[Semiannual Report, October 2000]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 10-S-00

Title: Semiannual Report, October 2000

Report No. 10-S-00

Title: Semiannual Report, October 2000

                  **********DISCLAIMER**********

This file contains an ASCII representation of an OIG report.
Subject: Semiannual Report, October 2000 (No. 10-S-00). No attempt
has been made to display graphic images or illustrations. Some
may be included but may not resemble those in the printed
version.

A printed copy of this report may be obtained by referring
to the PDF file or by calling the Office of Inspector General,
Division of Acquisition and Management Operations at (202)
208-4599.

                  ******************************

Report No. 10-S-00

Message from the Inspector General 

As the Office of Inspector General (OIG) for the Department of the Interior (DOI) continues to evaluate and modify the way it conducts business, so, too, has the Department, as a direct result of the efforts of the OIG.  Among the highlights reported in this Semiannual Report, one noteworthy achievement serves as a model for the OIG and the DOI to both identify and solve management problems within the Department.  Resolution of issues arising from an audit reported in the last Semiannual Report served as the catalyst for the Department to recognize a potential weakness in program administration across Bureau lines, and in response, DOI issued a comprehensive policy to address the concern throughout the Department.

This Semiannual Report also announces the creation of an Evaluations Unit in the OIG, as well as reports the Unit's first two successful reviews of Departmental programs.  The achievements of the Evaluations Unit are an example of the success we have had in expanding our efforts to communicate findings and recommendations effectively, and achieve results.  

We also report the results of our financial statement audits for Fiscal Year 1999.  Our focus, however, is on the efforts being made to resolve the internal control findings, as we attribute most of the delay in issuing our FY99 report to the underlying internal control problems that were identified during the course of our audit work.  We continue to stress the importance of correcting these internal control issues, and have received the assurance of the Department and the Bureaus that concerted efforts to resolve them are underway.  

The success we have experienced using timely and effective communication with the Department and Bureaus in a number of arenas punctuates the importance of our exchange.  The accomplishments highlighted in this Report illustrate the results of our efforts.  Our office brought its collective experience to bear in the issuance of 44 audits that resulted a total monetary impact of more than $33 million.  

Positive change was echoed in our Office of Investigations, which completed and reported its reorganization in our last semiannual report.   Since then, we issued guidance to the Departmental offices and bureaus clarifying the criteria for investigative case referrals to our office.  Due in large part to this initiative, we maximized our limited investigative resources and increased our effectiveness.  Our indictments increased by 10 percent and our convictions by 17 percent over this semiannual period.  A 60 percent increase in completed administrative actions also illustrates our commitment to ensuring accountability by the Departmental offices and bureaus.  

We also report on our continued pursuit of responsibility and accountability by organizations and individuals who defraud the Department or its Bureaus.  To this end, we collected nearly $147 million in civil settlements, criminal restitutions, and administrative recoveries.  Included in this total was a first-of-its-kind settlement of $56 million by a major oil company for the underpayment of gas royalties.

Overall, this semiannual period boasts considerable dollar accomplishments from all activities totaling more than $181 million.  


                                        Earl E. Devaney
                                      Inspector General

CONTENTS

PAGE

STATISTICAL HIGHLIGHTS                                                          II
INTRODUCTION                                                                    1
OIG ORGANIZATION AND MISSION                                                    2
SIGNIFICANT AUDIT ACTIVITIES AND INVESTIGATIONS                         3
DEPARTMENT OF THE INTERIOR                                                      3
BUREAU OF INDIAN AFFAIRS                                                        6
BUREAU OF LAND MANAGEMENT                                                       8
BUREAU OF RECLAMATION                                                           9
FISH AND WILDLIFE SERVICE                                                       10
INSULAR AREAS                                                                   11
MINERALS MANAGEMENT SERVICE                                                     13
NATIONAL PARK SERVICE                                                           15

