[Office of Inspector General Semiannual Report the Congress - October 1996]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 10-S-96

Title: Office of Inspector General Semiannual Report the Congress
       - October 1996

Date: October 1, 1996

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

This file contains an ASCII representation of an OIG report.  No attempt
has been made to display graphic images or illustrations.  Some tables
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, Logistical Services Branch at
(202) 208-4599.
                  ******************************

MESSAGE FROM THE 
INSPECTOR GENERAL


In our Statement of Reinvention Principles, adopted in January 1994, the
Inspectors General emphasize, among other things, the need to "[b]uild
relationships with program managers based on a shared commitment to
improving program operations and effectiveness."  This concept of a "shared
commitment" holds, in my view, one of the keys to meeting successfully the
challenges that we face as Inspectors General in the effective performance of
our statutory mission.   

The idea of a "shared commitment" between Offices of Inspector General and
agencies over which they have audit and investigative jurisdiction may, on the
surface, seem somewhat novel; however, upon further reflection, any such
thought should quickly disappear.  While it is true that Offices of Inspector
General are the entities charged, by statute, with the responsibility to "prevent
and detect fraud and abuse," and to "promote economy, efficiency, and
effectiveness" in the operations of government, every public servant has a
similar responsibility.  That is because as public servants, we hold a public
trust that requires us, among other things, to ensure to the best of our abilities
the integrity and accountability of the programs and operations over which we
have cognizance.  

This "shared commitment," then, is simply the embodiment of our
responsibilities as public servants, based on mutual respect for the important
role played by each participant who shares the commitment.  In this case, the
respect underlying the "shared commitment" should foster recognition of the
role of Inspectors General as providing independent and objective audits,
investigations, reviews, analyses, and recommendations, and the role of agency
personnel as providing responsible program administration, with the
contribution of each directed toward the common goal of promoting and
achieving better government.

As "agents of positive change," we in the Office of Inspector General are
planting the seeds of, and cultivating, that "shared commitment" as we perform
our mission.  On the audit side, we continue to receive and respond to an
increasing number of requests from our auditees to lend our expertise,
proactively, to various projects, programs, and activities with which they are
involved.  In this regard, we are providing, or have provided, assistance in a
variety of areas, including Indian Self-Determination Act rulemaking,
correction of financial accounting system deficiencies, Departmental
reinvention efforts, issues related to the U.S. Geological Survey's map inventory
and the Minerals Management Service's Royalty Gas Marketing Pilot program,
accounting controls and procurement practices in the U.S. Virgin Islands, and
financial modernization in Guam.  Through the combined efforts of Office of
Inspector General auditors and our auditees, improvements are being made in
various programs and activities.
 On the investigative side, we are continuing to expand our "Fraud Awareness"
Outreach program.  This initiative is designed to enhance our "prevention and
detection" efforts by sensitizing program personnel to indicia of fraud, and
enlisting their support and assistance in the fight against fraud in
Departmental programs through increased vigilance as they perform their daily
responsibilities and the timely referral of suspected cases of wrongdoing to the
Office of Inspector General.  This outreach initiative has provided an effective
vehicle for us to deliver personally our law enforcement message to
Departmental and bureau employees in various locations in the United States.  

Finally, we have launched our Affirmative Civil Enforcement (ACE) initiative,
which will, in our view, provide an effective additional law enforcement tool to
be used to combat fraud and other forms of white- collar crime in
Departmental programs.  Two ACE training conferences, held in Denver,
Colorado, and Arlington, Virginia, and cosponsored by the Office of Inspector
General and the Department of Justice, brought together approximately 400
individuals from several U.S. Attorney's Offices, the audit and investigative
staffs of the Office of Inspector General, the Department's Office of the Solicitor,
and the bureaus and offices within the Department to learn about ACE and to
discuss its applicability to Departmental programs.  The conferences, whose
attendees came from various parts of the continental United States, as well as
from Alaska, Guam, and the Virgin Islands, brought to life the potential power
of a "shared commitment."

A "shared commitment to improving program operations and effectiveness" is,
unquestionably, one of the keys to better government.  We hope, through our
continued efforts, to make this concept a powerful force within the Department
of the Interior. 



     
     Wilma A. Lewis
     Inspector General  CONTENTS

                                                           Page

Statistical Highlights . . . . . . . . . . . . . . . . . . . . .v
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . .1
   Department Profile. . . . . . . . . . . . . . . . . . . . . .1
   OIG Organization. . . . . . . . . . . . . . . . . . . . . . .2
OIG Officewide Initiatives . . . . . . . . . . . . . . . . . . .4
Audit Activity . . . . . . . . . . . . . . . . . . . . . . . . .5
Investigative Matters. . . . . . . . . . . . . . . . . . . . . .8
Congressional Hearings . . . . . . . . . . . . . . . . . . . . 10
Legislative Review . . . . . . . . . . . . . . . . . . . . . . 16
Significant Audits and Investigations. . . . . . . . . . . . . 17
   Bureau of Indian Affairs. . . . . . . . . . . . . . . . . . 17
   Bureau of Land Management . . . . . . . . . . . . . . . . . 20
   Bureau of Reclamation . . . . . . . . . . . . . . . . . . . 22
   U.S. Fish and Wildlife Service. . . . . . . . . . . . . . . 24
   U.S. Geological Survey. . . . . . . . . . . . . . . . . . . 25
   Minerals Management Service . . . . . . . . . . . . . . . . 26
   National Biological Service . . . . . . . . . . . . . . . . 28
   National Park Service . . . . . . . . . . . . . . . . . . . 28
   Office of Surface Mining Reclamation and Enforcement. . . . 30
   Insular Areas . . . . . . . . . . . . . . . . . . . . . . . 30
  
Appendices

1 - Summary of Audit Activities. . . . . . . . . . . . . . . . 33
2 - Audit Reports Issued and Indirect Cost Agreements Negotiated
      During the 6-Month Period Ended September 30, 1996 . . . 34
      - Internal Audit Reports . . . . . . . . . . . . . . . . 34
      - Contract Audit Reports . . . . . . . . . . . . . . . . 36
      - Single Audit Reports . . . . . . . . . . . . . . . . . 37
      - Indirect Cost Proposals. . . . . . . . . . . . . . . . 50
3 - Monetary Impact of Audit Activities. . . . . . . . . . . . 57
4 - Audit Resolution Activities. . . . . . . . . . . . . . . . 58
      - Table I - Inspector General Audit Reports With Questioned Costs58
      - Table II - Inspector General Audit Reports With Recommendations That    
         Funds Be Put To Better Use. . . . . . . . . . . . . . 59
      - Table III - Inspector General Audit Reports With Lost or Potential Additional Revenues60
5 - Summary of Audit Reports Over 6 Months Old Pending Management Decisions61
      - Internal Audit Reports . . . . . . . . . . . . . . . . 61
      - Contract and Grant Audit Reports . . . . . . . . . . . 62
      - Single Audit Reports . . . . . . . . . . . . . . . . . 63
6 - Summary of Internal Audit Reports Over 6 Months Old Pending Corrective Action66
7 - Non-Federal Funding Included in Monetary Impact of Audit Activities 
     During the 6-Month Period Ended September 30, 1996. . . . 69
8 - Statutory and Administrative Responsibilities. . . . . . . 70
9 - Cross-References to the Inspector General Act. . . . . . . 72

 Subject: Office of Inspector General Semiannual Report the Congress -
October 1996 (No. 10-S-96)  STATISTICAL HIGHLIGHTS



Audit Activities
   Audit Reports Issued or Processed . . . . . . . . . . . . .446
     - Internal Audits . . . . . . . . . . .35                   
     - Contract Audits . . . . . . . . . . .21                   
     - Single Audits . . . . . . . . . . . 390                   
    Indirect Cost Proposals Negotiated . . . . . . . . . . . .182

Impact of Audit Activities - (Dollar Amounts in Millions)
    Total Monetary Impact. . . . . . . . . . . . . . . . . .$63.7
     - Questioned Costs. . . . . . . . . $11.9                   
     - Recommendations That Funds Be Put To Better Use$42.1                   
     - Lost or Potential Additional Revenues$9.7                   
    Internal Audit Recommendations Made. . . . . . . . . . . . 91
    Internal Audit Recommendations Resolved. . . . . . . . . . 69

Administrative Actions Taken by Bureaus
    Matters Referred for Administrative Action . . . . . . . . 72
    Removals/Resignations. . . . . . . . . . . . . . . . . . . 12
    Employee Suspensions (Totaling 219 days) . . . . . . . . . 10
    Reprimands/Counseling. . . . . . . . . . . . . . . . . . . 15
    Downgrades . . . . . . . . . . . . . . . . . . . . . . . . .2
    Reassignments/Transfers. . . . . . . . . . . . . . . . . . .5
    Other Personnel Actions. . . . . . . . . . . . . . . . . . .8
    Procurement Remedies . . . . . . . . . . . . . . . . . . . .1
    General Policy Actions . . . . . . . . . . . . . . . . . . 25
    Contractor Suspensions . . . . . . . . . . . . . . . . . . .3

Investigative Activities 
   Total Reports Issued. . . . . . . . . . . . . . . . . . . . 90
    Cases Closed . . . . . . . . . . . . . . . . . . . . . . . 73
    Cases Opened . . . . . . . . . . . . . . . . . . . . . . .160
    Cases Pending. . . . . . . . . . . . . . . . . . . . . . .447
    Hotline Complaints Received. . . . . . . . . . . . . . . . 57
    Hotline Complaint Matters Opened . . . . . . . . . . . .  2  
    Hotline Referrals Closed . . . . . . . . . . . . . . . . .188
    Hotline Referrals Pending. . . . . . . . . . . . . . . . .104

