delivery Expected at 10:00 a.m. EST

Friday, February 16, 2007

DEPARTMENT OF THE INTERIOR

Major Management Challenges

Statement of Robin M. Nazzaro, Director
Natural Resources and Environment

GAO-07-502T

Mr. Chairman and Members of the Committee:

I am pleased to be here today to discuss our work at the Department of the
Interior. As the stewards for more than 500 million acres of federal land
and 1.8 billion acres of the Outer Continental Shelf, Interior agencies
are responsible for a wide array of programs to ensure that our nation's
natural resources are adequately protected and that access to and use of
those resources is appropriately managed. Difficult choices face this
Congress and administration in fulfilling the federal government's
responsibilities as a steward of these resources under increasing
budgetary constraints. My testimony today includes findings from a number
of reports we have issued over the past few years on some of Interior's
natural resource management programs. Specifically, I will discuss
management challenges in six key areas: (1) resource protection, (2)
Indian and insular affairs, (3) land appraisals, (4) deferred maintenance,
(5) revenue collection, and (6) contracts and grants.

Summary

In summary, our reports indicate that while Interior agencies have
improved the management of some of the programs we have reported on over
the years, some issues remain problematic. Moreover, more recent work has
identified new problems that need to be addressed. In many cases, Interior
agencies have work underway or planned to address our recommendations, but
we have not evaluated these efforts.

           o Management of resource protection efforts needs to be
           strengthened. Our work on the challenges that Interior, working
           with the U.S. Department of Agriculture (USDA), faces in
           protecting the nation against the threat of wildland fires has
           revealed a continued need for several improvements. Despite
           concurrence with our previous recommendations, Interior and USDA
           have yet to complete a cohesive national strategy that identifies
           long-term options and associated funding needs for responding to
           wildland fire issues. Nor have the departments developed a
           tactical plan to inform the Congress about the steps and time
           frames needed to develop such a strategy. And while they have
           undertaken steps to improve upon the information they use to
           assess and allocate resources for addressing wildland fire
           threats, it remains unclear whether the agencies will successfully
           complete these efforts. In addition, the Bureau of Land Management
           (BLM) and the Fish and Wildlife Service (FWS) have not been
           effectively carrying out their important responsibilities for
           ensuring that hardrock mining, oil, and gas operations occurring
           on their lands do not cause unnecessary environmental harm.
           Specifically, we found that BLM was not ensuring that hardrock
           mining operations had sufficient financial assurances to provide
           for proper reclamation of disturbed lands and was not effectively
           carrying out its environmental mitigation responsibilities for oil
           and gas operations. Similarly, we reported that FWS was not
           consistently inspecting oil and gas operations in national
           wildlife refuges to ensure that environmental standards were being
           met.

           o Management problems in Indian and island community programs
           persist. While Interior has taken significant steps in the last 10
           years to address weaknesses in certain Indian programs, it is
           still in the process of implementing key trust fund reforms, and
           several concerns exist about the completion of these reforms. We
           have also reported on serious delays in the Bureau of Indian
           Affairs' (BIA) program for determining whether the department will
           accept land in trust: over 1,000 land in trust applications from
           tribes and individual Indians are currently pending. In addition,
           the department could be doing more to assist seven island
           communities--four U.S. territories and three sovereign island
           nations--with long-standing financial and program management
           deficiencies.

           o Land appraisals continue to fall short of standards. Over the
           years, we and Interior's Inspector General (IG) have reported on
           the difficulties BLM and other federal land management agencies
           have had in managing land appraisals and the loss of millions of
           federal dollars resulting from inadequate appraisals. While major
           program changes have been made, significant problems continue.
           Specifically, we found that appraisals still do not adhere to
           appraisal standards and, thus, the federal government risks losing
           millions of dollars more if land is undervalued. In addition,
           Interior does not have a process for setting and meeting realistic
           deadlines for completing appraisals, which can be particularly
           important for transactions in areas with changing land values.

           o Deferred maintenance backlog needs to be addressed. While
           Interior has made progress addressing prior recommendations to
           improve information on the deferred maintenance needs of National
           Park Service facilities and BIA schools, its maintenance backlog
           continues to grow substantially--the department's estimate
           increased from between $8.1 billion and $11.4 billion in 2003, to
           between $9.6 billion and $17.3 billion in 2006. It is not clear
           how the department will secure needed funding to reduce this
           daunting backlog to a manageable level. In addition, we recently
           reported that better information was needed on 16 BIA irrigation
           projects with an estimated $850 million in deferred maintenance.
           Specifically, we found that some of the irrigation projects
           classified items as deferred maintenance when they were actually
           new construction, and some had incomplete information on their
           deferred maintenance needs.
           o Revenue collection needs more management attention. Recent work
           indicates that the federal government may not be collecting all
           the revenue that it could be and that some programs that receive
           revenue do not have needed controls. For example, we reported that
           billions of dollars in oil and gas royalties may be forgone
           because of a failure to include important price limitations in
           leases during 1998 and 1999. We also reported that while the
           department is required by law to continue to collect a certain
           level of revenue from geothermal leases, it is not collecting the
           necessary information to do so. Furthermore, the National Park
           Service is authorized to collect fees from a number of different
           types of uses of its lands, but has not done so in all cases.
           Finally, should the Congress choose to authorize it to do so, BLM
           could be collecting more in grazing revenue, thereby bringing its
           fees more in line with the fees charged by other federal agencies.

           o Contract and grant management lack needed controls. Interior's
           management of contracts and grants has been identified as a
           management challenge by Interior's IG for a number of years.
           Recent work we have conducted echoes some of the IG's concerns, in
           particular with regard to a lack of management controls.
           Specifically, we reported on weaknesses in (1) management of two
           Interior interagency contracting mechanisms that the Department of
           Defense (DOD) has used to obtain services and (2) a program that
           provides grants to nonfederal entities for activities related to
           the Chesapeake Bay.
			  
			  Background

           The Department of the Interior has jurisdiction over more than 500
           million acres of land--about one-fifth of the total U.S.
           landmass--and over 1.8 billion acres of the Outer Continental
           Shelf. As the guardian of these resources, the department is
           entrusted to preserve the nation's most awe-inspiring landscapes,
           such as the wild beauty of the Grand Canyon, Yosemite, and Denali
           national parks; our most historic places, like Independence Hall
           and the Gettysburg battlefield; and such revered national icons as
           the Statue of Liberty and the Washington Monument. At the same
           time, Interior is to provide for the environmentally sound
           production of oil, gas, minerals, and other resources found on the
           nation's public lands; honor the nation's obligations to American
           Indians and Alaskan Natives; protect habitat to sustain fish and
           wildlife; help manage water resources in western states; and
           provide scientific and technical information to allow for sound
           decision-making about resources. In recent years, the Congress has
           appropriated about $10 billion annually to meet these
           responsibilities. With these resources, Interior employs about
           73,000 people in eight major agencies and bureaus at over 2,400
           locations around the country to carry out its mission.

           Interior's management of this vast federal estate is largely
           characterized by the struggle to balance the demand for greater
           use of its resources with the need to conserve and protect them
           for the benefit of future generations. GAO, among others, have
           identified management problems facing the department and have made
           many recommendations to improve its agencies and programs. In some
           cases, Interior has made significant improvements; in others,
           progress has been slow. As a result, several major management
           challenges remain.
			  
			  Management of Resource Protection Efforts Needs to Be Improved

           Although Interior, working with USDA's Forest Service, has taken
           steps to help manage perhaps the most daunting challenge to its
           resource protection mission--protecting lives, private property,
           and federal resources from the threats of wildland fire--concerns
           remain. In addition, Interior's programs for managing hardrock
           mining, oil, and gas operations have not adequately protected
           federal resources from the environmental effects of these
           activities.
			  
			  Wildland Fire Management Challenges Persist

           The wildland fire problems facing our nation continue to grow. The
           average number of acres burned by wildland fires annually from
           2000 to 2005 was 70 percent greater than the average number burned
           annually during the 1990s, and appropriations for the federal
           government's wildland fire management activities tripled from
           about $1 billion in fiscal year 1999 to nearly $3 billion in
           fiscal year 2005. Experts believe that catastrophic damage from
           wildland fire will continue to increase until an adequate
           long-term federal response is implemented and has had time to take
           effect. While USDA's Forest Service receives the majority of fire
           management resources, Interior agencies--the National Park
           Service, BIA, FWS, and, particularly, BLM--are key partners in
           responding to the threats of wildland fire. Consequently, most of
           our work and recommendations on wildland fire management address
           both departments.