APPENDICES

1 - SUMMARY OF AUDIT ACTIVITIES FROM APRIL 1, 2000 THROUGH SEPTEMBER 30, 2000   16
2 - REPORTS ISSUED OR PROCESSED AND INDIRECT COST PROPOSALS NEGOTIATED           
        DURING THE 6-MONTH PERIOD ENDED SEPTEMBER 30, 2000                              17
        - INTERNAL AUDITS                                                                               17
        - EVALUATIONS                                                                           19
        - CONTRACT AND GRANT AUDITS                                                             19
        - SINGLE AUDITS                                                                         20
        - INDIRECT COST PROPOSALS                                                               22
3 - MONETARY IMPACT OF AUDIT ACTIVITIES FROM APRIL 1, 2000 THROUGH SEPTEMBER 30,        2000                                                                                            29
4 - NON-FEDERAL FUNDING INCLUDED IN MONETARY IMPACT OF AUDIT    
        ACTIVITIES                                                                              30
5 - AUDIT RESOLUTION ACTIVITIES                                                         31
       DURING THE 6-MONTH PERIOD ENDED SEPTEMBER 30, 2000
        - TABLE I - INSPECTOR GENERAL AUDIT REPORTS WITH QUESTIONED COSTS               31
        - TABLE II - INSPECTOR GENERAL REPORTS WITH RECOMMENDATIONS THAT
                FUNDS BE PUT TO BETTER USE                                                      32
        - TABLE III - INSPECTOR GENERAL REPORTS WITH LOST OR POTENTIAL ADDITIONAL               REVENUES                                                                                33
6 - SUMMARY OF REPORTS OVER 6 MONTHS OLD PENDING MANAGEMENT DECISIONS           34
        - INTERNAL AUDITS                                                                               34
        - CONTRACT AND GRANT AUDITS                                                             36
        - SINGLE AUDITS                                                                         37
7 - SUMMARY OF INTERNAL REPORTS OVER 6 MONTHS OLD PENDING CORRECTIVE ACTION     40
8 - STATUTORY AND ADMINISTRATIVE RESPONSIBILITIES                                       44
9 - CROSS-REFERENCES TO THE INSPECTOR GENERAL ACT                                       45

INTRODUCTION

OFFICE OF INSPECTOR GENERAL
ORGANIZATION AND MISSION

WORKING WITH A BUDGET OF $26 MILLION, THE OFFICE OF INSPECTOR GENERAL (OIG) HAS 264 EMPLOYEES ASSIGNED TO 13 OFFICES THROUGHOUT THE UNITED STATES AND THE INSULAR AREAS, IN ADDITION TO WASHINGTON, D.C.  THE OIG STAFF IS TASKED WITH PROVIDING POLICY DIRECTION FOR AND CONDUCTING AUDITS, INVESTIGATIONS, AND OTHER ACTIVITIES IN THE DEPARTMENT OF THE INTERIOR (DOI).  

OIG ALSO PROVIDES DOI WITH INDEPENDENT AND OBJECTIVE REVIEWS OF THE INTEGRITY OF DOI OPERATIONS.  OIG IS THE PRIMARY AUTHORITY TO ENSURE QUALITY, COVERAGE, AND COORDINATION OF AUDIT AND INVESTIGATIVE SERVICES BETWEEN DOI AND OTHER FEDERAL, STATE, AND LOCAL GOVERNMENTAL AGENCIES.  THE INSPECTOR GENERAL REPORTS DIRECTLY TO THE SECRETARY OF THE INTERIOR ON THESE MATTERS AND IS REQUIRED TO KEEP BOTH THE SECRETARY AND THE CONGRESS FULLY AND CURRENTLY INFORMED ABOUT PROBLEMS AND DEFICIENCIES RELATING TO THE ADMINISTRATION OF DOI PROGRAMS AND OPERATIONS AND THE NECESSITY FOR CORRECTIVE ACTION.

IN ADDITION TO THE REQUIREMENT FOR SEMIANNUAL REPORTING TO THE SECRETARY OF THE INTERIOR AND THE CONGRESS, OIG?S MISSION ENCOMPASSES A WIDE ARRAY OF STATUTORY AND ADMINISTRATIVE AUDIT AND INVESTIGATIVE RESPONSIBILITIES.  OIG ALSO CONDUCTS AUDITS, EVALUATIONS AND OTHER PROGRAM REVIEWS, AND INVESTIGATIONS RESPONSIVE TO REQUESTS MADE BY DOI AND THE CONGRESS.

