[Final Audit Report on Management of International Activities, Division of International Affairs, Bureau of Reclamation
]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 95-I-1041

Title: Final Audit Report on Management of International Activities,
       Division of International Affairs, Bureau of Reclamation

 Date:    July 7, 1995


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United States Department of the Interior
 OFFICE OF INSPECTOR GENERAL
      WASHINGTON, D.C. 20240

                         JUL 14, 1995


MEMORANDUM

TO:                           The Secretary

FROM:                         Wilma A. Lewis
                              Inspector General

SUBJECT SUMMARY:         Final Audit Report for Your Information -
                              "Management of International Activities, Division of
                          International Affairs, Bureau of Reclamation
                              (No. 95-I-1041)

Attached for your information is a copy of the subject final audit report.

Division of International Affairs funds were used for reasonable and necessary
expenses for foreign activities as authorized by applicable laws, regulations and
Bureau of Reclamation policies. However, during 1991 through 1994, the Bureau
did not recover up to $1 million annually of indirect costs relating to its international
activities.

We recommended that the Bureau implement a cost allocation plan to obtain full
reimbursement for costs associated with its international activities, especially any
costs without tangible benefit to the Bureau's domestic programs. The Bureau
agreed with our recommendation and stated that it would review its cost allocation
processes and make necessary adjustments to ensure appropriate reimbursement
from foreign governments.

If you have any questions concerning this matter, please contact me at
(202) 208-5745.

Attachment

 C-IN-BOR-001-94


United States Department of the Interior
 OFFICE OF INSPECTOR GENERAL
          Headquarters Audits
         1550 Wilson Boulevard
            Suite 401
          Arlington, VA 22209

                         JUL 7, 1995

                         MEMORANDUM AUDIT REPORT


To:            Assistant Secretary for Water and Science

From:          Marvin Pierce
               Acting Assistant Inspector General for Audits

Subject:  Final Audit Report on Management of International Activities, Division
                    of International Affairs, Bureau of Reclamation (No. 95-I-1041)


                                   INTRODUCTION

The Office of Inspector General has completed a review of the Bureau of
Reclamation's management of international activities for fiscal years 1991 through
1994. The objective of our review was to determine whether:  (1) funds for
international activities were used only for reasonable and necessary purposes; and
(2) the Bureau obtained appropriate reimbursement for costs for international activities.

BACKGROUND

The Bureau's Division of International .Affairs is responsible for establishing policies
and developing programs and procedures for use during the Bureau's participation
in international activities.  These activities include providing specific foreign
technical assistance, such as engineering evaluations and project design and
feasibility studies, and training projects for foreign nationals and attending foreign
project-related meetings and technical seminars.

The Bureau's current policy is to obtain reimbursement from project beneficiaries
for all costs of international activities, such as providing assistance at specific
foreign
locations, unless the Bureau's domestic programs benefit from the activities. During
fiscal year 1993, the Bureau was involved in reimbursable projects in 13 foreign
countries. Examples of overseas projects include the Three Gorges Dam in China,
the Aswan High Dam Powerplant in Egypt, and the HYDROS Project in Saudi

 
Arabia. Bureau costs (including both direct and indirect) for these projects totaled
about $6.1 million, and costs of about $5.0 million were reimbursed. Sources of
funds for the reimbursable costs are the World Bank, the United Nations, the
U.S. Agency for International Development, and the benefiting host country.

SCOPE OF AUDIT

Our audit was made in accordance with the "Government Auditing Standards," issued
by the Comptroller General of the United States. Accordingly, we included such
tests of records and other auditing procedures that were considered necessary under
the circumstances. We interviewed Bureau officials responsible for conducting the
international activities, and we reviewed pertinent records and cost accounting data
for fiscal years 1991 through 1994. The review was performed at the Division's
Washington, D. C., and Lakewood, Colorado, offices.