           The Interior agencies and the Forest Service have not yet
           developed a cohesive strategy that identifies long-term options
           and associated funding estimates for addressing wildland fire
           threats, as we first recommended in 1999; 1 nor have they
           developed a tactical plan that outlines the critical steps and
           time frames needed to complete such a strategy, as we recommended
           in 2005.2 While the agencies together issued a document in
           February 2006 titled Protecting People and Natural Resources: A
           Cohesive Fuels Treatment Strategy, it does not identify long-term
           options or associated funding estimates.3 Also, although the
           agencies have undertaken some tasks over the past 7 years that
           they stated are important to developing the cohesive strategy that
           we recommended, we have concerns about when and whether such tasks
           will be completed as planned.4 For example, the agencies began
           developing two modeling systems to help them (1) allocate
           resources to respond to wildland fires and (2) identify the
           extent, severity, and location of wildland fire threats to our
           nation's communities and ecosystems; these systems are slated for
           completion in 2008 and 2009, respectively. We are concerned,
           however, that the agencies' recent endorsement of significant,
           mid-course design changes to the resource allocation model may not
           fulfill key project goals, including determining the most
           cost-effective allocation of resources. In addition, the agencies
           currently have no plans to routinely update data in the threat
           modeling system--this would be necessary, for example, after major
           fires, hurricanes, or other factors have significantly altered the
           landscape. Such updated data are necessary to accurately capture
           the nature of wildland fire threats and to optimize allocation of
           resources over time. For these reasons, we continue to believe
           that a cohesive strategy and tactical plan would be helpful to the
           Congress and the agencies in making informed decisions about
           effective and affordable long-term approaches to addressing the
           nation's wildland fire problems.

           In addition, in 2006, we reported that the agencies needed to
           develop better guidance on sharing the costs of suppressing fires
           among federal and nonfederal entities.5 In some cases, these
           entities used different cost-sharing methodologies for fires with
           similar characteristics, which resulted in inconsistent sharing of
           costs among federal and nonfederal entities. The cost-sharing
           method used can have consequences in the millions of dollars for
           the entities involved. As of January 2007, the agencies were
           updating their guidance on possible cost-sharing methods and when
           each typically would be used, but it is unclear how the agencies
           will ensure that the guidance is followed.
			  
1GAO, Western National Forests: A Cohesive Strategy Is Needed to Address
Catastrophic Wildfire Threats, [112]GAO/RCED-99-65 (Washington, D.C.: Apr.
2, 1999).

2GAO, Wildland Fire Management: Important Progress Has Been Made, but
Challenges Remain to Completing a Cohesive Strategy, [113]GAO-05-147
(Washington, D.C.: Jan. 14, 2005).

3GAO, Wildland Fire Management: Update on Federal Agency Efforts to
Develop a Cohesive Strategy to Address Wildland Fire Threats,
[114]GAO-06-671R (Washington, D.C.: May 1, 2006).

4GAO, Wildland Fire Management: Lack of a Cohesive Strategy Hinders
Agencies' Cost Containment Efforts, [115]GAO-07-427T (Washington, D.C.:
Jan. 30, 2007).

5GAO, Wildland Fire Suppression: Lack of Clear Guidance Raises Concerns
about Cost Sharing between Federal and Nonfederal Entities,
[116]GAO-06-570 (Washington, D.C.: May 30, 2006).

           Finally, as we testified last month, preliminary findings from our
           ongoing work indicate that the effectiveness of the agencies'
           efforts to contain wildfire suppression costs may be limited
           because the agencies have not clearly defined their
           cost-containment goals, developed a strategy for achieving those
           goals, or developed related performance measures. 6 In addition,
           for efforts to contain wildfire suppression costs to be effective,
           once the agencies have defined their cost-containment goals, they
           need to integrate them with other goals of the wildland fire
           program--such as protecting life and property--and to recognize
           that trade-offs will be needed to meet desired goals within the
           context of fiscal constraints.
			  
			  Hardrock Mining Operations Lack Needed Financial Assurances

           Under BLM regulations, hardrock mining operators who extract gold,
           silver, copper, and other valuable mineral deposits from land
           belonging to the United States are required to provide financial
           assurances, before they begin exploration or mining, to guarantee
           that the costs to reclaim land disturbed by their operations are
           paid.7 However, we reported in June 2005 that BLM did not have a
           process for ensuring that adequate assurances were in place.8 As a
           result, some assurances may not fully cover all future reclamation
           costs, some operators do not have financial assurances, and some
           have either outdated reclamation plans and cost estimates or none
           at all. When operators with insufficient financial assurances fail
           to reclaim BLM land disturbed by hardrock mining operations, BLM
           is left with public land that poses risks to the environment and
           public health and safety, and requires millions of federal dollars
           to reclaim. For example, we reported that 48 hardrock operations
           had ceased to operate and had not been reclaimed since the
           financial assurance requirement began in 1981; for 43 of these
           sites, BLM identified a total of about $56 million in unfunded
           reclamation costs. We also reported that BLM's system for managing
           financial assurances did not have current information or track
           certain information critical to managing the program.
			  
6 [117]GAO-07-427T .

7Unlike operations that extract oil and gas from federal lands, hardrock
mining operations are not required to pay royalties on the minerals they
extract.

8GAO, Hardrock Mining: BLM Needs to Better Manage Financial Assurances to
Guarantee Coverage of Reclamation Costs, [118]GAO-05-377 (Washington,
D.C.: June 20, 2005).

           In response to our 2005 recommendations, BLM has taken substantial
           steps to correct these problems. In 2006, the agency modified its
           system for managing financial assurances to track key data. BLM
           also began requiring its state office directors to use a newly
           created report available from the system to ensure that adequate
           financial assurances are in place, and to (1) develop corrective
           action plans to address any financial assurance deficiencies with
           operators and (2) certify that reclamation cost estimates are
           adequate. If implemented properly, these efforts should ensure
           that appropriate financial assurances are in place to pay for
           necessary reclamation of federal lands.
			  
			  Increases in Oil and Gas Permitting Activities Lessen BLMï¿½s
			  Ability to Meet Its Environmental Protection Responsibilities

           The number of oil and gas operations occurring on or under federal
           lands and private lands for which the federal government retains
           mineral rights that are permitted by BLM, has increased
           dramatically--more than tripling from fiscal year 1999 to fiscal
           year 2004--in part as a result of the desire to reduce the
           country's dependence on foreign sources of oil and gas. In June
           2005, we reported that BLM has struggled to deal with this
           permitting workload increase while also carrying out its
           responsibility to mitigate the impacts of oil and gas development
           on land that it manages.9 Overall, BLM officials told us that
           staff had to devote increasing amounts of time to processing
           drilling permits, leaving less time to ensure mitigation of the
           environmental impacts of oil and gas development. For example, two
           field offices we visited that had the largest increases in
           permitting activity were each able to meet their annual
           environmental inspection goals only once in the past 6 years. BLM
           has authority to assess and charge fees to cover its expenses for
           processing oil and gas permits, which would enable it to
           supplement its program resources. While the agency had not
           exercised this authority at the time of our report, it had begun
           taking steps to develop a fee structure for these permits. To help
           BLM better respond to its increased workload, we recommended that
           the agency finalize and implement this fee structure to recover
           its costs for processing applications for oil and gas drilling
           permits.
			  
9GAO, Oil and Gas Development: Increased Permitting Activity Has Lessened
BLM's Ability to Meet Its Environmental Protection Responsibilities,
[119]GAO-05-418 (Washington, D.C.: June 17, 2005).			  

           In response to our recommendation, BLM issued a proposed
           regulation in July 2005 that included a $1,600 fee for processing
           oil and gas permits.10 However, the next month, the Congress
           prohibited Interior from initiating the new fee in the Energy
           Policy Act of 2005, and the final regulation did not include the
           proposed fee.11 Nevertheless, the department has continued to
           express interest in initiating such a fee and has proposed that
           the Energy Policy Act be amended to allow the fee to move forward.
			  
