[Audit Report on Expenditures Charged to the Wild Horse and Burro Program, Bureau of Land Management]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 97-I-375

Title: Audit Report on Expenditures Charged to the Wild Horse and
       Burro Program, Bureau of Land Management

Date: February 7, 1997

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A printed copy of this report may be obtained by referring to the PDF file or by calling the Office
of Inspector General, Division of Acquisition and Management Operations at (202) 208-4599.
                  ******************************

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

MEMORANDUM

TO:                 The Secretary

FROM:               Wilma A. Lewis
                    Inspector General


SUBJECT SUMMARY:    Final Audit Report for Your Information: - "Expenditures
                    Charged to the Wild Horse and Burro Program, Bureau of Land
                         Management" (No. 97-I-375)

Attached for your information is a copy of the subject final report, which presents the results
of our review of the expenditures charged to the Wild Horse and Bureau Program, Bureau
of Land Management. The objective of the audit was to determine whether the Bureau's
expenditures charged to the Program were spent for activities related to the Program.

We concluded that the Bureau had recorded and generally spent funds for Program purposes
in accordance with its accounting procedures. However, the Bureau inaccurately classified
certain indirect salaries and other expenditures as direct costs in its financial records for the
Program. As a result, the reported salary and other expenditure costs indicated that more
direct work was accomplished for the Program than may have actually occurred.

The Bureau concurred with our two recommendations regarding: (1) developing and
implementing procedures that require support costs to be identified and charged as indirect
costs and applying these costs consistently at all the offices involved in the Program and (2)
discontinuing charging buyouts and change-of-station moves directly to unrelated programs.
Based on the Bureau's response, we requested additional information for the two
recommendations.

If you have any questions concerning this matter, please contact me or Mr. Robert J.
Williams, Acting Assistant Inspector General for Audits, at (202) 208-5745.

Attachment




C-IN-BLM-004-96(a)
United States Department of the Interior
OFFICE OF INSPECTOR GENERAL
Washington, D.C. 20240

AUDIT REPORT

Memorandum

To:   Assistant Secretary for Land and Minerals Management

From:     Robert J. Williams
     Acting Assistant Inspector General for Audits

Subject:  Audit Report on Expenditures Charged to the Wild Horse and Burro
Program, Bureau of Land Management (No. 97-I-375)

INTRODUCTION

This report presents the results of our audit of Bureau of Land Management expenditures
charged to the Wild Horse and Burro Program. We performed this review at the request of
Bureau officials. This is the first of two reports that we are issuing on the Program. The
second report will address certain Program activities. The objective of this review was to
determine whether the Bureau's expenditures charged to the Program were spent for
activities related to the Program.

BACKGROUND

The Wild Free-Roaming Horses and Burros Act of 1971, as amended, mandates the
protection, management, and control of wild horses and burros on public lands at population
levels that ensure a thriving natural ecological balance while also recognizing multiple-use
management of the public lands. The primary Bureau activities under the Program have been
to remove excess wild horses and burros from public lands and to place them with private
individuals and organizations through the Bureau's adoption program. During fiscal year
1995, the Bureau removed 9,286 excess wild horses and burros from public lands and placed
9,655 animals through the adoption program. At the end of fiscal year 1995, an estimated
43,590 wild horses and burros were in herd management areas on public lands in 11 western
states, with 24,067 of these animals in Nevada. Also at the end of fiscal year 1995, the
Bureau determined that the public lands could sustain only about 27,150 wild horses and
burros, including 14,430 animals in Nevada. The Bureau spent approximately $16.5 million
in fiscal year 1995 and approximately $12.2 million in fiscal year 1996 (through August 3,
1996) on the Program (Appendix 1).

 
At the time of our review, the Bureau had formed an emergency review team to examine
Program operations. Specifically, the team was to evaluate Program finding and past
spending patterns, animal management, compliance with legal requirements, and
appropriateness of current Program policies. Of immediate concern to the team was the
continuing drought in Nevada and the deteriorating health of the wild horses and burros in
that area caused by the drought.

