Fish and Wildlife Service: Use of Federal Aid Programs' Administrative
Funds (Testimony, 07/19/2000, GAO/T-RCED-00-262).

Pursuant to a congressional request, GAO discussed the Fish and Wildlife
Service's (FWS) management and oversight of the administrative funds
associated with the Wildlife Restoration Program and, to a lesser
extent, with the Sport Fish Restoration Program.

GAO noted that: (1) funds provided for the Wildlife Restoration Program
and the Sport Fish Restoration Program, are derived from federal excise
taxes from the sale of firearms, ammunition, archery equipment, and
other items; (2) the core mission of these programs is to distribute
funds to states and other qualified government recipients for the
purposes of wildlife and sport fish restoration; (3) a portion of the
funds can be used by FWS Office of Federal Aid for the programs'
administration and implementation-up-to 8 percent for wildlife and up to
6 percent for sport fish; (4) of the roughly $550 million these programs
received in fiscal year 1998, about $31 million was used for
administration and implementation-$13.5 million for wildlife and $17.4
million for sport fish; (5) numerous problems exist with the way
administrative funds are used and managed; (6) GAO believes that these
problems led to a culture of permissive spending within the Office of
Federal Aid; (7) at the time of the September 1999 testimony, GAO
believed that there were at least three primary options to consider for
controlling the use of administrative funds; (8) first, the Office of
Federal Aid could have been given additional time by the Congress to
correct the problems GAO identified; (9) in August 1999, FWS said that
it had taken or was taking a number of corrective actions including
continuing with its reconciliation efforts to track the use of
administrative funds; (10) a second approach could place legislative
limits on how FWS spends administrative funds; (11) for example, the
spending of administrative funds could be limited to functions necessary
for the Office of Federal Aid to carry out its most basic
responsibilities, namely to: (a) administer the formula for getting
grant funds to states; (b) review specific project proposals from these
entities and (c) audit these entities' use of grand funds for compliance
with existing legislation and program goals, and (12) a third option
would be to require FWS to use appropriated funds to administer the
Wildlife and Sport Fish Restoration programs and devote all excise tax
revenues to state and other qualified government recipients' grants.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-RCED-00-262
     TITLE:  Fish and Wildlife Service: Use of Federal Aid Programs'
	     Administrative Funds
      DATE:  07/19/2000
   SUBJECT:  Administrative costs
	     Federal aid programs
	     Wildlife management
	     Cost control
	     Funds management
	     Federal/state relations
	     Grants to states
IDENTIFIER:  FWS Wildlife Restoration Program
	     FWS Sport Fish Program

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GAO/T-RCED-00-262

Mr. Chairman and Members of the Subcommittee:

We are pleased to be here today to discuss the Fish and Wildlife Service's
(Service) management and oversight of the administrative funds associated
with the Wildlife Restoration Program and, to a lesser extent, with the
Sport Fish Restoration Program. The information we present today is based on
work that we completed and presented in testimonies to the House Committee
on Resources on July 20 and September 29, 1999. At that time, the Service
promised a number of corrective actions. We have not determined whether, or
how, the Service has implemented those promised actions.

The Wildlife Restoration Program was begun in 1938 following the passage of
the Federal Aid in Wildlife Restoration Act, often called the
Pittman-Robertson Act. The purpose of the act is to restore, conserve,
manage, and enhance the nation's wildlife resources and to provide for
public use and benefits from these resources. The Service, an agency of the
Department of the Interior, administers the program. The Service's Office of
Federal Aid (Office) provides overall support and direction for implementing
the Wildlife Restoration Program as well as a sister program, the Sport Fish
Restoration Program. This sister program provides funds to restore and
manage the nation's sport fishery resources and to provide public use and
benefits from these resources. The programs received a total of about $550
million in fiscal year 1998-$170 million for Wildlife and $380 million for
Sport Fish.

Funds provided for these programs are derived from federal excise taxes from
the sale of firearms, ammunition, archery equipment, fishing equipment, and
other items. The core mission of these programs is to distribute funds to
states and other qualified government recipients for the purposes of
wildlife and sport fish restoration. A portion of the funds can be used by
the Office for the programs' administration and implementation-up to 8
percent for wildlife and up to 6 percent for sport fish. Of the roughly $550
million these programs received in fiscal year 1998, about $31 million was
used for administration and implementation-$13.5 million for Wildlife and
$17.4 million for Sport Fish.

