Fish and Wildlife Service: Management and Oversight of the Federal Aid
Program Needs Attention (Testimony, 07/20/1999, GAO/T-RCED-99-259).

Pursuant to a congressional request, GAO discussed the management and
oversight of the Fish and Wildlife Service's Wildlife Restoration
Program, focusing on: (1) how administrative funds are used and
monitored; and (2) whether there is adequate oversight of the funds
provided to the states.

GAO noted that: (1) administrative funds are used for many purposes,
such as for employee travel and for special types of grants; (2) in each
area where administrative funds are used, there are problems; (3) these
included ineffective management oversight, inadequate internal controls,
and inadequate policies and procedures for reviewing and approving
administrative expenditures; (4) collectively, these conditions have
spawned a culture of permissive spending; (5) as a result, it appears
that some of the administrative funds have been spent unnecessarily and
ineffectively; (6) this situation raises questions about whether the
Office of Federal Aid is meeting its management responsibilities; (7)
since fiscal year 1996, the Office has spent about $4.4 million on
audits to ensure that the states and territories use fish and wildlife
restoration funds consistent with the purposes of the programs; (8)
audits completed to date, involving 22 states, yielded returns of about
$5.4 million, with another $9.6 million pending resolution; (9) while
GAO commends the Office for undertaking this important oversight effort,
GAO's work to date has identified some concerns about the process used
to resolve problems uncovered by the audits of two states; (10)
according to the audits, these two states misused funds; (11) however,
according to program officials, the repayment actions being planned may
not hold the states accountable for their actions; (12) for example,
grants generally are funded 25 percent by the state and 75 percent by
the Federal Aid Program; (13) program officials informed GAO that, in
these two instances, the regional office is planning to allow the states
to offset their repayment obligations by crediting the states for
payments in excess of the states' share on closed grants; (14) it is not
clear whether this approach complies with program requirements; and (15)
the actions could be precedent-setting, and if incorrect, could diminish
the deterrent effect of the audits.

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

 REPORTNUM:  T-RCED-99-259
     TITLE:  Fish and Wildlife Service: Management and Oversight of the
	     Federal Aid Program Needs Attention
      DATE:  07/20/1999
   SUBJECT:  Wildlife conservation
	     Fund audits
	     Endangered species
	     Funds management
	     Internal controls
	     Grants to states
	     Noncompliance
IDENTIFIER:  Federal Aid in Wildlife Restoration Fund
	     FWS Wildlife Restoration Program
	     FWS Sport Fish Restoration Program
	     FWS Director Conservation Fund

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO report.  Delineations within the text indicating chapter **
** titles, headings, and bullets are preserved.  Major          **
** divisions and subdivisions of the text, such as Chapters,    **
** Sections, and Appendixes, are identified by double and       **
** single lines.  The numbers on the right end of these lines   **
** indicate the position of each of the subsections in the      **
** document outline.  These numbers do NOT correspond with the  **
** page numbers of the printed product.                         **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
** A printed copy of this report may be obtained from the GAO   **
** Document Distribution Center.  For further details, please   **
** send an e-mail message to:                                   **
**                                                              **
**                                            **
**                                                              **
** with the message 'info' in the body.                         **
******************************************************************

Cover
================================================================ COVER

Before the Committee on Resources, House of Representatives

For Release
on Delivery
Expected at
11 a.m.  EST
Tuesday
July 20, 1999

FISH AND WILDLIFE SERVICE -
MANAGEMENT AND OVERSIGHT OF THE
FEDERAL AID PROGRAM NEEDS
ATTENTION

Statement of Barry T.  Hill, Associate Director,
Energy, Resources, and Science Issues,
Resources, Community, and Economic
Development Division

GAO/T-RCED-99-259

GAO/RCED-99-259T

(141290)

Abbreviations
=============================================================== ABBREV

  OMB -

============================================================ Chapter 0

Mr.  Chairman and Members of the Committee: 

We are here today to discuss our ongoing work on the management and
oversight of the Wildlife Restoration Program within the Fish and
Wildlife Service.  This program was begun in 1938 following 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 U.S. 
Fish and Wildlife Service (the Service), an agency of the Department
of the Interior, administers the program.  The Service's Office of
Federal Aid provides overall program support and direction for
implementing the Federal Aid in Wildlife Restoration Program as well
as a sister program, namely the Sport Fish Restoration Program.\1
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 $552 million
in fiscal year 1998--$180 million for Wildlife and $372 million for
Sport Fish. 