SCOPE OF AUDIT

To accomplish our audit objective, we reviewed Program expenditures charged during fiscal
years 1995 and 1996 (through August 3, 1996) and evaluated Bureau procedures for
allocating certain administrative costs. Specifically, we reviewed a judgmentally selected
sample of transactions representing charges for salaries and for other expenditures, such as
employee buyouts and change-of-station moves, contract services, and other materials and
supplies. Our review included salary charges for the California and Nevada State OffIces,
which included the states' dktrict and resource area offices, and for the Eastern States OffIce,
which included its district offices. The salary charges for these offices totaled nearly $3
million, or 54 percent of the $5.5 million in total salaries charged to the Program, for fiscal
year 1995 and more than $2.2 million, or 53 percent of the $4.2 million in total salaries, for
fiscal year 1996 (Appendix 2). We also reviewed $1.1 million of the $8.7 million in other
expenditures charged to the Program for fiscal year 1995.

In performing the audit, we reviewed accounting records at the Nevada State Office in Reno,
Nevada, and at the Bureau's Service Center in Lakewood, Colorado. Additionally, we
interviewed officials in the Bureau's Wild Horse and Burro National Program and Nevada
State Office in Reno; the California State Office in Sacramento, California; the Eastern States
Office in Springfield, Virginia, and its district offices; the Canon City District Ofllce, within
the Colorado State Office; and the Service Center (Appendix 3). The review was made, as
applicable, 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 considered necessary under the circumstances. Because of the
limited scope of thk review, we reviewed internal controls only to the extent necessary to
accomplish our objective. We also reviewed the Department's Annual Statement and Report,
required by the Federal Managers' Financial Integrity Act, for fiscal year 1995 and determined
that none of the reported weaknesses were directly related to the objective and scope of thk
audit.

PRIOR AUDIT COVERAGE

During the past 5 years, the General Accounting Office has not issued any audit reports on
the Bureau of Land Management's Wild Horse and Burro Program, but the Office of
Inspector General has issued two related audit reports as follows:

 


- "Memorandum of Understanding Relating to the South Dakota Wild Horse Sanctuary,
Bureau of Land Management" (No. 92-I-543), issued in March 1992, concluded that the
Bureau made payments of $95,000 for services that were not the Bureau's responsibility;
approved a basic rate increase for horse care that was not justified; and lost the opportunity
to save $800,000 by not evaluating alternative offers for horse care. The report additionally
stated that the sanctuary had not achieved financial self-sufficiency. The report's four
recommendations have been resolved and implemented.

- "Selected Aspects of the Wild Horse and Burro Program, Bureau of Land Management"
(No. 94-I-585), issued in May 1994, concluded that it was not cost effective to maintain the
Oklahoma sanctuary and that it would be less expensive to return the horses to the public
lands. Additionally, the report concluded that the Bureau may have overpaid the State of
New Mexico to terminate the New Mexico prison horse training program. The report's one
recommendation has been resolved and implemented.

RESULTS OF AUDIT

Based on our review of the Bureau's expenditures charged to the Wild Horse and Burro
Program for fiscal years 1995 and 1996, we found that the Bureau had recorded and
generally spent funds for Program purposes in accordance with its accounting procedures.
However, the Bureau inaccurately classified certain indirect salaries as direct costs in its
financial records for the Program. The Bureau's accounting procedures require that certain
program support costs be charged directly to Bureau programs. This procedure caused the
Bureau to report charges that support programs (primarily indirect salaries for the district and
resource area offices) as direct program charges. As such, at the offices we reviewed, the
accounting records reflected a 9 percent rate for indirect salaries, whereas we calculated an
average rate of nearly 35 percent from the same records. Additionally, we noted that,
because of the Bureau's accounting procedures, charges were made to the Program for an
employee buyout and for an employee change-of-station move, although the employees did
not work for the Program. As a result, reported salary and other expenditure costs indicated
that more direct work was accomplished for the Program than may have actually occurred.

