[Semiannual Report, October 2001]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 10-S-01

Title: Semiannual Report, October 2001

 
Date:  October 2001

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This file contains an ASCII representation of an OIG report,
Subject:  Semiannual Report, October 2001 (No. 10-S-01).  No attempt
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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) 219-3841.
******************************

I am pleased to present the accomplishments and results achieved by the Office of Inspector General (OIG) during the period of April 1, 2001 - September 30, 2001.  This period includes activities focused specifically on Department of the Interior (DOI) programs and operations, as well as activities that extend beyond DOI - specifically, domestic security.  The tragic events of September 11, 2001, and the ensuing war on terrorism forever altered America's sense of security and highlighted the importance of our security-related responsibilities.

The Department of the Interior was not immune to the effects of the terrorist attacks.  Within minutes of the attacks, the Office of Inspector General coordinated with DOI Senior Staff for continuity of operations, while every OIG investigative field office coordinated with area Federal Bureau of Investigations (FBI) offices to offer and provide investigative assistance.  Soon after the attack, our agents were at the scene of ground zero assisting the New York Fire and Police Departments.  Nearly one-third of the Office of Investigations' investigative staff was dedicated to anti-terrorist task forces throughout the country performing various law enforcement functions.

Despite its current focus on terrorism, the Administration has firmly emphasized  major management reforms in Government organizations, increased accountability in the Government's financial and management operations, and results from program activities.  The OIG continues to play a significant role in promoting integrity and accountability in the Department's programs and          operations.  Our accomplishments and activities over the last six months reflect our focus on addressing the most serious management and program challenges facing the Department.

Following the mission objectives identified in our Strategic Plan, our audit and investigative work over the last six months involved several crosscutting issues and management challenges for the Department.  Results include findings and recommendations related to:

ï¿½Weaknesses in the Department's non-national security information technology (IT) systems;
ï¿½Continued internal control and management weaknesses identified in financial statement audits;
ï¿½Potential liabilities for sealing oil and gas wells on Indian Trust land;

ï¿½Continued underpayment of royalties to the Federal Government;
ï¿½Lack of security and oversight for protecting the integrity of Indian Trust Fund records;
ï¿½Intensified OIG efforts to identify, prevent, and resolve instances of Government credit card abuses; and Historic debarment of a grant recipient for misuse of Federal funds.

I am also proud to highlight the recognition of two OIG Special Agents.  The President's Council on Integrity and Efficiency (PCIE) recently recognized these agents for their exemplary efforts exhibited during the investigation of widespread oil and gas royalty fraud.  I am pleased to have such outstanding staff working aggressively to further the mission of the OIG and the Department.

The OIG continues its efforts for enhancing communication and  coordination with the Department and the Bureaus and facilitating more collaborative resolutions to problems.  We appreciate the continued support given to us by the Secretary, the Congress, and the Office of Management and Budget for our work.  We hope to continue building a stronger foundation to address and solve difficult internal control, management and program weaknesses within the Department.

Earl E. Devaney
Inspector General

Mission
The mission of the Office of Inspector General (OIG) is to promote        excellence in the programs, operations and management of the Department of the Interior.

Responsibilities

The OIG is responsible for independently and objectively identifying risks and vulnerabilities that directly impact, or could impact, the Department's ability to accomplish its mission.  We are required to keep the Secretary and the        Congress fully and currently informed about problems and deficiencies relating to the administration of Departmental programs and operations.  Effective 
implementation of this mandate addresses the public's demand for greater          accountability in the administration of Government programs and operations and the demand for programs that work better, cost less, and get the results Americans want.  

Activities

The OIG accomplishes its mission through conducting audits, evaluations, and investigations relating to programs and operations of the Department.  The OIG has reorganized and re-engineered its internal operations to provide higher quality products and services in areas that are of the highest priority and provide the greatest return on investment.

