[Audit Report on Followup of Nevada Land Exchange Activities, Bureau of Land Management]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 98-I-689

Title: Audit Report on Followup of Nevada Land Exchange Activities,
       Bureau of Land Management

Date:  September 30, 1998




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U.S. Department of the Interior
Office of Inspector General


AUDIT REPORT


FOLLOWUP OF NEVADA LAND EXCHANGE
ACTIVITIES, BUREAU OF LAND MANAGEMENT

REPORT NO. 98-I-689
SEPTEMBER 1998






MEMORANDUM


             TO:  The Secretary

           FROM:  Richard N. Reback
                  Acting  Inspector General

SUBJECT SUMMARY:  Final Audit Report for
                  Your Information  -  "Followup of Nevada
                  Land Exchange Activities, Bureau of  Land
                  Management" (No. 98-I-689)


Attached for your information is a copy of the subject final
audit  report.  This report   presents  the  results  of our
followup  review  of  recommendations  contained in our July
1996 audit report "Nevada Land Exchange  Activities,  Bureau
of  Land Management" (No. 96-I-1025).  The objective of  the
followup  review was to determine whether the Bureau of Land
Management  satisfactorily  implemented  the recommendations
made in our 1996 report and whether any new  recommendations
were warranted.  We issued a separate advisory  report  (No.
98-I-363)  in March 1998 on the Del Webb land exchange ("The
Del  Webb  Land   Exchange   in   Nevada,   Bureau  of  Land
Management").

We determined that, of the five recommendations  made in our
July  1996 report,  the Bureau  had fully implemented  three
recommendations,     had     partially    implemented    one
recommendation, and had not implemented  one recommendation.
Regarding  the  unimplemented recommendation,  we  concluded
that the Bureau's  efforts  to establish and follow controls
to ensure that Nevada land exchanges  were processed in full
accordance with applicable laws, regulations, and procedures
were   generally  unsuccessful.   As  a  result   of   these
inadequate  implementation  efforts, the Bureau continued to
experience significant monetary  losses  in  its Nevada land
exchanges.     Specifically,   we   believe  that  (1) about
$5.9 million was lost on the Deer Creek exchange because the
Nevada  State  Office  did not comply with  the  established
delegation of authority  requirements  associated  with land
valuation;  (2) about  $12.3 million  was  lost because  the
private  lands  included  in  the Cashman and Dreyfus/Zephyr
Cove exchanges were not, in our  opinion,  appraised in full
accordance with the "Uniform Appraisal Standards for Federal
Land  Acquisitions"; and (3) about $3.4 million  could  have
been put  to better use if the Bureau had not acquired three
parcels of  land  that  were  not  in  conformance  with the
current  land  use  plan  and  did  not  have  a discernible
mission-related  purpose.   We also noted that the  Bureau's
Washington Office did not follow  established  standards and
controls  for  appraisals  and land valuations and  did  not
justify or document the propriety of its actions for the Del
Webb exchange.  The Government  would have lost $9.1 million
based on the initial "development-based"  appraisal  of  the
selected  Federal lands had the Bureau not obtained a second
appraisal that  was based on comparable sales in conformance
with the "Standards."

Our followup  report  contained  five  new  recommendations.
Based  on the Bureau's responses to the recommendations,  we
considered    three   recommendations   resolved   but   not
implemented and requested that the Bureau provide additional
information  for   one  recommendation  and  reconsider  its
response to the remaining recommendation.  Specifically, the
Bureau should establish  a  moratorium  on land exchanges in
the  State  of Nevada until it establishes  and  empowers  a
"land  exchange   review   team"  that  includes  non-Bureau
representatives to review proposed exchanges.

If  you have any questions concerning  this  matter,  please
contact  me  at  (202)  208-5745 or Mr.  Robert J. Williams,
Assistant Inspector General for Audits, at (202) 208-4252.


Attachment





AUDIT REPORT                                 W-IN-BLM-001-97





Memorandum

           To:  Director, Bureau of Land Management

         From:  Robert J. Williams
                Assistant Inspector General for Audits

      Subject:  Audit Report on Followup of Nevada Land
                Exchange Activities, Bureau of Land
                Management (No. 98-I-689)

INTRODUCTION

This report presents the  results  of our followup review of
recommendations  contained  in our July  1996  audit  report
"Nevada Land Exchange Activities, Bureau of Land Management"
(No. 96-I-1025).  The objective  of  the followup review was
to  determine whether the Bureau satisfactorily  implemented
the recommendations  made in our 1996 report and whether any
new recommendations were  warranted.   We  issued a separate
advisory report (No. 98-I-363) in March 1998 on the Del Webb
land exchange ("The Del Webb Land Exchange in Nevada, Bureau
of Land Management").

BACKGROUND

The  Bureau of Land Management is responsible  for  managing
and protecting  over  260 million  acres of Federal land, of
which about 48 million acres are in  the  State  of  Nevada.
The  Congress  has emphasized the use of land exchanges  and
fee purchases to acquire lands containing resource values of
public significance  and  to  improve  the  manageability of
Federal  land  by  consolidating  its  land ownership.   The
Bureau prefers to acquire land through land exchanges, which
may be initiated by the Bureau or other  interested  parties
called  proponents.[1]   In  recent  years,  the  Bureau has
identified  about  70,000 acres of Federal land for disposal
in the Las Vegas Valley of Nevada, which continues to be one
of the fastest growing  metropolitan  areas  in  the  United
States.   The  potential  for real estate development in the
private market associated with this growth in the Valley has
created significant interest  in acquiring available Federal
land.