Funds provided for these programs are derived from excise taxes.  For
the Wildlife Restoration Program, these taxes apply to firearms,
ammunition, and archery equipment.  For the Sport Fish Restoration
Program, the taxes are on fishing equipment and other sources.  The
core mission of these programs is to distribute funds to states and
other qualified recipients for wildlife and sport fish restoration
purposes.  While most of the funds go to the states and other
qualified recipients, a portion of the funds can be used for program
administration and implementationï¿½up to 8 percent for Wildlife and up
to 6 percent for Sport Fish.  Of the $552 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. 

Bills have been introduced in the Congress that, among other things,
would provide additional funding for restoration purposes.  Depending
on the bill, the amount of additional funding will eventually range
from $350 million to $459 million per year.  In anticipation of an
increase in funding, the Committee asked us to determine (1) how
administrative funds are used and monitored and (2) whether there is
adequate oversight of the funds provided to the states.  You asked us
to focus our work on the Wildlife Restoration Program.  However, as
you requested, where appropriate, we also included the Sport Fish
Restoration Program's activities in our analysis.  In summary, our
work to date shows the following: 

  -- Administrative funds are used for many purposes, such as for
     employee travel and for special types of grants.  In each area
     where administrative funds are used, there are problems.  These
     included ineffective management oversight, inadequate internal
     controls, and inadequate policies and procedures for reviewing
     and approving administrative expenditures.  Collectively, these
     conditions have spawned a culture of permissive spending.  As a
     result, it appears that some of the administrative funds have
     been spent unnecessarily and ineffectively.  This situation
     raises questions about whether the Office of Federal Aid is
     meeting its management responsibilities.

  -- Since fiscal year 1996, the Office has spent about $4.4 million
     on audits to ensure that the states and other qualified
     recipients use fish and wildlife restoration funds consistent
     with the purposes of the programs.  Audits completed to date,
     involving 21 states, yielded returns of about $5.4 million, with
     another $9.6 million pending resolution.  While we commend the
     Office for undertaking this important oversight effort, our work
     to date has identified some concerns about the process used to
     resolve problems uncovered by the audits of two states. 
     According to the audits, these two states misused funds. 
     However, according to program officials, the repayment actions
     being planned may not hold the states accountable for their
     actions.  For example, grants generally are funded 25 percent by
     the state and 75 percent by the Federal Aid Program.  Program
     officials informed us that, in these two instances, the regional
     office is planning to allow the states to offset their repayment
     obligations by crediting the states for payments in excess of
     the states' share on closed grants.  It is not clear whether
     this approach complies with program requirements.  The actions
     could be precedent-setting, and if incorrect, could diminish the
     deterrent effect of the audits. 

--------------------
\1 In 1993, we issued a report on the administration of this program
entitled Fisheries Management:  Administration of the Sport Fish
Restoration Program (GAO/RCED-94-4, Nov.  8, 1993). 

   PROBLEMS IN THE WAY
   ADMINISTRATIVE FUNDS ARE USED
---------------------------------------------------------- Chapter 0:1

Administrative funds are used for several purposes within the
Service.  Examples include the uses made by the Director's
Conservation Fund, the Office of Federal Aid, and regional offices
for such purposes as salaries, travel, grants, and contracts.  We
found problems in each area where administrative funds are used: 

  -- Controls over expenditures and revenues are inadequate. 

  -- Controls over grant funds used by the Director of the Service
     are inadequate. 

  -- Controls over the management and oversight of administrative
     grants are inadequate. 

  -- How regional offices use administrative funds is inconsistent. 

  -- Whether charges for Service-wide overhead are accurate is
     uncertain. 

  -- No routine audit program exists for reviewing the use of
     administrative funds. 

