[Final Advisory Report on Costs Claimed by the State of Michigan, Department of Natural Resources, under Federal Aid Grants from the U.S. Fish and Wildlife Service from October 1, 1995 through September 30, 1997]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 2003-E-0017

Title: Final Advisory Report on Costs Claimed by the State of Michigan,
       Department of Natural Resources, under Federal Aid Grants
       from the U.S. Fish and Wildlife Service from October 1,
       1995 through September 30, 1997

  
Date:  February 5, 2003

**********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, Division of Acquisition and Management Operations at (202) 219-3841. 
******************************

ADVISORY REPORT

Memorandum

To:  Director, U.S. Fish and Wildlife Service

From:  Roger La Rouche,  Assistant Inspector General for Audits

Subject:  Final Advisory Report on Costs Claimed by the State of Michigan, Department of Natural Resources, under Federal Aid Grants from the U.S. Fish and Wildlife Service from October 1, 1995 through September 30, 1997 (No. 2003-E-0017)

Introduction

This report presents the results of our performance of procedures to review another audit agencyï¿½s work related to costs claimed by the State of Michigan Department of Natural Resources (Department) under Federal Aid grants from the U.S. Fish and Wildlife Service (FWS) for the period October 1, 1995 through September 30, 1997.

Background and Scope

The Federal Aid in Wildlife Restoration Act, as amended (16 U.S.C. 669) and the Federal Aid in Sport Fish Restoration Act, as amended (16 U.S.C. 777), (the Acts), authorize FWS to provide Federal assistance grants to states to enhance their sport fish and wildlife programs.  The Acts provide for FWS to reimburse the states up to 75 percent of all eligible costs incurred under the grants.  The Acts also specify that state hunting and fishing license revenues cannot be used for any purpose other than the administration of the stateï¿½s fish and game agencies.  In addition, FWS provides grants to the states under the Clean Vessel Act and the Endangered Species Act.

In May 2001, another audit agency prepared a draft audit report entitled ï¿½Audit of Michigan Federal Aid Program Grants and Payments Awarded by the U.S. Fish and Wildlife Service, Division of Federal Aid, Fiscal Years 1996 and 1997.ï¿½  The scope of its audit work, as stated in the report to the Department, was to evaluate (1) the adequacy of the Departmentï¿½s accounting system and related internal controls; (2) the accuracy and eligibility of the direct and indirect costs claimed by the Department under the Federal Aid grant agreements with FWS; and (3) the adequacy and reliability of the Departmentï¿½s hunting and fishing license fees collection and disbursement process.  The audit also included a review of the Departmentï¿½s operating expenses and receipts to (1) determine the accuracy of the claimed expenses, and (2) verify that the receipts were dispensed in accordance with government regulations and grant provisions.  In addition, the audit included an analysis of other issues considered to be sensitive and/or significant to FWS.  The audit work at the Department covered claims totaling approximately $48 million on FWS grants that were open during the Departmentï¿½s fiscal years ending September 30, 1996 and 1997 (see Appendix 1).  The audit agencyï¿½s agreement with FWS expired before issuance of its draft and final reports to the State of Michigan.  However, the State was provided a preliminary draft report in April 2000.

From 1996 through September 2001, the audit agency conducted audits of Federal Aid grants under a reimbursable agreement with FWS.  The FWS did not renew or extend its agreement with the other audit agency.  At the time of expiration, final audit reports on several uncompleted audits had not been issued and the audits were in various stages of the audit and reporting processes.  The other audit agency indicated in a September 18, 2001 memorandum that its supervisors had not reviewed the working papers for the Michigan audit to ensure that (1)ï¿½sufficient, competent and relevant evidence was obtained, (2) evidential matter contained in the working papers adequately supported the audit findings in the report, and (3) sound auditing techniques and judgment were used throughout the audit.  

On September 20, 2001, FWS and the Department of the Interior (DOI) Office of Inspector General (OIG) entered into an Intra-Departmental Agreement under which FWS requested the OIG to (1) review the audit work performed by the audit agency including its working papers, summaries and draft reports for these audits and (2) issue reports on the findings that were supported by the working papers.  Accordingly, our review was limited to performing the procedures set forth in the Intra-Departmental Agreement and our conclusions presented in the report are limited to findings substantiated by the working papers.  We did not perform any additional audit work of the granteeï¿½s records and the limited work performed under these procedures does not constitute an audit by the OIG in accordance with Generally Accepted Government Auditing Standards.  

Major issues impacting Michiganï¿½s administration of the Federal Aid program are presented in the body of the report and other management issues, which may require corrective action, and other observations, are presented in Appendix 2

Results of Review

The results of our review of the working papers disclosed the following:

* The Department used hunting and fishing license revenues of an estimated $3.3ï¿½million to $4.2 million to pay the wages of conservation officers for law enforcement work unrelated to fish and wildlife.  

* The eligibility for reimbursement of costs totaling $467,087 was questioned representing duplicate claims ($301,806), costs incurred outside of approved grant periods ($100,432), costs for projects not included in grant agreements ($49,375), and mischarged labor hours ($15,474).