OIG RESPONSIBILITIES ALSO EXTEND TO THE INSULAR AREAS OF GUAM, AMERICAN SAMOA, THE U.S. VIRGIN ISLANDS, THE COMMONWEALTH OF THE NORTHERN MARIANA ISLANDS, THE FEDERATED STATES OF MICRONESIA, THE REPUBLIC OF THE MARSHALL ISLANDS, AND THE REPUBLIC OF PALAU.

OIG's organization and locations relative to these
responsibilities are represented on the chart on
page 2. (See PDF file.)




OFFICE OF INSPECTOR GENERAL
DEPARTMENT OF THE INTERIOR

SIGNIFICANT AUDIT ACTIVITIES
AND INVESTIGATIONS


DEPARTMENT OF THE INTERIOR


FOLLOWING A THOROUGH ASSESSMENT OF THE ISSUES, THE OFFICE OF INSPECTOR GENERAL (OIG) AND THE FISH AND WILDLIFE SERVICE (FWS) RESOLVED THE OUTSTANDING AUDIT RECOMMENDATIONS CONCERNING FEE COLLECTION AT FWS REFUGES (SEMIANNUAL REPORT TO THE CONGRESS:  OCTOBER 1, 1999 - MARCH 31, 2000).  AS A DIRECT RESULT OF THIS RESOLUTION, AND IMPLEMENTATION BY THE FWS, THE ASSISTANT SECRETARY FOR POLICY, MANAGEMENT AND BUDGET (PMB) ISSUED A POLICY GOVERNING THE COLLECTION AND USE OF FEES DEPARTMENT-WIDE.  THE DEPARTMENT HAS ALSO UNDERTAKEN A STUDY OF FEE COLLECTION PRACTICES NATIONWIDE, TO ENSURE THAT COLLECTION AND USE OF FEES WITHIN THE DEPARTMENT OF THE INTERIOR (DOI) COMPLY WITH LEGAL AND POLICY REQUIREMENTS.    

IN ORDER TO RESPOND MORE EFFECTIVELY TO DOI MANAGEMENT REQUESTS, THE OFFICE OF INSPECTOR GENERAL RECENTLY ESTABLISHED AN EVALUATIONS AND FOLLOW-UP UNIT TO CONDUCT EVALUATIONS AND PROGRAM REVIEWS, PROVIDE CONSULTING SERVICES AND ENSURE IMPLEMENTATION OF OUTSTANDING OIG AUDIT RECOMMENDATIONS.  THIS UNIT IS DESIGNED TO INDEPENDENTLY AND EXPEDIENTLY ASSESS AREAS OF CONCERN IDENTIFIED BY THE DEPARTMENT, USUALLY WITHIN A 60 - 90 DAY PERIOD.  THIS GIVES THE OIG EXPANDED FLEXIBILITY FOR TIMELY COVERAGE OF UNPLANNED REQUESTS FOR OIG ASSISTANCE.  USING AN ARRAY OF TECHNIQUES, THE UNIT IDENTIFIES ACTIONS THAT DEPARTMENTAL MANAGEMENT MIGHT TAKE TO IMPROVE OPERATIONS AND MEET PROGRAM OBJECTIVES IN A MORE EFFECTIVE, EXPEDIENT AND/OR LESS COSTLY MANNER.  THE RESULTS OF THIS UNIT'S EFFORTS ARE COMMUNICATED IN A VARIETY OF FORMS, FROM ORAL BRIEFINGS TO WRITTEN REPORTS.  DURING THIS REPORTING PERIOD, TWO EVALUATIONS WERE COMPLETED:

The Assistant Secretary for PMB requested that we evaluate the structure and operation effectiveness of the Office of Hearings and Appeals (OHA) and provide recommendations to improve organizational morale and enhance accountability.  Drawing additional expertise from outside our audit unit, we conducted comprehensive interviews of staff members and OHA clients, analyzed case processing practices, and performed a benchmarking study of OHA operations at other Federal agencies.

The Assistant Secretary for PMB also requested that we evaluate the organizational structure and operational effectiveness of DOI's Office of Ethics.  In response to the request, we evaluated reporting relationships, staffing, assignment of responsibilities, and budget authorizations; conducted a workload analysis; and performed a benchmarking study to compare the operations and organization of DOI's Office of Ethics with those of other Federal agencies. 

