[Survey Report on Land Acquisition Activities, Bureau of Reclamation]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 00-i-282

Title: Survey Report on Land Acquisition Activities, Bureau of
       Reclamation



Date:  March 31, 2000




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U.S. Department of the Interior
Office of Inspector General



SURVEY REPORT
LAND ACQUISITION ACTIVITIES,
BUREAU OF RECLAMATION


REPORT NO. 00-I-282 

MARCH 2000




EXECUTIVE SUMMARY

Land Acquisition Activities, 
Bureau of Reclamation
Report (No. 00-i-282)

BACKGROUND

In 1987, the Bureau of Reclamation (BOR) changed its mission
focus from one of developing large, Federally funded water
projects to that of managing water resources, with an emphasis on
water conservation and the environment. Recently, BOR has been
acquiring land primarily for the protection, restoration, and
enhancement of  fish, wildlife, and associated habitats in order
to mitigate the environmental impacts of its water development
projects.  In situations where BOR must act expeditiously to
prevent the sale of desired property to other parties, where
landowners are reluctant to sell directly to BOR, or where funds
are not available, BOR may acquire land with the assistance of
nonprofit organizations.  In these instances, nonprofit
organizations either purchase the land or obtain a purchase
option with the intention of selling the land to BOR.  During
fiscal years 1996 through 1998, BOR acquired 668 parcels of land,
at a cost of about $27.3 million. 

OBJECTIVE

The objective of the review was to determine whether BOR
conducted its land acquisition activities in accordance with
applicable laws and regulations and  paid a fair price for the
land acquired.

RESULTS IN BRIEF

We concluded that BOR generally conducted its land acquisition
activities in accordance with applicable laws and regulations and
paid a fair price for the land it acquired.  However, BOR had not
developed guidelines for conducting transactions with nonprofit
organizations.  As such, BOR had no formal criteria for
establishing the respective roles and responsibilities of BOR and
the nonprofit organizations or for determining the basis for
reimbursing these organizations for acquisition-related
expenditures.

RECOMMENDATION

We recommended that the Commissioner, BOR, develop guidance for
conducting land acquisitions with the assistance of nonprofit
organizations. This guidance should be similar to the Department
of the Interior's 1983 "Guidelines for Transactions Between
Nonprofit Conservation Organizations and Federal Agencies," as
clarified in August 1995 and July 1996 memoranda, which was
established for the Land and Water Conservation Fund realty
purchases.

AUDITEE COMMENTS AND OIG EVALUATION

BOR agreed with the report's recommendation and stated that the
guidance would be developed by October 31, 2000.  Based on the
response, we considered the recommendation resolved but not
implemented.



SURVEY REPORT                                  W-IN-BOR-004-99-R


Memorandum

     To:  Assistant Secretary for Water and Science

   From:  Roger La Rouche
          Acting Assistant Inspector General for Audits

Subject:  Survey Report on Land Acquisition Activities,
          Bureau of Reclamation (No. 00-i-282)

INTRODUCTION

This report presents the results of our survey of the Bureau of
Reclamation's (BOR) land acquisition activities.[1]  The
objective of the review was to determine whether BOR  conducted
its land acquisition activities in accordance with applicable
laws and regulations and  paid a fair price for the land
acquired.

BACKGROUND

BOR acquires land for its water projects and for mitigation[2]
and conservation purposes.  The land is acquired through
purchase, donation, transfer from other Federal agencies,
exchange, and condemnation.  In 1987, BOR changed its mission
focus from one of developing large, Federally funded water
projects to that of managing water resources, with an emphasis on
water conservation and the environment. Recently, BOR has been
acquiring land primarily for the protection, restoration, and
enhancement of  fish, wildlife, and associated habitats in order
to address the environmental impacts of its water development
projects.  In situations where BOR must act expeditiously to
prevent the sale of desired property to other parties, where
landowners are reluctant to sell directly to BOR, or where funds
are not available, BOR may acquire land with the assistance of
nonprofit organizations.  In these instances, nonprofit
organizations, such as The Conservation Fund, The Trust for
Public Lands, The Nature Conservancy, and the River Network,
either purchase the land or obtain a purchase option with the
intention of selling the land to BOR. 