In 1993, we reported problems with the use of administrative funds in
the Sport Fish Restoration Program.  These problems included having
inadequate justification for the increases in funds used for
administering the program and approving administrative grants that
were outside the established review and approval process.  At that
time, the Service promised corrective action.  Nonetheless, 6 years
later, we have found the actions taken by the agency in response to
our earlier recommendations were not entirely responsive.  As a
result, many of the same problems still exist for both the sport fish
and wildlife restoration programs.  Our current effort involved
tracking the flow of administrative funds to those activities that
received them, including the Service, Office headquarters, and
regional offices (of which we visited three). 

      CONTROLS OVER EXPENDITURES
      AND REVENUES ARE INADEQUATE
-------------------------------------------------------- Chapter 0:1.1

We found that the Office of Federal Aid is not adequately managing
program funds--for either grants or administration.  As a result, it
has been unable to track millions of dollars in program funds.  It
has also missed the opportunity to earn over $400,000 in interest
income and has accumulated over $100,000 in contract-generated fees,
the disposition of which is unclear.  In addition, the Office is not
monitoring income generated by grants and is not following basic
management principles or procedures for controlling the use of travel
funds. 

Regarding the millions of dollars in program funds, about 3 years
ago, the Office began an effort to reconcile the financial and
reporting systems that track, among other things, sport fish and
wildlife obligations and expenditures.  Because the Office is
implementing a new grant financial management and information system,
it is attempting to reconcile the data that were in the information
systems maintained in each of its regional offices with the system
used in headquarters.  While this effort is laudable, so far it has
disclosed a discrepancy of about $105 million among these systems. 
Upon further checking, the Office determined that about $85 million
of the discrepancy was due to administrative errors, such as clerical
mistakes.  As of July 1999, Office officials, however, still could
not explain the remaining $20 million difference in the reporting
systems.  Moreover, there is a discrepancy between the Office's
estimates of the funds that are unaccounted for and the estimates
provided by the Service's Division of Finance, which indicate that
the difference is $7.4 million.  Thus, both the amount of the
discrepancy and the status of the funds in question are unclear. 
Federal Aid officials told us that they are planning to find out the
disposition of these funds, but, so far, they have not done so. 

In terms of the unearned interest issue, the Office of Federal Aid
conducts a national survey of hunting and fishing activities every 5
years.  This survey is one of the most expensive projects funded by
administrative dollars and is funded by both the sport fish and
wildlife restoration programs.  To fund one portion of this project,
Federal Aid transferred funds to the Department of Commerce's Bureau
of the Census.  However, Federal Aid transferred more money than was
necessary to complete the project.  As of January 1997, Federal Aid
had transferred a total of almost $9.7 million from its
interest-earning account to Census.  However, because the Office had
provided the majority of these funds in advance of when they were
needed, it lost the interest that these funds would have earned.  Had
the funds been transferred when needed, Federal Aid would have earned
over $400,000 in interest,\2 making more money available for the use
of the sport fish or wildlife restoration programs.  In fiscal years
1997 and 1998, Census ended up returning a total of about $1.9
million in unused funds to the Office.  Federal Aid officials
informed us that, for their next survey, the Office will transfer to
Census only the funds to cover the actual costs in any one fiscal
year. 

We also questioned the disposition of income from contract-generated
fees.  In this case, the Office contracted in 1993 for a Reference
Service to process requests for information on fish and wildlife
publications.  The Reference Service is permitted to charge a fee for
distributing copies of fish and wildlife documents to certain
requesters.  Over the 5-year period that this contract was in
existence, more than $100,000 in fees was collected.  But, the
contract does not make clear who should receive these fees.  At this
time, it is not clear whether some, all, or none of this amount will
be returned to the Office or retained by the contractor.  Although
the Office claimed to be unaware of the relatively high dollar amount
that had been collected, the contractor told us that he provided
monthly reports to the Office that showed the amounts collected. 
Thus, the disposition issue could have been resolved earlier.  The
Office recently renewed the contract for another 5 years with exactly
the same fee provisions.  Similarly, in reviewing grant files, we
found other instances in which revenue is being generated.  However,
when we queried agency officials about this, they told us that they
do not know how many other grants are generating revenue or how much
they are generating.  Thus, the Office has no idea of how much
revenue is being generated or what is being done with these funds. 
In our opinion, the lack of concern exhibited by the agency officials
about these kinds of issues is indicative of the weak oversight of
the program.  In commenting on these matters, agency officials told
us that they agreed with these points and said that they will take
action such as discussing possible amendments to the Reference
Service contract with the contractor.  They also said that they will
ensure that future contracts and grants contain provisions regarding
income disposal. 