Impact of Investigative Activities
    Indictments/Informations . . . . . . . . . . . . . . . . . 43
    Convictions. . . . . . . . . . . . . . . . . . . . . . . . 28
    Sentencings. . . . . . . . . . . . . . . . . . . . . . . . 17
     - Jail. . . . . . . . . . . . . . . . . . . . . 1,001 months
     - Probation . . . . . . . . . . . . . . . . . . . 828 months
     - Community Service . . . . . . . . . . . . . . . .700 hours
    Cases Pending Prosecutive Action as of April 1, 1996 . . .150
    Cases Referred for Prosecution This Period . . . . . . . . 42
    Cases Declined . . . . . . . . . . . . . . . . . . . . . . .9
    Cases Pending Prosecutive Action as of September 30, 1996.168
    Administrative Actions . . . . . . . . . . . . . . . . . . 79
    Criminal Judgments/Restitutions. . . . . . . . . . $1,512,311
    Civil Judgments. . . . . . . . . . . . . . . . . . . . $2,824
    Civil Referrals. . . . . . . . . . . . . . . . . . . . . . 12
    Civil Declinations . . . . . . . . . . . . . . . . . . . . .2
    Civil Judgments. . . . . . . . . . . . . . . . . . . . . . .1
 INTRODUCTION

Department Profile

The Congress created the Department of the Interior (DOI) on March 3,
1849, to manage the Nation's internal affairs.  As the Nation's principal
conservation agency, DOI has responsibility for most of our nationally
owned public lands and natural resources.  This includes fostering the use of
our land and water resources; protecting our fish, wildlife, and biological
diversity; preserving the environmental and cultural values of our national
parks and historic places; and providing for the enjoyment of life through
outdoor recreation.  DOI assesses our mineral resources and works to ensure
that their development is in the best interests of all our people by encouraging
stewardship and citizen participation in their care.  DOI also has a major
responsibility for American Indian reservation communities and insular area
governments.

DOI has about 70,000 employees, spends about $9 billion a year, collects
revenues of about $6 billion a year, and is geographically dispersed to over
2,000 locations.  The jurisdiction of DOI includes: 

Administration of over 500 million acres of Federal land and trust responsibilities
for approximately 50 million acres of land, mostly Indian reservations;

Conservation and development of mineral and water resources;

Conservation, development, and utilization of fish and wildlife resources;

Coordination of Federal and state recreation programs;

Preservation and administration of the Nation's scenic and historic areas;

Operation of Job Corps Conservation Centers and Youth Conservation Corps
Camps and coordination of other manpower and youth training programs;

Reclamation of arid lands in the West through irrigation; and 

Management of hydroelectric power systems.

DOI is also concerned with the social and economic development of the insular
areas and administers programs providing services to Indians and Alaska
Natives. OIG Organization

To cover DOI's many and varied activities, the Office of Inspector General
(OIG) has a budget of $24 million and has 271 full-time employees. 
Employees are under the direction of the Assistant Inspectors General
for Audits, Investigations, and Administration and are assigned to the
headquarters office in Washington, D.C., and field offices in:

Agana, Guam; Rapid City, South Dakota; Albuquerque, New Mexico; Sacramento,
California; Arlington, Virginia; St. Paul, Minnesota; Billings, Montana; St.
Thomas, U.S. Virgin Islands; Lakewood, Colorado; Tulsa, Oklahoma; and
Phoenix, Arizona

OIG provides policy direction for and conducts, supervises, and coordinates all
audits, investigations, and other activities in DOI designed to promote economy
and efficiency or prevent and detect fraud, waste, and mismanagement.  The
Inspector General is DOI's focal point for independent and objective reviews of
the integrity of operations; is the central authority concerned with the quality,
coverage, and coordination of the audit and investigative services of DOI; and
reports directly to the Secretary of the Interior on these matters.  The Inspector
General provides the means for keeping 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 Inspector General's requirements for semiannual reporting to
the Secretary of the Interior and the Congress in accordance with the Inspector
General Act of 1978 (Public Law 95-452), as amended, OIG's mission
encompasses a wide array of audit and investigative responsibilities (see
Appendix 9).  These responsibilities include OIG's review of various programs
and activities within DOI in accordance with numerous public laws, Office of
Management and Budget (OMB) circulars, and criminal and civil investigative
authorities (see Appendix 8).

The Inspector General recommends policies for and conducts, supervises, or
provides coordination between DOI and other Federal, state, and local
government agencies for matters that promote economy and efficiency and that
prevent and detect fraud, waste, and mismanagement.  In the insular areas of
Guam, American Samoa, the U.S. Virgin Islands, and the Commonwealth of
the Northern Mariana Islands, OIG performs the functions of government
comptroller through audits of revenues, receipts, expenditures, and property in
accordance with the Insular Areas Act of 1982 (48 U.S.C. 1422).  OIG has
additional audit responsibilities in the Federated States of Micronesia, the
Republic of the Marshall Islands, and the Republic of Palau pursuant to the
Compact of Free Association Act of 1985 (Public Law 99-239).  OIG's
organizational chart is included on the following page.  OIG OFFICEWIDE INITIATIVES


Continuation of Internal Reviews

In our last Semiannual Report, we reported that we were in the process of
performing internal reviews of our operations to help ensure that we are
operating as efficiently and effectively as possible.  In addition to this
ongoing effort within individual units of the OIG, in September, we conducted a
management training conference, which brought together managers from
throughout the OIG and which had as its central theme "agents of positive
change."  The objectives of the conference were to foster improvements in
efficiency and effectiveness of OIG operations through a coordinated team
approach and to foster long-range planning through preparation of an OIG
strategic plan.  The conference was supported by presentations from
Government and non-Government speakers and facilitators and was designed
to promote creative thought and discussion and to assist in the development of
a draft strategic plan to meet the increasing demands and challenges of our
times.

  AUDIT ACTIVITY

Summary of Audit Results

OIG auditors issued or processed 446 audit reports during this period. 
Appendix 1 summarizes audit activities, and Appendix 2 lists the audit
reports issued or processed and the indirect cost proposals negotiated. 
Monetary findings in these reports totaled $63.7 million, which was composed
of questioned costs, funds to be put to better use, and lost or potential
additional revenues.  Appendix 3 summarizes the monetary impact of audit
activities.  During this 6-month period, OIG resolved $26.7 million of monetary
findings.  Appendix 4 provides summary information of resolution activity,
Appendix 5 provides a listing of audit reports over 6 months old pending
management decisions, and Appendix 6 provides a summary of resolved audits
over 6 months old pending final action.  Appendix 7 identifies the non-Federal
funds (from audits of insular area governments) included in the monetary
impact of audit activities.

Proactive and Joint Audit Efforts

As "agents of positive change" and in keeping with the Government's
reinvention goals, OIG's proactive and joint audit efforts continued throughout
this reporting period.   In addition to our traditional audit activities, our
auditors continued to devote a significant amount of time in consulting with
and providing technical assistance to improve the efficiency and effectiveness of
programs and operations.  In addition, our auditors continued to be engaged in
various audit efforts in which we joined forces with other audit entities to
accomplish specified purposes.

During this reporting period, we continued our proactive and joint audit efforts
in areas previously reported, including our work in connection with the Indian
Self- Determination Act Negotiated Rulemaking Committee, the correction of
financial accounting system weaknesses and deficiencies within bureaus, the
development of DOI's new personnel/payroll system, the streamlining and
reengineering of DOI's travel program, and our participation on task forces
responsible for developing accounting and auditing guidance.  Additional
proactive and joint audit efforts are described below.

Audit Assistance Improves Management and Control of USGS's
Map Inventory

Several OIG auditors have been working with U.S. Geological Survey (USGS)
officials to resolve problems surrounding the USGS's inventory of maps and
books that had caused the OIG to qualify its opinion of the USGS's financial
statements for fiscal year 1995 and resulted in the USGS initiating its
Inventory Assessment and Management Project to develop and implement
solutions.  As a result of joint efforts, the USGS has made significant progress
in establishing accurate inventory counts, establishing inventory quantities
based on product demand, and reducing significantly excess inventory levels.    

Requested Review Results in More Efficient and Effective
Operations Within the Office of Hearings and Appeals 

At the request of the Director, Office of Hearings and Appeals, OIG undertook a
review to determine whether the Hearings Division was managing its case work
load in an efficient and effective manner.  Our review identified areas where
cost savings could be achieved and/or the efficiency of case monitoring and
processing could be improved as follows: (1) some of the field offices could be
consolidated; (2) clerical pools could be established to enhance case processing;
(3) the automated case tracking systems for Indian probate and public lands
cases could be enhanced; and (4) the automated Indian probate case
processing system developed by a Hearings and Appeals task force could be
utilized more fully.  We found that relocating and consolidating certain field
offices would result in cost savings of about $161,000 in the first year and
about $747,000 per year thereafter.  The Director agreed to implement all four
of our recommendations, which related to achieving cost savings and improving
the efficiency of case monitoring and processing.




Coordinated GAO and OIG Efforts Enhance Efficiency of
Financial Statement Audits

OIG and General Accounting Office (GAO) auditors are working as a team on
audits of the bureaus' financial statements. As required by the Chief Financial
Officers Act of 1990, GAO is auditing the financial statements of the Federal
Government, and OIG is auditing the financial statements of DOI and its
bureaus. To prevent the duplication of audit efforts, reduce the amount of
audit work that GAO must perform, and reduce the disruption to the bureaus'
daily operations, OIG has coordinated its audit efforts in the areas that GAO is
focusing on within DOI.   