Salaries

An August 23, 1994, Bureau memorandum stated that certain administrative positions were
to be funded through program support (indirect) costs and the remaining administrative
positions were to be charged directly to programs. The Bureau defines program support as
"items which benefit multiple programs, but whose costs cannot be readily assignable to a
specific organization or program. " The Bureau's memorandum stated that indirect salary
costs from the state offices may be allocated to a program based on a percentage that is
determined annually. The accounting procedures, however, did not provide for a similar

3

 


allocation of indirect salary costs from the district and resource area offices. Consequently,
district and resource area offices' indirect salary costs were recorded in the Bureau's
accounting records as direct costs.

As shown in Appendix 1, salary costs for the Program totaled about $5.5 million for fiscal
year 1995 and about $4.2 million for fiscal year 1996 (through August 3, 1996). We
reviewed salaries charged by the California and the Nevada State offices and the Eastern
States offices for the 22-month time period, which totaled about $5.2 million (Appendix 2).
We found that 65 percent, or about $3.4 million, of the salaries for both fiscal years were
charged by personnel whose positions were directly related to the Program, such as
wranglers, wild horse and burro specialists, range conservationists, range technicians, and
law enforcement rangers and investigators. The remaining 35 percent, or about $1.8 million,
of the salaries were charged by managers, clerical staff, purchasing staff, public affairs
specialists, computer specialists, and others who performed services in support of the
Program on a periodic basis.

Of the $1,818,000 charged for personnel, such as managers and clerical staff, costs of only
$464,000 were shown in the Bureau's accounting records as program support costs or
indirect salaries. The remaining administrative salary costs of about $1,354,000 were
charged directly to the Program, of which $996,000 was from district and resource area
offices. Because of the method of recording these charges, the Bureau's accounting records
reflected an indirect cost rate of only 9 percent, which we believe implies that more direct
work was performed on the Program than may have actually occurred. In our opinion, the
administrative salary costs of about $1,354,000 that were directly charged to the Program
meet the Bureau's definition of program support (or indirect costs) and should have been
charged as indirect salaries.

Of the offices reviewed, we found that the Eastern States Office charged the highest
percentage, an average of more than 53 percent, of indirect salaries to the Program for the
period audited. For example, the Office charged $125,100 for public affairs specialists and
$123,000 for district managers and associate district managers. We contacted some of the
Bureau personnel involved, who told us that they charged a portion of their salary because
they performed services that supported the Program. The California and Nevada offices
charged 34 percent and 27 percent, respective y, in indirect salaries to the Program. In our
opinion, indirect charges for salaries of 53 percent, 34 percent, and 27 percent were more
representative of the actual indirect salary costs of the Program for the three offices reviewed
than the 9 percent indirect rate reflected in the Bureau's financial records.

Other Expenditures

Of the $8.7 million charged for fiscal year 1995 for other expenditures, we reviewed costs
of $1.1 million and noted instances in which expenditures were charged to the Program for
employees who did not charge time to the Program.

4

 
To cover employee costs, such as buyouts and change-of-station moves, the Bureau
determined that it would "set aside" a percentage of funds from each program based on direct
salaries charged to the program. For example, in fiscal year 1995, Program funding for
Nevada was assessed 8 percent for these costs. However, because the Bureau did not
actually charge the costs to a "pool" of funds and then allocate a percentage of those costs
to its various programs, individual buyouts and change-of-station moves were charged
directly to unrelated programs. For example, the Eastern States Office charged a $25,000
buyout of an employee who worked in the public information room to the Program because,
according to a States Office official, that was "where funding was available. " In Nevada, a
$74,000 permanent change-of-station move for an environmental specialist was charged to
the Program. Conversely, we noted that for fiscal year 1996, a permanent change-of-station
move costing $18,600 of a wild horse and burro specialist was charged to the Soil, Water,
and Air Management Program.

Recommendations

We recommend that the Director, Bureau of Land Management, ensure that:

1. Procedures are developed and implemented which require support costs to be
identified and charged as indirect costs and that these costs are applied consistently by all
offices to the Program. Also, these indirect costs should be reviewed by managers, who
should then determine whether these costs are appropriately charged to the Program.