At the conclusion of each of these two reviews, we provided the Assistant Secretary with a comprehensive briefing.

At the request of the Chairman of the U.S. Senate Committee on Governmental Affairs, we evaluated the effectiveness of Departmental bureaus in carrying out the first annual performance plans required under the Government Performance and Results Act.  We concluded that, overall, bureau goals and measures were appropriate to accomplishing their missions and program objectives.  The DOI reported that it met 145 (63 percent) of its 231 performance goals and measures and adequately explained why 82 of the remaining 86 goals and measures were not achieved.  We also provided recommendations for improvement to the performance goals to include:

* Refocusing specific performance goals to better measure program results; 
* Establishing goals for all significant program elements;
* Better describing methods used to establish target levels of accomplishment; and
* Linking performance measures with program results.

FOR FISCAL YEAR 1999, WE ISSUED UNQUALIFIED OPINIONS ON THE FINANCIAL STATEMENTS, REQUIRED BY THE CHIEF FINANCIAL OFFICERS' (CFO) ACT, FOR THE DOI AND SIX OF THE EIGHT DEPARTMENTAL BUREAUS AND FOR MINERALS MANAGEMENT SERVICE (MMS) ROYALTY COLLECTIONS.  MMS DID NOT ISSUE FINANCIAL STATEMENTS FOR ITS APPROPRIATED FUNDS.  

WE HAVE NOT, HOWEVER, RENDERED AN OPINION ON THE BUREAU OF RECLAMATION'S (BOR) FINANCIAL STATEMENTS.  AUDIT WORK IS CONTINUING ON BOR'S CONSTRUCTION WORK-IN-PROGRESS AND PROPERTY, PLANT, AND EQUIPMENT ACCOUNTS.  WE ARE EVALUATING THE IMPACT OF THESE ACCOUNTS ON THE DOI'S FINANCIAL STATEMENTS.  

DURING THE COURSE OF OUR AUDIT WORK, WE IDENTIFIED ACCOUNT ADJUSTMENTS WHICH MANAGEMENT MADE BEFORE ISSUING THE FINANCIAL STATEMENTS.  WE ALSO IDENTIFIED SEVERAL AREAS IN WHICH PROGRAM CONTROLS NEEDED TO BE STRENGTHENED.  WE BROUGHT THESE MATTERS TO THE ATTENTION OF MANAGEMENT AND CORRECTIVE ACTION IS BEING UNDERTAKEN.    THE MOST SIGNIFICANT AREAS INCLUDE:  

*    LAND IMPROVEMENTS AND LAND RIGHTS ACCOUNTS - THE BUREAU OF INDIAN AFFAIRS (BIA) AND BOR ARE TAKING STEPS TO IMPROVE CONTROLS OVER LAND-RELATED FINANCIAL INFORMATION IN ORDER TO ENSURE THAT ERRORS AND OMISSIONS RELATED TO THESE ACCOUNTS ARE IDENTIFIED AND CORRECTED IN A TIMELY MANNER.

* Construction-in-Progress Accounts - BIA and the Fish and Wildlife Service (FWS) have agreed to implement controls to ensure that these accounts are accurately stated and properly supported.

* Automated Information Systems - BIA has agreed to undertake improvements in controls over security, appropriateness of user access levels, and information recovery in case of system failure.

* Financial Management and Accounting Processes - Operating without established internal control procedures, the MMS was unable to produce accurate, complete, and timely financial data for fiscal year 1999.  MMS has established a number of internal control procedures to address this concern.

* Deferred Maintenance Management - Departmental and individual bureau controls are being enhanced to ensure proper identification of deferred maintenance needs, accurate and complete cost estimates, and proper recording and processing of information.  

* FEDERAL AID GRANTS TO STATES - FWS IS IMPROVING CONTROLS TO ENSURE THAT DRAW-DOWN AMOUNTS ARE FOR COSTS INCURRED.
The progress and success of these internal control improvement efforts by the DOI and bureaus will be assessed during our audits of the FY2000 financial statements.