Our testimony today will recap the results of our work on the management and
oversight of the Federal Aid program which provided options to improve the
program's use of administrative funds and provided additional information
related to the use of administrative funds.

Problems in the Way Administrative Funds Are Managed and Used

Last July we reported numerous problems with the way administrative funds
are used and managed. We believe that these problems led to a culture of
permissive spending within the Office of Federal Aid. The problems we
identified included the following:

   * controls over expenditures, revenues, and grants were inadequate;
   * millions of dollars in program funds could not be tracked;
   * basic principles and procedures for managing travel funds were not
     followed;
   * basic internal control standards or Office of Management and Budget
     guidance for maintaining complete and accurate grants files was not
     followed;
   * regional offices used administrative funds inconsistently and for
     purposes that were not clearly justified;
   * charges for Service-wide overhead may not be accurate;
   * routine audits to determine whether administrative funds were being
     used for authorized purposes were not conducted; and
   * the process for resolving audit findings involving states' use of
     program funds was questionable.

It is important to point out that many of the problems we identified last
July were the same as those we identified over 6 years earlier. In 1993, we
reviewed the use of administrative funds for the Sport Fish Restoration
Program. As part of our work last year, we found that the Service had not
been entirely responsive to our earlier recommendations to correct the
management problems we identified in our previous review.

Options to Improve the Use of Administrative Funds

At the time of our September 1999 testimony, we believed that there were at
least three primary options to consider for controlling the use of
administrative funds. First, the Office of Federal Aid could have been given
additional time by the Congress to correct the problems we identified in our
work. In August 1999, the Service said that it had taken or was taking a
number of corrective actions including continuing with its reconciliation
efforts to track the use of administrative funds, requiring supervisory
review and approval of travel vouchers, and evaluating how to establish a
procedure for performing routine audits of administrative funds. This option
would probably have had the least impact on the Office's current operations,
but it would require follow-up at some point to verify that the promised
corrective actions have been taken. With this approach, we would be
concerned about the Service's commitment to taking the needed corrective
actions, given that it has not been fully responsive to prior
recommendations we have made.

Second, legislative limits could be placed on how the Service spends
administrative funds. For example, the spending of administrative funds
could be limited to functions necessary for the Office of Federal Aid to
carry out its most basic responsibilities; namely, to (1) administer the
formula for getting grant funds to the states and other qualified government
recipients, (2) review specific project proposals from these entities, and
(3) audit these entities' use of the grant funds for compliance with
existing legislation and program goals. By placing more restrictions on the
use of the administrative funds this option would likely result in less
money being spent administering the program and would make more funds
available for distribution to the states and other qualified government
recipients.

A third option would be to require the Service to use appropriated funds to
administer the Wildlife and Sport Fish Restoration programs and devote all
excise tax revenues to state and other qualified government recipients'
grants. This option would have required the Service to annually justify to
the Congress the amount of funds it needs for administering the program.
Hence, how the funds are being used and the direction that the program is
taking would be more visible to the Congress. Also, the Wildlife and Sport
Fish Restoration programs would be competing against other programs within
the Department of the Interior for appropriated funds. As in the second
option, this option could potentially have removed much of the
organization's flexibility for determining where to use the funds for
administrative purposes.

Additional Information on the Use of Administrative Funds

Subsequent to the July 20, 1999, hearing, the House Resources Committee
asked us to respond to a number of questions about the use of administrative
funds raised by our testimony. Appendix I of my September 29, 1999,
statement provided our responses to these questions. I have included this as
an appendix to this statement as well. For the most part, these responses
elaborated on points made earlier. However, they also included substantial
additional information, such as our views on actions the Fish and Wildlife
Service was planning to take to correct the problems we identified. In this
regard, we were hopeful but not confident that the agency would be committed
to implementing the planned changes and that the changes would result in
lasting improvement. Our lack of confidence was due to the Office of Federal
Aid's poor track record in dealing with the identified problems. For
example, in response to our past recommendation that all administrative
costs be thoroughly documented, the Service stated that it had a system that
allows it to maintain a comprehensive file for documenting all direct
charges against the Sport Fish Restoration Program. We later found that, in
many instances, we could not track and verify the status of a grant, the
amounts authorized for payment, or when the expenditures were made.