During fiscal years 1996 through 1998, BOR acquired 668 parcels
of land, at a cost of about $27.3 million (Appendix 1).  Of these
668 parcels, 341 parcels were acquired at a cost of about $25.1
million by the three regions (Mid-Pacific, Upper Colorado, and
Pacific Northwest Regions) visited during our survey.  The three
regions acquired an additional 79 parcels, at a cost of about
$12.7 million, during the period of October 1998 through May
1999[3] (Appendix 2).  Realty officials estimated that they will
acquire about 1,700 parcels (about 75,000 acres) of land during
fiscal years 1999 and 2000, for about $57.5 million.[4] 

SCOPE OF SURVEY

We conducted our survey from May through September 1999 at the
BOR offices listed in Appendix 3.  To accomplish our survey
objective, we reviewed applicable laws and regulations, including
the Uniform Standards of Professional Appraisal Practice and the
Uniform Appraisal Standards for Federal Land Acquisitions, and
BOR policies, procedures, and processes related to land
acquisitions.  We also reviewed BOR land acquisition documents,
such as contract files, negotiation records, and appraisals.  In
addition, we interviewed BOR realty personnel, appraisers, and
program managers[5] to discuss land acquisitions at the offices
visited and contacted.

The scope of the survey included a review of land acquisitions
that occurred during the period of October 1, 1995, through May
31, 1999, at three of BOR's five regions.  To obtain a broad
understanding of BOR's acquisition processes, we judgmentally
selected and tested 10 transactions that were representative of
BOR's range of land acquisition activities.  Our selection of the
10 transactions was based on (1) the manner in which the land was
acquired, such as purchase (either directly by BOR or with the
assistance of a nonprofit organization), exchange, or
condemnation; (2) the type of ownership acquired, such as fee
simple or easement; and (3) the dollar value. Our preliminary
review and testing did not disclose any material weaknesses in
BOR's land acquisition activities.  However, during our review of
the 10 transactions, we noted that BOR had not established
guidelines, policies, or procedures for land acquisitions
conducted with the assistance of nonprofit organizations.
Accordingly, we expanded our testing to include the remaining
three transactions with nonprofit organizations at the three
regions visited.  The 13 transactions totaled more than $9.8
million, or 26 percent of the dollar amount reported by BOR for
the three regions visited (Appendix 2), of which 6 transactions
totaling $7.4 million involved nonprofit organizations.  This
report covers the results of our review of 12 of the 13
transactions.  A separate report will be issued on the results of
our review of the remaining transaction, the Jasper Land
Exchange, which is being conducted by BOR's Pacific Northwest
Region.

Our survey was conducted in accordance with the "Government
Auditing Standards," issued by the Comptroller General of the
United States.  Accordingly, we included such tests of records
and other auditing procedures that were considered necessary to
accomplish our  objective.  As part of the survey, we reviewed
BOR's annual assurance statements on management controls and  the
Departmental Reports on Accountability for fiscal years 1996,
1997, and 1998, all of which included information required by the
Federal Managers' Financial Integrity Act, and determined that no
material weaknesses were reported that directly related to the
objective and scope of our survey.

We also reviewed the system of internal controls over BOR's land
acquisition activities, specifically as they apply to BOR's
appraisal processes and its transactions with nonprofit
organizations.  We found that BOR had generally conducted land
acquisition activities in accordance with applicable laws and
regulations and paid a fair price for the land acquired.

In none of the cases tested did the amount paid exceed the limits
of BOR officials' authority.[6]  However, we found that BOR had
not established guidelines, policies, or procedures for working
with the nonprofit organizations.  (This issue is addressed in
the Results of Survey section of this report.)  Our
recommendation, if implemented, should improve the process of
acquiring land with the assistance of nonprofit organizations.
Because our survey covered 26 percent of the value of the land
transactions at the three regions reviewed and did not identify
any significant deficiencies, we discontinued our review after
the survey phase.