2. The practice is discontinued of charging buyouts and change-of-station moves directly
to unrelated programs.

Bureau of Land Management Response and Office of Inspector General
Reply

In the December 18, 1996, response (Appendix 4) from the Director, Bureau of Land
Management, the Bureau indicated concurrence with both recommendations. Based on the
response, additional information is needed for both recommendations (see Appendix 5).

Recommendation 1. Concurrence.

Bureau Response. The Bureau stated that it "will expand the use of the program
support cost methodology to all field offices or implement another technique to improve its
identification and allocation of indirect costs to all pro grams." The Bureau also stated that
its in-house review of the Program concluded that "practically all of the amounts `reviewed
were clearly legitimate expenditures of the program.'" Additionally, the Bureau stated that
it agreed that "some of the $996,000 in BLM [Bureau of Land Management] District and

5

 
Resource Area costs charged directly to the Wild Horse and Burro Program may have been
eligible for distribution through the program support cost methodology. "

Office of Inspector General Reply. We do not agree with the Bureau's statement that
"practically all of the amounts reviewed were clearly legitimate expenditures of the
program. " A cost that is clearly a legitimate expenditure of one program must be directly
charged to that program and should not be eligible for distribution to another program.
However, the Bureau's policy of identifying indirect costs as program support costs and then
charging those program support costs directly to its programs at the district and resource area
office levels rather than through an allocation procedure overstates the actual amount of
direct work on the Program. In its response, the Bureau agreed that some of the costs
charged directly to the Program may have been eligible for distribution to other programs
through the program support cost methodology. In addition, we found that certain costs,
such as permanent change-of-station moves for personnel who did not work in the Program,
were charged to the Program (also see discussion under Recommendation 2). We believe
that the Bureau's plan to expand the use of the program support cost allocation methodology
to its field offices will correct the overstatement. Although management concurred with the
recommendation, additional information is needed, and if the Bureau decides to "implement
another technique to improve [its] identification and allocation of indirect costs, "
information is requested on that technique (see Appendix 5).

Recommendation 2. Partial concurrence.

Bureau Response. The Bureau stated that it "will charge all future buyouts and
permanent change of station costs in field offices as part of program support costs" and that,
as part of streamlining processes and practices, it charged certain costs to one subactivity
rather than applying these costs proportionally among approximate y 25 subactivities.
Further, the Bureau stated that it will "encourage Bureau offices to minimize this practice in
the future. "

Office of Inspector General Reply. The buyout and permanent change-of-station costs
were charged directly to an unrelated program, which was contrary to the Bureau's
procedures to charge those costs to a "pool" of funds and then allocate those costs to its
various programs. In developing its program support cost methodology, the Bureau should
reconsider procedures for accounting for certain costs. Specifically, we believe that
permanent change-of-station costs should be charged directly to the program for which the
employee works or will work when there is no benefit to any other program. For example,
if a wild horse and burro employee transfers to another state office in this program, then this
program should be charged for the employee's change-of-station costs. Conversely, if a wild
horse and burro employee transfers to another state office in a different program, such as the
environmental program, then the environmental program should be charged for the move.
Further, a program support employee's move should be charged to the "pool" and allocated
equitably to the various programs, since there is no benefit to a specific program for the

6

 
action. We agree that buyout costs should be charged as program support costs and allocated
equitably to all programs.

As required by the Departmental Manual (360 DM 5.3), please provide us with your written
comments to this report by March 25, 1997. The response should provide the information
requested in Appendix 5.

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.

We appreciate the cooperation of Bureau officials in the conduct of our audit.

cc:  Assistant Secretary - Land and Minerals Management
  Audit Liaison Officer, Land and Minerals Management
  Audit Liaison Officer, Bureau of Land Management

7

 
                          APPENDIX 1
EXPENDITURES OF THE WILD HORSE AND BURRO PROGRAM
     FOR FISCAL YEARS 1995 AND 1996*

    Category

Salaries and Personal Benefits

Salaries
Payroll Additive
Leave Surcharge
Subtotal

Other Expenditures

Travel - Persons
Transportation - Things
Rent, Utilities, Printing
Equipment Use and Repair
Contracts
Advertising, Storage
Miscellaneous Services
Office Supplies & Materials
Other Supplies & Materials
Equipment
Land, Buildings, & Other
State Grants
Insurance Claims
Subtotal