In our first annual evaluation of the Department of the Interior's (DOI) non-national security Information Technology (IT) systems, as required by the Government Information Security Reform Act, we concluded that the Department does not have adequate security policies, procedures, or controls to protect all information systems supporting DOI operations and assets.  We found inadequate risk assessments and security plans that were not current, maintained, or followed.  We also determined that security programs were not established or evaluated for all bureaus, and employees were not consistently trained on their IT security responsibilities.  Those bureaus that did not include IT security in their budget requests need to do so.  We considered these inadequacies material weaknesses that require an action plan that identifies the personnel, tasks, and resources needed to correct the deficiencies.

In the past year, OIG intensified its efforts to identify, prevent, and resolve instances of  government credit card abuses, and the Department has responded in kind.  More than 40 cases were resolved by Departmental bureaus with administrative action, and three were criminally prosecuted.  Disciplinary actions were taken ranging from reprimands to removals.  In an effort to prevent credit card abuses, our Investigative staff provides fraud awareness briefings to DOI employees and managers.  In addition, our three top Regional law enforcement managers were invited to make a presentation at the biannual Acquisition and Property conference sponsored by the Department.  They conveyed their experience and expertise to assist managers in guarding against employee misuse, identifying fraud indicators, and detailing the available criminal and administrative remedies.

OIG estimated that DOI could face a potential liability of as much as $584 million to plug abandoned oil and gas wells on Indian trust lands.  Oil and gas companies leasing Indian trust lands are required to obtain sufficient bonding to cover all lease terms, including plugging abandoned wells and reclaiming the trust lands.  We rec ommended that the Bureau of Land Management (BLM) and the Bureau of Indian Affairs (BIA) work together to ensure that this is accomplished.
 
BLM is responsible for determining DOI's financial risk for wells on Indian trust lands and providing that information to BIA.  BIA should determine the amount of bonding needed to protect DOI from liability should the oil or gas company owner/operator default on the lease.  DOI must be especially vigilant when large, well-capitalized oil and gas companies assign leases to smaller, less-capitalized oil and gas companies.  BIA and BLM have been reluctant to enforce bonding requirements because enforcement might constrain economic development of Indian trust lands or permanently close wells.

BIA agreed with our recommendations to ensure that sufficient bonding is obtained and oil and gas company assignors and assignees are held jointly liable for leases.  BIA also agreed to determine whether it had legal authority to establish a contingency fund to protect DOI from potential liability in those cases where companies do not have sufficient bonding.   Although BLM concurred with the  recommendation to ensure that the financial liability of all lessees is reviewed, it did not indicate the specific actions it would take to implement the recommendation.  We requested BLM to reconsider its response.

In recent meetings, we advised the Minerals Management Service (MMS) and the State and Tribal Royalty Audit Committee of issues which may result in the underpayment of royalties under the Stripper Oil Well Royalty Rate Reduction Program.  This Program provides economic incentive for operators to maintain or restart production of marginal or uneconomic oil wells.  Our key concerns were:

An incorrect and lower royalty rate will result if operators blend oil with condensate, a lighter grade of hydrocarbon fluid not eligible for the royalty rate reduction program.

A reduced royalty rate and a lower average daily  production rate will result if the monthly reporting of production and injection days exceed the actual number of days the wells are in operation.

Reduced royalty rates result when single well bores (producing from two or more oil formations) are counted as multiple wells.  This increases production days and lowers average daily production rates.  

We also provided in-depth training on methodologies for detecting underpayments to auditors from several states, including New Mexico and Wyoming.  The New Mexico, California, and other state auditors have pursued these issues at several properties and have issued letters for underpayments of royalties of more than $1.6 million.
	
We issued unqualified opinions on the Bureau of Reclamation (BOR), Geological Survey (GS), Bureau of Indian Affairs, and the Departmental Offices (DO) financial statements for fiscal year 2000.  

Fish and Wildlife Service's (FWS) principal financial statements for fiscal year 2000 were fairly presented except for the undelivered orders' recorded balances on the Consolidated Statement of Budgetary Resources.  Deobligation of undelivered orders needs to be performed in a timely manner. 
 
Minerals Management Service did not submit their principal financial statements for fiscal year 2000 on time, therefore, we did not express an opinion.  We did, however, issue an unqualified opinion on MMS' Statement of Custodial Activities.  