* The Departmentï¿½s certifications of paid fishing and hunting license holders were overstated by an estimated 99,634 out of the reported total of 4,711,095.  The number of license holders is one of the factors used to determine the amount of Federal Aid funds provided to the State for Sport Fish Restoration and Wildlife Restoration.

* The Department did not transfer interest earned on revenue of $210,824 to the Departmentï¿½s Game and Fish Protection Fund.

* The Department did not adequately account for personal property acquired with Federal Aid funds.

A.  Use of Hunting and Fishing License Revenues

The Department used an estimated $3.3 million to $4.2 million in hunting and fishing license revenues for law enforcement activities unrelated to fish and wildlife programs during fiscal years 1996 and 1997.  This range encompasses the calculation contained in the working papers adjusted to incorporate additional information provided by the Department ($4.2 million) and our modified calculation ($3.3 million) based on our analysis of information found in the working papers.  Use of license revenues for non-fish and wildlife activities is not in compliance with the relevant regulation (50 C.F.R. ï¿½ 80.4), which states that "[r]evenues from license fees paid by hunters and fishermen shall not be diverted to purposes other than the administration of the State fish and wildlife agency."  

The Departmentï¿½s Law Enforcement Division (LED) enforces the laws of all divisions within the Department and also provides assistance to other state agencies, including the Michigan State Police.  LED expenditures are funded by a number of state funding sources, including revenues from the sale of hunting and fishing licenses.  For example, in fiscal year 1996, LED expenditures were about $21 million of which approximately 72 percent were funded with license revenues, and in fiscal year 1997 approximately 66 percent of $23 million in expenditures was funded with license revenues.  

The Department used a formula for allocating the costs of LED to the different funding sources.  Department officials could not, however, furnish documentation to support the percentages used to compute the allocations to the different funds.  The officials indicated that the percentages were established once a year based on a committeeï¿½s review of budgets.  Officials informed us that they no longer use this process to assign LED costs to the restricted funds.

 Because the Department did not have sufficient documentation to support its allocation, the working papers contained a calculation based on the number of hours that were deemed to be fish and wildlife activity in relation to the total hours worked by the conservation officers.  Next, the percentage of hours charged to fish and wildlife activity was compared to the percentage of law enforcement expenditures funded by license revenues.  The difference between the two percentages was considered the percent of license revenues estimated to be diverted.  This calculation identified $4.2 million in license revenues that were used for law enforcement activities not related to fish and wildlife.

The calculation was based on the assumption that almost all (ï¿½over 95 percentï¿½) of the license revenues allocated to the law enforcement division funded employeesï¿½ wages.  Our review of the working papers revealed that wages in fiscal years 1996 and 1997 comprised approximately 81 and 75 percent, respectively, of total law enforcement expenditures funded with license revenues.  Based on this information, we concluded that it was appropriate to apply the percentage unrelated to fish and wildlife activities to law enforcement wages rather than to total law enforcement costs because the percentage was computed based on an analysis of labor charges and labor did not represent over 95ï¿½percent of total law enforcement costs.  Thus, our new calculation resulted in $3.3ï¿½million of expenditures for labor that was spent on unrelated fish and wildlife activities.  The two calculations are presented in Appendix 3.

Since the working papers did not contain any other specific information on how non-wage costs (such as costs for training and equipment) should be charged to the different funding sources, we could not determine an exact dollar value of the amount of funds used for non-fish and wildlife activities.  Lacking any other analysis of costs, we believe that the range of $3.3ï¿½million to $4.2 million provides a reasonable estimate of the amount of license revenues used for non-fish-and-wildlife related activities.  The Department should also be assessed interest on the amount of license revenue eventually restored to the Game and Fish Protection Fund based on the rate of return earned by the fund.

Recommendations

We recommend that FWS: 

1. Use the estimated range as a basis to reach agreement with the Department on the final amount, plus interest associated with this amount, that should be returned to the restricted license revenue fund for use on fish and wildlife related activities.

2. Ensure that the Department implements corrective action to prevent the use of hunting and fishing license revenues for law enforcement activities unrelated to fish and wildlife programs.

Department Response

In its December 12, 2002 response, the Department stated that it believed that the estimated diversion was made up of three components:  the over-appropriation of Game and Fish Protection Funds, disputed habitat protection activities (identified as activities charged to time codes 5XX), and general administrative expenses.  The Department agreed that there was some over-appropriation of game and fish license revenue from the Game and Fish Protection Fund for activities in the Law Enforcement Division.  It estimated the amount to be $1,725,822.  The Department did not agree that all of the habitat protection activities were ineligible for Game and Fish Protection Fund support.  It stated that ï¿½[t]hese activities are integral to Michigan meeting its obligations under its U.S. Fish and Wildlife Service grants to restore, rehabilitate and improve wildlife habitat and to manage, conserve and restore fishery resources.ï¿½  It did not identify an amount with this portion of the finding.  The Department also disagreed with the portion of the finding relating to the calculation of the ineligible general administrative expenses.  It stated that the allocation method it used was consistent, documentable, and reasonable, making it an appropriate allocation method in accordance with OMB Circular A-87.  The Department also stated that the alternative allocation method proposed by the prior audit agency was not reasonable given the Departmentï¿½s budget system.