Audits of Accounting Controls, Procurement Practices, and
Grant Administration Procedures Conducted in Cooperation
With FEMA's OIG

Under a cooperative agreement, OIGs of the Federal Emergency Management
Agency (FEMA) and DOI, with participation from the U.S. Virgin Islands
Bureau of Audit and Control, conducted reviews of accounting controls,
procurement practices, and grant administration procedures of various
agencies of the Virgin Islands Government.  These proactive reviews were
conducted in anticipation of the receipt by the Virgin Islands Government of
FEMA-approved disaster grants in the aftermath of Hurricane Marilyn, which
struck the Virgin Islands on September 15, 1995, causing major damage to
public and private structures and prompting the President to issue a major
disaster declaration.  As a result of this ongoing effort, seven audit reports were
issued during this period, which offered recommendations related to managing,
controlling, and expending the disaster grants.  These reports were provided to
the Secretary of the Interior for use in his report to the Congress, as required
by Section 203(b) of the Omnibus Insular Areas Act of 1992.  The results of our
audit efforts are detailed in the "Significant Audits and Investigations" section
of this report.

Financial Modernization Project Receives Audit Assistance 

At the request of the Governor of Guam, OIG's North Pacific Region has begun
a review of the Government of Guam's Financial Management Modernization
Project.  The purpose of this review is to assist the Government in evaluating
the project before the Governor submits proposed legislation on budget reform. 
According to the Government, the Project was undertaken to address the
inadequacy of existing budgetary and financial management techniques and
systems to meet the demands of Guam's government and Guam's growing
economy.

Auditor Participates on Interior Service Center Task Force

At the request of the Office of the Assistant Secretary for Policy, Management
and Budget, an OIG auditor participated on an Interior Service Center Task
Force to review the Center's procedures for billing customers for its services. 
Based on the work of the Task Force, the Center's cost allocation procedures
and billing rates were revised to more closely reflect the cost of providing
services to DOI's client offices.

Requested Audit Reviews  Royalty-in-Kind Concept

At the request of the Minerals Management Service (MMS), we reviewed MMS's
natural gas royalty-in-kind pilot project, the Royalty Gas Marketing Pilot.  The
Pilot project involves the taking of royalty gas in kind (that is, accepting gas
production instead of receiving cash payments) and immediately selling the gas
to marketers at or near the lease sites through competitively awarded
contracts.  MMS's objective in conducting this project was to streamline the
royalty collection process and to improve the efficiency of gas valuations
without decreasing revenue collections.  We found that MMS was effective in
administering the Pilot and had demonstrated the feasibility of taking gas
royalties in kind as an alternative to the royalty-in-value system.  However, as
an alternative to taking gas in kind and subsequently marketing it, MMS
should explore the concept of taking and using the gas.  This concept, although
more administratively challenging, could offer financial benefits to the U.S.
Treasury.  The results of our audit efforts on the royalty-in-kind concept are
detailed in the "Significant Audits and Investigations" section of this report.  INVESTIGATIVE MATTERS


During the past 6 months, the Office of Investigations has conducted
successful investigations that resulted in 43
indictments/informations, 
28 convictions, and financial recoveries of $1,515,135.  In addition to these
investigative activities, we have focused on special initiatives designed to
enhance our law enforcement efforts.

OIG Initiatives

Affirmative Civil Enforcement (ACE) Training Conference

The Affirmative Civil Enforcement (ACE) program, a white-collar fraud initiative
that targets fraud in Federal procurement and programs, is a major initiative
within the OIG.  Through the ACE program, the OIG believes that it can better
utilize available resources in investigating fraud directed at DOI programs and
activities.  By focusing on investigations that involve fraudulent activity and
significant amounts of DOI funds, we can use the civil enforcement process to
obtain larger monetary recoveries and actually return DOI funds to programs
that have been victimized by the fraud.

The OIG, which is responsible for investigating allegations of fraud in DOI
programs, has traditionally utilized only criminal statutes to obtain penalties. 
However, the ACE initiative provides an avenue for bringing civil charges
against individuals and companies that defraud DOI. The ACE initiative also
allows us more flexibility in our investigative program and the opportunity to
create a larger deterrent effect with increased financial penalties.  With the vast
natural and valuable resources that are entrusted to DOI, OIG believes it is
essential to employ all available sanctions to safeguard DOI programs.  

In June, OIG and the Department of Justice (DOJ) cosponsored an ACE
training conference in Denver, Colorado, for DOI and OIG elements located in
the western United States.  Attended by over 150 people, the Denver conference
brought together various personnel from DOJ, several U.S. Attorney's offices,
the audit and investigative staffs of the OIG, the Office of the Solicitor, and
many DOI bureaus.  Through a combination of presentations and workshops
led by individuals from each of the participating entities, the conference
attendees learned the applicability of the ACE laws and the opportunities that
the program provides for combating fraud in DOI programs. During this
reporting period, we also began planning a second conference, which will be
held in the Washington, D.C., area in late October for the various DOI
components responsible for operations in the eastern United States.






Outreach Program

The OIG continues to use and develop its program of making "Fraud
Awareness" presentations to the numerous bureaus throughout DOI and the
country.  Our special agents have made presentations to managers and
employees that have focused on informing and educating DOI officials in
recognizing and reporting suspected fraudulent activity related to their specific
programs.  OIG has made such presentations in Washington, D.C.;
Pennsylvania; Kentucky; Georgia; Montana; California; Colorado; and Arizona. 
We have found that "Fraud Awareness" presentations assist DOI personnel in
better understanding the types of activities that should be reported to OIG for
audit or investigative followup.  

Memorandum of Understanding With Department of Justice

Because OIG has operated almost uniformly with blanket deputation authority
for approximately 10 years because of the necessity of conducting
investigations of criminal acts pertaining to violations involving the Bureau of
Indian Affairs (BIA), law enforcement officers, and the U.S. Territories, OIG was
named as one of the participants in the DOJ program deputizing OIG special
agents as Special Deputy U.S. Marshals during the upcoming year.  The
program, which was initiated last year, now covers most of the OIGs and has
resulted in the formulation of a Memorandum of Understanding (MOU) with
each respective department.  The MOU establishes the policy and guidelines for
full law enforcement authority in the performance of criminal investigative
activities.  This should prove to be very beneficial and assist greatly in carrying
out investigative activities that require law enforcement powers such as serving
search warrants and making arrests incident to criminal activity or at the
instruction of the Assistant U.S. Attorney.  This is a significant step in
eliminating repetitive and burdensome administrative requirements which, in
some cases, meant that individual deputations had to be obtained for each
particular investigation.  The DOJ/OIG agreement is effective through August
1997 and will be reassessed at that time.  We welcome the opportunity to
participate with DOJ in this program throughout the coming year.
 CONGRESSIONAL HEARINGS


During this reporting period, the Inspector General testified before two
Congressional subcommittees and the Legislature of the U.S. Virgin
Islands as follows:

Commonwealth of the Northern Mariana Islands Audits 

On June 26, 1996, Inspector General
Wilma A. Lewis testified before the Subcommittee on Native American and
Insular Affairs, Committee on Resources, U.S. House of Representatives, on the
Federal-Commonwealth of the Northern Mariana Islands initiatives and related
legislative reforms on labor, immigration, and law enforcement.  Specifically,
the Inspector General was asked to comment on OIG audits performed on the
Commonwealth during the past 3 years, including a discussion of an audit
report, issued in March 1996, on the management of public lands, and to
discuss the Commonwealth's response and constructive actions, or lack
thereof, to resolve issues raised in the audit reports.

The Inspector General testified that, during the past 3 years, the OIG has
issued nine audit reports to Commonwealth officials.  These audits covered a
variety of financial and program areas and included audits whose objective was
to report on the Commonwealth's implementation of recommendations made in
audit reports dating back as far as October 1982.  These nine reports
contained 63 recommendations for corrective action based on weaknesses or
deficiencies identified during the audits.

Regarding the audit report on the management of public lands, the Inspector
General reported that the Commonwealth had lost $118.4 million on completed
exchanges of public land, could lose an additional $70.1 million on pending
exchanges, and lost revenues of $25.1 million on exchanged public land that
was leased to a developer by landowners.  She noted that these problems arose
because the Commonwealth did not exchange public land for private land of
comparable value, use current land valuations in land exchanges, and consider
the revenue that could be realized from the commercial development of public
land exchanged. In addition, she reported that because policies and procedures
were not implemented properly to ensure that appropriate lease agreements
were established and were managed effectively, lease revenues of $565,000
were lost and the Government may lose additional lease revenues of $469.2
million over the unexpired period of the 12 leases that we reviewed.

The Inspector General noted that the Commonwealth did not respond to our
November 1995 draft report but that we received a response from the Governor
after our March 1996 final audit report was issued.  However, Commonwealth
officials did not agree with or adequately address all of our recommendations;
therefore, six of the seven recommendations were unresolved. (On August 8,
1996, the Inspector General sent a followup letter to the Governor requesting
additional information for the unresolved recommendations.  However, a
response had not been received as of September 30, 1996.  The letter was also
provided to the Subcommittee.)

Regarding responses to audit reports, the Inspector General testified that
Commonwealth officials reported that they had implemented 36 of the 54 audit
recommendations made by OIG during the past 3 years and that 9 of the
remaining 18 recommendations had been resolved.  However, she also noted
that followup reports on earlier recommendations concerning the Capital
Development Funds and the Economic Development Loan Fund showed that,
although recommendations had been reported as resolved, they were not
always implemented.  Further, recommendations reported as implemented
were not always implemented fully or effectively.