The financial statement audits identified the following internal control weaknesses: Construction-in-progress was overstated.  The general ledger control accounts incorrectly included:  costs for completed projects, costs that should have been expensed when incurred, costs for land that should have been recorded in the standard general ledger for land, costs for grants that should have been expensed, and costs for projects where the construction had been placed in       abeyance.  (FWS, BOR, BIA, DO)

Unliquidated obligations were not timely deobligated or adequately supported.  (FWS, BOR, GS, MMS, DO)

Liabilities were not properly accrued at year-end and not reported within the appropriate accounting period.  (FWS, MMS, BIA)

Security and general controls over financial management systems were not adequately established or operating effectively to ensure that sensitive or critical financial data or systems were safeguarded.  (FWS, MMS, BIA)

Deferred maintenance amounts were inadequately supported.  (FWS, BIA)

Property, plant, and equipment balances in subsidiary ledgers were not recorded in accordance with Federal Financial Accounting Standards. (FWS, GS, MMS, BIA)

MMS financial management and accounting processes were inadequate, resulting in fiscal year 2000 financial data that were inaccurate, incomplete, and late.  As a result, critical milestones for the preparation of its fiscal year 2000 statements were missed, resulting in the OIG being unable to complete its audit. 

FWS grant payment records did not support that the drawdowns taken by grantees were for costs incurred during fiscal year 2000.  Currently, the Department is working with other Federal agencies as part of the Interagency Electronic Grants Committee to develop and implement electronic processes to correct this issue.  

The DOI is working with the bureaus to initiate corrective action on these weaknesses.

Financial statements for fiscal year 2000 and 1999 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, 2000 and 1999; inadequacies in various Indian trust fund accounting systems;inadequate records and weaknesses in internal controls; and  disagreements with individual Indians about their trust fund balances.  

OIG's Audit Quality Assurance and Follow-up Unit completed its first review cycle of OIG audit recommendations.  We examined actions reportedly taken to recently implement six recommendations in four audit reports and found that two of the recommendations had not been fully implemented.  After the Unit met with the Department and the affected bureaus to discuss their findings, the Department reinstated one recommendation as unimplemented and the affected bureau provided additional information to show that corrective actions were being taken for the other recommendation.  

At the request of the Chairman of the U.S. House of Representatives Committee on Government Reform, we reviewed ten significant Fiscal Year 2000 DOI performance measures.  We concluded that the performance measures, such as fair return of value to the public on minerals, provided useful information on major DOI activities to decision makers and the public.  Many of the measures, however, need to be clarified, expanded to include other bureaus, or supplemented with additional information to explain the significance of the measure and to better describe reported accomplishments.  For example:

The measure for meeting water resource needs was to deliver or release the amount of water contracted-for from BOR-owned and operated facilities, expected to be no less that 27 million acre-feet. Although meeting water commitments is important, the quantity of water delivered in any given year is weather-dependent, and water commitments are generally established annually based on the water supply.  Therefore, the BOR should always be able to meet its water delivery goals.

The measure for acres of land restored was to enhance or restore 237,000 acres of mined lands, refuges, parklands, and forests.  It could be improved by also showing the total number of acres in need of restoration and by defining "restoration.

The measure for number and percentage of cultural properties in good condition was for the National Park Service (NPS) to maintain 47 percent (10,900 of 23,167) of structures in good condition and 35 percent (83 of 236) of landscapes in good condition against the baseline.  For this measure to be more meaningful it should be expanded to include all bureaus responsible for restoring cultural properties and be expanded to include resources.

In a review mandated by the Treasury and General Appropriations Act of 2001 which requires that Congress be informed about information that personally identifies Government web site users, we determined that, with some exceptions, DOI Web page visitors were appropriately informed on how the information would be used.  While not all of DOI's 6,000 Web pages collected this information, our review of 598 Web pages discovered that 84 did.  Of those 84 pages, 67 revealed that user information was collected and how it would be used.  The remaining 17 pages did not reveal this information, but asked users to submit comments, feedback, or personal information when submitting applications for positions, registering for conferences, or downloading application software.  