			  FWS Oversight of Oil and Gas Activities in Wildlife Refuges Needs
			  Improvement

           Similar to the concerns we have about BLM's protection of
           environmental resources from oil and gas activities, we reported
           in 2003 that FWS's oversight of oil and gas operations on wildlife
           refuge lands was not adequate.12 For example, we found that some
           refuge managers took extensive measures to oversee operations and
           enforce environmental standards, while others exercised little or
           no control. We found that such disparities occurred for two
           primary reasons. First, FWS had not officially determined its
           authority to require permits--which would include environmental
           conditions to protect refuge resources--of all oil and gas
           operations in refuges; we believe the agency has such authority.
           Second, refuge managers lacked guidance, adequate staffing levels,
           and training to properly oversee oil and gas activities. We also
           found that FWS was not collecting complete and accurate
           information on damage to refuge lands as a result of oil and gas
           operations and what steps were needed to address that damage.

           FWS has taken some steps to address recommendations we made to
           resolve these problems. For example, the agency has implemented
           training for staff overseeing oil and gas activities and has begun
           collecting better data on the nature and extent of oil and gas
           activities. However, FWS has not implemented two key
           recommendations that would strengthen its ability to protect
           refuge resources.
			  
1070 Fed. Reg. 41532, 41542 (July 19, 2005).

11Pub. L. No. 109-58, title III, subtitle F, S 365(i), 119 Stat. 594, 725
(2005) and 70 Fed. Reg. 58854 (Oct. 7, 2005).

12GAO, National Wildlife Refuges: Opportunities to Improve the Management
and Oversight of Oil and Gas Activities on Federal Lands, [120]GAO-03-517
(Washington, D.C.: Aug. 28, 2003).

           o First, because FWS had not formally clarified its authority to
           oversee all types of oil and gas operations on refuges, we
           recommended that the agency (1) determine its authority to oversee
           such operations and report that determination to the Congress and
           (2) seek from the Congress any additional authority that might be
           needed to apply a consistent and reasonable set of controls over
           all oil and gas activities occurring on national wildlife refuges.
           To date, FWS has not finalized its determination, but it has
           indicated that it does not believe it has the authority to require
           permits of all oil and gas operations that would include steps
           that must be taken to protect refuge resources. Further, FWS has
           indicated that it does not believe it needs additional authority
           to effectively manage oil and gas operations on refuges. We
           continue to believe, however, that FWS does have the authority to
           require such permits of all operators. Moreover, because of the
           effects of oil and gas activities on refuge resources that we
           previously reported, we also continue to believe that if FWS
           ultimately determines that it does not have the authority to
           require permits, it should seek this authority from the Congress
           in order to adequately protect refuges.

           o Second, although FWS has taken steps to identify the level of
           staffing it needs to adequately oversee oil and gas activities
           occurring on national wildlife refuges, it has not--as we
           recommended--sought the funding to meet those needs through
           appropriations, its authority to assess fees, or other means.
			  
			  Management Problems in Indian and Island Community Programs Persist

           GAO has reported on management weaknesses in Indian programs for a
           number of years. While the department has taken significant steps
           in the last 10 years to address these weaknesses, it is still in
           the process of implementing key trust fund reforms, and several
           concerns exist about the completion of these reforms. We have also
           reported on serious delays in BIA's program for determining
           whether the department will accept land in trust. In addition, the
           department could be doing more to assist seven island
           communities--four U.S. territories and three sovereign island
           nations--with long-standing financial and program management
           deficiencies.
			  
			  Indian Trust Funds and Assets Need to Be More Effectively Managed

           The Secretary of the Interior administers the government's trust
           responsibilities to tribes and individual Indians, including
           maintaining about 1,450 trust fund accounts for more than 250
           tribal entities with assets of about $2.9 billion and about
           300,000 individual Indian trust fund accounts with assets of about
           $400 million. Management of Indian trust funds and assets has long
           been plagued by inadequate financial management, such as poor
           accounting and information systems; untrained and inexperienced
           staff; backlogs in appraisals, determinations of ownership, and
           record-keeping; lack of a master lease file or accounts-receivable
           system; inadequate written policies and procedures; and poor
           internal controls.

           In response to these problems, the Congress enacted the American
           Indian Trust Fund Management Reform Act of 1994, which among other
           things, established the Office of the Special Trustee (OST) to
           oversee and coordinate the department's implementation of trust
           fund management reforms.13 In December 2006, we reported that OST
           had made progress implementing reforms, and it estimated that
           almost all key reforms needed to develop an integrated trust
           management system and to provide improved trust services would be
           completed by November 2007. 14 However, OST also estimated that
           data verification for leasing activities would not be completed
           for all Indian lands until December 2009. Furthermore, OST's most
           recent strategic plan, issued in 2003, did not include a timetable
           for implementing trust reforms or a date for OST's termination, as
           required by the reform act. As a result, we recommended, among
           other things, that the department provide the Congress with a
           timetable for completing the trust fund management reforms. The
           department agreed with our recommendation and stated that it
           expects to have a timetable for implementing the remaining trust
           reforms by late June 2007, including a date for the proposed
           termination or eventual deposition of OST. Although the
           department's consolidated financial statements for the fiscal year
           ending September 30, 2006, received an unqualified audit opinion,
           the management of Indian trust funds continued to be reported as a
           material internal control weaknesses, and information security was
           reported as an internal control weakness.

13Pub. L. No. 103-412, 108 Stat. 4239 (1994). Also, in 1996, a class
action lawsuit was filed by Elouise Cobell, a member of the Blackfeet
Tribe, and others against the federal government concerning the
department's management of Indian trust fund accounts (Cobell v.
Kempthorne). The lawsuit is still ongoing and the recent attempts during
the 109th Congress for a legislative settlement were not enacted.

14GAO, Indian Issues: The Office of the Special Trustee Has Implemented
Several Key Trust Reforms Required by the 1994 Act, but Important
Decisions about Its Future Remain, [121]GAO-07-104 (Washington, D.C.: Dec.
8, 2006).
  
			  Improvements Needed in BIAï¿½s Processing of Land in Trust
			  Applications

           BIA is the primary federal agency charged with implementing
           federal Indian policy and administering the federal trust
           responsibility for 1.9 million American Indians and Alaska
           Natives. BIA provides basic services to 561 federally recognized
           Indian tribes throughout the United States, including social
           services, child welfare services, and natural resources management
           on about 54 million acres of Indian trust lands. Trust status
           means that the federal government holds title to the land in trust
           for tribes or individual Indians; land taken in trust is no longer
           subject to state and local property taxes and zoning ordinances.
           Many Indians believe that having their land placed in trust status
           is fundamental to safeguarding it against future loss and ensuring
           their sovereignty. In 1980, the department established a
           regulatory process intended to provide a uniform approach for
           taking land in trust.15 While some state and local governments
           support the federal government's taking additional land in trust
           for tribes or individual Indians, others strongly oppose it
           because of concerns about the impacts on their tax base and
           jurisdictional control.

           We reported in July 2006 that while BIA generally followed its
           regulations for processing land in trust applications, it had no
           deadlines for making decisions on them.16 Specifically, the median
           processing time for the 87 land in trust applications with
           decisions in fiscal year 2005 was 1.2 years--ranging from 58 days
           to almost 19 years. We also found that while there was little
           opposition to applications with decisions in fiscal year 2005 from
           state and local governments, some state and local governments we
           contacted said (1) they did not have access to sufficient
           information about the land in trust applications and (2) the
           30-day comment period was not sufficient. We recommended, among
           other things, that the department move forward with adopting
           revisions to the land in trust regulations that include (1)
           specific time frames for BIA to make a decision once an
           application is complete and (2) guidelines for providing state and
           local governments more information on the applications and a
           longer period of time to provide meaningful comments on the
           applications. The department agreed with our recommendations, and
           BIA has developed a corrective action plan to implement them by
           June 30, 2007.

1525 C.F.R. pt. 151.

16GAO, Indian Issues: BIA's Efforts to Impose Time Frames and Collect
Better Data Should Improve the Processing of Land in Trust Applications,
[122]GAO-06-781 (Washington, D.C.: July 28, 2006).			  
			  