FWS Response  

FWS provided us with a December 13, 2002, letter to the Department concerning the draft advisory report which stated that:

Based on the information from our meeting and other communications, we understand Michigan Department of Natural Resources (MDNR) was acting on an assumption that the law enforcement expenses charged to some 5XX codes were eligible for license fees, and that law enforcement expenses charged to certain other 5XX codes were partially eligible.  To the extent these expenses were not eligible, we recognize that you may have been given inadequate guidance and oversight in the past from the Service indicating otherwise.  Complicating the situation was the lack of training of the conservation officers as to the coding of their time and the fact that available documentation did not establish a definitive determination of the eligibility of these expenses.  Therefore, we have decided to adjust the amount of the license fee revenues that would be required to be repaid accordingly. . . .

In addition, we have reviewed the information from our meeting and other communications concerning allocation of law enforcement general administrative expenses.  We have concluded that repayment should be made to the appropriate State fish and wildlife agency fund concerning these expenses.

Based on all available documentation and appropriate considerations, we agree that the amount to be returned for use for the administration of the State fish and wildlife agency will be $1.9 million due to the allocation methodology employed, and $556,000 concerning the general administrative expenses, for a total of $2,456,000.  We further agree that this shall constitute the full amount to be repaid for the fiscal years ending September 30, 1996 and 1997. . . .

With regard to corrective action, the letter stated that the Department should make arrangements to return $1.9 million by December 31, 2002, and the additional $556,000 by January 1, 2004.  The Department should also review its current codes and procedures to ensure better determination of eligibility of future expenses and should allow the FWS regional office to review the Departmentï¿½s work on this activity.  The FWS agreed to postpone any audits of these activities until the FWS provides the Department with a determination of eligibility and provides the Department an opportunity to implement any changes, if necessary.  The FWS further stated that a final corrective action plan should be completed as soon as practicable.

The Department responded to FWS on December 23, 2002 that it accepted the FWS conditions.  

Office of Inspector General Comments 

The agreement of the Department with the conditions of the FWSï¿½ December 13, 2002, letter is sufficient to consider Recommendations A.1 and A.2 resolved but not implemented.  The corrective action plan should identify the dates for completing all required actions and the names of the responsible officials.

B.  Questioned Costs

The working papers identified costs of $467,087 which are questionable for reimbursement representing duplicate claims for inmate labor ($301,806), out-of-period costs ($100,432), costs for projects not included in grant agreements ($49,375), and mischarged labor hours ($15,474).

1. Duplicate claims for inmate labor.  A total of $301,806 was questioned representing the cost of inmate labor that was claimed twice.  The Michigan Department of Corrections provided inmate labor at a cost of $2.50 per day per inmate plus 100 percent of the associated administrative costs and billed these costs to the Department of Natural Resources.  The Department of Natural Resources charged these costs directly to the grants and also claimed these costs as the Stateï¿½s match on the same grants.  The grants and associated questionable costs are as follows:

Grant

Amount
Federal
Share
W-139-D-1
$216,725
$162,544
W-138-D-1
2,106
1,580
W-127-R-14
82,975
62,231
Total
$301,806
$226,355

2. Out-of-period costs.  The Department charged out-of-period costs without prior approval when it reimbursed Michigan State University (MSU) with Federal Aid grant funds for performing various fish research projects.  MSU billed the Department up to a year after incurring these costs.  Due to the late billing, the Department charged these costs to current grants because the grants under which MSU originally carried out the work had expired.  Office of Management and Budget (OMB) Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments, Attachment A, Part C, states that to be allowable, costs must conform to any limitations or exclusions set forth in Federal laws and terms and conditions of the Federal award.  The Federal Aid agreements identify specific grant periods.  Therefore, $100,432 was questioned as follows:

Grant
Number
Project
Number
Document
Number
Questioned
Amount
Federal
Share
F-53-R-13
230464
W6089856
$7,687
$5,765

230480
W6089917
23,066
17,300

230476
W6110099
22,052
16,539

230471
W6110208
5,494
4,120

Subtotal

$58,299
$43,724





F-53-R-14
230480
W7045301
$8,165
$6,124

230480
W7041370
16,423
12,317

230464
W7052656
8,196
6,147

230489
W7086959
9,349
7,012

Subtotal

$42,133
$31,600

Total

$100,432
$75,324

3. Costs for projects not included in the grant agreement.  Costs of $49,375 were questioned representing the costs of activities that were not provided for in the grant agreements.  The Department charged costs to projects that did not correspond with the approved projects listed in the agreements for grants F-53-R-13 and F-53-R-14.  According to OMB Circular A-87 Attachment A, Part C, costs must conform to any limitations or exclusions set forth in Federal laws and terms and conditions of the Federal award.  Questioned costs of projects not included in the grant agreement are as follows:

Grant
Number
Project
Number
Document
Number
Vendor
Questioned
Amount
Federal
Share
F53-R-13
230481
W6074927
Regents of University of Michigan
$  2,427
$  1,820

230475
W6089909
Michigan State University
 41,528
31,146



   Subtotal
$43,955
$32,966






F54-R-14
230481
W7045265
Regents of University of Michigan
$  5,420
$ 4,065









    Total
$49,375
$37,031

4.  Mischarged labor hours.  Costs of $15,474 were questioned representing the cost of labor for ineligible activities charged to hunter education grants.  The mischarges represented the estimated cost of time charged to activity 410 associated with ï¿½Area Controls and Search/Rescue of Lost Huntersï¿½.  These activities are ineligible activities under the hunter education grant.  According to OMB Circular A-87(C)(3)(a), allocable costs are those that can be charged or assigned to a particular cost objective in accordance with the relative benefits received.

Grant
Hours
Rate
Questioned
Costs
Federal
Share
W-120-S-27
430.5
$22.50
$9,686
$7,265
W-120-S-28
252.0
$22.97
5,788
4,341
Total


$15,474
$11,606

Recommendations

We recommend that the FWS:  

1. Resolve the $467,087 of questioned costs.

2. Ensure that the Department institutes controls to ensure that costs are charged to the correct grant periods, prior FWS approval is sought before charging out-of-period costs to grants, costs are claimed only for projects included in the grant agreement, and training is provided on eligible and ineligible charges to the hunter education grants.

Department Response

The Department agreed with the questioned costs, stating that it will adjust future Federal Aid billings in order to repay the Federal share.  It also stated that appropriate internal controls had been instituted to prevent a further occurrence of these types of questioned costs.  	On December 30, 2002, the Department submitted four Financial Status Reports, SF-269s, to indicate how the questioned costs were repaid.  

Office of Inspector Generalï¿½s Comments

We forwarded the documents provided by the Department to the FWS for its determination of the adequacy of the Departmentï¿½s proposed resolution.  The FWS should review the documentation and determine whether the questioned costs have been properly repaid.  In addition, the FWS should obtain a description of the Departmentï¿½s new internal controls that have been instituted, including training on identification of eligible and ineligible charges to the hunter education grants, to prevent a further occurrence of these types of questioned costs, and determine if they seem adequate.  

C.  License Certification

States are required by regulation (50 C.F.R. ï¿½ 80.10) to certify the accuracy of the reported number of paid hunting and fishing licenses each year.  The number of licenses is one of the factors used by the FWS to determine the Federal Aid apportionment for Sport Fish Restoration and Wildlife Restoration.  The working papers demonstrated that the fishing license holder certifications for fiscal years 1996 and 1997 and the hunting license holder certification for 1997 were overstated.  These certifications included duplicate license holders and licenses which were issued free of charge.  ï¿½ï¿½ [A]n individual shall not be counted more than once as a hunting or fishing license holderï¿½ (50 C.F.R. ï¿½ 80.10(c)(5)).  ï¿½Licenses which do not return net revenue to the State shall not be included [in determining eligible licenses]ï¿½ (50 C.F.R. ï¿½ 80.10(c)(2)).  We estimated duplicate license holders and licenses issued free of charge as follows: 

Year
Fishing

Hunting

Total
1996
81,527
(a)
0

81,527
1997
1,276
(b)
16,831
(c)
18,107
Total
82,803

16,831

99,634

      (a) The overstated licenses were calculated by deducting from the individual fishing license holder certification of 1,464,027 the 1,382,500 individual fishing license holders developed by using an electronic query1 of the Retail Sales System (RSS) database for License Year (LY) 1995 (ending March 31,1996) (1,370,184), plus the Charter Boat Daily licenses included in the certification (12,316).  The Charter Boat Daily licenses were added to the query results because they are still sold via a paper system and are not entered into the RSS.

      (b) The individual fishing license holders certification for fiscal year 1997 is overstated by 1,276 due to the inclusion of individual Senior Fish Spouse fishing licenses that were issued free of charge.  The overstated licenses were calculated by deducting from the 1,348,107 individual fishing license holder certification the 1,346,831 individual fishing license holders developed by an electronic query of the RSS database for LY 1996 that excluded the free Senior Fish Spouse licenses.

      (c) The individual hunting license holders certification for fiscal year 1997 is overstated by 16,831 due to the inclusion of duplicate hunting license holders.  The overstated licenses were calculated by deducting from the individual hunting license holder certification of 964,531 the 947,700 individual hunting license holders developed using an electronic query of the RSS database for LY 1996 (ending Marchï¿½31, 1997) and excluding subordinate license types (those which are not supposed to be purchased without already having a primary license type) and daily and annual waterfowl area use permits (the area use permits are not a license to hunt).

In our exit conference on September 18, 2002, the Department agreed with the finding and stated that its license certification procedures had been changed in 1998.  
      
Recommendation

We recommend that the FWS ensure that the Departmentï¿½s new procedures prevent duplicate and free licenses from being included in the certification count. 