In addition, we tested five third-party contractors that collected personally identifiable information.  Three of the five did not disclose all uses of the collected information.

The sudden death of a BIA employee responsible for maintaining the financial data and program files associated with distribution of Indian Trust funds to members of the Pine Ridge Indian Reservation in South Dakota prompted an investigation leading to the discovery of questionable security measures, lack of oversight, and insufficiently trained personnel, which potentially compromised the integrity of Trust fund records.  Each November the BIA Pine Ridge Agency makes the annual distribution of nearly $3 million in grazing lease revenues, held in trust by the BIA for approximately 13,000 Pine Ridge Reservation residents.  The deceased was the sole Agency employee trained in the data maintenance and program files needed to complete the distribution.  A Trust Resource Specialist from the Office of the Special Trustee, Office of Trust Fund Management, attempted to complete the distribution and discovered that the employee had   downloaded critical data to diskettes, which were part of the personal effects removed by the deceased's family.  The records were recovered and no destruction or tampering was revealed.  Based on a management implication memorandum issued by our Office of Investigations, BIA implemented significant preventative measures.  A recent BIA directive requires that all Trust data be stored on the proper secured server and that periodic site reviews be conducted to ensure compliance.  In addition, BIA mandated that each agency dealing with the range and leasing programs have more than one properly trained employee and that no simultaneous leave be approved for those maintaining the database records.  Lastly, BIA directed that a supervisor, or designated official must ensure that no Trust records, data, papers or memoranda are removed from BIA facilities during an employee out-processing period.

Herman G. Fisher, former Safety and Occupational Health Specialist, Facilities Management and Construction Center, BIA, Albuquerque, New Mexico, was indicted by a Federal grand jury on charges that he demanded and received bribes totaling $20,000 from an Albuquerque contractor.  The contractor was awarded a  $5.6 million contract to provide portable classrooms throughout Indian country, and according to the indictment, on four separate occasions between December 1999 and May 2000, Fisher demanded and received bribe payments totaling approximately $20,000 in exchange for Fisher facilitating the approval of payments to an Albuquerque contractor.  The contractor cooperated with the joint OIG and FBI investigation.  Fisher entered a plea of not guilty in the U.S. District Court, District of New Mexico, and his trial is pending.  Fisher retired from Federal service after the BIA proposed to terminate him. 

An OIG audit of the BIA credit card activity revealed that Sylvia "Cookie" Poblano, former secretary, Southwest Regional BIA Office, Albuquerque, New Mexico, misused a Government-issued credit card.  The resulting investigation disclosed that on 43 occasions between February 1999 and August 2000, Poblano charged nearly $14,000 in personal expenses on her government credit card.  In order to conceal the purchases, Poblano, using the names of legitimate companies with which the BIA conducts business, created and submitted a series of falsified invoices to BIA officials.  Following her guilty plea to charges of theft, Poblano was sentenced in U.S. District Court for the District of New Mexico, to four months of home detention with electronic monitoring and two years of supervised probation.  Prior to sentencing, Poblano resigned her position with the Government and full restitution was deducted from her Federal retirement account.

In a precedent setting measure, the Office of Acquisition and Property Management debarred the Black Widow Rope Company and its principal officers, Tim and Belinda Chalfant from participating in Federal business transactions for three years.  The Black Widow Rope Company was established, in part, through Indian Business Development grants.  The Chalfants received $53,000 in DOI grant money and used more than $23,000 for personal expenditures.  The action reflects a successful cooperative effort between OIG and the Office of Acquisition and Property Management under which referrals for debarment action are actively sought and pursued.  This is the first debarment of grant recipients in the Department's history.

Gerald T. Burd, former Executive Director and Financial Controller for the Haskell Foundation, was sentenced in U.S. District Court for the District of Kansas, to 12 months of imprisonment, 36 months of supervised release, and ordered to pay restitution in the amount of $103,980.  The Haskell Foundation is a non-profit organization formed to administer gifts and donations to the Haskell Indian University, both of Lawrence, Kansas.  Burd embezzled grant and contract funds provided to the Haskell Foundation by BIA Office of Indian Education Programs (OIEP), in part, to be used for  improvement studies of BIA elementary and secondary schools.  A debarment proposal is pending. 