- - - - -

This concludes my prepared statement. I would be happy to respond to any
questions that you and Members of the Committee may have.

Contact and Acknowledgments

For further information, please contact Barry T. Hill at 202-512-3841.
Individuals making key contributions to this and our prior testimonies are
Lew Adams, Margie Armen, Cliff Fowler, and Roy Judy.

Fish and Wildlife Service: Additional Information

Related to the Uses of Administrative Funds

Federal Aid administrative funds are used for several purposes within the
Fish and Wildlife Service. Examples include the uses made by the
Administrative Grant Program, the Director's Conservation Fund, the Office
of Federal Aid, and regional offices for such purposes as salaries, travel,
grants, and contracts. The Service also uses the Office of Federal Aid's
administrative funds to pay for general administrative support services such
as telephone usage, equipment servicing and space rental, and a contractor
to audit the use of program funds provided to the states and other qualified
government recipients. This appendix provides our responses to the
additional questions asked by the Chairman, House Resources Committee, about
these and other topics subsequent to our July 20, 1999 testimony. Some of
the responses address promised corrective action by the Service. We have not
had an opportunity to update our work or to determine whether, or how, the
Service has implemented those promised actions.

Question 1. What is the Administrative Grant Program, how have the program's
funds been used, and what problems does GAO have with the administration of
this program?

Response 1. The Administrative Grant Program is operated by the Office of
Federal Aid. The program uses some of the administrative funds to support
national fish and wildlife projects that provide collective benefits to at
least 50 percent of the states. The Fish and Wildlife Service (Service)
annually publishes a notice in the Federal Register, announcing the
procedures for submitting project proposals, deadlines, and the amount of
money that is available for administrative grants. The applicants submit
their proposals to the Office of Federal Aid (Office), which reviews each
grant against established criteria to determine eligibility. To determine
eligibility for an administrative grant, the Office makes an assessment of
the benefits to be derived from the proposed project, the importance of
providing the grant, the problems that need to be addressed, the number of
states that are affected, and the approach that will be taken to accomplish
the objectives of the grant. In fiscal year 1998, the Office made about $4
million in administrative funds available for administrative grants. The
Office awarded 18 grants ranging from about $18,500 to $684,000 for such
activities as developing and publishing a fish hatchery publication and a
wildlife law news quarterly, developing a national hunter retention outreach
program, and improving public knowledge of hunting and related animal use
programs in the United States. Since fiscal year 1994, the Office has funded
83 grants totaling about $19.5 million.

In reviewing administrative grant files, we found that the Office was not
following standard management practices to ensure that grant funds were
properly applied and accounted for. Specifically, we found that basic
internal controls and documentation standards were not being used and that
the agency was not following the Office of Management and Budget's (OMB)
requirements for grant management. We reviewed the grant files for fiscal
years 1993 through 1998 and found them to be incomplete, out of date, and
disorganized. To illustrate, the files did not contain required key
financial documents, status reports, or other supporting documentation. As a
result, in many instances, we could not track and verify the status of a
grant, the amounts authorized for payment, or the time periods in which
these expenditures were made.

We also found instances in which Office of Federal Aid officials authorized
questionable payments to grantees without thoroughly reviewing the submitted
documentation. For example, we found that the Office paid grantees for
alcoholic beverages and excessive meal charges that should have been
questioned, and for work that was neither related to the grant nor ever
performed. We are concerned that the problem of authorizing questionable
payments may be widespread because the officials responsible for grant
management said that they did not review the details supporting requests for
payment. Internal controls for this aspect of the Office's operations
appeared to be nonexistent at the time of our review.

After our July 1999 testimony on this issue, the Service issued a notice in
the Federal Register on July 26, 1999, terminating the Administrative Grant
Program for new administrative grants effective in fiscal year 2000. In an
August 10, 1999, letter to us, the then-Acting Director of the Service
stated that the decision to terminate the program was due in part to
budgetary constraints and in recognition of concerns received in response to
a September 1998 Federal Register notice regarding the management of these
grants.

Question 2. What is the Director's Conservation Fund, how has it been used,
and what problems does GAO have with the administration of this fund?