Department Response

The Department agreed with the finding and stated that it had corrected the overstatement of fishing and hunting licenses.

Office of Inspector General Comments

In responding to this final report, FWS should state whether it concurs with and has implemented the recommendation.

D.  Revenue From Land Acquired With State License Revenues

The Department received revenue from the sale of gas and oil produced from property owned by the State that was initially deposited in the Michigan Natural Resources Trust Fund (MNRTF).  At year-end, this revenue was to be transferred to the appropriate fund based on the acquisition source of the parcel of land from which the gas and oil was extracted.  The working papers disclosed that the Department did transfer to the Game and Fish Protection Fund most of the gas and oil revenue that was generated on land acquired with State license revenues.  In reconciling the fiscal year 1997 annual production report to the individual monthly journal vouchers, a discrepancy of $210,824 in revenue was identified, which represented oil and gas revenue from land acquired with funding from the Game and Fish Protection Fund.  When advised of this discrepancy, the Department corrected it.  Both the MNRTF and the Game and Fish Protection Fund are interest-earning funds.  Consequently, the restoration of license revenue to the Game and Fish Protection Fund should include the interest earned while the funds were in the MNRTF. 

In its briefing to OIG dated February 27, 2001, the Department provided documents to show that the transfer had been made from the MNRTF to the Game and Fish Protection Fund on May 23, 2000.  In our exit conference with the Department on September 18, 2002, it provided a document to show that the interest earned by the revenue while in the MNRTF was transferred to the Game and Fish Protection Fund on June 13, 2002.

Recommendation

We recommend that the FWS ensure that the amounts transferred, for which the Department provided documentation, were made as indicated.
      
Department Response

The Department agreed with the finding and stated that it had corrected the issue.

Office of Inspector General Comments

In responding to the final report, the FWS should indicate whether it agrees with and has implemented the recommendation.

E.  Property Management  

The working papers disclosed that the Department needs to improve its controls over personal property.  The working papers showed that:

* Some assets did not have identification tags attached.
* Inventory records did not reconcile with the equipment observed at the site.
* Supporting documentation for some transferred property was missing.
* Loans of assets to organizations outside the Department, as well as to other sites within the same division, were not supported by required documentation.
* Identification tag numbers for some items did not correspond with the tag numbers in the fixed asset system.
* Information for items that were missing, returned as surplus, or transferred was not entered into the fixed asset system.

The Department agreed with this finding at our exit conference on September 18, 2002.  It stated that it had developed Equipment Inventory and Building Inventory Asset Management Systems and placed them in operation in June 1999.  

Recommendation

We recommend that the FWS determine if the new systems contain controls to adequately account for personal property acquired with Federal Aid grant funds.

Department and FWS Responses

The Department agreed with the finding and stated that it had corrected the issue.

Office of Inspector General Comments

In responding to the final report, FWS should state whether it agrees with and has implemented the recommendation.

In accordance with the Departmental Manual (360 DM 5.3), please provide us youï¿½re your written comments by May 6, 2003 regarding the status of the corrective action plan.  

This advisory report is intended solely for the use of grant officials of the U.S. Fish and Wildlife Service, and is not intended for, and should not beused by anyone who is not cognizant of the procedures that were applied to the review of another audit agencyï¿½s work. 

If you have any questions regarding this report, please contact Mr. Joseph Ansnick, Director, External Audits, at (703) 487-8011. 


cc:  Regional Director, Region 3
      U.S. Fish and Wildlife Service

APPENDIX 1

FINANCIAL SUMMARY OF REVIEW COVERAGE
OCTOBER 1, 1995, THROUGH SEPTEMBER 30, 1997

Grant Number
Title
Grant
Amount
Year
Costs Claimed
Federal Share of Questioned Costs
Sport Fish Restoration
FW-4-C-7
D.J. Administration
$       61,431