PRIOR AUDIT COVERAGE

During the past 7 years, neither the Office of Inspector General
nor the General Accounting Office has issued any reports
regarding land acquisition activities of BOR.  However, the
Office of Inspector General issued the audit report "Department
of the Interior Land Acquisitions Conducted With the Assistance
of Nonprofit Organizations" (No.  92-I-833) in May 1992, which
addressed land acquisitions made by the National Park Service,
the U.S. Fish and Wildlife Service, and the Bureau of Land
Management.  The report concluded that nonprofit organizations
provided beneficial assistance in acquiring lands identified as
priority acquisitions by the Department or the Congress but that
certain transactions were not sufficiently controlled to ensure
that the Government's interests were  adequately protected and
that nonprofit organizations did not benefit unduly.  The report
also stated that none of the three bureaus fully complied with
established appraisal standards, which required that estimates of
property values be timely, independent, and adequately supported
by market data.  As a result, according to the report, the
Department had little assurance that the fair market value
estimates used to establish land acquisition prices were timely,
complete, and accurate.  The report contained seven
recommendations to improve controls over land acquisition
activities and to ensure that transactions conducted with the
assistance of nonprofit organizations are performed in a uniform
and consistent manner throughout the Department.  As a result of
the audit, in August 1995, the Department's Assistant Secretary
for Policy, Management and Budget issued the document
"Clarifications to August 10, 1983 Guidelines for Transactions
Between Nonprofit Organizations and Agencies of the Department of
the Interior."  All seven recommendations were considered
resolved and implemented.  

RESULTS OF SURVEY

Based on the limited tests made during our survey, we concluded
that BOR generally conducted its land acquisition activities in
accordance with applicable laws and regulations and paid a fair
price for the land it acquired.  Specifically, we found that  the
12 land acquisitions reviewed were supported by appraisals
conducted in accordance with applicable standards.  We also found
that BOR paid a fair price for its land acquisitions because the
acquisitions were based on an appraised fair market value or on
an adjusted value in accordance with the Reclamation Manual.
However, BOR had not developed guidelines for conducting
transactions with nonprofit organizations.  As such, BOR had no
formal criteria for establishing the respective roles and
responsibilities of BOR and the nonprofit organizations or for
determining the basis for reimbursing these organizations for
acquisition-related expenditures.  The Chief Realty Officer said
that specific guidelines had not been developed because BOR has
had only limited involvement with nonprofit organizations
assisting in land acquisitions.  As a result, BOR may be hindered
in using nonprofit organizations effectively to acquire land
needed to mitigate the environmental impacts of its water
development projects.  Furthermore, according to one field
official, BOR has lost the opportunity to purchase certain water
rights and some land with water rights because of its inability
to take actions in a timely manner.

We found that when the three BOR regional offices we reviewed
contacted and established a working relationship with the
nonprofit organizations, they did not (1) adequately define the
respective roles and responsibilities of BOR and the nonprofit
organization, (2) identify projected time frames for the
acquisition, and (3) specify BOR's right to decline the purchase
without liability to the Federal Government.  Of the six
transactions[7] involving nonprofit organizations reviewed, we
found that BOR initially contacted the nonprofit organizations
informally in four transactions, three by telephone and one by a
facsimile letter that contained only the name of the property to
be acquired.  BOR did not follow up with written documentation
establishing the roles and responsibilities of BOR and the
nonprofit organizations.  Although BOR contacted the nonprofit
organizations by letter in the remaining two transactions, the
letters were not sufficient in establishing an effective working
relationship.  Specifically, in both transactions, the letter
identified only the land desired and discussed the appraised
value of the subject land. 