Total

Fiscal Year
1995

$5,500,897.98
1,186,625.56
1.139.518.17
$7,827,041.71

509,448.30
473,397.33
546,598.66
330,915.44
2,009,966.67
9,933.96
2,838,786.92
227,750.94
1,532,470.64
168,779.04
25,962.12
17,000.00
2.377.60
$8.693,387.62

$16,520.429.33

Fiscal Year
1996*

$4,237,715.35
989,940.94
822.149.94
$6,049.806.23

266,930.96
320,202.63
368,610.53
200,766.40
1,916,956.11
  9,113.36
1,974,896.25
54,180.06
894,954.54
58,484.92
  19,143.51
  16,050.00
  12.524.53
$6,112.813.80

$12.162.620.03

*Expenditures incurred through August 3, 1996.

8

 
WILD HORSE AND BURRO PROGRAM SALARY CHARGES
       FOR FISCAL YEARS 1995 AND 1996*

                        State Office    State Office    District/Resource
            Total Salaries      Salaries      Salaries      Indirect Salaries           Percentage of
          Charged to     Charged as   Charged as     Charged as                Indirect to
Office           Promam       sulmort       Direct         Direct      Total Indirect    Total Salary

Fiscal Year 1995

California
Eastern States
Nevada
Total -1995

  Fiscal Year 1996
a

  California
  Eastern States
Nevada
   Total -1996

Total

$508,250.29     $46,524.70    $70,789.80     $60,093.25     $177,407.75     34.91
784,358.89     131,449.23     70,144.38      217,806.56      419,400.17      53.47
1,675.677.92      77.583.96     42,201.02      289.729.10      409.514.08     24.44
$2.968,287.10    $255.557.89    $183.135.20     $567,628.91    $1.006,322.00      33.90

$425,517.77     $43,004.79    $74,775.86     $24,046.64     $141,827.29      33.33
617,113.07      81,388.69     55,974.85      188,658.13      326,021.67     52.83
1.190,850.86      84,316.00     44,688.49      215.263.34      344.267.83      2891
$2.233,481.70     $208,709.48    $175,439.20     $427,968.11     $812,116.79   =

$5.201.768.80     $464.267.37    $358.574.40     $995.597.02    $1.818.438.79    34.96

*Fiscal year 1996 costs through August 3, 1996.

t'J

 
                  
APPENDIX 3

  WILD HORSE AND BURRO PROGRAM
OFFICES VISITED OR CONTACTED DURING AUDIT

OFFTCFS

Washington Headquarters*

Service Center

National Office, Wild Horse
and Burro Program

California State Office*

Eastern States Office*

Jackson District Office*

Milwaukee District Office*

Nevada State Office

Palomino Valley Center

Carson City District Office*

Canon City District Office
(Colorado State Office)

LOCATION

Washington, D.C.

Lakewood, Colorado

Reno, Nevada

Sacramento, California

Springfield, Virginia

Jackson, Mississippi

Milwaukee, Wisconsin

Reno, Nevada

Sparks, Nevada

Carson City Nevada

Canon City, Colorado

*Contacted only.

10

 
APPENDIX 4
Page 1 of 2



United States Department of the Interior

BUREAU OF LAND MANAGEMENT

In Reply Refer To:
1684 (BC-605)

MEMORANDUM

Assistant Inspector

Bob Armstrong .

Subject:   Draft Audit Report on Expenditures Charged to the Wild Horse and Burro
     Program, Bureau of Land Management (C-IN-BLM-004-96(A))

Thank you for the opportunity to respond to the subject audit. We appreciate the Office of
Inspector General (OIG) undertaking this audit on such short notice and completing the audit m
three months.

We conducted an in-house review of the Wild Horse and Burro Program expenditures in Nevada
last August. Our review concluded that "there were no instances where other BLM programs
inappropriately charged to the wild horse and burro program" and that practically all of the
amounts "reviewed were clearly legitimate expenditures of the . . . program."