			  Improve Effectiveness and Accountability for Island Programs

           The Secretary of the Interior has varying responsibilities to the
           island communities of American Samoa, Guam, the Commonwealth of
           the Northern Mariana Islands, and the U.S. Virgin Islands, all of
           which are U.S. territories--as well as to the Federated States of
           Micronesia, the Republic of the Marshall Islands, and the Republic
           of Palau, which are sovereign nations linked with the United
           States through Compacts of Free Association. The Office of Insular
           Affairs (OIA) carries out the department's responsibilities for
           the island communities. OIA's mission is to assist the island
           communities in developing more efficient and effective government
           by providing financial and technical assistance and to help manage
           relations between the federal government and the island
           governments by promoting appropriate federal policies. The island
           governments have had long-standing financial and program
           management deficiencies. Specifically, island governments
           experience difficulties in accurately accounting for expenditures,
           collecting taxes and other revenues, controlling the level of
           expenditures, and delivering program services.

           In December 2006, we reported on serious economic, fiscal, and
           financial accountability challenges facing the U.S. insular areas
           of American Samoa, Guam, the Commonwealth of the Northern Mariana
           Islands, and the U.S. Virgin Islands.17 The economic challenges
           stem from dependence on a few key industries, scarce natural
           resources, small domestic markets, limited infrastructure,
           shortages of skilled labor, and reliance on federal grants to fund
           basic services. To help diversify and strengthen their economies,
           OIA sponsors conferences and business opportunities missions to
           the areas to attract U.S. businesses; however, there has been
           little formal evaluation of these efforts. In addition, efforts to
           meet formidable fiscal challenges and build strong economies are
           hindered by financial reporting that does not provide timely and
           complete information to management and oversight officials for
           decision making. The insular area governments have also submitted
           required audits late, received disclaimer or qualified audit
           opinions, and had many serious internal control weaknesses
           identified. As a result of these problems, numerous federal
           agencies have designated these governments as "high-risk"
           grantees. Interior and other federal agencies are working to help
           these governments improve their financial accountability, but more
           should be done.
			  
17GAO, U.S. Insular Areas: Economic, Fiscal, and Financial Accountability
Challenges, [123]GAO-07-119 (Washington, D.C.: Dec. 12, 2006).			  

           To increase the effectiveness of the federal government's
           assistance to the U.S. insular areas, we recommended, among other
           things, that the department (1) increase coordination activities
           with officials from other federal grant-making agencies on issues
           of common concern relating to the insular area governments, such
           as single audit reports, high-risk designations, and deficiencies
           in financial management systems and practices and (2) conduct
           formal periodic evaluations of OIA's conferences and business
           opportunities missions, assessing their impact on creating private
           sector jobs and increasing insular area income. The department
           agreed with our recommendations, stating that they were consistent
           with OIA's top priorities and ongoing activities. We will continue
           to monitor OIA's actions on our recommendations.

           Also in December 2006, we reported on challenges facing the
           Federated States of Micronesia and the Republic of the Marshall
           Islands.18 In 2003, the United States amended a 1986 compact with
           the countries by signing Compacts of Free Association with the two
           governments. The amended compacts provide the countries with a
           combined total of $3.6 billion from 2004 to 2023, with the annual
           grants declining gradually. We found that for 2004 through 2006,
           compact assistance to the respective governments was allocated
           largely to the education, infrastructure, and health sectors, but
           that neither country has planned for long-term sustainability of
           the grant programs, taking into account the annual decreases in
           grant funding. In addition, both countries' single audit reports
           for 2004 and 2005 indicated (1) weaknesses in their ability to
           account for the use of compact funds and (2) noncompliance with
           requirements for major federal programs. For example, the
           Federated States of Micronesia's audit report for 2005 contained
           57 findings of material weaknesses and reportable conditions in
           the national and state governments' financial statements for
           sector grants and 45 findings of noncompliance. We recommended,
           among other things, that the department work with the countries to
           establish plans to minimize the impact of declining assistance and
           to fully develop a reliable mechanism for measuring progress
           towards program goals. The department concurred with our
           recommendations.

18GAO, Compacts of Free Association: Micronesia and the Marshall Islands
Face Challenges in Planning for Sustainability, Measuring Progress, and
Ensuring Accountability, [124]GAO-07-163 (Washington, D.C.: Dec. 15,
2006).
			  
			  Land Appraisals Continue to Fall Short of Standards

           Over the years, we and Interior's IG have reported on the
           difficulties BLM and other federal land management agencies have
           had in managing land appraisals. Conducting appraisals is an
           important function--between November 2003 and May 2006, for
           example, Interior appraised more than 6.5 million acres of land
           that was valued at over $7 billion. Land appraisals are needed
           when Interior agencies are buying, exchanging, or leasing land.
           Such transactions are an integral part of Interior's land
           management in order to achieve specific purposes, such as
           consolidating existing holdings, acquiring land deemed important
           for wildlife habitat or recreational opportunities, and opening
           land to the development of energy and mineral resources. Interior
           generally requires land acquisitions to be based on market value
           and, thus, objective land appraisals are essential. Past reports,
           however, have identified serious problems with Interior agencies'
           appraisal programs, particularly with regard to appraisal
           independence, and have identified millions of dollars that the
           federal government had lost because of inadequate appraisals.

           While Interior has made major program changes, significant
           problems continue. Specifically, to remedy decades of problems
           with the quality and objectivity of its land appraisals, Interior
           removed the land appraisal function from its land management
           agencies and consolidated it into a departmental office--the
           Appraisal Services Directorate--in November 2003. This was a
           substantial move in the right direction to help ensure the
           independence of the appraisal function, and we reported in
           September 2006 that the objectivity of appraisals has improved
           since the directorate's inception.19 However, we also identified
           two major remaining challenges.

           o First, there is still wide variation in the quality of
           appraisals for land transactions involving potentially billions of
           dollars. For example, about 40 percent of Interior's appraisals
           for land transactions that we reviewed did not comply with
           recognized appraisal standards. This lack of compliance occurred,
           in large part, because appraisers appeared not to apply the
           specialized skills needed to perform their duties for certain
           appraisals. In addition, peer reviews of appraisals were cursory,
           with reviewers approving appraisals without considering property
           characteristics that can impact the value of land, such as the
           presence of roads.
			  
19GAO, Interior's Land Appraisal Services: Actions Needed to Improve
Compliance with Appraisal Standards, Increase Efficiency, and Broaden
Oversight, [125]GAO-06-1050 (Washington, D.C.: Sept. 28, 2006).

           o Second, the directorate does not have a system for ensuring that
           it sets and meets realistic time frames for appraisal delivery. Of
           the 3,500 appraisals completed since the directorate was created,
           over 70 percent missed their deadlines, with an average delay of 4
           months. Delays in delivery of appraisals can impact the ability of
           land management agencies to carry out land acquisition missions,
           and some land deals have been scuttled as a result.

           Since our report last fall, Interior has taken encouraging steps
           to address our recommendations. For example, Interior has stated
           that it has implemented a compliance inspection program for
           appraisals that are considered "high risk" to help ensure that
           such appraisals comply with recognized appraisal standards. We
           will continue to monitor the department's progress in this area.
           In addition, we currently we have a review under way to evaluate
           Interior's management of land exchanges.
			  
			  Deferred Maintenance Backlog Needs to Be Addressed

           In addition to the challenges the department faces in adequately
           maintaining the natural resources under its stewardship, it also
           faces a challenge in adequately maintaining its facilities and
           infrastructure. The department owns, builds, purchases, and
           contracts services for assets such as visitor centers, schools,
           office buildings, roads, bridges, dams, irrigation systems, and
           reservoirs; however, repairs and maintenance on these facilities
           have not been adequately funded. The deterioration of facilities
           can adversely impact public health and safety, reduce employees'
           morale and productivity, and increase the need for costly major
           repairs or early replacement of structures and equipment. In 2003,
           we reported that the department estimated that the deferred
           maintenance backlog was between $8.1 billion and $11.4 billion. In
           November 2006, the department estimated that the deferred
           maintenance backlog for fiscal year 2006 was between $9.6 billion
           and $17.3 billion, an increase of between 18 to 51 percent (see
           table 1).