Charles Kirkpatrick, former pilot for the Seminole Tribe of Florida, pleaded guilty to charges that he embezzled tribal funds.  Specifically, Kirkpatrick arranged the purchase of various aircraft on behalf of the tribe.  After negotiating a purchase price with a broker, Kirkpatrick artificially increased the purchase price of each aircraft by several hundred thousand dollars, and took a commission from the difference.  At his sentencing hearing, Kirkpatrick told the U.S. District Court, Southern District of Florida, that he wanted to rescind his guilty plea because he did not believe that he had committed a crime.  Kirkpatrick's attorney immediately requested that the Court allow him to withdraw from the case, and the Court appointed a new attorney to represent him.  In a subsequent hearing, the judge denied Kirkpatrick's motion to withdraw his plea, and set a sentencing date.  

Tribal Comptroller Allan Butterfield and Tribal Accountant Lou Ann Gordon of the Red Cliff Band of Chippewa Indians (Red Cliff Band) were sentenced in U.S. District Court for the Western District of Wisconsin for their role in a scheme to embezzle approximately $925,000 from a tribal bank account and converting nearly a quarter of a million dollars of the funds to their personal use.  The Red Cliff Band located in Bayfield City, Wisconsin, is an Indian tribal organization that receives more than $1 million in funding from  BIA each year.  During the investigation, it was discovered that a bank account reserved solely for the distribution of Federal program funds was improperly being used to issue payroll advances to Red Cliff Band employees.  None of the advances were repaid.  For more than three years, Butterfield and Gordon used a bank account that the tribal council was told had been closed, then disbursed payroll advances from the hidden account to themselves and others within the tribal accounting department.  Butterfield was sentenced to 12 months of imprisonment and ordered to make restitution of $108,000.  Gordon was sentenced to 18 months of imprisonment and ordered to make restitution of $137,208.

Three employees of the Oglala Sioux Tribe's Financial  Accounting Department were indicted on charges of conspiracy and embezzlement by a Federal grand jury in South Dakota.  The indictment alleges that Estelle Goings, Director, Vonnie Goings, Deduction Clerk, and Carol Vitalis, Payroll Technician, embezzled more than $97,000 from the tribe by diverting tribal funds to themselves via fictitious payroll advances and fabricated overtime.  Trials are pending.


A comprehensive review was conducted by Investigations and Audits arising from allegations that an employee of the Colorado State BLM office was circumventing procurement regulations and small purchase guidelines.  The review identified several areas of needed improvements in the control and oversight of Government credit card purchases and the use of convenience checks by the Colorado State BLM office.  Following the issuance of a management implication memorandum by the OIG, the Colorado State BLM office agreed to strengthen operations and record-keeping statewide.  To that end, the BLM issued a June 29, 2001 Instruction Memorandum to all employees, which provided more stringent guidance pertaining to the monthly credit card statements that requires an amplified review and approval process by supervisors, and a five-day reconciliation period for monthly statements by all employees.  To ensure consistency among reviewing officials, the guidance offered a 19-item checklist.  

Douglas A. Anderson, former lead architect for BLM in Arizona, was sentenced in U.S. District Court, District of Arizona, to six months of electronically-monitored house arrest, 60 months of        probation, and was ordered to pay restitution of nearly $70,000.  For more than a year while working for the BLM, Anderson used his government-issued credit cards for work and services purportedly performed by three businesses he owned.  Anderson created the three fictional businesses on paper only, and invented work orders and billing charges to supplement his income.  No work or service was ever performed by the companies, and Anderson used the money paid to his companies by BLM to pay his personal debts.