Response 2. The Director's Conservation Fund was established in 1994 and was
terminated in March 1999. The Fund was set up for use by the Director of the
Service to make discretionary grants. From fiscal years 1994 through 1998,
the Director used about $3.8 million in administrative funds for 53 grants.
The grant funds have been used to support the Service's own activities such
as conducting regional workshops, human resource projects, and specific
research projects on subjects such as mourning dove productivity in the
Central Valley of California. These funds have also been granted to private
organizations such as the FishAmerica Foundation for such activities as a
challenge cost-share program to enhance sport fisheries and their habitats
and to a state game and fish commission for a symposium on North America's
hunting heritage.

We found that the Office had not followed OMB's guidance that requires
agencies awarding grants to notify the public of intended funding priorities
for discretionary grant programs. Moreover, the procedures used for
approving grants under the Director's Conservation Fund were more open to
subjective judgment and much less rigorous than the procedures used for
approving administrative grants. Under the Director's Conservation Fund,
there were no specific criteria that a grantee needed to meet to obtain
approval. The potential grantee essentially had to identify only the title,
purpose, and estimated cost of the project. As we indicated in our response
to question 1, the criteria for eligibility and approval under the
Administrative Grant Program were much more delineated. To illustrate, we
found three grants, totaling $280,000, that were rejected under the
Administrative Grant Program but subsequently funded by the Director's
Conservation Fund. We found a fourth grant for $75,000 that met the
eligibility requirements for an administrative grant but fell below the
cutoff point for funding. This grant was also funded under the Director's
Conservation Fund. Finally, we found in a limited review of grants awarded
during fiscal years 1994 through 1998, that the Office had not exercised
adequate controls over these grants. Specifically, the Office had not
followed internal control documentation standards and OMB guidance. As with
the administrative grant files, the files for this program were incomplete,
out of date, and disorganized and did not contain required financial forms
and supporting documentation.

In its August 10, 1999, letter to us, the Service stated that it had
terminated the Director's Conservation Fund. According to agency officials,
the Director made this decision in March 1999, shortly after we initiated
our audit.

Question 3. Does existing legislation authorize a national grant program as
exercised in the Administrative Grant Program and the Director's
Conservation Fund?

Response 3. Program funds for the Federal Aid in Wildlife and Sport Fish
Restoration Acts are derived from federal excise taxes on selected items
used in hunting and fishing. The bulk of the program funds are available for
making grants to states to conduct fish and wildlife management and
restoration programs and projects. However, the legislation expressly
reserves a percentage of the program funds to be made available for
expenditure on "administration and execution" of the programs. This portion
of the program funds is often referred to as "administrative funds." The two
authorizing statutes also specifically provide for some additional
particular activities to be conducted with administrative funds, and they
set a maximum amount that can be devoted annually to program "administration
and execution" (up to 8 percent of Wildlife Restoration funds and up to 6
percent of Sport Fish Restoration funds).

While program administration is a relatively well-understood concept,
neither statute specifies what might constitute program "execution." In our
view, the most logical interpretation of that language is that authority to
use funds for program execution encompasses carrying out activities that
further program goals but do not involve making grants to states. The
Department of the Interior's Solicitor has issued several opinions that bear
on the interpretation of program execution with administrative funds. In
1949, the Solicitor advised that administrative funds could be used directly
by the Department to import bird eggs for the purposes of introducing a new
species of game birds into this country. In 1955 and again in 1985, the
Solicitor advised that administrative funds could be used to conduct surveys
that reported on matters other than the consumptive use of wildlife. In
1986, the Solicitor determined that administrative funds could be used to
carry out a national education program and to do so by means of grants to
"public or private agencies and organizations."

The existing legislation does not specifically direct that either the
Administrative Grant Program or the Director's Conservation Fund be
established. However, the authority to use funds for program execution is
sufficiently broad that these types of programs are not precluded.

Question 4. On August 10, 1999, the Fish and Wildlife Service provided you
with a letter enumerating a number of actions it was taking to address the
concerns raised in your testimony. In light of your work in 1993 and 1999,
what confidence do you have that the Service will actually follow through on
its commitments and implement the kind of corrective actions it mentions in
its letter?