The Inspector General concluded her testimony by stating that the long-range
strategy developed by the OIG for the Commonwealth has focused, and will
continue to focus, on revenues and expenditures of government operations. 
The emphasis was on these areas, according to the Inspector General, because
our audits have repeatedly raised questions about the Commonwealth's ability
to raise sufficient revenues locally to fund government operations and a portion
of its infrastructure 


needs, and its ability to carry out its operations in an efficient and cost-
effective manner.

In addition to questions posed during the hearing, the Subcommittee
submitted four written questions to the Inspector General 
regarding the Commonwealth's land 
exchanges.  Specifically, the Subcommittee requested the aggregate cost of all
the amounts identified in the Inspector General's statement, an updated
estimate of the lost revenues resulting from the mismanagement of public
lands in the Commonwealth, information on other audits conducted in the
Commonwealth and on the timeliness of responses, and the actions
recommended to ensure the proper and adequate accounting of public funds in
the Commonwealth.

In her July 10, 1996, response to the questions, the Inspector General stated
that the monetary amounts identified in the nine reports cited in her statement
totaled $770.8 million; that OIG did not have the additional information needed
to update the estimated $25.1 million of lost revenues; that 2 grant audits were
performed and 17 single audits were reviewed and processed during the past 3
years; and that implementation of audit recommendations and future technical
assistance by the Federal Government would help ensure the proper and
adequate accounting of public funds in the Commonwealth.

The Subcommittee also submitted written questions to the Inspector General
relating to certain disputes over property interests on Water Island in the
U.S.Virgin Islands.  Specifically, the Subcommittee requested the amount of
the annual lease rents being collected by DOI from each lessee and the amount
of rents being collected from all of the sublessees, including those in Sprat Bay. 
Because of the Inspector General's prior involvement in related litigation
involving Water Island while she served as an Associate Solicitor for DOI's
Office of the Solicitor, she recused herself from this matter, and all questions
were referred to Richard N. Reback, the Chief of Staff and General Counsel in
the OIG.

The Chief of Staff and General Counsel's July 9, 1996, response to the
Subcommittee stated that the United States lease agreement with the master
lessee required payment of a fixed rent of $3,000 per calendar year, plus 3
percent of gross receipts over $200,000 but not more than $300,000 and 4
percent of gross receipts over $300,000.  The most recent information on the
amount of annual rental payments is contained in our March 1988 audit report
entitled "Water Island Rental Payments."  The report states that the master
lessee paid rent of $221,031 and $43,018 for calendar years 1985 and 1986,
respectively.  The General Counsel further explained that DOI does not collect
rents or fees from any sublessee, including those in Sprat Bay, but that the
master lessee collects annual rents of $25 or $100 from each of its sublessees
and an annual rent of $100 from Sprat Bay.

The Subcommittee also asked whether the requirement to collect rent ended or
changed at the expiration of the 40-year lease; whether rents were being
properly collected and accounted for; what management practices had
contributed to the delay in resolving the transfer of title to Water Island
properties; why the Environmental Impact Statement, issued in May 1996, was
not initiated after the 1992 expiration of the lease; and what DOI's position was
on the value of the possessory interest in the hotel on Water Island and what
the Court had ruled on this issue.

The General Counsel stated that he had no information to directly respond to
these questions.  However, the General Counsel cited our September 1985
audit report "Lease to Water Island, U.S. Virgin Islands," which stated that
from 1972 through 1981, documentation was not available to verify that the
rent was actually paid or received or to substantiate the lessee's gross receipts. 
That audit report also noted that the interests of the Federal Government were
not adequately protected by the terms and conditions established in the lease;
that is, the lease placed DOI in an "unfavorable position" because when the
lease expired, it allowed the lessee to occupy the island indefinitely until a
successor was found and fair compensation was paid for possessory interests.

Bureau of Land Management
Nevada Land Exchanges

On July 30, 1996, Inspector General 
Wilma A. Lewis testified before the Subcommittee on National Parks, Forests,
and Lands, U.S. House of Representatives, about OIG's audit of land exchange
activities conducted in the State of Nevada by the Bureau of Land Management
(BLM). 





The Inspector General stated that while BLM's Nevada State Office had
acquired some high quality properties by exchanging lands with private entities
(proponents), it did not consistently follow prescribed land exchange
regulations or procedures and ensure that fair and equal value was received in
completing three of the four exchanges we reviewed.  She explained that this
occurred because State Office management wanted to expedite the exchanges,
given that the proponent had willing buyers available or land purchase options
that were close to expiring.  In other instances, management proceeded with an
exchange in a certain manner without documenting the rationale used to
support the action.  As a result, the State Office exchanged BLM land for 2,461
acres of private land, valued at $2.7 million, that was not in conformance with
current land-use plans and therefore had no discernible mission-related
purpose.  In addition, the Government may have lost about $4.4 million in
completing three of the exchanges reviewed.  She also indicated that the State
Office has a unique opportunity to use its highly marketable Las Vegas lands to
acquire more land for mission-related purposes and could take maximum
advantage of this opportunity by introducing competition into the disposal
process for the Las Vegas lands.  To improve operations in these areas, the
Inspector General recommended that the Director of the Nevada State Office
institute competitive procedures (sale or competitive exchange) into the land
disposal process, take appropriate action to have unneeded easements removed
from Federal lands before processing transactions for the exchange or sale of
those lands, and establish the controls necessary to ensure 

that land exchanges are processed in full compliance with applicable laws and
regulations. 

The Inspector General stated further that the audit found that in three of the
four exchanges reviewed, the State Office exchanged a total of 446 acres of
Federal land within the land sale area designated by the Santini-Burton Act
(Public Law 96-586).  She explained that Santini-Burton legislation does not
specifically prohibit BLM from exchanging lands in the sale area under the
authorities provided by the Federal Land Policy and Management Act. 
However, she said it was clear that the Congress intended proceeds from the
sale of lands within the designated area to be used to offset the costs incurred
for the Lake Tahoe Basin land acquisitions in order to keep the costs of
enacting the Santini-Burton legislation nominal.  In that regard, the Inspector
General said that because these lands were exchanged rather than sold, sales
revenues of at least $9.2 million were not generated, of which about $7.8
million would have been remitted to the U.S. Treasury to repay incurred Lake
Tahoe Basin land acquisition costs.  She noted that at the time of our review,
the Lake Tahoe Basin acquisition costs of $93 million reportedly exceeded the
sales revenues remitted to the U.S. Treasury by about $40 million. 
Accordingly, the Inspector General said that recommendations were made that
the Director of the Nevada State Office should use the land sales process,
except in compelling circumstances, when disposing of its Santini-Burton Act
lands until the sales revenues generated closely approximate the Lake Tahoe
Basin acquisition costs.  
In a related issue, the Inspector General stated that the State Office initiated
an exchange of 25 acres of BLM's Las Vegas area lands, valued at $665,000, in
order to obtain a defunct bowling alley with the intention of using this facility
as an administrative complex for the Tonopah Resource Area.  She said she
provided information on this exchange because such exchanges may not
represent the most effective use of Federal land and because BLM personnel
said that additional proposals to acquire administrative facilities through land
exchanges may be forthcoming based on the precedent set at Tonopah.

Legislature of the 
U.S. Virgin Islands

On September 27, 1996, Inspector General Wilma A. Lewis testified by
teleconference before the Committee of the Whole of the Legislature of the U.S.
Virgin Islands about basic guidelines for the use of Federal grant funds by state
and local governments.  The Legislature was considering, as part of the
Government of the Virgin Islands fiscal year 1997 operating budget, a proposal
to use unexpended Federal grant funds to pay a portion of retroactive salary
increases due Virgin Islands Government employees.  The proposal, contained
in Section 10 of Bill No. 21-0265, would have appropriated $40 million in
unexpended Federal funds, along with $8.9 million in savings from unfilled
vacant positions and $15 million from the Virgin Islands Transportation Trust
Fund, to pay the salary increases to locally and Federally funded employees.




The Inspector General stated, "There is reason for the Government [of the U.S.
Virgin Islands] to pause before embarking on a course of this magnitude." 
Citing basic Federal grant guidelines contained in OMB Circular A-87 and the
"Uniform Administrative Requirements for Grants and Cooperative Agreements
to State and Local Governments" (the Common Rule), the Inspector General
noted that several impediments existed for the proposed 
course of action as follows: 

     -  To the extent that unexpended Federal funds are used to make
payments to employees whose positions were not funded by the specific grant
programs from which the unexpended funds were taken, such costs would be
unallowable in accordance with Circular A-87 (Attachment A, Sections C.1a,
C.1b, and C.1d).

     -  Although Circular A-87 (Attachment A, Section C.1h) and the Common
Rule (Subpart C, Section .23) allow carryover funds and unobligated balances
of Federal grants to be used, if permitted by the specific grant program, for
obligations in subsequent periods, no provision is made for the use of
unobligated balances for the payment of obligations incurred in prior periods.

     -  Each Federal grant program has very specific program requirements
and restrictions as to how program funds are to be used.

The Inspector General suggested that the most prudent course of action for the
Virgin Islands Government would be to: (1) determine the specific Federal grant
programs and related unexpended balances that make up the $40 million and
(2) contact each of the appropriate Federal grantor agencies to determine under
what conditions, if any, the unexpended balances can be used for retroactive
salary increases
to Virgin Islands Government employees.

 As of October 1, 1996, the Legislature was still debating Section 10 of Bill
No. 21-0265.