Our work also disclosed several instances in which the Office was not
following basic principles and procedures for managing its travel
funds.  For example, it is the Service's policy that staff working
for the Office of Federal Aidï¿½like all Service employeesï¿½must receive
specific approval by the Director before attending certain national
conferences.  However, we found nine instances in which this policy
was violated by Federal Aid staff who attended conferences in 1998
and 1999.  In addition, we found that the head of Federal Aid had
subordinates routinely approve his travel vouchersï¿½a practice that is
not consistent with agency policy.  These vouchers amounted to almost
$36,500 in travel expenses over a period of about 1 1/2 years. 
Agency officials acknowledged problems in this area and said that
they will send out a notice to all of the staff reminding them of the
need to follow established guidelines. 

--------------------
\2 To calculate the interest we used the average amount of unexpended
funds available from May 1995 through January 1999 at the prevailing
interest rate. 

      CONTROLS OVER GRANT FUNDS
      USED BY THE DIRECTOR OF THE
      SERVICE ARE INADEQUATE
-------------------------------------------------------- Chapter 0:1.2

The Director's Conservation Fund was established in 1994.  The Fund
was set up for use by the Director of the Service to make
discretionary grants.  For example, the Director has provided grants
to federal, state, and independent fish and wildlife organizations
for such purposes as workshops, symposiums, promoting fish and
wildlife resource uses, and research.  Since its inception, the
Director's Conservation Fund has been used to award 35 grants
involving about $3.8 million in administrative funds.  However,
unlike the procedures used for approving other grants made with
administrative funds, the procedures for obtaining approval of grants
under the Director's Conservation Fund are much less rigorous and are
open to subjective judgment. 

We found that the Office has not followed the Office of Management
and Budget's (OMB) guidance that requires agencies awarding grants to
notify the public of intended funding priorities for discretionary
grant programs.  Moreover, there are no specific criteria that a
grantee must meet to obtain approval.  The potential grantee
essentially only has to identify the title, purpose, and estimated
cost of the project.  In contrast, to obtain approval of
administrative grants, an assessment must be made of the benefits to
be derived, the importance of providing the grant, the problem that
needs to be addressed, the number of states that are affected, and
the approach that will be taken to accomplish the objectives of the
grant.  As a result, compared with the administrative grant
evaluation process, the Director has very broad latitude in awarding
grants. 

We are reviewing grants awarded under the Director's Conservation
Fund during fiscal years 1994 through 1998.  While our review is
limited to date, we found that the Office has not exercised adequate
controls over these grants.  Specifically, the Office has not
followed internal control documentation standards and OMB guidance.\3
The grant files maintained were incomplete, out of date, and
disorganized and did not contain required financial forms and
supporting documentation.  As a result, tracking and verifying the
status of a grant, the amounts that have been authorized for payment,
or the timeframes in which the expenditures are made is very
difficult. 

Furthermore, we found three grants, totaling $280,000, that were
rejected under the administrative grant program and subsequently
funded by the Director's Conservation Fund.  One grant for $125,000
was for more than 3 years' duration and thereby ineligible for
funding as an administrative grant.  The remaining two grants, for
$155,000 in total, were ineligible because they did not benefit more
than 50 percent of the states.  One of these two grants was to help
restore the ecology of band-tailed pigeons in western Oregon, and the
other was to study the causes for the decline of mourning doves in
California's Central Valley.  Both of these grants were made to the
National Biological Service, a unit within the Department of the
Interior.  In addition, we found a fourth grant that met the
eligibility requirements for an administrative grant but fell below
the cutoff point for funding.  This grant, for $75,000, was also
funded under the Director's Conservation Fund subsequent to the
Office determining that it did not have enough funds to do so as an
administrative grant. 

According to agency officials, the Director decided in a March 1999
meeting to terminate this program. 