FY96
Total

$       57,868
$       57,868

FW-4-C-8
D.J. Administration
61,373

FY97
Total

$       49,754
$       49,754

F-35-R-21
Inland Fisheries
          Research
1,216,012

FY96
Total

$     361,865
$     361,865



F-35-R-22
Inland Fisheries
          Research
1,403,820

FY96
FY97
Total

$     363,050
       364,760
$     727,810

F-35-R-23
Inland Fisheries
          Research
1,383,186

FY97
Total

$     293,719
$     293,719

F-53-R-12
Great Lakes Fisheries
                   Research
2,956,629

FY96
Total

$    960,361
$    960,361

F-53-R-13
Great Lakes Fisheries
                   Research
3,035,050

FY96
FY97
Total

$ 1,641,946
   1,139,042
$ 2,780,988

$ 76,690


F-53-R-14
Great Lakes Fisheries
                   Research
3,351,469

FY97
Total

$ 1,457,421
$ 1,457,421

$ 35,665
F-58-B-33
Fair Haven Boat Access
165,000

FY96
Total

$        5,928
$        5,928



F-58-B-37
Lake St. Helen Boat
                    Access
305,000

FY96
FY97
Total

$      49,414
       76,610
$    126,024

F-58-B-38
Selfridge Boat Access
544,218

FY96
FY97
Total

$    339,363
     221,314
$    560,677



F-58-B-39
Grand Haven Boat
                 Launch
324,000

FY97
Total

$      15,225
$      15,225



F-62-D-9
Fish Production and
                 Stocking
6,801,000

FY96
Total

$ 6,801,000
$ 6,801,000



F-62-D-10
Fish Production and
                 Stocking
7,161,000

FY97
Total

$ 6,475,938
$ 6,475,938




F-72-D-5
Manistee River
      Restoration
50,020

FY96
Total

$      50,010
$      50,010



F-75-R-2
Drug Registration
20,014

FY96
Total

$      20,014
$      20,014

F-75-R-3
Drug Registration
20,014

FY97
Total

$      20,004
$      20,004

F-76-B-1
Rogers City Mooring
    Facility Expansion
3,499,448

FY96
FY97
Total

$    474,649
       91,520
$    566,169













Total Sport Fish Restoration



$32,358,684
FY96
FY97


$11,125,468
 10,205,307

$21,330,775
$ 76,690
  35,665

$112,355






Wildlife Restoration
FW-4-C-7
PR Administration
$     70,931

FY96
Total

$     64,549
$     64,549

FW-4-C-8
PR Administration
61,373

FY97
Total

$     48,790
$     48,790

W-120-S-27
Hunter Education
1,028,056

FY96
Total

$   934,476
$   934,476

$    7,265
W-120-S-28
Hunter Education
1,202,952

FY97
Total

$ 1,175,781
$ 1,175,781

$    4,341
W-125-D-15
Game Area Maintenance
525,000

FY96
FY97
Total

$   400,510
      39,611
$   440,121


W-127-R-14
Statewide Research
3,050,193

FY96
Total

$ 2,911,403
$ 2,911,403

$   62,231
W-127-R-15
Statewide Research
2,614,645

FY97
Total

$ 2,532,011
$ 2,532,011


W-134-L-1
Statewide Land
       Acquisition
2,668,534

FY96
FY97
Total

$    561,351
     159,546
$    720,897


W-136-S-1
Sharonville Shooting
               Range
500,350

FY96
Total

$    493,557
$    493,557


W-137-S-1
Rose Lake Shooting
               Range
500,200

FY96
FY97
Total

$    263,726
     229,915
$    493,641


W-138-D-1
Statewide Wildlife
        Development
291,183

FY96
Total

$     83,422
$     83,422

$    1,580
W-138-D-2
Statewide Wildlife
        Development
326,183

FY97
Total

$     58,726
$     58,726

W-139-D-1
Statewide Wildlife
         Management
8,742,094

FY96
Total

$ 7,590,990
$ 7,590,990

$ 162,544
W-139-D-2
Statewide Wildlife
         Management
8,266,772

FY97
Total

$ 7,774,812
$ 7,774,812



W-140-D-1
Facilities, Construction, Renovation, and Special Maintenance
838,900

FY97
Total

$    478,369
$    478,369

W-140-D-2
Facilities, Construction, Renovation, and Special Maintenance
281,630

FY97
Total

$     67,484
$     67,484



H-1-1
Migratory Bird Harvest
Information Program
90,000

FY96
Total

$     90,000
$     90,000



H-1-1 or 
98210-6-0508
98210-7-M066
Migratory Bird Harvest Information Program 
Fee per name

FY96
FY97
Total

$   23,280
    30,868
$   54,148







Total Wildlife Restoration



$31,058,996
FY96
FY97


$13,417,264
 12,595,913

$26,013,177
$ 233,620
    4,341

$ 237,961



Endangered Species

E-1-25
Michigan Endangered Species Program
$345,819

FY96
Total

$       21,859
$       21,859



E-1-26
Michigan Endangered Species Program
322,667

FY97
Total

$     322,667
$     322,667

E-1-27
Michigan Endangered Species Program
306,207

FY97
Total

$     352,080
$     352,080

Total Endangered Species

$974,693

FY96
FY97

$      21,859
      674,747
$   696,606








Clean Vessel Program

V-1-2
Clean Vessel Program
$      217,467

FY96

$     167,967

V-1-3
Clean Vessel Program
144,000

FY97

$      39,471

Total Clean Vessel Program
$     361,467

$     207,438










Other

P-1-W-1
Wildlife, Conservation,
     and Appreciation
$     24,000

FY96

$       10,383

P-1-W-1
Wildlife, Conservation,
     and Appreciation
20,000

FY96

$       20,000

Cooperative
Agreement
St. Joseph River
   Cooperative Project
50,000

FY96
FY97
Total

$         6,385
        33,881
$       40,266

Total Other
$     94,000

FY 96
FY 97

$      36,768
        33,881

$      70,649

Summary Totals

$64,847,840

FY96
FY97

Total

$24,769,326
 23,549,319

$48,318,645

$ 310,310
$   40,006

$ 350,316



APPENDIX 2

MANAGEMENT ISSUES

The working papers identified several management issues that the Michigan Department of Natural Resources and the Fish and Wildlife Service need to address and commented on the adequacy of the Stateï¿½s assent legislation.  These matters are discussed below.