The FY1997 and 1998 financial statements for trust funds held by DOI for Indian tribes and individual Indians were not accurate.   As a result, the certified public accounting firm that conducted the audit qualified its opinion because of irreconcilable differences of about $35 million between recorded cash balances and the balances reported by the U.S. Treasury as of September 30, 1997 and 1998; inadequacies in various Indian trust fund accounting systems; inadequate records and weaknesses in internal controls; and disagreements from individual Indians about their trust fund balances.  In response to these and other related concerns, the DOI has implemented a high-level action plan to reform the trust fund management system.                         
                                

BUREAU OF INDIAN AFFAIRS


Thomas P. Lalley, the final defendant in a $2.6 million embezzlement and money-laundering scheme at the Oglala Lakota College, was sentenced in U.S. District Court, for the District of South Dakota, to 70 months of imprisonment and 36 months of supervised release.  Lalley was also ordered to make restitution of $630,894 to the College.   Lalley was convicted in January 2000 of conspiracy to launder $593,061 related to 73 checks stolen from the College, located on the Pine Ridge Indian Reservation, South Dakota.  

Jovanna Wallace, former employee of the Crow Tribe of Indians, was sentenced in U.S. District Court for the District of Montana, to 12 months of imprisonment and 36 months of supervised release stemming from charges of bank fraud and possession of counterfeit checks.  Wallace was also ordered to submit to a mental health evaluation, to perform 40 hours of community service, to pay $200 to the Crime Victims Fund and to make restitution of $53,760.

From September through December 1999, Wallace created 35 counterfeit Crow Tribe checks totaling more than $130,000.  After successfully cashing more than $53,000 of the bogus checks, Wallace was arrested at a bank as she attempted to negotiate yet another check.  At the time of her arrest, Wallace was in possession of 14 additional counterfeit Crow Tribe checks totaling $65,000.  Wallace admitted that she had scanned a valid tribal check to develop an electronic template for the creation of the counterfeit checks. 

Jason and Chad Smeby, co-owners of North Country Lumber, McIntosh, Minnesota, were sentenced in U.S. District Court for the District of Minnesota for their role in a scheme to defraud the government on a $4.4 million contract to construct 50 homes on the White Earth Indian Reservation in White Earth, Minnesota.  For more than a year, the Smebys submitted fictitious claims to the White Earth Indian Reservation Housing Authority for payment of materials and supplies that were not provided and resubmitted claims for which they had already been paid.  Investigators uncovered nearly $300,000 in fraudulent payments before a grand jury indicted the brothers on charges of conspiracy and theft of government money.  The Smebys were sentenced to 4 months of home confinement, 36 months of probation and were ordered to pay restitution of $94,000.

A Federal grand jury for the District of Arizona indicted two former employees of a Navajo boarding school for stealing more than $200,000 from a Federal program intended to feed underprivileged school children.  Sisters Diana M. Smith and Doreen A. Begay were employed by the Kaibeto Boarding School, Tuba City, Arizona, where they allegedly found a defunct school bank account, stole checks, put money into that account, and used that money to gamble together at casinos.

JEAN PETERSON, former laboratory technician with Aaron Swan & Associates, Inc., pleaded guilty to charges for her involvement in falsifying laboratory testing reports related to the quality of materials used by a BIA contractor to complete a $3.5 million, 12-mile road on the Cheyenne River Indian Reservation in South Dakota.  BIA estimates that it could cost millions of dollars to repair the road to quality specifications.  The investigation continues to determine whether other individuals participated in the scheme to falsify the lab results.  

Bureau of Land Management


The Bureau of Land Management (BLM) successfully located and determined tribal affiliation for about 90 percent of the Native American human remains in its museum collections, and has agreed to improve its oversight of the protection and repatriation of Native American remains on public land, particularly in Colorado and Utah.  Specifically: 

* In Colorado, BLM allowed Native American remains to be reburied on public lands, counter to BLM regulations prohibiting such reburials.  BLM also did not adequately protect Native American remains buried on public land in Colorado from vandalism or theft.

* In Utah, BLM has not repatriated Native American remains in a timely manner or assigned the resources necessary to the inventory and repatriation requirements of the Native American Graves Protection and Repatriation Act.

BLM concurred with our two recommendations to ensure compliance with legislative requirements for inventorying, identifying tribal affiliation, and repatriating Native American remains and with the BLM policy prohibiting reburial of Native American remains on BLM lands.