In the case reviewed at the Upper Columbia Area Office, a
nonprofit organization wrote a letter to the Office concerning
its role in the Office's land acquisition program.  The nonprofit
organization stated that "[i]f Reclamation and the [Nature]
Conservancy cannot resolve the above matters [establish roles and
responsibilities of the parties] in a timely fashion, the
Conservancy will need to move on to other pressing acquisition
projects with other agencies."  The nonprofit organization
attached a sample letter and stated that it "routinely" received
such letters from other Federal agencies with which it had "an
excellent record of working successfully," particularly with
those agencies within the Department of the Interior.  We believe
that the lack of definitive guidelines which identify the roles
and responsibilities of BOR and the nonprofit organizations
hinders both BOR and the nonprofit organizations from effectively
purchasing land from willing sellers in a competitive market.  In
this case, land had not been acquired 10 months after BOR had
contacted the nonprofit organization in July 1998 to assist it
with implementing a $9.6 million fish, wildlife, and habitat
protection and enhancement program in the Yakima and Umatilla
River Basins.  The program is scheduled to be completed by the
end of fiscal year 2001.  Furthermore, in correspondence with the
nonprofit organization, a BOR official from the Area Office said
that BOR "has lost several opportunities to purchase water rights
and land with water rights in both the Yakima and Umatilla Basins
to date due to our [the Area Office's] inability to be
competitive in a timely manner."  

In addition to the lack of guidelines identifying the roles and
responsibilities of BOR and the nonprofit organizations, BOR did
not have guidelines specifying the types of acquisition-related
expenses, such as appraisals, staff salaries, and travel, that
could be reimbursed to the nonprofit organizations.  Of the six
transactions reviewed, we found that none had written agreements
that adequately identified the acquisition-related expenses that
would be reimbursed.  Rather, BOR officials reimbursed the
nonprofit organizations for expenses on a case-by-case basis.
For example, in one transaction BOR paid the nonprofit
organization 3 percent of the fair market value for indirect
costs ($6,900).  In another transaction BOR paid $5,500 more than
the appraised fair market value of the acquired land, which,
according to a Regional official, was for acquisition-related
expenses.  However, because of the lack of documentation, the
official did not know what specific acquisition-related
expenditures of the nonprofit organizations were reimbursed. 

We believe that both BOR and the nonprofit organizations would
benefit from clear guidelines that establish the respective roles
and responsibilities of each entity and identify the types of
expenditures to be reimbursed.  In that regard, the Department in
1983 published in the "Federal Register" the "Guidelines for
Transactions Between Nonprofit Conservation Organizations and
Federal Agencies" for land transactions between nonprofit
organizations and the National Park Service, the U.S. Fish and
Wildlife Service, the Bureau of Land Management, and other
Federal agencies that use funds appropriated from the Land and
Water Conservation Fund.[8]  The Department issued clarifications
to these guidelines in August 1995.  The 1983 guidelines and the
1995 clarifications provide basic principles to ensure that
transactions with nonprofit organizations are conducted in a
uniform and consistent manner.  The guidelines and
clarifications, however,  do not specifically apply to BOR
because it does not receive funding from the Land and Water
Conservation Fund.  Nevertheless, we believe that guidelines
similar to the existing Departmental guidelines would provide BOR
an appropriate mechanism for effectively working with nonprofit
organizations.  These guidelines state that Federal agencies
requesting the assistance of a nonprofit organization in a
proposed land acquisition do so with a letter of intent which
establishes the roles and responsibilities of the Federal
agencies and the nonprofit organizations.  The guidelines state
that the letter of intent, at a minimum, is required to identify
the land desired by the agency; state the estimated value of the
land subject to future appraisal; state the projected time frame
for when the agency intends to acquire the property; and contain
a statement that if the agency is unable to or declines to
purchase the land, the Federal Government is not liable to the
nonprofit organization for the disposition of the land.  These
guidelines further state that the Federal agency's purchase price
should be either (1) the fair market value of the property based
on an approved appraisal or "such lesser figure at which the
nonprofit organization offers to sell the property" or (2) the
nonprofit organization's cost to acquire the property at an
amount "not to exceed the appraised fair market value . . . plus
related and associated expenses from a list approved by the
Assistant Secretary for Policy, Management and Budget."[9]  BOR
officials said that BOR intends to use the assistance of
nonprofit organizations more extensively to meet its mission in
the future.  Accordingly, we believe that BOR should adopt
guidelines which ensure that transactions conducted with the
assistance of nonprofit organizations are performed effectively
and consistently throughout  BOR.   

Recommendation

We recommend that the Commissioner, BOR, develop guidance for
conducting land acquisitions with the assistance of nonprofit
organizations similar to the Department of the Interior's 1983
"Guidelines for Transactions Between Nonprofit Conservation
Organizations and Federal Agencies," as clarified in August 1995
and July 1996 memoranda that were established for the Land and
Water Conservation Fund realty purchases.