           Table 1: Department of the Interior's Estimate of Deferred
           Maintenance for Fiscal Year 2006
			  
Dollars in billions                                                        
                                                  Estimated range of deferred
                                                          maintenance
Type of structures                              Low estimate High estimate 
Roads, bridges, and trails                             $4.80         $9.18 
Irrigation, dams, and other water structures            1.39          1.85 
Buildings (e.g., administration, education,                                
housing, historic buildings)                            2.12          3.70 
Other structures (e.g., recreation sites and                               
fish hatcheries)                                        1.29          2.57 
Total                                                  $9.60        $17.30 

           Source: Department of the Interior.

           Interior is not alone in facing daunting maintenance challenges.
           In fact, we have identified the management of federal real
           property, including deferred maintenance issues, as a
           governmentwide high-risk area since 2003.20 While Interior has
           made progress addressing prior recommendations to improve
           information on the maintenance needs of Park Service facilities
           and BIA schools, the challenge of how the department will secure
           the significant funding needed to reduce this maintenance backlog
           to a manageable level remains.

           While some programs have improved information on their deferred
           maintenance needs, in February 2006, we reported that similar
           information is still needed for 16 BIA irrigation projects with an
           estimated $850 million in deferred maintenance.21 For example, we
           found that some of the irrigation projects classified items as
           deferred maintenance when they were actually new construction, and
           some had incomplete information on their deferred maintenance
           needs. To further refine the deferred maintenance estimate for the
           16 irrigation projects, BIA plans to hire experts in engineering
           and irrigation to conduct thorough condition assessments of all 16
           irrigation projects every 5 years. The first such assessment was
           completed in July 2005, with all 16 assessments expected to be
           completed by 2010.
			  
20GAO, High-Risk Series: An Update, [126]GAO-03-119 (Washington, D.C.:
Jan. 2003); GAO, High-Risk Series: Federal Real Property, [127]GAO-03-122
(Washington, D.C.: Jan. 2003); GAO, High-Risk Series: An Update,
[128]GAO-05-207 (Washington, D.C.: Jan. 2005); GAO, High-Risk Series: An
Update, [129]GAO-07-310 (Washington, D.C.: Jan. 2007).

21GAO, Indian Irrigation Projects: Numerous Issues Need to Be Addressed to
Improve Project Management and Financial Sustainability, [130]GAO-06-314
(Washington, D.C.: Feb. 24, 2006).			  
			  
			  Revenue Collection Needs More Management Attention

           For many years, Interior's IG has identified revenue collection as
           a top management challenge for the department because of the
           significant potential for underpayments given that it collects, on
           average, over $10 billion annually. Work we have conducted in the
           past 2 years also raises questions about how and when Interior is
           collecting authorized revenues from oil and gas leases, geothermal
           leases, recreational uses, and grazing and whether funds are
           properly controlled and accounted for.
			  
			  Substantial Revenue May Be Forgone Because of Royalty Relief

           We testified in January 2007 on ongoing work investigating the
           Minerals Management Service's (MMS) implementation of the Outer
           Continental Shelf Deep Water Royalty Relief Act of 1995 and other
           authorities for granting royalty relief for oil and gas leases.22
           We reported that MMS had issued lease contracts in 1998 and 1999
           that failed to include price thresholds above which royalty relief
           would no longer be applicable. As a result, large volumes of oil
           and natural gas are exempt from royalties, which significantly
           reduces the amount of royalty revenues that the federal government
           can collect. At least $1 billion in royalties has already been
           lost because of this failure to include price thresholds. MMS has
           estimated that forgone royalties from leases issued between 1996
           and 2000 under the act could be as high as $80 billion. However,
           there is much uncertainty in MMS's estimate as a result of, for
           example, the inherent difficulties in estimating future production
           and prices, as well as ongoing litigation addressing MMS's
           authority to set price thresholds for some leases. Other
           authorities for granting royalty relief may also affect future
           royalty revenues. Specifically, under discretionary authority, the
           Secretary of the Interior administers programs granting relief for
           certain deep water leases issued after 2000, certain deep gas
           wells drilled in shallow waters, and wells nearing the end of
           their productive lives. In addition, the Energy Policy Act of 2005
           mandates relief for leases issued in the Gulf of Mexico during the
           5 years following the act's passage, provides relief for some gas
           wells that would not have previously qualified for royalty relief,
           and would provide relief in certain areas of Alaska where there
           currently is little or no production.
			  
22In order to promote oil and gas production, the federal government has
at times and in specific cases provided "royalty relief"--the waiver or
reduction of royalties that companies would otherwise be obligated to pay.
See GAO, Oil and Gas Royalties: Royalty Relief Will Likely Cost the
Government Billions, but the Final Costs Have Yet to Be Determined,
[131]GAO-07-369T (Washington, D.C.: Jan. 18, 2007).			  

           The U.S. Comptroller General has highlighted royalty relief as an
           area needing additional oversight by the 110th Congress.23
           Currently, we are assessing MMS's estimate of forgone royalties in
           light of changing oil and gas prices, revised estimates of future
           oil and gas production, and other factors. We are also seeking to
           identify comprehensive studies that quantify the potential
           benefits of royalty relief. We intend to issue a report on these
           issues later this year.
			  
			  Revenue from Geothermal Leases May Change

           In May 2006, we reported that a change in how royalties on
           geothermal leases are disbursed may result in a change in the
           amount of royalties collected by the federal government.24
           Specifically, while the Energy Policy Act of 2005 included
           provisions to encourage geothermal development, it also reduced
           the royalty percentage the federal government receives. Despite
           this, the act directs the Secretary of the Interior to seek, for
           most leases, to maintain the same level of royalty revenues as
           before the act. This could be accomplished by negotiating
           different royalty rates based on past royalty history, provided
           that electricity prices remain constant. Although it is impossible
           to predict with reasonable assurance how these prices will change
           in the future, Interior must make its best effort to mitigate the
           impact of changing prices if federal royalty revenue is to remain
           the same. This mitigation can only be achieved if there is timely
           and accurate knowledge of the revenues that lessees collect when
           they sell electricity. However, we reported that MMS does not
           routinely collect revenue data from electricity sales. Without
           such knowledge, MMS will have difficulty collecting the same level
           of royalties from lessees under the new royalty process. To
           demonstrate its commitment to collect the same level of royalty
           revenues as prior to passage of the act, we recommended that MMS
           routinely collect future sales revenues for electricity when
           royalty payments are due. MMS has plans to address these issues,
           and we will continue to monitor their efforts.
			  
23GAO, Suggested Areas for Oversight for the 110th Congress,
[132]GAO-07-235R (Washington, D.C.: Nov. 17, 2006).

24GAO, Renewable Energy: Increased Geothermal Development Will Depend on
Overcoming Many Challenges, [133]GAO-06-629 (Washington, D.C.: May 24,
2006).

			  Interior Has Not Maximized Revenue Collections from Recreational
			  and Other Uses

           Interior agencies are authorized--and in some cases required--to
           collect fees for a variety of uses. For example, the Park Service
           collects fees from air tour operators at selected national parks
           and from individuals and companies conducting commercial filming.
           However, we found that the agencies were not collecting such fees
           in the following cases:

           o In May 2006, we reported that the Park Service was not
           collecting all required fees from companies conducting air tours
           in or around three highly visited national parks because of (1) an
           inability to verify the number of air tours conducted over the
           three national parks and, therefore, to enforce compliance and (2)
           confusion resulting from differing geographic applicability of
           legislation governing air tours in national parks.25

           o In May 2005, we reported that the Park Service could be
           collecting more revenue through the permits it issues for special
           park uses, such as special events, but was not doing so because
           park units were not consistently applying criteria for charging
           permit fees.26 In addition, the Park Service had not implemented a
           May 2000 law that required the collection of location fees for
           commercial filming and still photography, resulting in significant
           annual forgone revenues. In response to our recommendation, the
           Park Service began collecting location fees in May 2006.

           o In September 2006, we reported that Interior agencies have been
           slow to implement authorities for charging fees for recreational
           uses of federal lands and waters.27 We also reported that some
           agencies lacked adequate controls and accounting procedures for
           collecting fees.
			  
25GAO, National Park Air Tour Fees: Effective Verification and Enforcement
Are Needed to Improve Compliance, [134]GAO-06-468 (Washington, D.C.: May
11, 2006).