Bureau of Reclamation

Although BOR's newly adopted concession directives will provide an adequate framework for concession operations, BOR has not corrected long-standing health and safety deficiencies at recreation sites managed by concessioners at two federal reservoirs.  At Lake Berryessa, a reservoir in Northern California, A deficient sewage system resulted in raw sewage flowing directly into the Lake.  In addition, mobile homes were "PERCHED" over eroding Lake embankments, posing a significant safety risk.  

At Canyon Ferry Reservoir near Helena, Montana, numerous health and safety deficiencies, such as improper battery storage, were found at the Goose Bay Marina concession.  
   
At both reservoirs, provisions in concession operation contracts were either inadequate or not enforced for the following areas:

* Contract defaults;
* Operation and maintenance plans;
* Building improvements;
* Health and safety inspections; and
* Prices charged the public.

BOR has made management of concessions a priority and concurred with the report's six recommendations to correct the health and safety deficiencies at the two reservoirs, improve oversight of concession operations, issue guidelines on implementing the new directives, and ensure that new and existing contracts are in compliance with the directives.  

FISH AND WILDLIFE SERVICE

FWS agreed to improve its administration of monetary incentive awards financed with Federal Aid in Fish and Wildlife Restoration Program funds.  In an audit requested by the Director of FWS, we found that in some cases FWS used funds for incentive awards that were not fully justified, properly supported, or processed in accordance with applicable guidance.  Of 150 awards reviewed, we found that 107 awards had some type of deficiency.  For example, 80 awards lacked documentation that they had been properly recommended and approved, and 4 awards compensated employees for achievements that had been recognized in 2 previously issued awards.  To address these problems FWS will perform periodical management reviews to ensure that awards are given only to qualified and properly approved individuals and processed in compliance with FWS and DOI guidance, update incentive awards guidance, and revise the awards form to specify the names and titles of officials who recommend and approve awards.

FWS awarded a $292,633 fixed-price contract to construct a brood stock test facility and drainage system at the Ennis National Fish Hatchery, Ennis, Montana.  The contractor was paid $231,033 before the contract was terminated for default.  The contractor filed a $416,335 claim for equitable adjustment that it attributed to a Federal government shutdown, differing site conditions, and weather delays.  We questioned $402,479 of the amount claimed by the contractor because the costs were not properly computed or supported.  FWS disallowed $411,313 of the contractor's claim, including the entire $402,479 questioned by our audit.

Insular Areas   

The Inspector General testified before the House Resources Committee on July 12, 2000, concerning the OIG's investigation of former Public Affairs Specialist of the Office of Insular Affairs at the Department of the Interior.  The allegations of misconduct were the subject of the OIG investigation related to the labor, Immigration and Enforcement laws in the Commonwealth of Northern Mariana Islands (CNMI).  The committee held the hearing following the Department of Justice's declination of prosecution.     

Leonard Manacop was sentenced in U.S. District Court, Saipan, to five years of probation, ordered to make restitution of $8,000, and to pay a fine of $7,000 for receiving bribes of more than $15,000 from contractors doing business with the commonwealth of the Northern Mariana Islands (CNMI) Government.  As a former estimator for the Technical Services Division, CNMI Department of Public Works, Manacop oversaw the performance of many CNMI contracts and had solicited bribes from CNMI contractors in return for providing bid information, expediting progress payments, approving change orders to increase contract awards, and accepting substandard materials or materials not meeting contract specifications.  

Florence Fermin-Eay, former fiscal officer of the Guam Humanities Council (GHC), an agency of the Territory of Guam, was sentenced in Federal District Court, District of Guam, to 12 months of imprisonment, 36 months of supervised release, and was ordered to pay restitution of $116,100.  From February 1996 to December 1997, Fermin-Eay embezzled GHC monies by writing unauthorized checks to herself.  She pleaded guilty to embezzlement charges in September 1999.

Antonio Cabrera, former Secretary of Finance, CNMI, was indicted by a Federal grand jury of the U.S. District Court, District of Guam.  The indictment charges that Cabrera accepted a $3,000 bribe from a contractor in order to facilitate the release of a $30,000 check to the contractor.  The contractor pleaded guilty for his part in the bribery and currently awaits sentencing. 

Audits identified more than $55 million in federal funds to the insular areas at issue, and continued to focus on management improvements needed in the administration of various federally funded programs.