1. Financial Management

The Stateï¿½s accounting system and related internal controls in effect during fiscal years 1996 and 1997 were generally adequate for the accumulation and reporting of costs under Federal Aid grants.  However, improvements in implementing the system are needed to ensure that employee time charges are accurate, that supporting documentation for in-kind contributions and vehicle use are sufficient, and that costs are charged to the correct grant.  The Department could resolve several of the needed improvements by taking advantage of the cost recording and reporting capabilities of the existing State accounting system.  

a. Time charges.  A review of the labor system in effect as well as field interviews with grant employees disclosed the following weaknesses:

* Some employees were not aware of all activities that were ineligible for Federal Aid funding.  Based on activity codes for time charges, the majority of the employees interviewed were aware of some activities which were ineligible for Federal Aid reimbursement.  However, this did not ensure that the employees understood the types of work that should not be charged to the Federal Aid grants.  For example, in certain cases the Department will respond to citizen calls for the removal of nuisance animals (such as a bear roaming into town or rounding up geese for relocation).  These types of activities have been charged to a variety of activity codes including public relations, species management, population surveys, and animal relocation.  In the labor recording system, all of these codes, except animal relocation, are eligible for Federal reimbursement.  However, Part 522.8.2 B.(2) of the Federal Aid Manual includes in its description of ineligible activities ï¿½Activities directed to the welfare of individual animals such as caring for injured animals or removal of nuisance animals.ï¿½  Considering the variety of activity codes charged for these efforts, it appears that code descriptions are ambiguous.

* Employees did not always complete time and attendance forms in ink and on a daily basis.  The Department Personnel Manual Chapter 15.02 I. requires that employees complete timesheets on a daily basis, in ink.  Noncompliance with this procedure could result in inaccurate labor charges to Federal projects.  Although, the review did not disclose any timesheets that did not reflect actual time worked, failure to comply with this requirement increases the risk of improper charges to the Federal Aid grants.

b. In-kind contributions.  The working papers disclosed that the Department does not have adequate, written policies and procedures to ensure proper accumulation, recording and reporting of in-kind contributions under Federal Aid grants.  As such, it could not be determined what procedures the Department followed for claiming in-kind match or what the individual volunteer's responsibilities were in recording and certifying the efforts performed.  In addition, it was noted that volunteers who performed work for the Department did not always sign the sheets supporting the claimed hours.  In some instances there was no signature, in others only one person signed for a group of volunteers.  Sometimes the lead volunteer or a member of the Hunter Education Instructor Group recorded the hours on an activity sheet, which was signed either by the lead instructor or the person who prepared the sheet.  This practice does not comply with the requirements, which states in part  ï¿½ï¿½To the extent feasible, volunteer services will be supported by the same methods that the organization uses to support the allocability of regular personnel costsï¿½ (43 C.F.R. ï¿½ 12.64(b)(6)).  Since the Departmentï¿½s employees were required to complete an activity sheets in support of labor costs charged to Federal Aid grants, the volunteers should do the same.

c. Vehicle Use Logs.  The Departmentï¿½s practice is to record vehicle mileage in a log.  During the review it was discovered that these logs, which were the supporting documents for the vehicle mileage entered into the system, were not available.  Supporting documents which are otherwise reasonably considered as pertinent to program regulations must be retained for three years from the starting date specified in paragraph (c) (43 C.F.R. ï¿½ï¿½ï¿½12.82(a)(1)(ii), (b)(1) and (2)).  Also, 50 C.F.R. ï¿½ï¿½80.19(a) requires that supporting documents, and all other records pertinent to a project shall be retained for a period of three years after submission of the final expenditure report on the project.  The vehicle log summaries are source documents for the vehicle mileage and were not kept for three years as required.  The Department did not have a formal policy to retain all supporting documents for the appropriate periods and destroyed the summaries after the data was entered into the system.   

d. Use of Grant Numbers.  The working papers indicated that the ï¿½grant numberï¿½ field in the accounting system was not filled in for accounting transactions totaling $362,595 that may have been charged to and claimed under grant W-139-D-2.  A Michigan Federal Aid Coordinator stated that charges defaulted to this grant number whenever the grant number field was not filled in.  The working papers did not include a verification that the accounting system had been programmed to default costs with a blank grant number to grant W-139-D-2.  However, we believe that the use of a default program does not ensure that costs are charged to the correct grant.  

2. Sale of Land and Easements

The Department funded expenditures of $216,940 for non-game related activities with game revenue in fiscal year 1997.  The Department collected revenue from the sale of land and from easements across State-owned property.  This revenue was recorded in the Departmentï¿½s general fund where it was classified as game or non-game revenue.  The game revenue represented revenue generated from property that was acquired with game and fish funds or with Federal Aid grants.  The non-game revenue was generated from property acquired with other resources.  The Department did not cross-reference the land sale or easement invoices or revenue receipt documentation to the specific parcels of land that generated the revenue.  This made it difficult for the Department to determine whether the affected land was originally acquired with license revenue or Federal Aid funds.  The source of funds for the original acquisition of the affected land must be identifiable to ensure proper accounting for the proceeds from the land sale, including the issuance of easements.  