Results of Audit

Salaries

The Bureau of Land Management (BLM) is working toward more accurately representing direct
and indirect costs through application of the program support cost methodology. We initiated
this methodology in Fiscal Year 1995 in response to earlier OIG audits. This methodology
permits the BLM to charge costs common to multiple programs in a rational, predetermined
manner. We do not consider this an attempt to confise direct and indirect costs.

The program support cost methodology uses a Federal Financial System subsystem called cost
allocation. This subsystem is computer processing resource intensive, is time consuming, and is
expensive to operate. For these reasons, we limited its application almost exclusively to the
BLM State Offices. We agree that some of the $996,000 in BLM District and Resource Area
costs charged directly to the Wild Horse and Burro Program may have been eligible for
distribution through the program support cost methodology had the system been available to
handle it. Now that we have had experience with the cost allocation subsystem, we will evaluate
expanding its use to the BLM District and Resource Area Offices.

11

 
APPENDIX 4
Page 2 of 2

2



The implication in the draft report is that certain positions/skills cannot charge directly to the
Wild Horse and Burro Program. Under the BLM's benefiting subactivity concept, any position
working directly for the benefit of any BLM program normally would charge costs directly to
that program. Therefore, it may be legitimate for District Managers, Assistant District Managers,
and Public Affairs Specialists to charge their salaries directly to the Wild Horse and Burro
Program if that is where they are working. Again. this is not an attempt to hide or confuse direct
and indirect costs.

Other Ex~enditures

In this era of downsizing and reengineering, we are continually looking for ways to streamline
processes and practices. Part of that approach was to charge certain budgeted non-program
specific costs to one subactivity rather than applying it proportionally among some
25 subactivities. This explains how costs for seemingly unrelated items were charged to the
Wild Horse and Burro Program, e.g., a change of station move for an environmental specialist.
We will encourage our offices to minimize this practice in the future.

Recommendations

1. We will expand the use of the program support cost methodology to all field offices or
implement another technique to improve our identification and allocation of indirect costs to all
programs.

2. We will charge all fiture buyouts and permanent change of station costs in field offices as
pqrt of program support costs.

Again, we appreciate the OIG redirecting its audit resources toward this audit on such short
notice. Please contact Jack Blickley, Financial Liaison Officer, at (202) 452-5147 if you have
any questions.

12

 
        
APPENDIX 5

STATUS OF AUDIT REPORT RECOMMENDATIONS

Finding/Recommendation
  Reference       Status          Action Reauired

1      Management concurs;    A target date for
      additional information    implementation is needed.
      needed.         However, if "another
                 technique" is chosen,
                 an action plan that
                 includes target dates and
                 titles of officials
                 responsible for
                 implementation is needed.

2

Management concurs;
additional information
needed.

A target date for
implementation is needed.

13

 
ILLEGAL OR WASTEFUL ACTMTIES
   SHOULD BE REPORTED TO
THE OFFICE OF INSPECTOR GENERAL BY:

Sending written documents to:            Calling:

VWthin the Continental United States

U.S. Department of the Interior         Our 24-hour
Office of Inspector General          Telephone HOTLINE
1849 C Street N.W.             l-800-424-50810r
Mail Stop 5341               (202) 208-5300
Washington, D.C. 20240

TDD for hearing impaired
(202) 208-2420 or
1-800-354-0996

Outside the Continental United States

CaribbeanReAon

U.S. Department of the Interior         (703) 235-9221
Office of Inspector General
Eastern Division- Investigations
1550 Wilson Boulevard
Suite 410
Arlington, Virginia 22209

North Pacific Re~on

U.S. Department of the Interior         (700) 550-7428 or
Office of Inspector General          COMM 9-011-671-472-7279
North Pacific Region
238 Archbishop F.C. Flores Street
Suite 807, PDN Building
Agana, Guam 96910

 
Toll Free Numbers:
1-800-424-5081
TDD 1-800-354-0996
FTS/Commercial Numbers:
(202) 208-5300
TDD (202) 208-2420

1849 C Street N.W.
Mail Stop 5341
Washington. D.C. 20240

m E E E