In addition, we reviewed the Secretary's Annual Statement and Report to the
President and the Congress for fiscal year 1993, required by the Federal Managers'
Financial Integrity Act of 1982, to determine whether any reported weaknesses were
within the objective and scope of our audit. We determined that none of the
reported weaknesses were directly related to the objective and scope of our audit.

PRIOR AUDIT COVERAGE

Neither the General Accounting Office nor the Office of Inspector General has
issued any audit reports on the Bureau's international activities during the past
5 years.

RESULTS OF AUDIT

We concluded that during fiscal years 1991 through 1994, Division of International
Affairs funds were used for reasonable and necessary expenses for foreign activities
as authorized by applicable laws, regulations, and Bureau policies. We determined,
however, that the Bureau did not adequately pursue recovery of all appropriate
indirect costs relating to its international activities. Part 346 of the Department of
the Interior Manual requires bureaus to recover both the direct and indirect costs
of providing special benefits to identifiable recipients. However, officials in the
Division of International Affairs were following Bureau policy that was effective for
periods prior to November 1993 which did not require reimbursement of indirect
costs related to international activities. Even though costs recovered by the Bureau
included some indirect costs, we believe that up to $1 million annually in additional
indirect costs could be recovered.

                                                         

 
On November 1, 1993, through his Blueprint for Reform, the Commissioner
established a new policy for the Bureau's international activities, which stated:

International work will be undertaken only if requested by others and
only if it does not conflict with the Administration's objectives or
interfere with Reclamation's primary responsibilities, is fully
reimbursable, and will help ensure responsible resources development
and management.

This policy was reiterated in the Commissioner's International Affairs Policy
Statement, dated October 12, 1994, which stated, "Reimbursement will be necessary
unless there are tangible benefits to Reclamation's domestic programs." During our
audit, we identified fiscal year 1993 costs of approximately $1 million that we believe
could have been allocated to reimbursable activities but that had not been billed to
the benefiting country. Based on similar data for 1991 and 1992, we determined that
the Bureau's indirect costs that were not reimbursed exceeded more than $1 million
annually. Reimbursement of these costs could result in more funds being available
for other foreign projects or future budget requests being reduced accordingly.

Bureau officials told us, however, that a portion of the $1 million in annual
unreimbursed costs was for activities which also benefited the Bureau and that these
costs appropriately had not been charged to foreign countries. However, the Bureau
did not identify what portion of indirect project costs benefited its domestic programs
or which programs benefited. The unreimbursed costs were charged directly to the
Bureau's General Administrative Expenses appropriation in accordance with Bureau
policy.

Recommendation

We recommend that the Commissioner, Bureau of Reclamation, implement a cost
allocation plan to obtain full reimbursement for costs associated with its international
activities, including all indirect costs, in providing assistance to foreign governments.
Any costs without tangible benefit to the Bureau's domestic programs should be
recovered through an appropriate charge to the foreign countries.

Bureau of Reclamation Response

The April 13, 1995, response (Appendix 1) from the Commissioner, Bureau of
Reclamation, concurred with our recommendation, stating that the Bureau would
review its cost allocation processes and make necessary adjustments to ensure full
reimbursement from foreign governments when there are no tangible benefits to the
Bureau's domestic program.

 
Office of Inspector General Comments

The Bureau's response was sufficient for us to consider the recommendation resolved
but not implemented. Accordingly, the recommendation will be referred to the
Assistant Secretary for Policy, Management and Budget for tracking of
implementation.

The Bureau's response was considered in preparing the final audit report, and
changes were made as appropriate.

Other Matters

At the beginning of our audit, the Bureau's Deputy Commissioner asked us to review
the Bureau's practice of crediting revenues for foreign travel. Bureau personnel
sometimes travel to international conferences and seminars at the request of foreign
governments but initially pay for the travel with appropriated Bureau funds. Foreign
governments ultimately reimburse the Bureau for the travel expenses. The Deputy
Commissioner wanted to know how these revenues should be credited. This issue
was discussed in our December 1989 report "General Administrative Expenses
Appropriation, Bureau of Reclamation" (No. 90-20), which recommended that this
type of revenue be credited to Miscellaneous Revenues and returned to the
U.S. Treasury. On October 9, 1992, the Department's Office of the Solicitor issued
an opinion stating that such revenue items can be returned to the appropriations
account which was originally charged. Accordingly, we believe that this decision
adequately addresses the Deputy Commissioner's concerns regarding the disposition
of these revenues.