Response 4. We are hopeful but not confident that these actions will result
in lasting change. Our lack of confidence is due to the Office's (1) record
in dealing with identified problems and (2) reinstatement or resurrection of
programs under different names that had been terminated in response to prior
recommendations.

In 1993, we reported on a number of problems with the use of administrative
funds for the Sport Fish Restoration Program and made recommendations to the
agency on how to correct them. In 1994, the Department of the Interior
notified the Congress that it and the Service confirmed their agreement with
each of the recommendations in our report and identified actions taken in
response to the recommendations. However, our work in 1999 on the Wildlife
Restoration Program shows that the assurances given to both the Congress and
to us in 1993 and 1994 led to little actual change. For example, in response
to our recommendation that all administrative costs be thoroughly
documented, the Service stated that it had a system allowing it to maintain
a comprehensive file for documenting all direct charges against the Sport
Fish Restoration and other Office of Federal Aid programs. Nearly 6 years
later, we found that, in many instances, we could not track and verify the
status of a grant, the amounts authorized for payment, or the time periods
in which the expenditures were made. Furthermore, the Office has not
effectively used the agency's accounting system's capability to identify
costs at the project level, thus making it impossible to identify all
project-specific costs. Finally, the Acting Director's testimony submitted
to your Committee for the July 20, 1999, hearing stated that an internal
review the Service initiated 4 years ago raised some of the same concerns
that we identified about program administration. The Acting Director stated
that efforts have been under way to address these issues "but are obviously
not completed."

The Office of Federal Aid responded to issues raised as a result of our 1999
work in part by reaffirming existing policy and by terminating programs.
Reaffirming existing policies is just the first step. Management must ensure
that these policies are implemented. Our concern is that this additional
step either will not be taken or that its effectiveness will gradually
degrade because of a lack of management attention, allowing a similar
situation to exist in the future. While terminating the Administrative Grant
Program and the Director's Conservation Fund provided a quick response, no
statutory or other limitation exists to prevent the programs' reinstatement
or resurrection under different names. This latter point is of concern
because the Office of Federal Aid responded to our previous report by
changing its criteria for approving "special investigations" (the term the
Office used for its projects) but then rescinded those changes. Hence,
rather than limiting grants to a maximum of (1) $200,000 per year for each
grantee and (2) 3 years or less duration, the Office resumed having no
limits at all. Also, rather than calling the projects special
investigations, the Office renamed them "administrative grants" or included
them under the Director's Conservation Fund. We are concerned that this type
of response could recur and, as a result, the agency will again face the
same management problems that we reported on in our July 20, 1999,
testimony.

Question 5. You have talked about problems in Federal Aid's management of
travel funds. Could you please elaborate on the problems you have
identified, including providing specific examples of travel abuses?

Response 5. We found that the Office did not routinely follow basic
principles and procedures for managing its travel funds. As we stated in our
July 20, 1999, testimony, the Service's policy is that staff working for the
Office-like all Service employees-must receive specific approval from the
Director of the Service before attending certain national conferences.
However, we found nine instances in which this policy was violated by Office
staff who attended conferences in 1998 and 1999. In addition, we found that
the head of the Office filed almost $68,000 in travel vouchers for 71 trips
taken from October 1995 through June 1999 but was inconsistent in obtaining
approvals for his travel vouchers. He had a supervisor approve his travel
vouchers for 25 trips taken from October 1995 through February 1997. For
travel taken from late February 1997 through May 1999, he had subordinates
approve 38 of his travel vouchers amounting to over $39,000 in travel
expenses. This practice is not permitted under the Service's travel policy.

When we questioned the practice of having a subordinate approve a
supervisor's travel voucher, we were told that the Service's existing policy
allowed subordinates to sign travel vouchers, and we were provided with a
copy of a 1991 policy. However, the 1991 policy pertained to situations in
which an office was isolated or geographically removed, making it difficult
to obtain proper supervisory approval. Regardless, the policy had been
superceded in 1992 by a policy specifically requiring supervisory approval
for travel vouchers. In addition, a statement printed on the back of the
travel authorizations specifies that a supervisor is responsible for
approving a travel voucher.

After we provided our testimony to the House Resources Committee on this
issue in July 1999, the Service concurred with the problems we identified.
In its August 10, 1999, letter to us, the Service said that it has suspended
the use of open travel authorizations for the Office's entire staff and has
reapprised all Service staff of its travel rules and regulations. In
addition, the head of the Office was directed to submit all future travel
vouchers to his supervisor, the Assistant Director for External Affairs, for
appropriate review.