 LEGISLATIVE REVIEW


During this reporting period, OIG reviewed several hundred legislative
items and, where appropriate, provided comments.  OIG performed
these reviews to monitor legislative proposals and evaluate their
potential for promoting economy and efficiency and preventing fraud, waste,
and mismanagement in the programs and operations of DOI, as required by
Section 4(a)(2) of the Inspector General Act of 1978, as amended.

OIG provided comments on S 1130, The Accounting Standardization Act of
1995, in response to OMB's request for views.  The purpose of the proposed Act
was to provide a uniform consistency of accounting by a Federal entity,
increase the accountability of 
Federal financial management, and increase 
Federal agencies' ability to monitor budget execution.

OIG did not support the passage of the proposed Act.  OIG commented that the
requirements of the proposed Act duplicated existing auditing requirements. 
Further, OIG disagreed with the requirement that individuals found not to
comply substantially with the proposed Act should be identified, because
actually identifying such individuals would be extremely difficult and would be
without any foreseeable benefit.  Finally, OIG commented that the provision
providing up to 2 percent of available agency appropriations for financial
management system improvements, particularly in this time of budgetary
constraints, would present an undue hardship on the remaining programs of
an agency.

OIG also provided comments on S 1579, Single Audit Act Amendments of 1996. 
OIG supported passage of the Act, particularly that portion providing for the
Director of the Office of Management and Budget to designate a Federal
clearinghouse to identify recipients that expend $300,000 or more in Federal
awards during the recipient's fiscal year but did not undergo an audit, as
required by the Single Audit Act.

OIG noted that agencies typically track only the awards they have made and
typically do not aggregate all the awards made to an entity.  Thus, an entity
that ought to be undergoing an audit under the Single Audit Act sometimes is
not.  A Federal clearinghouse, as proposed in the amendments, would be in a
better position than an individual agency to identify all awards made to a single
entity and thus ensure that the required audit was performed. SIGNIFICANT AUDITS AND
INVESTIGATIONS

Bureau of Indian
Affairs

Deficiencies in Road Construction Program Cited

Although the Indian reservation roads we reviewed were generally well
constructed, some road construction projects contained planning and
design deficiencies and/or construction deficiencies that were avoidable. 
These planning and design deficiencies included incomplete and inaccurate
project plans and specifications, inaccurate surveys and inadequate analyses of
site conditions, and projects that were started late in the construction season. 
The plans and designs contained deficiencies primarily because BIA rushed to
award contracts or complete work to obligate funds so that unused funds
would not have to be returned to the Federal Highway Administration; had
inexperienced personnel performing road construction tasks; and did not
review plans and specifications adequately.  Consequently, completion of the
projects was delayed, and excess costs of about $3.3 million were incurred.  In
addition, some deficiencies occurred because BIA did not adequately monitor or
control the performance of construction crews and did not verify both the test
results of materials and the quantities and qualities of materials used.  These
construction deficiencies resulted in excess costs of about $1.2 million to
rectify.  BIA agreed with all seven of our recommendations to correct the
deficiencies.

School Grant Expenditures Not Supported Adequately

We identified grant expenditures made by the Circle of Nations Wahpeton
Indian School totaling about $117,650 which occurred during school years
1993-1994 and 1994-1995 that were not adequately supported or that were
not in conformance with applicable Federal cost principles. In addition, the
financial statements audit for the school year ended June 30, 1994, reported
that School expenditures exceeded revenues by about $290,000.  Further, BIA
did not comply with key provisions of the September 1994 memorandum of
agreement between the Wahpeton Indian School Board and BIA's Office of
Indian Education Programs pertaining to BIA's funding and oversight
responsibilities.  Specifically, financial resources needed to fund the School's
program for implementing its therapeutic community school model were not
identified, implementation team reports were not prepared timely, and a school
support team was not established.  Further, the School Board and relevant
state and local agencies of North Dakota had not completed an agreement
regarding child protection and law enforcement because jurisdictional issues
related to the School had not been resolved.  Finally, the School did not
prepare an annual written plan required by the Improving America's School Act
of 1994 for the therapeutic model in a timely manner.  As such, we concluded
that the School's implementation of the therapeutic model will be impacted
adversely if these issues are not resolved.  The report made no
recommendations because the purpose of our review was to determine, and
subsequently present information on, whether grant funds were spent in
accordance with grant agreements and whether BIA complied with the
September 1994 agreement.  However, our report identified several matters
that adversely impacted the School's implementation of the therapeutic model,
and we believe that BIA should focus its efforts on completing implementation
of the agreement. We requested and received comments from both BIA and the
School regarding the grant expenditures and the actions that BIA and the
School took to implement the therapeutic model.  In its responses, neither BIA
nor the School adequately addressed the issues in the report.   
Improvements in Administration of Delinquent Loans Needed

BIA's Phoenix Area Office did not adequately administer delinquent loans.
Specifically, the Area Office: (1) did not aggressively pursue the collection of
delinquent loans totaling about $14.7 million; (2) did not adequately secure its
interest in, appraise, and liquidate collateral for 21 of the 33 loans reviewed;
and (3) canceled or waived interest totaling $3.4 million on a direct loan
without proper authority.  These deficiencies existed because required debt
collection practices and collateral liquidation were not routinely performed,
primarily because experienced Area Office credit staff retired and were not
replaced.  Of the seven recommendations contained in our report, BIA
concurred with the four recommendations regarding debt collection and was
asked to reconsider its response to the two recommendations pertaining to
collateral for guaranteed loans and one recommendation on renegotiating loan
repayment provisions.   

Credit Card Used Illegally

A former game warden for a California Indian tribe used a tribal government
credit card to obtain personal goods and services in excess of $8,700.  The
credit card was used to purchase firearms that included an AK-47 rifle, an UZI
9 mm assault weapon, and a 12-gauge shotgun.  The subject pled guilty to one
count of a five-count indictment charging embezzlement of tribal funds.  As
part of the plea agreement, the subject agreed to cooperate in the investigation
and subsequently testified as a Government witness in a related trial.  The
subject was sentenced to 3 years of probation and was ordered to pay $625 in
restitution to the tribe.  

Grant School Funds Embezzled

An OIG investigation disclosed that three former employees of a BIA grant
school in Arizona converted over $150,000 in school
funds to personal use.  All subsequently pled guilty after being indicted by a
Federal grand jury in Phoenix, Arizona.  



On February 12, 1996, the first employee was sentenced to 5 years of
probation and was ordered to pay $19,354.54 in restitution to the school.  The
second employee was sentenced on February 26, 1996, to 15 months in prison
and 3 years of probation and was ordered to pay $98,744.47 in restitution to
the school.  (Sentencing of these two employees was reported in our last
Semiannual Report.)  The third employee was sentenced during this reporting
period to 4 months in prison, 4 months of home detention, and 3 months of
supervised probation and was ordered to pay $51,763.88 in restitution to the
school.

Fraud in Obtaining Loan Discovered

An OIG investigation disclosed that the former credit officer of a South Dakota
Indian tribe conspired with a husband and wife in a fraudulent scheme to
obtain a $215,000 BIA direct loan.  The husband and wife used the $215,000
in loan proceeds to purchase a business from the credit officer and then
defaulted on the full amount of the loan.  The investigation also disclosed that
the credit officer had previously falsified BIA and other documents to obtain a
$150,000 loan through a private lending institution insured by the Federal
Deposit Insurance Corporation.

The husband and wife each pled guilty to one false statement count and were
each sentenced to 5 years of probation, were fined $1,550, and were ordered to
pay $107,500 in restitution.  In June 1996, the credit officer pled guilty to one
false statement count and was scheduled to be sentenced in October 1996. 
Three Sentenced for Embezzlement and Theft 

A state senator, the chairman of a midwestern state's band of Indians, and the
band's secretary/treasurer were indicted in an extensive criminal conspiracy to
steal approximately $1 million from the band.  During April 1996, the state
senator, who served as the band's attorney during the period covered in the
indictment, was convicted of multiple criminal charges, including conspiracy,
mail fraud, and theft totaling approximately $630,000.  The chairman was
convicted of conspiracy and theft totaling $550,000, and the secretary/
treasurer was convicted of conspiracy.  

In September 1996, the state senator was sentenced to 57 months in prison, 3
years of supervised release, and 600 hours of community service and was
ordered to pay $25,600 in fines and $400,000 in restitution to the tribe. 
Following his conviction, the individual resigned from the senate, and his
license to practice law was suspended.  The chairman, who resigned from his
position, was sentenced to 33 months in prison and 2 years of supervised
release and was ordered to pay $150 in fines and $66,440 in restitution to the
tribe.  The secretary/treasurer was sentenced to 12 
months of home detention and 2 years of probation and was ordered to pay
$7,500 in fines and $31,412 in restitution to the tribe.

Indian Tribal Funds Embezzled

In November 1992, the Federal Bureau of Investigation requested OIG audit
and investigative assistance with a financial investigation at an Arizona Indian
school. 
A subsequent OIG audit and investigation showed that between l990 and l992,
the school's business manager improperly wrote checks totaling $102,000 to
himself.  In May 1995, a Federal grand jury in Phoenix, Arizona, returned a
three-count indictment charging the business manager with embezzlement of
$102,000 in Indian tribal funds.  In April 1996, the subject entered into a plea
agreement and pled guilty to embezzlement and theft from an Indian tribal
organization.  The subject was sentenced to 15 months in prison, was ordered
to pay restitution of $102,000, and was fined $500.