For lands acquired with State license fees, the proceeds from the sale or issuance of an easement should be used for the administration of the State fish and wildlife agency (50 C.F.R. ï¿½ï¿½80.4).  On the other hand, for lands acquired with Federal Aid funds, the grantee must notify FWS that the property is no longer needed and request disposition instructions (43 C.F.R. ï¿½ï¿½12.71).  The FWS should then provide for one of three alternatives identified in the regulations for disposition (43 C.F.R. ï¿½ï¿½12.71(c)).  

In its February 27, 2001, briefing to the OIG, the Department stated that it had properly accounted for the $216,940 in the appropriate subfund.  In addition, the Department stated that it had begun cross-referencing the invoices and revenue receipt documentation to the parcel of land involved in each transaction.

3. Useful Life Clause

Most of the grants reviewed for the acquisition of boat access sites contained a useful life clause, as well as a few grants for harbors.  Pre-determining a useful life may be contrary to 43 C.F.R. ï¿½ï¿½12.71(b), which states ï¿½ï¿½real property will be used for the originally authorized purposes as long as needed for that purposes [sic].ï¿½  The clause typically allows a grantee to gain control of the Federally funded property after a pre-determined period without obtaining the approvals required by the regulations.  Since it cannot be determined in advance when a harbor or boat access site will no longer be needed for its intended purpose, the pre-determined useful life wording should be removed from the grants and not be used in the future.  The Department agreed with the finding and indicated that it has removed the clause from current agreements and will not use the clause in the future.  

4. Field Trials

Field trails were not approved in accordance with State requirements.  Field trial activities include the training and competing of hunting dogs.  The Department allowed field trials at designated field trial areas throughout the State.  Michiganï¿½s Wildlife Conservation Order Chapter 15.3 states ï¿½A person shall not conduct a field trial without first obtaining written authorization from the director upon an application form approved by the director.ï¿½  Wildlife Conservation Order Chapter 15.1 defines director as ï¿½the director of the department of natural resources or an authorized representative.ï¿½ 

The process used to obtain approval for field trials provided for field trial clubs to submit a form entitled ï¿½Field Dog Trial Application and Permit for Special State Owned Trial Areasï¿½ to the field trial association where it was signed by a representative of the field trial association and forwarded to the Department.  At the Department, a Wildlife Division Permit Specialist assigned a number to the application.  If the application was prepared after the first of the year, the form required the signature of the Area Manager for the State Game Area involved before the approved permit would be returned to the field trial association representative. 

None of the 65 field trial applications reviewed were signed by the Director of the Department of Natural Resources or an authorized representative of the Director.  The applications showed only the signature of a field trial association representative, who is not an employee of the Department.  In addition, 16 of the 65 applications were signed by the Wildlife Division Biologists and/or supervisors approving the field trial event.  However, neither the field trial association representative, wildlife biologists, wildlife supervisors, nor the Wildlife Division Permit Specialist had been authorized by the Director to approve field trials.

5. Assent Legislation

The working papers indicated that State of Michiganï¿½s legislation assenting to the provisions of the Federal Aid in Wildlife Restoration and Federal Aid in Sport Fish Restoration Acts is considered adequate and in compliance with Federal requirements.

APPENDIX 3

CALCULATIONS USED TO ESTIMATE THE RANGE OF
 ESTIMATION OF LICENSE REVENUES USED FOR 
NON-FISH AND WILDLIFE ACTIVITIES

Percentage of Funds Used for Purposes Unrelated to Fish and Wildlife

A
B
C
D
Fiscal Year
Percent of Total Law Enforcement Labor Hours Related to Fish & Wildlife
Percent of Total Law Enforcement Expenditures Funded by License Revenues
Percent Unrelated to 
Fish and Wildlife Activities (C ï¿½ B)
1996
59%
72%

13%

1997
60%
66%

6%



Estimation of Funds Based on Total Law Enforcement Expenditures

E
F
G
H
Fiscal
Year
Total Law Enforcement Expenditures
Percent Unrelated to Fish and Wildlife Activities
(From Column D)
Amount Unrelated to 
Fish and Wildlife
Activities (F x G)
1996
$21,283,547
13%

$2,766,861

1997
$23,463,292
6%
  
  1,407,798


    Total


$4,174,659



Estimation of Funds Based on Total Labor Costs

I
J
K
L
Fiscal Year
Total Labor Expenditures
Percent Unrelated to Fish 
and Wildlife Activities
(From Column D)
Amount Unrelated to
Fish and Wildlife Activities (J x K)
1996
$17,199,474
13%

$2,235,932

1997
$17,493,221
6%

  1,049,593


     Total


$3,285,525


1 The electronic query is designed to include individual customers only once regardless of how many licenses an individual may have purchased.