26GAO, National Park Service: Revenues Could Increase by Charging Allowed
Fees for Some Special Uses Permits, [135]GAO-05-410 (Washington, D.C.: May
6, 2005).

27Total fee collections in fiscal year 2004 were about $192 million. See
GAO, Recreation Fees: Agencies Can Better Implement the Federal Lands
Recreation Enhancement Act and Account for Fee Revenues, [136]GAO-06-1016
(Washington, D.C.: Sept. 22, 2006).			  
			  
			  Additional Revenue Could be Generated Through an Adjustment to
			  BLM Grazing Fees

           Ten federal agencies manage grazing on over 22 million acres, with
           BLM and the Forest Service managing the vast majority of this
           activity.28 In total, federal grazing revenue amounted to about
           $21 million in fiscal year 2004, although grazing fees differ by
           agency. For example, in 2004, BLM and the Forest Service charged
           $1.43 per animal unit month, while other federal agencies charged
           between $0.29 and $112 per animal unit month.29 We reported in
           2005 that while BLM and the Forest Service charged generally much
           lower fees than other federal agencies and private entities, these
           fees reflect legislative and executive branch policies to support
           local economies and ranching communities.30 Specifically, BLM fees
           are set by a formula that was originally established by a law that
           expired, but use of the formula has been extended indefinitely by
           Executive Order since 1986. This formula takes into account a
           rancher's ability to pay and, therefore, the purpose is not
           primarily to recover the agencies' costs or capture the fair
           market value of forage. Instead, the formula is designed to set a
           fee that helps support ranchers and the western livestock
           industry. Other federal agencies employ market-based approaches to
           setting grazing fees.

           Using this formula, BLM collected about $12 million in receipts in
           fiscal year 2004, while its costs for implementing its grazing
           program, including range improvement activities, were about $58
           million. Were BLM to implement approaches used by other agencies
           to set grazing fees, it could help to close the gap between
           expenditures and receipts and more closely align its fees with
           market prices. We recognize, however, that the purpose and size of
           BLM's grazing fee are ultimately for the Congress to decide.
			  
			  Contract and Grant Management Lack Needed Controls

           Interior's management of contracts and grants has been identified
           as a management challenge by Interior's IG for a number of years.
           Our recent work echoes some of the IG's concerns, in particular
           with regard to interagency contracting and grant management for
           the Chesapeake Bay Gateways grant program.

28The 10 agencies are the BLM, FWS, Park Service, Bureau of Reclamation,
Forest Service, Department of Energy, Army Corps of Engineers, Army, Air
Force, and Navy. In addition, a number of other federal agencies manage
some minor grazing-related activities.

29An animal unit month is the amount of forage (vegetation such as grass
and shrubs) that a cow and her calf eat in a month (or one bull, one
steer, one horse, or five sheep).

30GAO, Livestock Grazing: Federal Expenditures and Receipts Vary,
Depending on the Agency and the Purpose of the Fee Charged,
[137]GAO-05-869 (Washington, D.C.: Sept. 30, 2005).
			  
			  Interiorï¿½s Management of Interagency Contracting Activities Needs
			  Improvement

           The Department of Defense (DOD) has used interagency contracting
           to help support the war in Iraq, including contracting with
           Interior. Governmentwide, the use of interagency contracts to
           procure goods and services has continued to increase over the past
           several years. Because of this continued growth, limited expertise
           in using these contracts, and unclear lines of responsibility, GAO
           has designated interagency contracting as a governmentwide
           high-risk area.31 In our review of 11 task orders Interior issued
           on behalf of DOD--amounting to about $66 million--we found
           numerous breakdowns in management controls. 32 Specifically, we
           found that Interior

           o issued task orders that were beyond the scope of the contract,
           in violation of federal competition rules;

           o did not comply with additional DOD competition requirements when
           issuing task orders for services on existing contracts;

           o did not comply with ordering procedures meant to ensure the best
           value for the government; and

           o inadequately monitored contractor performance.

           Moreover, we found that the contractor was allowed to play a role
           in the procurement process normally performed by the government
           because the officials at Interior and DOD responsible for the
           orders did not fully carry out their roles and responsibilities.
           In response to the concerns identified, Interior and DOD initiated
           actions to strengthen management controls. In our report, we made
           recommendations to further refine their efforts.

           In 2005, we also reported on weaknesses in Interior's GovWorks.
           GovWorks is a government-run, fee-for-service organization that
           provides various services, including contracting services, on
           which DOD has relied.33 Specifically, Interior did not always
           ensure that GovWorks contracts received fair and reasonable prices
           and may have missed opportunities to achieve savings from millions
           of dollars in purchases. In addition, GovWorks added substantial
           work--as much as 20 times above the original value of a particular
           order--without determining that prices were fair and reasonable.
           We made recommendations to Interior to improve the manner in which
           GovWorks funds are used to ensure value and compliance with
           procurement regulations. Interior concurred with our
           recommendations and identified actions to take to address them. We
           will continue to monitor their implementation of these actions.

31GAO, High-Risk Series: An Update, [138]GAO-07-310 (Washington, D.C.:
Jan. 31, 2007).

32GAO, Interagency Contracting: Problems with DOD's and Interior's Orders
to Support Military Operations, [139]GAO-05-201 (Washington, D.C.: Apr.
29, 2005).

33Such organizations are referred to as "franchise funds." See GAO,
Interagency Contracting: Franchise Funds Provide Convenience, but Value to
DOD Is Not Demonstrated, [140]GAO-05-456 (Washington, D.C.: July 29,
2005.)
			  
			  Chesapeake Bay Gateways Grant Program Lacks Needed Controls

           In September 2006, we reported on weaknesses in the Park Service's
           management of grants provided to nonfederal entities under its
           Chesapeake Bay Gateways Program.34 In 1998, Congress passed the
           Chesapeake Bay Initiative Act to establish (1) a network of
           locations where the public can access and experience the bay and
           (2) a grant program to accomplish this objective. From 2000
           through 2005, the Park Service awarded 189 grants totaling over $6
           million to support the network. However, our review revealed
           several accountability and oversight weaknesses in the Park
           Service's management of these grants, including (1) inadequate
           training of Park Service staff, (2) a lack of timely grantee
           reporting on progress and finances, (3) continuing awards to
           nonperforming grantees, and (4) a backlog of uncompleted grants.
           To enhance accountability and oversight, we recommended that the
           department

           o develop and implement a process to determine the extent to which
           grants are effectively meeting program goals;

           o ensure that staff responsible for grant management are
           adequately trained;

           o ensure that grantees submit progress and financial reports in a
           timely manner; and

           o ensure that grants are awarded only to applicants who completed
           any previous grants they received or to applicants who have
           demonstrated the capacity for completing a grant on schedule.

           Interior concurred with our recommendations and has plans to
           implement them.

34GAO, Chesapeake Bay Gateways Program: National Park Service Needs Better
Accountability and Oversight of Grantees and Gateways, [141]GAO-06-1049
(Washington, D.C.: Sept. 14, 2006).			  
			  
			  Concluding Observations

           To conclude, Mr. Chairman, I would like to note that in 1993, GAO
           testified at a broad oversight hearing on Interior before this
           Committee, similar to today's hearing. At that time, we testified
           that Interior faced serious challenges to addressing the declining
           condition of the nation's natural resources and related
           infrastructure under its responsibility. Unfortunately, almost 15
           years later, the message in my testimony today is very similar.
           While some of the programs we evaluated in the past have improved,
           evaluations of additional programs reveal many of the same
           persistent management problems--a lack of adequate data to
           understand the condition of its natural resources and
           infrastructure and the actions necessary to improve them, a lack
           of adequate controls and accountability to ensure federal
           resources are properly used and accounted for, and a lack of
           adequate strategic planning and guidance for program
           implementation. Clearly the department needs to address management
           and control gaps in its programs and ensure its activities are
           carried out in the most cost-effective and efficient manner, but
           difficult choices remain for improving the condition of the
           nation's natural resources and the department's infrastructure in
           light of the federal deficit and long-term fiscal challenges
           facing the nation. Either new sources of funding need to be
           identified and pursued, or the department must determine the
           services it can continue and the standards it will use for
           maintaining its facilities and lands. As we stated in our
           testimony nearly 15 years ago, we believe that in reaching these
           decisions, policy makers should know the full extent of the
           resource shortfalls facing federal natural resource management
           agencies. In addition, it is essential for the department to
           identify the impacts on services and infrastructure that would
           occur should serious cutbacks be necessary in order to maintain a
           certain standard of quality.