* A review of capital improvement projects managed by the Republic of Palau revealed several problem areas, including (1) the inefficient use of $2 million in Federal capital improvement funds; (2) failure to complete 22 Trust Territory-funded projects valued at $48.3 million for periods ranging from 2 to 25 years after funds were made available; (3) discharge of pollutants into coastal waters by Malakal's sewage treatment plant because a $5.25 million expansion funded under a 1993 capital project had not been started; and (4) the lack of assurance by the Republic that $4.3 million appropriated during fiscal years 1995 through 1999 would result in long-term economic improvements to the Republic's 16 states.  The President of the Republic agreed with 11 of the report's 13 recommendations to expedite completion of the sewage treatment plant, assess staffing needs and training and implement personnel changes, and improve procedures for the planning, funding, and construction of Federally funded projects.  We have asked for an additional response to 2 revised recommendations relating to inventories of state roads and zoning laws.  

* A review of a low-income housing grant administered by the Virgin Islands Housing Authority revealed several deficiencies, including duplicate payments to a contractor, exclusion of $1.1 million of Housing and Urban Development (HUD) contributions from the Authority's Statement of Operating Receipts and Expenditures, and unsupported costs.  The Authority agreed with the report's eight recommendations to recover duplicate payments, review overtime practices, reconcile its bank accounts, and submit amended financial reports to HUD.

MINERALS MANAGEMENT SERVICE

In an ongoing effort to recover underpaid royalties on gas, crude oil, and coal extracted from Federal and Indian lands, the Department of Justice and OIG have recovered more than $330 million since 1998.   

Recently, Shell Oil Company (Shell) agreed to pay $56 million to resolve claims under the False Claims Act that it underpaid royalties owed on natural gas produced from August 1986 to December 1999.  The settlement resolves allegations that Shell systematically underreported the value of the natural gas that it produced on Federal leases in the Gulf of Mexico and, consequently, paid less royalties than it owed to the government.  This was the first settlement involving natural gas.

In several settlements involving the underreporting of oil royalties by oil companies, the U.S. Government secured another
$89.8 million.  BP Amoco agreed to pay $32 million; Pennzoil Company - $11.9 million; Sunoco, Incorporated -  $200,000; Union Pacific Resources Company - $2.7 million; and Texaco - $43 million, for their systematic underreporting of the value of oil that they extracted from Federal and Indian lands.  Investigations of additional companies are ongoing.

Following her plea of guilty to embezzling funds from MMS, Robin Bland, a former MMS accountant, was sentenced in U.S. District Court for the Eastern District of Virginia to 18 months of imprisonment, 36 months of supervised release and was ordered to make restitution of $359,397.  For more than two years, Bland had electronically transferred MMS funds into her own bank accounts and accounts of her associates.  The scheme went undetected because proper checks and balances designed to separate procurement functions among MMS employees were not followed.  MMS has since taken steps to enhance its internal control measures.

Management officials of MMS's Offshore Minerals Management program have agreed to develop enhanced security procedures for the Technical Information Management System (TIMS), a comprehensive database essential to managing revenues from MMS mineral leases.  The leases result in royalties of more than $4 billion annually.  Lack of adequate security increased the risk that TIMS:

* Data could be accessed and modified or disclosed by unauthorized users;
* Software and data could be inaccurate, stolen, or destroyed; and
* Functions and processes could not be recovered in the event of a disaster or system failure and TIMS could not perform as intended.  

MMS concurred with the report's 15 recommendations to make improvements in the TIMS security program, the continuity of operations plan, the access controls to TIMS and its databases, and the policies and procedures for making changes to TIMS software. 

National Park Service

Deborah Wilcox, a former employee of the Rocky Mountain Nature Association (RMNA), a nonprofit entity associated with Rocky Mountain National Park, Estes Park, Colorado, was sentenced in Larimer County District Court, Fort Collins, Colorado, following a guilty plea to tax evasion in connection with the theft of $31,496 from RMNA.  Wilcox, as RMNA's accounting manager, embezzled the monies between January 1996 and June 1997.  She was sentenced to 60 days of confinement in county jail, 8 years of probation, and was ordered to make restitution of $10,000, perform 768 hours of community service, and to pay the state of Colorado $1,635 in back taxes.