Bureau of Land
Management

Inspection and Enforcement Program Improvements Needed

Although BLM generally complied with the requirement of the Federal Oil and
Gas Royalty Management Act for inspecting annually all Federal and Indian oil
and gas leases that had significant production or a history of regulatory
noncompliance (as defined by BLM), improvements were needed to more
effectively accomplish program objectives.  Specifically, 908 (61 percent) of
1,482 inspections conducted to ensure overall production accountability were
performed on leases that had minimal production, including 46 production
inspections of leases that had no production;  65 (55 percent) of the 118
inspections conducted at seven field offices were either incomplete or
performed inadequately; and, based on supporting documentation, 700 
(8 percent) of the more than 9,200 required inspection items at the seven field
offices had not been inspected for at least 5 years.  In addition, none of these
field offices had properly classified inactive oil and gas wells, BLM's minimum
bond requirements were often not sufficient to protect the Government in the
event that a lease operator defaulted, and BLM routinely approved lease
assignments without considering bond adequacy.  As a result of insufficient
bonds, the Government has plugged, since fiscal year 1991, 131 orphan wells,
at a cost of about $1.6 million, and is currently liable for plugging over 300
additional orphan wells, at a cost estimated to exceed $3 million.  In addition to
cost, orphan wells may contaminate groundwater and other resources.  BLM
concurred with all 11 of our recommendations to improve controls over the
inspection and enforcement program and to ensure that inactive wells are
properly reviewed and sufficiently bonded. 

Fair and Equal Value Not Always Received in Land Exchanges

While some high quality properties were acquired by exchanging lands with
private entities, BLM's Nevada State Office did not consistently follow land
exchange regulations or procedures and did not ensure that fair and equal
value was received in completing three of the four exchanges we reviewed.  As a
result, the State Office exchanged 2,461 acres of private land, valued at $2.7
million, that was not in conformance with current land-use plans and therefore
had no discernible mission-related purpose.  In addition, the Government may
have lost revenues of $4.4 million in completing three of the four exchanges
reviewed.  Also, the State Office exchanged rather than sold land within the
land sale area designated by the Santini-Burton Act.  While the Act does not
specifically prohibit land exchanges, we believe, based on our General
Counsel's legal review of the legislation, it is clear that the Congress intended
the lands within the designated area to be sold to offset the costs incurred for
Lake Tahoe Basin land acquisition.  We concluded that because 446 acres of
Federal land were exchanged rather than sold, the Government relinquished
the opportunity to repay about $7.8 million of the costs incurred to acquire
Basin land.  At the time of our review, the Government had a shortfall of $53
million for Basin land acquisitions, based on $93 million of costs incurred
against $40 million of revenues collected.  Furthermore, we believe that the
State Office may not have acted in the Government's best interests in
exchanging 25 acres of BLM's Las Vegas area lands, valued at $665,000, to
obtain a defunct bowling alley for use as an administrative complex for the
Tonopah Resource Area.  BLM officials concurred with the three
recommendations regarding land exchanges.  Regarding the Santini-Burton
Act, we asked BLM to reconsider its response to the recommendation regarding
submission of accounting reports and to provide an additional response to the
recommendation regarding the use of land sales except in compelling
circumstances.






Occupancy Trespass Resolution Not Actively Pursued

Four of the five BLM resource areas we visited did not assign a high priority to
resolving occupancy trespass, including occupancy trespass on unpatented
mining claims, and were not systematically identifying, recording, and resolving
occupancy trespass cases.  During fiscal years 1993 and 1994, the four
resource areas had identified only 10 and resolved only 14 occupancy trespass
cases out of a backlog of 160 such cases.  BLM Resource Area Managers who
assigned a low priority to the resolution of occupancy trespass stated that they
did so because of the cumbersome and costly processes required for resolution,
concern for the safety of employees involved in trespass cases, and the need to
focus on other activities with higher priorities.  In contrast, the remaining
resource area, which had assigned a high priority to resolving occupancy
trespass, had identified and recorded 88 new cases of trespass and resolved
107 cases during the same period.  Trespass on the public lands created health
and safety hazards, restricted public access, and resulted in cleanup costs of
up to $27,000 per instance.  We verified, through site visits, the existence of
significant amounts of trash and violations of local building, fire, health, and
sanitation codes.  We also noted during the site visits that fences and "No
Trespassing" signs restricted public access to rivers and other recreation areas,
and that significant cleanup needed to be performed.  BLM concurred with our
two recommendations to promulgate regulations concerning mining occupancy
trespass and financial guarantees and to instruct Resource Area Managers to
work with local law enforcement to address the threat of violence to BLM
employees.  We revised, and requested BLM to reconsider, the two
recommendations relating to developing an action plan for resolving existing
cases and seeking appropriate legislative changes to provide a range of
penalties for occupancy trespass.

Compliance With Withdrawn Lands Mandate Inadequate

Although the Federal Land Policy and Management Act of 1976 required the
Secretary of the Interior to review, by October 1991, certain existing land
withdrawals and to recommend to the President whether to continue, modify,
or terminate the withdrawals, we found that none of the 4,100 withdrawals,
covering about 46 million acres, as estimated by BLM, had been processed
through DOI.  Also, BLM had completed another 335 withdrawal reviews that
were forwarded for DOI processing and was holding another 1,057 reviews that
were completed by its field offices pending DOI action on the 335 reviews
previously submitted.  We believe that the reviews were not processed through
DOI because of disagreements between BLM and the Office of the Solicitor
concerning procedures for conducting the withdrawal reviews and because of
DOI's lack of emphasis in completing the withdrawal reviews.  As a result, BLM
estimated that about 25 million acres of withdrawn public lands were no longer
needed for the purposes for which they were withdrawn, including 8.7 million
acres of land withdrawals recommended for termination in the 1,392 reviews
currently completed by BLM.  We also noted that the Bureau of Reclamation
(BOR) had generally identified and reported to BLM lands that were no longer
needed for the purposes for which they were withdrawn.  BLM and BOR
generally agreed with our three recommendations to address the processing of
the land withdrawal reviews already completed and to complete the remaining
withdrawal reviews. 

Bureau of
Reclamation

Policy for Valuation of Project Facilities Proposed for Sale
Nearly Completed

BOR had made considerable progress in implementing the three
recommendations contained in our prior audit report on the valuation of
project facilities proposed for sale.  Specifically, BOR issued a framework policy
for the title transfer of facilities proposed for sale.  However, the framework
policy did not fully address the title transfer of complicated projects and did not
require the development of a range of valuation methods to determine the fair
value of projects.  In addition, non-Federal entities interested in acquiring
facilities continued to present, directly to the Congress, sales legislation that
was not in compliance with BOR policy or that did not protect the interests of
project beneficiaries and the general taxpayers.  By expanding the framework
policy to address these issues, BOR should enhance its ability to complete its
plans to transfer the ownership of projects and facilities at a fair return and
protect the interests of the taxpayers.  Since BOR had implemented or partially
implemented the prior report's recommendations, we made no additional
recommendations.  

Improvements to Financial Administration of Conservation
Commission Instituted

The Utah Reclamation Mitigation and Conservation Commission was generally
established in accordance with the Reclamation Projects Authorization and
Adjustment Act of 1992 (Public Law 102-575).  However, we confirmed that the
Commission had not established adequate financial and administrative policies
and procedures, as reported by the Commission's contracted certified public
accountant in a June 1995 audit report.  As a result, the Commission's
accounting records of the receipt and expenditure of funds for fiscal years 1994
and 1995 were not auditable.  Thus, we could not determine whether
administrative and mitigation funds were expended in accordance with the Act.
However, we found that the Commission was actively pursuing the necessary
corrective actions to implement sound administrative and financial
management systems in response to the certified public accountant's report. 
Accordingly, our report contained no recommendations.






Internal Control Improvements Over Development Fund Needed

BOR generally complied with the legislative requirements that apply to receipts
and expenditures of the Lower Colorado River Basin Development Fund for
fiscal year 1995.  However, BOR could strengthen its internal controls if it
would formulate written procedures to account for Fund receipts and
expenditures.  Also, BOR had not completed its required Central Arizona
Project reports on Fund activity for fiscal years 1994 and 1995.  BOR
concurred with our recommendation to develop procedures to account for Fund
receipts and expenditures and implemented our recommendation to complete
the two Project reports.  

Contractor's Claim Not Substantiated

We performed audits of resubmitted claimed costs for a contractor and two
subcontractors.  The original claims were audited during 1995.  The contractor
proposed and filed claimed costs of $31,040,071 for constructing a visitors
center and parking structure at Hoover Dam, Nevada.  The contractor's portion
of the claimed amount was $17,540,572.  We questioned $7,349,810 of this
amount because the costs were for unsupported field labor costs, direct costs
covered by the modified contract, unsupported forecasted direct costs, bid
errors, materials and services not supported or allowed, excess home office
overhead costs resulting from using the proposed overhead rate instead of the
audited rate, profit, bond and insurance costs associated with the other
questioned costs, unallowed costs of money expenses, and unallowed requests
for equitable adjustment and claim preparation costs.

A subcontractor that performed excavation, blasting, filling, grading, and other
work at the site claimed costs of $2,496,438 as part of the $31,040,071 claim. 
We questioned costs of $752,873 because they were financing costs that were
unallowed, bond and insurance costs that were not incurred, excess home
office overhead expenses that resulted from using the claimed rate versus the
audited rate, and direct costs that were already covered by the modified
subcontract.

A second subcontractor that performed concrete reinforcement work required
under the contract claimed $2,045,462 as part of the $31,040,071 claim.  We
questioned costs of $822,533 for field costs, second-tier subcontractor
expenses, office overhead, profit, bond and insurance expenses, and contract
modifications already settled because these costs were unallowable or
unsupported or exceeded actual costs.