BOR Response and Office of Inspector General Reply

In the February 11, 2000, response (Appendix 4) to the draft
report from the BOR Commissioner, BOR concurred with the
recommendation.  Based on the response, we consider the
recommendation resolved but not implemented.  Accordingly, the
recommendation will be referred to the Assistant Secretary for
Policy, Management and Budget for tracking of implementation.

Since the report's recommendation is considered resolved, no
further response to the Office of Inspector General is required
(see Appendix 5).

Section 5(a) of the Inspector General Act (5 U.S.C. app. 3)
requires the Office of Inspector General to list this report in
its semiannual report to the Congress.  In addition, the Office
of Inspector General provides audit reports to the Congress. 

**FOOTNOTES**

[1]:Land acquisitions may entail the purchase of outright
ownership, known as "fee simple" ownership, or the purchase of
significant interests in land, such as easements for conservation
or access purposes.  The terms "acquisition" or "purchase"
throughout this report will refer to either of these. 

[2]:Mitigation is the reduction of the environmental impact
caused by water development projects.

[3]:We did not obtain the fiscal year 1999 data for the two
regions not visited because this information was not readily
available.

[4]:This amount includes the $12.7 million for land acquired
during the period of October 1998 through May 1999 by the three
regions visited. 

[5]:Program managers interviewed included financial,
environmental, and other program-specific managers, such as the
Yakima River Basin Water Enhancement Program Manager. 

[6]:According to the Reclamation Manual (LND 02, paragraph
7.G(1)), regional directors or their designees may acquire land
above the appraised value as follows: without limitation if the
appraised amount is less than $100,000, by 15 percent if the
appraisal amount is between $100,000 and $500,000, and by 10
percent if the appraisal amount is over $500,000.  Approval by
the Chief Realty Officer is required if the purchase price of the
land exceeds these limitations.  In each case, we determined that
the price paid was based on an appraisal that was reviewed and
approved by a review appraiser and that the basis for any
additional amounts was documented in the files and did not exceed
the amounts specified in the Reclamation Manual.

[7]:Of the six transactions reviewed, five transactions had been
completed, and one transaction, which involved land being
acquired by the Upper Columbia Area Office, in Yakima,
Washington, had not been completed.

[8]:The Land and Water Conservation Fund Act of 1965 (Public Law
88-578, as amended) established the Fund to assist state and
Federal agencies in meeting present and future outdoor recreation
demands, including the acquisition of land, water, or interests
in land or waters. 

[9]:The list of approved acquisition-related expenditures, such
as appraisals and escrow fees, travel, and staff salaries, that
could be paid to nonprofit organizations is documented in a May
2, 1996, U.S. Fish and Wildlife Service memorandum which was
submitted to the Assistant Secretary for Policy, Management and
Budget and approved on July 18, 1996. 

APPENDIX 1

-----------------------------------------------------------------
| Fiscal    | |Fiscal Year|  |Fiscal Year |  |
|Year 1996  | |  1997     |  |   1998     |  |
|Region||Tracts|Amount|Tracts|Amount|Tracts|Amount|Tracts
-----------------------------------------------------------------
|Amount
-----------------------------------------------------------------
Pacific       38 $243,140   31 $355,052    45   $99,560   114
Northwest
-----------------------------------------------------------------
$697,752
-----------------------------------------------------------------
Mid-           3   1,586,909 0   0          7   1,932,400  10
Pacific
-----------------------------------------------------------------
3,519,309
-----------------------------------------------------------------
Lower         16   841,140   2   275,820    2   773,400    20
Colorado
-----------------------------------------------------------------
1,890,360
-----------------------------------------------------------------
Upper         27   5,241,96129   5,206,714161   10,435,624217
Colorado*
-----------------------------------------------------------------
20,884,299
-----------------------------------------------------------------
Great        112   122,571  92   71,857   103   68,432    307
Plains
-----------------------------------------------------------------
262,860
-----------------------------------------------------------------
Totals|    |196 |$8,035,721|154|$5,909,443|318|$13,309,416|668
-----------------------------------------------------------------
|$27,254,580
-----------------------------------------------------------------

*The Upper Colorado Region's amounts include $6,508,177 for 51
tracts that were purchased by BOR on behalf of the Utah
Reclamation Mitigation and Conservation Commission, another
Federal agency, which paid for the acquired land.