Question 6. Have you identified any additional issues with the use of
General Administrative Service (GAS) funds by the Fish and Wildlife Service?

Response 6. In addition to the issues we addressed on our July 20, 1999,
testimony, we have identified two other issues that indicate that GAS
assessments were either too high in the past or could be lowered in the
future. The first issue relates to the potential impact on the GAS
assessment from projects and initiatives funded under the Servicewide
Administrative Support account managed by the Fish and Wildlife Service,
which pays for overhead and support expenses such as rental payments,
telephone service, postage, and training. This account is funded from three
sources: (1) appropriated funds, (2) reimbursable agreements, and (3) GAS.
The GAS portion is made up of assessments made to the Sport Fish and
Wildlife Restoration programs and nine other programs.

From fiscal year 1990 through fiscal year 1998, the Servicewide
Administrative Support account funded over $10 million in projects and
initiatives by the Fish and Wildlife Service Director's Office, some of
which are questionable as central administrative support for the Service.
Examples of the questionable Director's Office projects and initiatives
funded under the Servicewide Administrative Support account include $400,000
for Atlantic salmon work, $200,000 for wolf monitoring and reintroduction,
and $100,000 for rhinoceros conservation studies. These projects and
initiatives were in addition to projects funded by the Director's
Conservation Fund.

Service officials said that none of these projects and initiatives was
funded with the GAS component of the Servicewide Administrative Support
account. Regardless of which component paid for these expenses, if these
projects had not been funded, the GAS contribution to the account could
potentially be reduced. In July 1999, the Service advised us that
Servicewide Administrative Support funds would no longer be used to fund the
Director's Office projects and initiatives.

The second issue relates to the unobligated balance in the Servicewide
Administrative Support account at the end of the fiscal year. On the basis
of data we obtained, this account had unobligated balances at the end of
fiscal years 1990 through 1998. These balances ranged from as high as about
$7 million in fiscal year 1990 to as low as about $100,000 in fiscal year
1998. Service officials informed us that these unobligated balances relate
to the appropriated fund component of the Servicewide Administrative Support
account. In total, from fiscal year 1990 through fiscal year 1995, over $12
million in unobligated balances expired and were not available for use in
the following fiscal year. Hence, for those years, the GAS component of the
account could have been reduced. To illustrate, in fiscal year 1990, the
Service's total GAS assessment was about $5.5 million, of which almost $5.2
million came from the Sport Fish and Wildlife Restoration programs. In that
same year, about $7.4 million in unobligated funds in the Servicewide
Administrative Support account expired. If the Service had spent all of its
appropriated fund component in the Servicewide Administrative Support
account, it would have needed less from the GAS component. That should then
have translated into a reduced GAS assessment and the potential for
additional program funds to go to the states and other qualified government
recipients. Beginning in fiscal year 1996, Interior's appropriations acts
have stipulated that appropriated funds can be obligated over 2 years
instead of just 1. And as a result, it is unlikely that any unobligated
balances will expire.

Question 7. The Administrative Grant Program was carried out in close
cooperation with the Grants-in-Aid Committee of the International
Association of Fish and Wildlife Agencies, raising questions about the
Committee's role. If the now terminated Administrative Grant Program was to
be reconstituted, should Federal Aid officials reshape the Committee's
involvement in the grant approval process?

Response 7. As it was previously conducted, the Administrative Grant Program
relied heavily on an outside group, the Grants-in-Aid Committee of the
International Association of Fish and Wildlife Agencies, to recommend both
the direction of the program and the award of administrative grant funds.
(See our response to question 1.) Because the Committee's role was so
central to the functioning of the Administrative Grant Program, officials of
the Office of Federal Aid and others questioned whether the Committee should
have operated within the framework of the Federal Advisory Committee Act
(FACA). That act requires, among other things, that a notice of meetings be
published in advance in the Federal Register and that papers, records, and
minutes of meetings be available to the public.