The contractor filed a claim in the U.S. Court of Federal Claims, but no court
date has been set.  Therefore, audits of the contract and the subcontracts were
in the resolution process at the end of this reporting period.




U.S. Fish and Wildlife Service

Costs Claimed Under Grants Questioned

We audited funds expended for sport fish and wildlife restoration and
endangered species grants for Guam and the Commonwealth of the Northern
Mariana Islands.  The audits were in the resolution process at the end of this
reporting period.    

In the first audit, we reviewed $751,242 of the $3,240,175 expended from
October 1990 through September 1994 by the Government of Guam.  Of this
amount, we questioned $321,194, which consisted of unsupported personal
services costs of $165,358 and related indirect costs of $37,130; procurement
costs of $41,423, in which vendor selection was not adequately supported;
unsupported sole source procurement costs of $31,034; costs of $33,800 for
the improper use of grant funds; and unsupported travel costs of $12,449. 

In the second audit, we reviewed $1,000,263 of the $1,240,523 expended from
October 1992 through September 1994 by the Commonwealth of the Northern
Mariana Islands.  Of this amount, we questioned $858,267, which consisted of
excess indirect costs of $116,425; unsupported personal services costs of
$655,215; unsupported travel costs of $21,834; procurement costs of $41,401,
in which vendor selection was not adequately supported; costs of $2,331 for
the improper use of grant funds; and indirect costs of $21,061 related to
questioned direct costs.  In addition, the Commonwealth government did not
collect approximately $30,000 in boat slip rental fees, as required under the
Boating Access Program.

U.S. Geological Survey

Production and Storage of Maps and Books Need Improvement

The USGS was not effectively managing the production and storage of maps
and books. Specifically, the USGS had not conducted physical inventories and
updated inventory records, implemented an inventory reduction plan,
formalized methods for ordering maps, and established time requirements for
processing printing requests.  As a result, inventory records were inaccurate,
excess maps and books were being printed and stored, and a large portion of
the inventory was excess and obsolete.  OIG had reported on these conditions
in a prior audit, but the USGS had not fully implemented the prior audit's
recommendations.  We concluded that the $83.7 million balance reported in
the fiscal year 1994 financial statements for inventory held for sale could not
be substantiated because the formula for computing the inventory balance
contained errors; the USGS did not have accurate historical cost data; and
inventory records were inaccurate.  We also concluded that these deficiencies
could not be corrected in time to provide a reliable inventory balance for the
fiscal year 1995 financial statements. The USGS took corrective action for two
of our recommendations and agreed to implement the remaining three
recommendations, which pertained to using statistical methods for ensuring
accurate inventory counts, establishing and implementing an inventory
reduction program, and ensuring that maps are recorded in the Federal
Financial Inventory System.   

Employee Sentenced for Embezzlement

A USGS employee in Wyoming signed and improperly issued 74 USGS third-
party draft payments, totaling $32,050.  The employee falsified contract
documents in an attempt to conceal the embezzlement.  Seventy-two of the
drafts were made payable to a non-DOI individual, who negotiated the drafts
and split the proceeds with the USGS employee.  The employee also issued two
other drafts to an associate, who cashed the drafts and gave the money to the
employee.  On November 29, 1995, a Federal grand jury indicted the employee
and the non-DOI individual on one count of conspiracy and three counts of
embezzlement of public funds.

In February 1996, the non-DOI individual pled guilty to one count of
conspiracy to defraud the Government, and the employee pled guilty to theft of
Government funds.  On March 29, 1996, the non-DOI individual was
sentenced to 12 months in prison and 3 years of supervised probation and was
ordered to participate in drug and alcohol treatment and to pay $5,000 in
restitution to the USGS.  (This sentencing was reported in our last Semiannual
Report.)



On May 1, 1996, the USGS employee was sentenced to 3 years of supervised
probation 
and 6 months of home confinement and was ordered to participate in drug and
alcohol treatment and to pay $14,703.05 in restitution to the USGS.  The
employee was removed from his position at the USGS.

Instructor's Academic Credentials Misrepresented 

A Colorado corporation and its president who were responsible for performing
training for the Mine Safety and Health Administration and the Occupational
Safety and Health Administration were administratively suspended from all
Federal contracting. The suspension, requested by OIG, was implemented after
investigation disclosed that the corporation's president falsely represented that
he had a master's degree and a Ph.D. during a hazardous materials training
course presented to USGS employees.  The corporation's president had
presented safety training courses to employees of the USGS, the U.S. Bureau of
Mines, and BOR in eight states. 

Minerals Management
Service

Royalty Settlement Negotiations Not Documented Sufficiently

MMS did not always conduct royalty settlement negotiations in accordance
with its "Minerals Management Service Settlement Negotiation Procedures." 
Specifically, based on our review of 10 settlements, we found that MMS's files
did not contain adequate documentation for the estimated values of the issues
to be settled and the arguments for reducing the values of issues for 6
settlements, and did not explain why the estimated values of 9 issues, totaling
about $312 million, were reduced by about $94 million at settlement.  In
addition, contrary to its "Negotiation Procedures," MMS neither offered two
Indian tribes the opportunity to separately negotiate their issues related to one
of the settlements nor included the tribes in the settlement negotiations.  As a
result of the documentation deficiencies, there was insufficient information for
us to determine whether the settlements were negotiated in the best interests
of the Government, states, Indian tribes, and Indian allottees.  Specifically, we
could not determine whether issues were improperly omitted from negotiations
or whether royalty values were reduced unnecessarily.  The monetary amounts
involved in the royalty settlements are significant.  For example, from April
1993 through March 1995, MMS negotiated 97 settlements, which will result in
additional royalty payments and interest on late payments of about $322
million.  MMS agreed with our recommendation that it should offer Indian
tribes the opportunity to exclude their issues from global settlements and to be
included in negotiations of issues in appropriate cases.  We requested MMS to
reconsider its response to our two remaining recommendations related to
settlement documentation.



Weaknesses in Royalty-in-Kind Concept Cited

In a special review performed at the request of MMS, we found that MMS was
effective in administering the Royalty Gas Marketing Pilot program in the Gulf
of Mexico and had demonstrated the feasibility of taking gas royalties in kind
for the gas produced as an alternative to the royalty-in-value (cash payments)
system.  However, the Pilot's design was not representative of overall gas
operations in the Gulf; revenue neutrality was not achieved, in that revenues
collected did not equal what would have been received had royalties been taken
in value; marketing strategies such as warranting the volumes of gas delivered
to the contract market, packaging gas volumes in the sizes most desired by
industry, and packaging lease groups along the most logical transportation
routes were not considered; and weak administrative controls contained in the
initial design of the program resulted in 17 of the original 36 lease groups in
the invitation for bids containing incorrect price index points.  Although our
report contained no formal recommendations, we requested that MMS consider
these issues in its further study of the royalty-in-kind concept.  

Oil and Gas Production and Sales Not Always Reported

MMS has not been successful in ensuring that all lessees and operators comply
with its requirements to accurately and timely report the production and sale
of oil and gas from Federal and Indian leases.  This occurred because of the
lack of a strong deterrent against noncompliance.  MMS's volume comparison
process, which compares sales volumes recorded on the production reports
with sales volumes recorded on the royalty reports, generated more exceptions
(differences) than MMS could resolve, even after a threshold was established
below which MMS did not research or resolve the exceptions.  We estimated the
royalty value of unresolved exceptions below the threshold to be about $1.7
million annually and the current backlog of unresolved exceptions over the
threshold to be about $21.2 million.  Although the Code of Federal Regulations
provides remedies for underpaid royalties, such as late payment interest
charges and civil penalties (for general noncompliance with the Federal Oil and
Gas Royalty Management Act), these remedies have not provided an adequate
deterrent against noncompliance.  Interest rates prescribed under the Code
have been low, and the assessment and collection of penalties for general
noncompliance have involved lengthy and time-consuming procedures, which
have been difficult for MMS to implement.  In addition, MMS has not assessed
fees to recover its annual costs of $2.1 million for resolving discrepancies
resulting from inaccurate reporting.  We recommended that MMS pursue the
submission of specific legislation through DOI that would authorize penalties
to be assessed for substantial underpayment of royalties.  MMS said that it
agreed "in principle" with our recommendation but would defer action until the
impact of the Federal Oil and Gas Royalty Simplification and Fairness Act,
enacted on August 13, 1996, could be determined.      




Company's Training Certification Revoked

An OIG investigation determined that a Louisiana company approved by MMS
to provide mandatory safety training to offshore oil field workers was not
meeting MMS's minimum requirements for training time and course content. 
The investigation revealed that a safety course in the operation and
maintenance of safety equipment of an offshore oil platform that should have
taken 32 hours was being conducted in 12 hours.  On August 1, 1996, MMS
revoked the company's approval to conduct MMS safety training.

National Biological Service

Fraudulent Claims Submitted 
An OIG investigation determined that two National Biological Service (NBS)
employees in Washington, D.C., embezzled $11,329.38 from a DOI imprest
fund by creating and submitting 49 fraudulent claims for reimbursement.  The
two employees pled guilty in the U.S. District Court for the District of Columbia
to one count of theft of public funds.  One employee was sentenced to 2 years
of probation and was ordered to pay $1,500 in restitution.  Sentencing for the
second employee is pending.  Both employees have resigned from NBS.