In May of 1989, Clive Joe, President, Pan American Geological Services, Inc., was found guilty of conspiracy and mail fraud by a jury in the U.S. District Court, Eastern District of New York, following a lengthy OIG investigation into an investment scam using the BLM's Simultaneous Oil and Gas Lease Lottery program.  Joe was released on $100,000 bond but failed to appear for sentencing and a bench warrant was issued for his arrest.  After more than 11 years as a fugitive, local law enforcement arrested Joe for a bad check charge.  A fingerprint check revealed his fugitive status, and Joe was taken into custody by the FBI.  Joe was subequently indicted by a Federal grand jury with violations pertaining to his flight from the previous conviction.  Joe agreed to plead guilty for failure to appear.  Joe's sentencing for this and the previous charges is pending with the same judge that presided over his original trial. 


Applications for mineral patents will not be processed by the deadline imposed by Congress.  BLM did not complete a sufficient number of mineral examinations and therefore the Solicitor's Office could not complete its review of the applications by the due date of September 30, 2001.

The General Mining Law of 1872 allows mining claimants meeting certain requirements to apply for mineral patents.  These patents convey title to the land where a mining claim exists.  Except for certain "grandfathered" applications, Congress subsequently imposed a moratorium on accepting and processing mineral patent applications.  The moratorium imposed a September 30, 2001 deadline for processing at least 90 percent of the grandfathered applications.
  
Our report contained two recommendations:  to develop a timeframe for application processing, and to report the status of  application processing to Congress.  BLM and the Solicitor's Office agreed to implement the recommendations.

	BLM agreed to a third-party review of its appraisal process to safeguard against the appearance of a conflict of interest or         wrongdoing.  The issue arose in Washington County, Utah, where BLM developed and used an alternative appraisal approach to acquire land, primarily to protect the endangered desert tortoise.  BLM         established the alternative approach as a means of overcoming      landowner resistance to and instilling confidence in BLM's acquisition program.

 	BLM's alternative approach, however, was risky.  As practiced in Washington County, the appraisal process was not separate from price negotiations and did not ensure that appraisals were objective and independent.  Prices negotiated in the reviewed appraisals might not have been based on estimates of fair market value, as required by Federal land acquisition regulations.  Using the alternative approach, BLM could not preclude the appearance of wrongdoing, such as the altering of land appraisal values to negotiate a price with the          landowner.

	BLM agreed to obtain a peer review of its alternative appraisal approach and to implement the changes recommended by the peer review.   


	An FWS employee entered into a Pretrial Diversion Agreement with the United States Justice Department to settle charges that he submitted false documents to FWS pertaining to a Permanent Change of Station move.  The employee admitted that he submitted travel vouchers claiming nearly $5,000 for expenses associated with qualified family members who relocated with him.  In fact, herelocated with and claimed expenses for non-family members.  The Pretrial Diversion Agreement provides for deferment of prosecution for a period of 18 months.  During the 18 months deferment period the employee was ordered to pay restitution.  The employee resigned from the FWS after receiving a notice of proposed removal.  


	Over $1.2 million of U.S. Virgin Islands lottery funds were not used for authorized purposes or properly collected and deposited. 

ï¿½Lottery funds totaling $99,102 were used by Anthony Dizon, former Executive Director, for personal purposes.  In addition, collections totaling $11,930 were not deposited to the lottery's account and may have been stolen, and a bank deposit totaling $40,985 was not credited to the lottery's bank account and also may have been stolen.            

An ensuing OIG investigation resulted in Dizon pleading guilty in U.S. District Court for the Virgin Islands to a charge of wire fraud in his embezzlement scheme.  His sentencing is pending.  

In a spin-off investigation, Sonia Foy, another lottery employee,	was charged and pleaded guilty to embezzling nearly $12,000	from the lottery.  Her sentencing is also pending. 

ï¿½Accounts receivable totaling $88,224 were not collected from dealers and agents for unpaid returned checks and for instant lottery tickets delivered to business establishments, and instant lottery funds totaling $916,000 were transferred to the traditional lottery without proper authorization. 

ï¿½Funds of $51,000 were used to fund a celebrity golf tournament and to pay the cost for 30 students to attend youth games in the United States.

ï¿½Licensing fees totaling $3,700 were not collected from agents who sell instant lottery tickets, and a total of $285 from two change funds at the instant lottery could not be accounted for.