           Mr. Chairman, this concludes my prepared statement. I would be
           pleased to answer any questions that you or other Members of the
           Committee may have at this time.
			  
			  GAO Contact
			  
			  For further information about this testimony, please contact me at
           (202) 512-3841 or [email protected] . Contact points for our
           Offices of Congressional Relations and Public Affairs may be found
           on the last page of this statement.
			  
			  Related GAO Products
			  
			  Performance and Accountability Series

           High-Risk Series: An Update. [39]GAO-07-310 . Washington, D.C.:
           January 2007.

           Major Management Challenges at the Department of the Interior
           (2005 Web-based Update--http://www.gao.gov/pas/2005/doi.htm).

           High-Risk Series: An Update. [40]GAO-05-207 . Washington, D.C.:
           January 2005.

           Major Management Challenges and Program Risks: Department of the
           Interior. [41]GAO-03-104 . Washington, D.C.: January 2003.

           High-Risk Series: An Update. [42]GAO-03-119 . Washington, D.C.:
           January 2003.

           High-Risk Series: Federal Real Property. [43]GAO-03-122 .
           Washington, D.C.: January 2003.

           Major Management Challenges and Program Risks: Department of the
           Interior. [44]GAO-01-249 . Washington, D.C.: January 2001.

           High-Risk Series: An Update. [45]GAO-01-263 . Washington, D.C.:
           January 2001.

           Major Management Challenges and Program Risks: Department of the
           Interior. [46]GAO/OCG-99-9 . Washington, D.C.: January 1999.

           High-Risk Series: An Update. [47]GAO/HR-99-1 . Washington, D.C.:
           January 1999.
			  
			  Resource Protection Efforts
			  
			  Wildland Fires

           Wildland Fire Management: Lack of a Cohesive Strategy Hinders
           Agencies' Cost-Containment Efforts. [48]GAO-07-427T . Washington,
           D.C.: January 30, 2007.

           Wildland Fire Suppression: Better Guidance Needed to Clarify
           Sharing of Costs between Federal and Nonfederal Entities.
           [49]GAO-06-896T . Washington, D.C.: June 21, 2006.

           Wildland Fire Suppression: Lack of Clear Guidance Raises Concerns
           about Cost Sharing between Federal and Nonfederal Entities.
           [50]GAO-06-570 . Washington, D.C.: May 30, 2006.

           Wildland Fire Management: Update on Federal Agency Efforts to
           Develop a Cohesive Wildland Fire Strategy. [51]GAO-06-671R .
           Washington, D.C.: May 1, 2006.

           Wildland Fire Management: Timely Identification of Long-Term
           Options and Funding Needs Is Critical. [52]GAO-05-923T .
           Washington, D.C.: July 14, 2005.

           Wildland Fire Management: Important Progress Has Been Made, but
           Challenges Remain to Completing a Cohesive Strategy.
           [53]GAO-05-147 . Washington, D.C.: January 14, 2005.

           Wildland Fires: Forest Service and BLM Need Better Information and
           a Systematic Approach for Assessing the Risks of Environmental
           Effects. [54]GAO-04-705 . Washington, D.C.: June 24, 2004.

           Wildland Fire Management: Additional Actions Required to Better
           Identify and Prioritize Lands Needing Fuels Reduction.
           [55]GAO-03-805 . Washington, D.C.: August 15, 2003.

           Wildland Fire Management: Reducing the Threat of Wildland Fires
           Requires Sustained and Coordinated Effort. [56]GAO-02-843T .
           Washington, D.C.: June 13, 2002.

           Severe Wildland Fires: Leadership and Accountability Needed to
           Reduce Risks to Communities and Resources. [57]GAO-02-259 .
           Washington, D.C.: January 31, 2002.

           Western National Forests: A Cohesive Strategy is Needed to Address
           Catastrophic Wildfire Threats. [58]GAO/RCED-99-65 . Washington,
           D.C.: April 2, 1999.
			  
			  Other Resource Protection Products

           Endangered Species: Many Factors Affect the Length of Time to
           Recover Select Species. [59]GAO-06-730 . Washington, D.C.:
           September 6, 2006.

           Endangered Species: Time and Costs Required to Recover Species Are
           Largely Unknown. [60]GAO-06-463R . Washington, D.C.: April 6,
           2006.

           Wind Power: Impacts on Wildlife and Government Responsibilities
           for Regulating Development and Protecting Wildlife. [61]GAO-05-906
           . Washington, D.C.: September 16, 2005.

           Hardrock Mining: BLM Needs to Better Manage Financial Assurances
           to Guarantee Coverage of Reclamation Costs. [62]GAO-05-377 .
           Washington, D.C.: June 20, 2005.

           Oil and Gas Development: Increased Permitting Activity Has
           Lessened BLM's Ability to Meet Its Environmental Protection
           Responsibilities. [63]GAO-05-418 . Washington, D.C.: June 17,
           2005.

           Oil and Gas Development: Challenges to Agency Decisions and
           Opportunities for BLM to Standardize Data Collection.
           [64]GAO-05-124 . Washington, D.C.: November 30, 2004.

           Endangered Species: More Federal Management Attention Is Needed to
           Improve the Consultation Process. [65]GAO-04-93 . Washington,
           D.C.: March 19, 2004.

           National Wildlife Refuges: Opportunities to Improve the Management
           and Oversight of Oil and Gas Activities on Federal Lands.
           [66]GAO-03-517 . Washington, D.C.: August 28, 2003.

           Invasive Species: Clearer Focus and Greater Commitment Needed to
           Effectively Manage the Problem. [67]GAO-03-1 . Washington, D.C.:
           October 22, 2002.
			  
			  Managing Indian Trust Responsibilities and Island Communities
			  
			  Indian Trust Funds

           Office of the Special Trustee for American Indians: Financial
           Statement Audit Recommendations and the Audit Follow-up Process.
           [68]GAO-07-295R . Washington, D.C.: January 19, 2007.

           Indian Issues: The Office of the Special Trustee Has Implemented
           Several Key Trust Reforms Required by the 1994 Act, but Important
           Decisions about Its Future Remain. [69]GAO-07-104 . Washington,
           D.C.: December 8, 2006.

           Indian Trust Funds: Individual Indian Accounts. [70]GAO-02-970T .
           Washington, D.C.: July 25, 2002.

           Indian Trust Funds: Tribal Account Balances. [71]GAO-02-420T .
           Washington, D.C.: February 7, 2002.
			  
			  Indian Land Management

           Indian Issues: BLM's Program for Issuing Individual Indian
           Allotments on Public Lands Is No Longer Viable. [72]GAO-07-23R .
           Washington, D.C.: October 20, 2006.

           Indian Issues: BIA's Efforts to Impose Time Frames and Collect
           Better Data Should Improve the Processing of Land in Trust
           Applications. [73]GAO-06-781 . Washington, D.C.: July 28, 2006.

           Indian Irrigation: Numerous Issues Need to Be Addressed to Improve
           Project Management and Financial Sustainability. [74]GAO-06-314 .
           Washington, D.C.: February 24, 2006.

           Alaska Native Allotments: Conflicts with Utility Rights-of-way
           Have Not Been Resolved through Existing Remedies. [75]GAO-04-923 .
           Washington, D.C.: September 7, 2004.

           Columbia River Basin: A Multilayered Collection of Directives and
           Plans Guides Federal Fish and Wildlife Plans. [76]GAO-04-602 .
           Washington, D.C.: June 4, 2004.

           Alaska Native Villages: Most Are Affected by Flooding and Erosion,
           but Few Qualify for Federal Assistance. [77]GAO-04-142 .
           Washington, D.C.: December 12, 2003.
			  
			  Island Communities

           Compacts of Free Association: Micronesia and the Marshall Islands
           Face Challenges in Planning for Sustainability, Measuring
           Progress, and Ensuring Accountability. [78]GAO-07-163 .
           Washington, D.C.: December 15, 2006.