Since the report's recommendation is considered resolved, no further response to this
office is required (see Appendix 2).

The legislation, as amended, creating the Office of Inspector General requires
semiannual reporting to the Congress on all audit reports issued, actions taken to
implement audit recommendations, and identification of each significant
recommendation on which corrective action has not been taken.

cc:  Commissioner, Bureau of Reclamation

                                      

 
APPENDIX 1

IN REPLY
REFER TO:

D-501O
ADM-8.00

                    MEMORANDUM


To:       Office of Inspector General
             Attention:  Assistant Inspector General for Audits

From:          Daniel P. Beard
          Commissioner

Subject:  Draft Audit Report on "Management of International Activities, Division of               
International Affairs, Bureau of Reclamation" (C-IN-BOR-001-94)

The Bureau of Reclamation (Reclamation) offers the following comments in response to the
recommendation. Additional comments on the text of the report are attached.

Recommendation

We recommend that the Commissioner, Bureau of Reclamation, implement a cost allocation plan
to obtain full reimbursement for costs of International Affairs operations, including all indirect
costs, in providing assistance to foreign governments. Any costs without tangible benefit to the
Bureau's domestic programs should be recovered through an appropriate indirect overhead rate
charged to the foreign countries.

Response

Concur. Reclamation will review its cost allocation procedures and processes and make the
necessary adjustments to ensure that fill reimbursement is obtained for all costs of
providing assistance to foreign governments where there are no tangible benefits to the
domestic program.

The responsible official is the Chief, International Affairs. The target date for
implementing this recommendation is December 31, 1995.

If you any questions or require additional information, please contact Luis Maez at (303)
236-3289, extension 245.

Attachment

cc: Assistant Secretary - Water and Science, Attention: Margaret Carpenter
     Office of Financial Management. Attention: Wayne Howard
     (w/attach to each)

         5

 


APPENDIX 1
Page 2 of 2

Additional Comments

Draft Report on Management of International Activities,
    Division of International Affairs
      C-IN-BOR-001-94

Reclamation appreciated the opportunity to discuss the preliminary draft report before the draft
report was issued. Comments were provided on both the findings and the
recommendation. While the draft report reflects parts of our discussions and comments,
some issues were not addressed. The following reiterates some of the unincorporated
comments that warrant additional attention.

In general, the report would seem to suggest that virtually all of Reclamation's
international activities should be reimbursed. However, a considerable share of our
international activities support our domestic mission and thus remain appropriate to fund
from General Administrative Expense (GAE) appropriations. Reclamation does not believe the
report gives a balanced picture of its international program in this regard.

Pages 3 and 4, the last sentence to begin on page 3 and the first sentence to begin on
page 4. "However, officials in the Division of International Affairs . . . . costs of up
to $1 million annually were not being recovered" implies that no indirect costs were being
recovered because of the current policy. In fact, Reclamation has generally been
reimbursed for indirect costs associated with work for foreign entities pursuant to the
provisions of the Economy Act, 31 U.S. C. 1535, and various other laws, regulations, and
governmental accounting guidelines.

Page 5, first paragraph. This section implies that charging any costs to GAE is
inappropriate. As indicated above, Reclamation disagrees with this position.

                    6



 
APPENDIX 2

STATUS OF AUDIT REPORT RECOMMENDATION

Finding/
Recommendation
Reference                Status                   Action Required

1                   Resolved; not       No further response to the Office of
                    implemented.        Inspector General is required. The
                                             recommendation will be referred to
                                             the Assistant Secretary for Policy,
                                             Management and Budget for tracking
                                             of implementation.

7

U S. GOVERNMENT PRINTING OFFICE: 1995 301-1 26/00064

 
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