--------------------
\3 Standards for Internal Controls in the Federal Government, U.S. 
General Accounting Office, 1983; ï¿½Uniform Administrative Requirements
for Grants and Agreements with Institutions of Higher Education,
Hospitals, and Other Non-Profit Organizations,ï¿½ Circular A-110
(revised Nov.  19, 1993, as further amended Aug.  29, 1997), Office
of Management and Budget. 

      CONTROLS OVER THE MANAGEMENT
      AND OVERSIGHT OF
      ADMINISTRATIVE GRANTS ARE
      INADEQUATE
-------------------------------------------------------- Chapter 0:1.3

The Office of Federal Aid made about $4 million in administrative
funds available for administrative grants in fiscal year 1998 to fund
national fish and wildlife projects--$2 million each from the sport
fish and wildlife restoration programs.  In reviewing administrative
grant files, we found that the agency was not following standard
management practices that should be used 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 OMB's requirements for
grant management.  These requirements call for such fundamental
internal controls as accurate and timely record keeping.  We reviewed
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.  In some cases, documents have not
been placed in the appropriate files for more than a year.  As a
result, in many instances, we could not track and verify the status
of a grant, the amounts authorized for payment, or the timeframes in
which these expenditures were made. 

We also found instances in which agency officials authorized
questionable payments to grantees without thoroughly reviewing the
submitted documentation.  While the individual amounts involved are
not large, the situation is indicative of a lack of attention to
detail that is crucial to effective money management.  For example,
federal travel regulations preclude claiming alcoholic beverages as a
travel expense.  However, Federal Aid paid grantees for alcoholic
beverages and other items that reasonably should have been
questioned.  Other examples include payments of

  -- $170 for work that was not related to the grant nor ever
     performed and

  -- excessive meal charges ($152 in meal charges were paid for one
     person's overnight trip, even though the maximum amount
     allowable for this trip was $76). 

While we only did a limited review, we are concerned that this
problem may be widespread because the officials responsible for
grants said that they do not review the details supporting these
types of claims.  Internal controls for this aspect of the Office's
operation appear to be nonexistent. 

Agency officials told us that they plan to eliminate the
administrative grant program.  In the interim, they plan to better
manage this aspect of their operations. 

      HOW REGIONAL OFFICES USE
      ADMINISTRATIVE FUNDS IS
      INCONSISTENT
-------------------------------------------------------- Chapter 0:1.4

We found that the Service has 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-type activities. 
As a result, each of the regions use a different approach for making
the assessments. 

Each of the Service's seven regional offices has employees dedicated
to the Office of Federal Aid in support of the sport fish and
wildlife restoration programs.  The regions use administrative funds
for these employees' salaries.  At the three regions we visited,
administrative funds are also used for other regional office
activities such as a portion of the salaries of nondedicated
employees, common support services such as equipment maintenance and
repair, and employee relocation costs.  The additional assessments
made against administrative funds by these three regions ranged from
about $25,000 to $100,000 for fiscal year 1998. 

One region's assessment included paying almost $50,000 of the
Regional Director's salary for one year.  In a different year, the
assessment included paying almost $25,000 of each of the Regional and
Deputy Directors' salaries.  Given that the Regional and Deputy
Directors oversee a variety of programs, such as endangered species,
refuges, law enforcement, and realty, and not just on fish and
wildlife restoration programs, it does not seem appropriate for the
administrative funds to be assessed such large amounts for their
salaries.  It would seem more appropriate for the assessment to have
some relationship to the time and effort that was actually spent
working on the sport fish and wildlife restoration programs.  In this
region, assessments were also made for common support functions such
as motor pool, equipment repair and maintenance, and office equipment
rental. 

In another region, the assessment was done differently.  In fiscal
year 1998, this region assessed the administrative funds for about
$98,000 to pay for a portion of the salaries of employees in the
Office of Personnel.  In fiscal year 1997, the administrative funds
were assessed about $95,000, including about $60,000 to pay for a
portion of the salaries of employees in the offices of the Regional
Director, Human Resources, and Personnel as well as $35,000 to pay
for the permanent change of station move for the new Deputy Regional
Director. 