We also found that unsold instant lottery tickets valued at about $97,000 were not appropriately returned to the contractor for refund and that unsold traditional lottery tickets valued at $14,380 were not accounted for and were unavailable for sale until one day prior to the drawings.  As a result, the lottery lost revenues of $111,380 from refunds and potential sales.  The report contained 16 recommendations, addressed to the Governor of the Virgin Islands and to lottery officials.  The Governor and lottery officials agreed with the recommendations.  


An audit of the U.S. Virgin Islands Department of Education payroll system found that controls over the preparation of time and attendance records, and distribution of payroll checks and direct deposit statements to employees were adequate.

A review of payroll records of 292 employees identified only nine instances of incorrect payments. In these nine cases, Federal funds, rather than local funds, had incorrectly been used to finance payroll expenses.  Three of the nine errors were corrected by the time our review was completed.  

We made three recommendations to strengthen controls over these accounts.  The Governor of the Virgin Islands agreed to implement these recommendations.

Guam's Economic Development Authority was found to have inadequate controls over its loan program funds.  Adequate controls are needed to deter improper use of funds such as those discovered by the audit.

More than $1.3 million was used to cover the cost of writing off uncollectible loans and to transfer profits of another $1.3 million from a property sale to an operating account.  Both of these uses are contrary to legislation and loan program guidance.  
	
The Authority lost over $450,000 and placed $3.6 million at risk of loss because it made loans to a corporation and several businesses that had delinquent loans or leases.  

Another $2.3 million in delinquent loans may have been lost and $2.2 million was placed at risk of loss because the Authority approved questionable loans and did not collect delinquent loans.

Recommendations were made describing measures to safeguard against losses from delinquent loans, improve loan collection practices, and strengthen the integrity of the loan process. 

The Guam Economic Development Authority needs to establish controls over its Qualifying Certificate Program, designed to encourage private sector investment by granting tax rebates and abatements to qualifying businesses.  

Nearly $770,000 in tax revenues was lost during a two-year period because unnecessarily generous tax benefits were given to hotel and tourist industry firms.  This loss could reach $70.8 million in the future.  About $460,000 in improper tax abatements was granted to companies not in compliance with their agreements.  Other Guam agencies improperly abated more than $5 million in use taxes without verification of eligibility.  Further, $2.3 million of legally mandated investments in Guam's economy may have been lost because the Authority did not require recipients of tax relief to reinvest their tax benefits. 

The report recommended that the Authority seek legislative changes to strengthen Program controls, develop standard operating procedures, provide formal training to Program staff, and coordinate its activities with those of other related governmental agencies.

The President's Council on Integrity and Efficiency (PCIE) recognized Office of Investigation Special Agents Joseph D. Crook and Patrick M. Murphy for their exemplary efforts exhibited during the investigation of widespread oil and gas royalty fraud with an "Award for Individual Accomplishment."  This annual award recognizes sustained contributions to the PCIE over a period of time and outstanding leadership of projects or events that contribute to the PCIE mission.  The agents' tenacious approach to these highly complex and labor-intensive investigations resulted in the recovery of $473.3 million since August 1998 and nearly $200 million during the past 12 months.  The magnitude of this program and the potential for the significant loss of revenues compelled the OIG to identify fraud in the Department's royalty program as a major OIG initiative in high-risk programs.  These efforts have been assisted by the MMS and the U.S. Department of Justice.  

In August 2001 the BP Corporation North America, Inc., agreed to pay $365,000 to the U.S. Government to resolve claims under the False Claims Act that they underpaid royalties to the MMS for carbon dioxide gas produced from Federal lands in New Mexico between 1994 and 1997.  This was the OIG's first such settlement related to carbon dioxide gas production.  This continuing effort by the Department of Justice, MMS and the OIG has resulted in the recovery of nearly $485 million since 1998 in underpayments of royalties on gas, crude oil, and coal from Federal and Indian lands.  Investigations of additional companies are ongoing.

