[Final Audit Report Bureau of Land Management Coal Inspection and Enforcement Program]
[From the U.S. Government Printing Office, www.gpo.gov]
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TABLE OF CONTENTS
PAGE
INTRODUCTION 1
BACKGROUND AND SCOPE 1
RESULTS OF AUDIT 2
OTHER MATTERS 3
STANDARDS 4
RESPONSE 4
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AUDIT REPORT
INTRODUCTION
This report presents the results of our audit of the
Bureau of Land Management�s Coal Inspection and
Enforcement Program. The objective of our audit was
to determine whether the program adequately
monitored coal production on federal and Indian leases.
BACKGROUND
AND SCOPE
BLM manages about 31 percent of all coal resources in
the United States and oversees all phases of coal
development on federal and Indian lands. BLM
performs inspections of producing and non-producing
coal leases on federal and tribal lands to verify coal
production to ensure proper royalty billing and
collection. BLM also inspects federally leased coal
producing lands to determine whether the operations:
> Wasted or degraded other resources;
> Avoided or minimized damage to formations and
deposits or nonmineral resources;
> Complied with applicable laws, rules, and orders
and terms and conditions of federal leases and
licenses;
> Complied with all requirements of approved
exploration or resource recovery and protection
plans.
The Code of Federal Regulations (43 CFR � 3480.0-
6(d)(4)) requires the BLM to inspect at least quarterly
federally leased lands where operations for the
exploration, development, production, preparation, and
handling of coal are conducted. BLM�s policy requires
that production reported to the Minerals Management
Service (MMS) by the operator/lessee be independently
calculated to ensure proper royalty billing and
collection.
We performed our work from February through August
2002. We visited the BLM�s State Office and White
River and Little Snake field offices in Colorado; the
Rock Springs and Casper field offices in Wyoming; and
the Farmington field office in New Mexico. We visited
active mines, interviewed Bureau employees
responsible for monitoring mine activity, and reviewed
inspection and production verification information. We
concluded our audit work after visiting the several sites
listed above because we did not identify any significant
potential problems with the inspection and enforcement
program at the locations we visited.
RESULTS OF AUDIT
We found that the monitoring of federal coal production
at BLM field offices visited was generally satisfactory.
Most of the offices we visited had acquired or
developed automated systems to aid them in verifying
production quantities. At four of the five field offices
we visited, the mine inspection and production
verification reports were generally well documented.
However, at the Farmington field office we found
inspection personnel did not document all inspections
and did not always perform required independent
verifications and comparisons between coal production
reported by the company and BLM�s calculations of
coal production. Inspection personnel at Farmington
told us that they did perform the required quarterly
inspections but failed to document them. Inspection
personnel stated that they failed to document all
quarterly inspections and perform all required
production verifications because they were working on
other assignments.
By not documenting inspections or verifying
production, the Farmington field office is not able to
assure that the production amounts reported by lessees,
on which royalties are based, are accurate. We
suggested that inspection personnel at the Farmington
field office perform and document all required
inspections and production verifications. Management
officials at the Farmington field office stated that they
have taken steps to correct the deficiencies identified.
Suggested Action: We suggest that the Director of
BLM ensure that all field office personnel perform all
required production verifications and adequately
document quarterly inspections.
OTHER MATTERS
During our audit, we also looked at coal royalty rate
reductions in Colorado. BLM State Directors have the
authority to award reduced royalty rates to companies
meeting certain criteria. Reduced royalty rates can be
awarded in order to encourage the recovery of coal
resources. We reviewed two instances in Colorado
where coal mining companies were receiving reduced
royalty rates to determine whether they met eligibility
requirements. In reviewing these two instances we
found:
> One company submitted documentation with its
reduced royalty rate application that did not
conform to requirements. The financial statements
submitted by the company as part of its application
package were prepared and annotated as not
intended to present the results of operations in
conformity with generally accepted accounting
principles. We brought this to the attention of
BLM officials and they subsequently requested that
the company provide the documentation that
conformed to professional standards. In addition,
we confirmed that the company was no longer
receiving the reduced royalty rate after the reduced
rate expired in January 2002.
> The other company initially appeared to be no
longer eligible for the reduced royalty rate based on
information we had obtained regarding the
company�s financial position. We suggested that
BLM officials obtain more complete information
from the company. BLM obtained such
information and determined that the reduced
royalty rate should remain in effect.
STANDARDS
We conducted our work in accordance with the
�Government Auditing Standards� issued by the
Comptroller General of the United States with some
exceptions because of the limited scope of the audit.
We included such tests of records and other auditing
procedures that were considered necessary under the
circumstances. In conducting our audit work we found
that BLM�s monitoring of Federal coal leases was
generally satisfactory and, except for the matters
discussed in the Results of Audit section, nothing came
to our attention that merited additional work.
Therefore, we concluded our work at the end of the
survey phase. As a result, the nature and scope of the
work conducted was limited to those procedures
performed during an audit survey. For example,
management controls were not reviewed, and a risk
assessment was not completed.
RESPONSE
Since this report does not include any
recommendations, a response is not required. However,
we would appreciate being kept informed of any
additional actions you choose to take as a result of this
report.
Section 5(a) of the Inspector General Act (5 U.S.C. �
App. 3) requires the Office of Inspector General to list
this report in its Semiannual Report to the Congress.
We wish to thank BLM for its assistance and
cooperation and for taking timely actions to address the
issues brought to their attention during our review. If
you or your staff has any questions regarding this report
please call Ms. Anne L. Richards, Regional Audit
Manager at (303) 236-9243.