National Park Service

Emergency Assistance Fees Not Administered Consistently

The National Park Service (NPS) had developed highly skilled and effective
staffs for providing emergency medical and search and rescue services to those
individuals needing assistance in park units and had taken action to recover,
from park visitors, some of its costs for providing emergency services. 
However, NPS had not established uniform procedures for recovering, from
specific beneficiaries, costs associated with providing emergency assistance;
was not depositing funds recovered into the U.S. Treasury account, as required
by regulations; and had included inadequate contract provisions in service fee
collection agreements with non-Federal entities.  As a result, cost recovery
practices among park units and park visitors were not consistent; costs for
emergency medical and search and rescue services for fiscal year 1993,
estimated to be at least $4.5 million, were not recovered from the specific
beneficiaries; and fee collections totaling 
$757,800 were inappropriately retained by park units.  The report was in the
resolution process at the end of this reporting period.






Improvements in Travel Management Needed 

Although the policies and procedures established by NPS's Denver Service
Center for extended travel of construction supervisors were in compliance with
Federal and DOI requirements, the Service Center did not adequately justify its
decisions to pay construction supervisors per diem instead of relocating them,
in accordance with its internal guidelines; paid fixed rates for lodging that
exceeded the travelers' actual costs; and paid for some items claimed on travel
vouchers that were not authorized. As a result, NPS made per diem
overpayments totaling $42,517 in fiscal years 1993 through 1995.  The
deficiencies occurred because construction supervisors and their immediate
supervisors did not always fulfill their responsibilities in the areas of
authorizing, approving, incurring, and claiming long-term travel costs.  NPS
agreed with our five recommendations to improve the Service Center's travel
management.

Subcontractors' Costs Questioned

In 1994, NPS issued an $11.1 million contract to renovate utilities at a historic
location.  Of the subcontracts issued by the primary contractor, one was for
electrical work for $775,697 and another was for asbestos abatement for $1.2
million.  In our audit of the electrical work, in which the contractor billed costs
of $197,122, we questioned $36,585, which consisted of cost exceptions of
$22,291 and unsupported costs of $14,294.  The cost exceptions identified
were for billed costs involving direct labor, fringe benefits, insurance and
payroll taxes, overhead, general and administrative expenses, and fixed fees
that were in excess of actul costs incurred.  The unsupported costs were for
charges involving mobilization and demobilization, critical path management,
project direction, engineering, training, general and administrative expenses,
and fixed fees.  

In our second audit, of asbestos abatement, we identified cost exceptions of
$43,935 of the $1,134,255 billed by the subcontractor.    These costs pertained
to costs billed for direct labor, labor burden, insurance, overhead expenses,
and fixed fees that were in excess of costs incurred.  Both audits were in the
resolution process at the end of this reporting period.

Settlement in Misuse of Government Aircraft Reached 
An OIG investigation disclosed that on two occasions in late 1994, an NPS pilot
in a southwestern state leased an airplane through the Office of Aircraft
Services for apparent personal use.  Aircraft Services then billed the cost of
these flights to NPS.  Under the terms of a settlement agreement negotiated
between the U.S. Attorney's Office and the employee in August 1996, the
employee paid the U.S. Government $2,824.20.  Administrative action against
the employee is pending.




Office of Surface
Mining Reclamation
and Enforcement

Fraudulent Travel Vouchers Cited

An assistant director and a construction branch supervisor with the Division of
Abandoned Lands, Commonwealth of Kentucky, were sentenced in the U. S.
District Court, Frankfort, Kentucky, after an OIG investigation disclosed that
the assistant director made fraudulent statements on travel vouchers
submitted to the Commonwealth and that the construction branch supervisor
had a financial interest in companies involved in coal mining operations.  The
DOI, through the Office of Surface Mining Reclamation and Enforcement
(OSM), funds Kentucky's Division of Abandoned Lands.

The assistant director was sentenced to 4 months of home detention and 3
years of probation and was ordered to pay $19,534 in restitution.  The
construction branch supervisor was sentenced to 3 years of probation and 100
hours of community service and was prohibited from being employed with the
Commonwealth of Kentucky during the probation period.



Insular Areas

U.S. Virgin Islands

Improvements in Contract Administration and Construction
Oversight Needed

Based on our review of DOI grants for the construction and renovation of
health care facilities, we determined that improvements were needed in the
policies and procedures of the Government of the U.S. Virgin Islands regarding
contract administration and construction oversight.  Specifically, because of
inadequate oversight, there was minimal assurance for 11 contracts, totaling
$7.7 million, that the Government received the most favorable prices, terms,
and conditions; liquidated damages of $302,000 had not been assessed against
four contractors that did not complete work within required time frames; and
59 change orders, totaling $3.9 million, were issued because original plans and
specifications were not sufficiently detailed.  In addition, we found that six
grant drawdowns, totaling $3.8 million, were not posted to the correct
accounts; the Government was billed $1.4 million for on-site representation
services that should have been provided by the Department of Public Works; $4
million could be spent on renovations to a health care facility that will not
accommodate all of the clinical services originally intended for the facility; and
advance payments of $1.4 million were made to a contractor for equipment
that was never installed at the St. Thomas Hospital.

The Governor concurred with all nine of our recommendations, including the
recommendations that the Department of Property and Procurement should
monitor compliance with the competitive procurement requirements of the
Virgin Islands Code and enforce existing policies and procedures related to the
assessment of liquidated damages and to the issuance of change orders.

Hurricane-Related Audits Conducted Jointly

On September 15, 1995, Hurricane Marilyn struck the U.S. Virgin Islands,
causing major damage to public and private structures and prompting the
President to issue a major disaster declaration.  As a result, as of July 2, 1996,
FEMA had approved disaster grants of $109.6 million ($98.8 million as the
Federal share and $10.8 million as the local share) for the Virgin Islands Office
of Management and Budget.  The Offices of Inspector General of FEMA and
DOI, with participation from the Virgin Islands Bureau of Audit and Control,
conducted reviews under a cooperative agreement that covered four functional
areas: overall grant administration, subgrantee accounting controls, hurricane-
related contracting, and community disaster loans.  As of September 30, 1996,
seven final reports had been issued during this reporting period, which are
summarized as follows:

     - Grant Administration.   Overall, the Government of the U.S. Virgin
Islands and its independent agencies had developed procedures, systems, and
controls that, if implemented, should be adequate to ensure that disaster
assistance funds are disbursed and accounted for in accordance with FEMA
requirements and other applicable laws and regulations.  However, individual
agencies need to take actions to strengthen controls and to enforce compliance
with existing policies and procedures.

     - Subgrantee Accounting Controls. The Virgin Islands Port Authority
had not identified the cause of duplicate charges that occurred after Hurricane
Hugo to ensure that similar errors did not occur with regard to Hurricane
Marilyn disaster funds; did not always show time allocation information on the
time sheets of employees who worked on more than one project; and issued two
contracts, totaling about $1.4 million, without obtaining competitive proposals
or documenting why competition was not practicable.  The Port Authority
implemented corrective actions to resolve all three of our recommendations.

The Virgin Islands Police Department had not established procedures and
controls that, in our opinion, would address the specific disaster record-
keeping requirements for FEMA or the Virgin Islands Government.  Also, the
Police Department did not have accounting staff assigned to process hurricane-
related transactions.  The Police Department concurred with our two
recommendations to correct these deficiencies.

     - Hurricane-Related Contracting.  The U.S. Army Corps of Engineers
awarded hurricane-related contracts using required competitive procurement
procedures and, in general, effectively monitored the work performed by
contractors.  During our audit, the Corps noted that it would ensure that it
had a sufficient number of inspectors on-site to monitor the work of
contractors and that a job tracking database system would be in place at the
start of the actual recovery process.  

The Department of Education and the Department of Public Works did not
always comply with procurement requirements for repairs to public schools. 
As a result, there was little assurance that the Government received the most
favorable prices, terms, and conditions with regard to the construction services
acquired.  Specifically, acquisitions of construction and other related services
were based on purchase orders rather than on formal contracts; competitive
negotiation procedures were not always used; and procurement files did not
adequately document whether competitive bids or proposals were solicited, the
results of such solicitations, and, if competition was not used, the reasons why
not.  Further, the purchase orders for construction services were issued
without the involvement or approval of the Commissioner of Property and
Procurement, as required by the Virgin Islands Code. In its response to the
draft report, the Department of Property and Procurement stated that policies
and procedures for procuring goods and services under "public exigency"
provisions of the Virgin Islands Code were being established and implemented
to address our recommendation.  Also, on July 18, 1996, the Commissioner of
Property and Procurement issued a directive regarding the emergency
procurement requirements.




     - Community Disaster Loans.  The Government of the U.S. Virgin
Islands did not account for the Hurricane Hugo Disaster Loan in accordance
with the requirements of the Code of Federal Regulations.  This occurred
because the Government did not maintain adequate data in its centralized
financial management system to account for Disaster Loan funds received and
disbursed and to track these funds.  Therefore, Government departments and
agencies individually compiled disaster-related expense information.  However,
that information was commingled with information on normal operating
expenses and expenses reimbursed through Damage Survey Reports.  As a
result, some unreimbursed disaster-related expenditures claimed against the
Disaster Loan were not reimbursable in accordance with Disaster Loan
provisions.  In addition, the Government could not provide documentation to
support all the unreimbursed disaster-related expenditures claimed against the
Disaster Loan.  The Virgin Islands Director of Management and Budget
concurred with our recommendation to ensure that cost centers are
established for categories of costs to be charged against Community Disaster
Loans and said that our recommendation to develop policies and procedures
for proper record keeping for 
Community Disaster Loans had been implemented.