The International Association of Fish and Wildlife Agencies is composed of
delegates from the 50 state fish and game authorities, foreign governments,
private organizations, and officials from the Office of Federal Aid. With
about 50 members, the Grants-in-Aid Committee included state and private
delegates as well as key staff from the Office of Federal Aid. The Committee
played an integral part in managing the Administrative Grant Program,
setting the focus areas each year for which grant proposals would be
solicited. It also evaluated and ranked eligible grant proposals, including
proposals from its parent organization, the International Association of
Fish and Wildlife Agencies. Finally, it recommended those grants it believed
the Office of Federal Aid should fund and the amount of funding for each
grant. The Committee's grant recommendations were typically adopted and
implemented by the Office.

The Grants-in-Aid Committee was not chartered as a Federal Advisory
Committee. As a result, it performed the functions described above
independently and outside the public view. FACA requires, among other
things, that advisory committees be chartered and reviewed every 2 years by
the agency head, that committee membership be representative and balanced,
and that committee proceedings and records be open to the public.

Officials of the Department of the Interior have questioned the
Grants-in-Aid Committee's status. For example, in a November 1991 memo, the
Chief of the Federal Aid Office stated that he believed that the grant
review process used the Committee in an advisory capacity and that the
Committee would need to comply with FACA. This opinion was shared by the
Chief's supervisor who informed the Director of the Service in a January
1992 memo, "The use of the Grants-In-Aid Committee has not been approved
under the Federal Advisory Committee Act and also raises an appearance of a
conflict of interest." He went on to state that it would be in the best
interest of the Service to discontinue this practice to avoid any further
questions or criticism of the Service. Although this concern was raised
informally to the Department of the Interior's Office of the Solicitor, a
written opinion was not requested, because, according to Service and Office
of Federal Aid officials, the informal advice they obtained was that there
was no violation of FACA.

We did not make a determination about whether the Committee should have been
subject to FACA's requirements. The applicability of the act to the
Committee's activities was outside the scope of our audit work. Because the
Administrative Grant Program has recently been terminated, questions about
its former procedures are at this point academic. Nevertheless, the
Committee guided the disbursement of about $4 million in Federal Aid funds
to administrative grantees each year. It functioned as a virtual partner in
managing the Administrative Grant Program, and because it was never brought
under FACA, it operated largely without supervision and behind closed doors.
If the Administrative Grant Program were to be reconstituted, the role of
any outside group in setting grant program parameters and in evaluating and
ranking potential grantees should be tailored appropriately. If the role is
not substantially more limited than what had previously existed, there
should be a formal determination that the group is functioning consistent
with FACA.

Question 8. Are the regional offices in the Fish and Wildlife Service using
Federal Aid funds to pay for regional activities in a consistent manner?

Response 8. As we discussed in our July 20, 1999, testimony, we found that
the Service had no consistent practices for making regional office
assessments. These assessments are charges that the regions make against the
administrative funds for salaries, travel expenses, support costs, and other
administrative activities. Each of the regions uses a different approach for
making the assessments.

In its August 10, 1999, letter to us, the Service said that it has sought to
establish a workable degree of consistency to the regional use of
administrative funds. It said that as part of its annual budget guidance, it
has told its regions that no assessments may be levied against any program,
budget activity, subactivity, or project funded by the Federal Aid in
Wildlife Restoration Act unless advance notice of such assessments and their
bases are presented to the Committee on Appropriations and are approved by
the Committee. Subsequently, Service and Office of Federal Aid officials
told us that they provided this guidance since 1997. The Service also said
that not all of its regions have followed this guidance. To ensure adherence
to this stated policy, the Service said that it would identify and adopt
specific steps to help provide consistency and uniformity. It also plans to
seek guidance in this area from a State/Federal Aid Review Team that has
been formed to evaluate the administration of the Federal Aid program. The
Service, however, failed to identify the specific steps it plans to take or
the schedule for completing them. Service and Office of Federal Aid
officials told us that they are currently developing a plan that identifies
the steps needed and their completion dates.

Question 9. You emphasized the absence of routine audits of Federal Aid's
use of administrative funds. However, many, perhaps even most, federal
programs are not routinely audited. Why do you think routine audits are so
important in the case of the Federal Aid program?