The assessment by the third regional office was for a portion of the
salaries of employees in the offices of the Regional Director and
External Affairs, amounting to about $26,000 from the wildlife
restoration account.  According to the acting Regional Director,
prior to fiscal year 1999, the region had no set formula for
assessing program funds to support administrative costs or salaries. 

Because, in many cases, the regional offices' assessment charges are
not based on actual program costs and because of the inconsistent
approaches that the regions take, there is no way of determining
whether the amounts charged to the administrative funds are
justified. 

      WHETHER CHARGES FOR
      SERVICE-WIDE OVERHEAD ARE
      ACCURATE IS UNCERTAIN
-------------------------------------------------------- Chapter 0:1.5

Like many of the Service's components, the Office of Federal Aid is
responsible for paying a portion of the service-wide administrative
support services provided to it.  Essentially, these are overhead
charges for such things as telephone usage, equipment servicing, and
space rental.  In fiscal year 1998, the Service received about $55.5
million for service-wide administrative support.  About $47.8 million
came from appropriated funds and collections on reimbursements.  Of
the remaining $7.7 million, Federal Aid paid $4.7 million.  However,
whether Federal Aid should be paying this much is unclear since the
charges do not have a relationship to actual usage of these services. 

      NO ROUTINE AUDIT PROGRAM
      EXISTS FOR REVIEWING THE USE
      OF ADMINISTRATIVE FUNDS
-------------------------------------------------------- Chapter 0:1.6

There are no routine program audits of the use of the administrative
funds provided under the sport fish and wildlife restoration
programs.  In our view, if routine program audits had been performed,
many of the shortcomings discussed above could have been identified
and corrected.  While these programs have been in existence for more
than 40 years, we determined that during the last 20 years there have
been three external audits that addressed the use of administrative
funds.  The Department of the Interior's Office of Inspector General
performed two audits, one in 1981 and the other in 1994,\4 and we
reported on the Sport Fish Restoration Program in 1993. 

In our report, we recommended that the Director, Fish and Wildlife
Service, follow established policies and procedures when selecting
special investigations (now known as administrative grants), consider
the priority needs of the states in selecting these investigations,
and monitor the investigations to ensure that their objectives are
achieved and their results are disseminated.  In response, the agency
said that it was taking a number of actions to address our concerns. 
For example, the Office agreed to develop a system for monitoring and
tracking the progress of administrative grants to ensure that the
intended results were achieved and properly disseminated.  However,
it has not done so. 

--------------------
\4 Review of Fish and Wildlife Service Administration of the Federal
Aid in Fish and Wildlife Restoration, Office of Inspector General,
July 1981, and Federal Aid in the Sport Fish and Wildlife Restoration
Programs, U.S.  Fish and Wildlife Service, Office of Inspector
General, Feb.  1994. 

   PROCESS FOR RESOLVING AUDIT
   FINDINGS ON STATES USE OF FUNDS
   MAY NEED TO BE IMPROVED
---------------------------------------------------------- Chapter 0:2

While the Office of Federal Aid does not routinely audit how
administrative funds are used, it initiated a national audit program
in fiscal year 1996 to routinely audit how states and other qualified
recipients are using the grant funds provided under the sport fish
and wildlife restoration programs. 

This audit program began because the agency believed that the grants
had not received adequate audits or financial reviews.  States' grant
funding can be quite substantial.  In fiscal year 1998 for instance,
the sport fish and wildlife restoration programs provided the states
and other qualified recipients with about $552 million.  Under the
program, each state and other qualified recipient will be audited
every 5 years under a contract with the Defense Contract Audit
Agency.  As of June 30, 1999, audit reports on 21 states have been
completed.\5 Audits of 19 states and 3 other qualified recipients are
under way.  The Office has spent about $4.4 million to date to
perform the audits.  The completed and ongoing audits have resulted
in about $5.4 million in program savings and the disposition of
another $9.6 million that is waiting to be resolved.\6

These savings result from recovering, for example, (1) license fee
revenues not used in support of the program, (2) salaries charged
inappropriately, and (3) excess fund withdrawals by a state.  To
illustrate, one state used about $725,000 in license fee revenues for
activities other than for fish and wildlife restoration purposes. 
Resolution of the audit findings is the responsibility of the Federal
Aid regional office covering the state being audited. 