MMS awarded a cooperative agreement to perform audits and related investigations of oil and gas leases to the Ute Indian Tribe.  Of the $1.3 million billed by the Tribe, we took exception to about $132,000 of indirect costs because the Tribe did not have an approved negotiated indirect cost rate for the periods billed.  MMS agreed with the audit finding, and stated that the cost exceptions will be resolved after the Tribe submits indirect cost rate proposals to its cognizant federal agency for the affected years.

Sharon Herring, a former secretary at the Recreation Conservation Division, NPS, was sentenced in U.S. District Court, District of Georgia, for falsely claiming more than $34,000 in overtime hours on her time and attendance forms.  For more than a year, Herring submitted the overtime hours for work she allegedly performed at the Southern Area Coordination Center.  The Southern Area Coordination Center is a multi-agency task force assigned to handle emergencies that include forest fires, hurricanes, and tornadoes.  In one pay period alone, Herring claimed 320 hours of overtime.  Herring was sentenced to six months of house arrest, and five years of probation.  In addition, Herring was ordered to make restitution of $34,487, which she paid in full at the time of sentencing, and to pay a fine of $2,000.

David Jones, former NPS Supervisory Botanist, Everglades National Park, Miami, Florida, was sentenced in the Circuit Court of the Eleventh Judicial Circuit for Dade County, Florida, to five years of imprisonment as a result of his conviction for theft of two government issued credit cards and misuse of his agency issued credit card.  Over a four-month period beginning in October 2000, Jones used two government credit cards that he stole from NPS vehicles, and his agency issued credit card, to make more than $13,000 in unauthorized purchases and automated teller machine withdrawals.  The investigation revealed that Jones used the credit cards to purchase goods that he would sell for cash, which he then used to purchase drugs.  After imposing a five-year sentence, the Court agreed to reduce the sentence to four months of incarceration and 12 months of house arrest at a residential drug treatment facility, provided that Jones surrender to the rehabilitation facility within one week.  In addition, the Court ordered Jones to make restitution in the amount of $13,596.  Administrative action by NPS is pending.

Ivan Jones, former Maintenance Worker, National Capital Parks East, NPS, Washington, D.C., pleaded guilty in U.S. District Court for the District of Columbia, to charges that he stole Government funds by submitting false trial subpoenas to his supervisor to justify receiving paid leave.  Over nearly two years, Jones submitted numerous fabricated Superior Court of the District of Columbia felony criminal trial witness subpoenas to his immediate supervisor at the NPS.  The supervisor subsequently granted more than six weeks of paid administrative court leave to which Jones was not entitled.  Jones resigned his position with the NPS, and is awaiting sentencing.

Addison Fair, former NPS Maintenance Worker, Sharpsburg, Maryland, pleaded guilty following his indictment for improperly receiving more than $50,000 in disability retirement benefits under the Department of Labor, Office of Worker's Compensation Program.  Fair, who was allegedly injured while on the job at NPS, submitted false reports to the Department that he was not working and earned no income when, in fact, he was employed as a limousine driver.  Fair also falsified his application for employment with the NPS by certifying that he had not been previously convicted of a crime when, in fact, he had a conviction in 1994.  Sentencing is pending.

NPS awarded a $23.7 million cost-plus-fixed-fee contract for the renovation of utilities at an historic site.  We took exception to about $110,000 in overhead costs billed by the contractor.  The contractor applied its overhead rate to the subcontractors' cost when submitting the subcontractors' bill to NPS for payment.  The $110,000 resulted from applying the contractors' overhead rate to the cost exceptions identified during our audits of the subcontractor.  NPS is in the process of resolving the cost exceptions with the contractor.

Office of Surface Mining (OSM) has improved controls over its automated information systems by implementing prior OIG recommendations. 

As recommended, OSM conducted risk assessments, reviewed system access procedures, provided for notification of users' employment status changes to system administrators, provided for separation of duties for certain personnel involved in monitoring system access, and enforced procedures for software development and management control changes.  

However, OSM has not completed its contingency plans or tested its Continuity of Operations Plan.  In addition, they need to base classification of sensitive positions on the risks and duties of those positions, strengthen access controls over certain systems, and implement additional controls over remote access connectivity to some information systems.