           U.S. Insular Areas: Economic, Fiscal, and Financial Accountability
           Challenges. [79]GAO-07-119 . Washington, D.C.: December 12, 2006.

           Compacts of Free Association: Development Prospects Remain Limited
           for Micronesia and Marshall Islands. [80]GAO-06-590 . Washington,
           D.C.: June 27, 2006.

           U.S. Insular Areas: Multiple Factors Affect Federal Health Care
           Funding. [81]GAO-06-75 . Washington, D.C.: October 14, 2005.

           Compacts of Free Association: Implementation of New Funding and
           Accountability Requirements Is Well Underway, but Planning
           Challenges Remain. [82]GAO-05-633 . Washington, D.C.: July 11,
           2005.

           American Samoa: Accountability for Key Federal Grants Needs
           Improvement. [83]GAO-05-41 . Washington, D.C.: December 17, 2004.

           Compact of Free Association: Single Audits Demonstrate
           Accountability Problems over Compact Funds. [84]GAO-04-7 .
           Washington, D.C.: October 7, 2003.

           Compact of Free Association: An Assessment of the Amended Compacts
           and Related Agreements. [85]GAO-03-890T . Washington, D.C.: June
           18, 2003.

           Foreign Assistance: Effectiveness and Accountability Problems
           Common in U.S. Programs to Assist Two Micronesian Nations.
           [86]GAO-02-70 . Washington, D.C.: January 22, 2002.

           Foreign Relations: Kwajalein Atoll Is the Key U.S. Defense
           Interest in Two Micronesian Nations. [87]GAO-02-119 . Washington,
           D.C.: January 22, 2002.
			  
			  Managing Federal Land Appraisals

           Interior's Land Appraisal Services: Action Needed to Improve
           Compliance with Appraisal Standards, Increase Efficiency, and
           Broaden Oversight. [88]GAO-06-1050 . Washington, D.C.: September
           28, 2006.

           Land Acquisitions: Agencies Generally Used Similar Standards and
           Appraisal Methodologies in CALFED and CVPIA Transactions.
           [89]GAO-02-278R . Washington, D.C.: January 23, 2002.
			  
			  Deferred Maintenance Backlog

           Indian Irrigation Projects: Numerous Issues Need to Be Addressed
           to Improve Project Management and Financial Sustainability.
           [90]GAO-06-314 . Washington, D.C.: February 24, 2006.

           Recreation Fees: Comments on the Federal Lands Recreation
           Enhancement Act, H.R. 3283. [91]GAO-04-745T . Washington, D.C.:
           May 6, 2004.

           National Park Service: Efforts Underway to Address Its Maintenance
           Backlog. [92]GAO-03-1177T . Washington, D.C.: September 27, 2003.

           Bureau of Indian Affairs Schools: Expenditures in Selected Schools
           Are Comparable to Similar Public Schools, but Data Are
           Insufficient to Judge Adequacy of Funding and Formulas.
           [93]GAO-03-955 . Washington, D.C.: September 4, 2003.

           Bureau of Indian Affairs Schools: New Facilities Management
           Information System Promising, but Improved Data Accuracy Needed.
           [94]GAO-03-692 . Washington, D.C.: July 31, 2003.

           National Park Service: Status of Agency Efforts to Address Its
           Maintenance Backlog. [95]GAO-03-992T . Washington, D.C.: July 8,
           2003.

           National Park Service: Status of Efforts to Develop Better
           Deferred Maintenance Data. [96]GAO-02-568R . Washington, D.C.:
           April 12, 2002.
			  
			  Revenue Collection Opportunities

           Oil and Gas Royalties: Royalty Relief Will Likely Cost the
           Government Billions, but the Final Costs Have Yet to Be
           Determined. [97]GAO-07-369T . Washington, D.C.: January 17, 2007.

           Recreation Fees: Agencies Can Better Implement the Federal Lands
           Recreation Enhancement Act and Account for Fee Revenues.
           [98]GAO-06-1016 . Washington, D.C.: September 22, 2006.

           Renewable Energy: Increased Geothermal Development Will Depend on
           Overcoming Many Challenges. [99]GAO-06-629 . Washington, D.C.: May
           24, 2006.

           National Parks Air Tour Fees: Effective Verification and
           Enforcement Are Needed to Improve Compliance. [100]GAO-06-468 .
           Washington, D.C.: May 11, 2006.

           Oil and Gas Development: Increased Permitting Activity Has
           Lessened BLM's Ability to Meet Its Environmental Protection
           Responsibilities. [101]GAO-05-418 . Washington, D.C.: June 17,
           2005.

           National Park Service: Revenues Could Increase by Charging Allowed
           Fees for Some Special Uses Permits. [102]GAO-05-410 . Washington,
           D.C.: May 6, 2005.
			  
			  Weaknesses in Contracts and Grants Management

           Chesapeake Bay Gateways Program: National Park Service Needs
           Better Accountability and Oversight of Grantees and Gateways.
           [103]GAO-06-1049 . Washington, D.C.: September 14, 2006.

           Interagency Contracting: Franchise Funds Provide Convenience, but
           Value to DOD Is Not Demonstrated.  [104]GAO-05-456 . Washington,
           D.C.: July 29, 2005.

           Interagency Contracting: Problems with DOD's and Interior's Orders
           to Support Military Operations. [105]GAO-05-201 . Washington,
           D.C.: April 29, 2005.
			  
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Highlights of [143]GAO-07-502T , testimony before the Committee on Natural
Resources, House of Representatives

February 16, 2007

DEPARTMENT OF THE INTERIOR

Major Management Challenges

The Department of the Interior is responsible for managing much of the
nation's vast natural resources. Its agencies implement an array of
programs intended to protect these precious resources for future
generations while also allowing certain uses of them, such as oil and gas
development and recreation. In some cases, Interior is authorized to
collect royalties and fees for these uses. Over the years, GAO has
reported on challenges facing Interior as it implements its programs. In
addition to basic program management issues, the department faces
difficult choices in balancing its many responsibilities, and in improving
the condition of the nation's natural resources and the department's
infrastructure, in light of the federal deficit and long-term fiscal
challenges facing the nation.

This testimony highlights some of the major management challenges facing
Interior today.

[144]What GAO Recommends

GAO has made a number of recommendations intended to improve Interior's
programs by enhancing the information it uses to manage its programs,
strengthening internal controls, and providing clearer guidance. Interior
has agreed with most of the recommendations and taken some steps to
implement them. However, the department has been slow to implement other
recommendations.

The Department of the Interior has made progress in addressing challenges
that GAO has identified in such areas as developing and maintaining better
data to manage the department's programs and strengthening internal
controls. However, numerous important problems remain, as discussed below.

           o Management of resource protection efforts needs to be
           strengthened. Interior has undertaken steps to improve some of its
           resource protection efforts, but it has yet to develop a cohesive
           national strategy to address wildland fire issues, as GAO has
           recommended. In addition, Interior agencies that manage hardrock
           mining and oil and gas production on their lands have not
           effectively carried out their environmental protection
           responsibilities.

           o Management problems in Indian and island community programs
           persist. While Interior has implemented major reforms to address
           weaknesses in managing Indian trust funds and other assets,
           concerns remain about finalizing organizational changes and delays
           in decisions about land that the department will take into trust
           status. In addition, island community programs continue to lack
           accountability measures.

           o Land appraisals continue to fall short of standards. While
           Interior has consolidated the land appraisal function into a
           departmental office to address serious problems with the quality
           of its appraisals and the millions of dollars that had been lost
           as a result, a large portion of appraisals that GAO reviewed still
           did not comply with recognized appraisal standards.

           o Deferred maintenance backlog needs to be addressed. Interior has
           implemented improved inventory and asset management systems for
           some programs, but it is not clear how it will address the
           estimated $17 billion in deferred maintenance. Other programs
           continue to lack information required to accurately estimate
           needs.

           o Revenue collection needs more management attention. Interior may
           not be collecting billions of dollars of revenue from oil and gas
           royalties; geothermal royalties; and fees from individual
           recreational uses, air tour operations in and around national
           parks, and commercial filming and still photography in national
           parks.

           o Contract and grant management lack needed controls. Because it
           lacks adequate controls over management of grants and contracts,
           Interior cannot ensure that millions of dollars in grant and
           contract funding were used appropriately.

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*** End of document. ***