While this audit program is laudable, we have concerns about how the
regional office is planning to resolve some of the audit findings. 
For example, $3.5 million, or 36 percent, of the $9.6 million in
savings to be resolved is associated with audits of two states.  The
actions the regional office plans for resolving the $3.5 million is
precedent-setting and could compromise the audit resolution process. 
Specifically, according to program officials, the two states involved
have misused grant funds but may not be held accountable for their
actions. 

In one instance, the audit disclosed that about $2.2 million in
revenues generated with the use of grant funds should be returned to
the program in accordance with federal regulations.  According to the
audit, the state sold timber rights generated on lands purchased with
Federal Aid funds but did not compensate the Service for those
revenues.  Grants generally are funded 25 percent by the state and 75
percent by Federal Aid.  Program officials said that regional
officials are planning to allow the state to offset its repayment
obligation by crediting the state for payments in excess of the
state's share on closed grants.  The same audit also found that the
state received about $1.3 million from the Service to acquire land. 
The state paid $500,000 for the land.  As a result, the state
received excess payments from the Office of Federal Aid of $800,000. 
According to the program and audit agency officials, however, the
Service's regional officials proposed to allow the state to offset
the overpayment with the amounts it had already paid for other lands. 
Office headquarters officials noted that the $800,000 difference
should be made up with purchases of newly acquired land.  An Office
of Federal Aid headquarters official said that the Office is in the
process of determining whether this action violates the Service's
regulations. 

In another instance, a state was unable to justify $500,000 in costs
associated with grants provided under both the sport fish and
wildlife restoration programs.  Similar to the first example, the
regional officials responsible for resolving the audit finding plan
to allow the state to offset its repayment obligation by crediting
the state for payments in excess of the state's share on closed
grants.  Program officials stated that the Office is in the process
of determining whether this action is allowed under current program
regulations. 

We, too, are concerned about these proposed actions for resolving
audit findings.  It is not clear whether the approach complies with
program requirements.  These actions could be precedent-setting and,
if incorrect, could diminish the deterrent effect of the audits. 

--------------------
\5 The Department of the Interior's Office of Inspector General
performed one of the state audits. 

\6 This figure includes $4.2 million identified by an audit of one
state performed by the Department of the Interior's Office of
Inspector General. 

   AGENCY COMMENTS
---------------------------------------------------------- Chapter 0:3

We provided copies of a draft of this testimony to the U.S.  Fish and
Wildlife Service and the Department of the Interior for review and
comment.  The Service generally agreed with our findings and said
that some of the issues we raised would be addressed by terminating
some of the programs, specifically the Director's Conservation Fund
and the administrative grants program.  In most of the other cases we
raised, the Service indicated that it would take corrective actions
on the problems identified.  The Service also provided clarifying
comments that have been incorporated into this testimony as
appropriate. 

-------------------------------------------------------- Chapter 0:3.1

In closing, Mr.  Chairman, the administrative funds associated with
the sport fish and wildlife restoration programs are used for various
purposes, some of which may not be necessary, justified, or
effective.  While individually the problems we identified in each of
the areas where administrative funds are spent may not appear too
significant, collectively, the problems suggests a lack of attention
to detail that erodes the Office of Federal Aid's ability to
effectively manage and oversee the administrative aspects of the
programs.  In our view, these conditions have spawned a culture of
permissive spending that raises significant questions about whether
the Office is meeting its management responsibilities.  Furthermore,
the audits of these funds provided to the states and other qualified
recipients are an important tool for ensuring that these funds are
spent appropriately.  The Office of Federal Aid should be commended
for its efforts in this area.  However, some of the actions now
planned to resolve open audit findings may diminish the effectiveness
of the audit process and could prevent the Office from realizing the
full benefits of the audit program. 

Mr.  Chairman, I want to point out that what you heard from us today
is based on our work to date.  When our work on this project is
completed, we will provide recommendations on what we believe needs
to be done to correct the problems that we identified here today. 

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 testimony
include Cliff Fowler, Roy Judy, Lew Adams, and Diana Cheng. 

*** End of document. ***