APPENDIX 2

-----------------------------------------------------------------
LAND ACQUISITIONS OF SELECTED
BUREAU OF RECLAMATION REGIONS
FOR FISCAL YEARS  1996-1999 (THROUGH MAY 1999)
AND NUMBER OF LAND ACQUISITIONS REVIEWED
-----------------------------------------------------------------
Acquisition Activities:
-----------------------------------------------------------------
|Pacific     |Mid-Pacific   |  Upper       |  Total
|Northwest    |              | Colorado     |
-----------------------------------------------------------------
|Tracts |Amount |Tracts|Amount |Tracts|Amount |Tracts|Amount
-----------------------------------------------------------------
FY 1996 - FY  114$697,752   10$3,519,309  217$20,884,299 341
$25,101,360   1998
-----------------------------------------------------------------
FY 1999 (May    5   291,650*  1  5,165,624 1999)
73   7,229,149 79    12,686,423
-----------------------------------------------------------------
Total|     119   |$989,402|11
|$8,684,933|290|$28,113,448**|420|$37,787,783
-----------------------------------------------------------------
Acquisitions Reviewed:
-----------------------------------------------------------------
|Pacific|Mid-Pacific|Upper|Total
|Northwest||Colorado|
-----------------------------------------------------------------
|Tracts |Amount |Tracts|Amount |Tracts|Amount |Tracts|Amount
-----------------------------------------------------------------
Acquisitions from    2$411,732    1$5,165,624    3$1,793,946    6
****$7,371,302  nonprofits
-----------------------------------------------------------------
All other   1   0   ***1   117,972  5   2,349,551  7    2,467,523
acquisitions
-----------------------------------------------------------------
Total|       3   |$411,732|2  |$5,283,596|8  |$4,143,497|13
|$9,838,825
-----------------------------------------------------------------
Percent of
amount           41.6         60.8           14.7            26.0
reviewed
-----------------------------------------------------------------

*A land acquisition totaling $290,000 had not been finalized as
of September 1999; however, it was included in our review because
this transaction is the first acquisition of a $9.6 million
program and the Upper Columbia Area Office's first attempt to use
the assistance of a nonprofit organization in its land
acquisition process.

**The Upper Colorado Region's amounts include $9,142,687 for 61
tracts that were purchased by BOR on behalf of the Utah
Reclamation Mitigation and Conservation Commission, another
Federal agency, which paid for the acquired land.

***No money was exchanged in this land exchange transaction.

****The six tracts, with a total value of $7,371,302, represent
all of the land acquisitions that were performed with the
assistance of nonprofit organizations at the three regions
visited.

APPENDIX 3

BUREAU OF RECLAMATION
OFFICES VISITED OR CONTACTED

Office
Location

Program Analysis Office              Denver, Colorado
Mid-Pacific Regional Office   Sacramento, California 
Klamath Basin Area Office      Klamath Falls, Oregon.
Pacific Northwest Regional Office        Boise, Idaho
Snake River Area Office*                 Boise, Idaho
Upper Columbia Area Office         Yakima, Washington
Ephrata Field Office              Ephrata, Washington
Upper Colorado Regional Office   Salt Lake City, Utah
Western Colorado Area Office       Northern Division*
Grand Junction, Colorado           Southern Division*
Durango, Colorado

*Offices contacted.

APPENDIX 4

APPENDIX 5

STATUS OF SURVEY REPORT RECOMMENDATION

Finding/Recommendation
Reference

Status

Action Required

1

Resolved; not implemented.

No further response to the Office of Inspector General is
required.  The recommendation will be referred to the Assistant
Secretary for Policy, Management and Budget for tracking of
implementation.




ILLEGAL OR WASTEFUL ACTIVITIES SHOULD BE REPORTED

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