Response 9. We think routine audits of the administrative funds are needed
for several reasons. First, unlike most other federal programs, Federal Aid
receives dedicated tax revenues each year to administer its programs. As a
result, program officials do not have to publicly justify the programs'
spending levels before the Congress each year. Second, although Federal Aid
provides bi-annual reports on its programs to the public, it does not fully
disclose all of its spending, as our work has shown. For example, the
spending associated with the use of administrative funds by the Director's
Conservation Fund and the Service's regional offices is not discussed in
these reports. Third, only three audits of the administrative funds have
been performed over the past 20 years, each of which has identified some
significant management problems. Since the program funding does not have to
be appropriated and no routine audits are performed, the Federal Aid program
has had very little oversight.

Routine audits will provide independent scrutiny of how these funds are
spent. Given the problems we identified in the Federal Aid programs in 1993
and the problems we again found in 1999, we believe that routine audits of
the use of administrative funds are essential. Service and Office of Federal
Aid officials told us that they have a proposal from an independent firm to
perform an audit of the administrative funds covering fiscal years 1999 and
2000.

Question 10. Do you think it is appropriate for Fish and Wildlife Service's
regional Federal Aid officials to be responsible for resolving the audit
findings of the Defense Contract Audit Agency's (DCAA) state audits?

Response 10. The Office of Federal Aid initiated a national audit program in
fiscal year 1996 to routinely audit how states and other qualified
government recipients are using the grant funds provided under the Sport
Fish and Wildlife Restoration programs. Under the audit program, each
recipient of grant funds will be audited every 5 years under a contract with
the DCAA. Resolution of the audit findings is the responsibility of the
Service's regional Federal Aid office covering the entity being audited.

In our opinion, having the Service's regional Federal Aid offices perform
audit resolution is problematic because it places them in a situation of
performing dual and somewhat conflicting roles and responsibilities. One of
the primary missions of the regional offices is to work closely with the
states in advocating and encouraging their participation in the Federal Aid
program to enhance the states' wildlife and fishery resources. To have these
same offices policing the program by charging them with resolving audit
findings could make it more difficult to maintain independence and comply
with existing internal control standards governing the separation of duties.
According to these standards, key duties and responsibilities in
authorizing, processing, recording, and reviewing transactions should be
separated among individuals. Furthermore, the deterrent for the states to
spend funds inappropriately could be jeopardized if the audit resolution
process is not independent of an organization that has a significant role in
encouraging the use of grant funds. DCAA officials, who perform the audits
of the states, also raised this concern to us. According to these officials,
the Service and the states have a partnership, and it may be difficult for a
regional Federal Aid office to hold states responsible for making the
repayments indicated by audit findings. Therefore, assigning the
responsibility for audit resolution to a Department of the Interior
organization other than the Service's regions would seem more appropriate.

Question 11. In addition to grants made via the Director's Conservation Fund
and the Administrative Grant Program, during your work did you find evidence
of other grants?

Response 11. We found that the Office of Federal Aid's headquarters made
grants in addition to those made from the Director's Conservation Fund and
the Administrative Grant Program. We identified 18 other grants amounting to
about $2.6 million that were awarded from fiscal year 1994 through fiscal
year 1998. The grants ranged from $5,000 awarded to a high school for
student training in aquatic environment and fisheries management to $400,000
each to three marine fisheries commissions. For example, the Gulf States
Marine Fisheries Commission received its $400,000 in fiscal year 1994 to
develop a work plan for the sport fish restoration administrative program.
Other examples of these grants include $25,000 to a state game commission to
conduct a symposium on North America's hunting heritage, $60,000 to a
university to publish and distribute a fish and wildlife laws newsletter,
and about $93,000 to a management firm to produce a handbook for fish and
wildlife managers and administrators.

It should be noted that the Federal Aid reports made available to the public
do not divulge the existence of these grants, why they were made, or what
the funds were used for, even though the reports explicitly state that their
intent is to provide a complete accounting of where the Federal Aid funds
are spent. For example, the message from the Office Chief appearing in a
1997 program update states, "This Program Update is intended to remove the
mystery of where the money comes from and where it goes, to inform the
reader about current Federal Aid issues and opportunities, and to build
knowledge of and credibility for the Sport Fish and Wildlife Restoration
grant programs and the U.S. Fish and Wildlife Service." Similarly, in a
program update for 1999, the Office Chief stated that "it is in the
conservation community's best interest" that the Office provides as much
information as can be absorbed.

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