The Bureau conducts land exchanges  under  the  authority of
Section 206 of the Federal Land Policy and Management Act of
1976  (Public Law 94-579), as amended, which authorizes  the
Secretary  of  the  Interior  to  dispose of Federal land by
exchange  when  the  public interest will  be  well  served.
Under Section 206, the values of the lands exchanged must be
equal or, if not equal,  must be equalized by a cash payment
by either party except in  circumstances  where the value of
the Federal land transferred by the Government  is  not more
than $150,000 (the value of the Federal land transferred  in
the exchanges we reviewed exceeded $150,000).

Section 206  specifically  directs the Secretary to make the
amount of such payments as small as possible but states that
in no event may the value difference  between the properties
exceed   25 percent  of  the  value  of  the  Federal   land
exchanged.   On  August 20,  1988,  the Congress enacted the
Federal  Land  Exchange  Facilitation Act  of  1988  (Public
Law 100-409), which granted  the Secretary limited authority
to approve adjustments in the values of lands exchanged as a
means of compensating a party  for  incurring  costs such as
those  for  land  surveys,  mineral examinations, and  title
searches which would ordinarily be borne by the other party.
In  December  1993,  the  Bureau   finalized   comprehensive
regulations  for  land exchanges (43 CFR 2200) to  implement
the provisions of both Acts.

SCOPE OF AUDIT

The scope of this followup  review included an evaluation of
actions taken to implement the  five recommendations made in
our July 1996 report.  The status of the recommendations and
corrective  actions is in Appendix  2.   To  accomplish  our
objective,  we   reviewed   all  nine exchange  transactions
completed by the Bureau's Las  Vegas  Field  Office  between
June 1,  1995,  and  August 1, 1997.  In completing the nine
transactions, the Bureau  disposed of 4,306 acres of Federal
land  in  the  Las  Vegas  area,   valued  at  approximately
$64.4 million,  and acquired 8,305 acres  of  private  land,
valued at approximately  $73.6 million.[2]  We also reviewed
the processing of four other exchanges that were in progress
at  the  Field  Office.   The   exchanges  and  transactions
included in our review are listed in Appendix 3.

The  audit  included  visits to the  Bureau's  Nevada  State
Office in Reno, Nevada,  and  its  Las Vegas Field Office in
Las Vegas, Nevada.  We also visited the offices of Clark and
Douglas Counties and the Tahoe Regional  Planning  Agency in
Nevada to analyze land use regulations, zoning restrictions,
and  land  use  application  records  in  order  to identify
development restrictions imposed on exchange lands  that may
have affected the valuation of some of the exchanged  lands.
We also contacted Bureau officials to obtain their views  on
specific   aspects   of  the  exchanges  and  to  verify  or
supplement information  and data obtained through our review
of   the  exchange  files.   In   addition,   we   contacted
representatives  of  the  Department  of  Agriculture's U.S.
Forest  Service  and Office of Inspector General  concerning
the Deer Creek, Cashman,  and Dreyfus/Zephyr Cove exchanges;
representatives   of   the  Clark   County   Department   of
Comprehensive  Planning  and  the  Tahoe  Regional  Planning
Agency concerning the Cashman  and  the  Dreyfus/Zephyr Cove
exchanges, respectively; and representatives of the contract
appraisal  firms  responsible  for  the  appraisal   reports
associated  with  the  Cashman  and  the Dreyfus/Zephyr Cove
exchanges.   Further, we contacted a representative  of  the
Appraisal Unit  of  the  Department  of  Justice  who  was a
coauthor  of  the  1992  revision  of the "Uniform Appraisal
Standards for Federal Land Acquisitions"  so  that  we could
enhance  our  understanding of the principles applicable  to
the appraisal of property for Federal acquisition.

This  followup  review  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  also
reviewed  the  Departmental Accountability Report for fiscal
year  1996,  which  includes  information  required  by  the
Federal Managers' Financial Integrity Act, and the Bureau of
Land Management's  annual  assurance  statements  for fiscal
years  1996 and 1997.  Administration and oversight  of  the
Nevada land  exchange appraisal process were identified as a
new material weakness  in  the  Bureau's  fiscal  year  1997
assurance  statement.   Accordingly,  we  also  reviewed the
Bureau's   management   control   evaluation  report,  which
identified this new material weakness.

PRIOR AUDIT COVERAGE

Our  July  1996  audit stated that while  the  Nevada  State
Office  had  acquired   some   high  quality  properties  by
exchanging  lands  with private entities  (proponents),  the
Office did not consistently  follow prescribed land exchange
regulations or procedures and  ensure  that  fair  and equal
value was received in completing three of the four exchanges
we  reviewed.  As a result, we estimated that the Government
may  have  lost  revenues  totaling  about  $4.4 million  in
completing  the three exchanges.  In addition, we found that
the Nevada State  Office  had  acquired about 2,461 acres of
land, with an exchange value of  $2.7  million,  that had no
discernible mission-related purpose.

We recommended that the Director of the Nevada State  Office
(1) institute  competitive  procedures  (sale or competitive
exchange)  into  the land disposal process  to  the  maximum
extent practicable; (2) direct that all easements on Federal
lands proposed for  disposal  be  reviewed to verify grantee
needs and that actions be taken to remove any easements that
are  not needed before the Federal lands  are  exchanged  or
sold;  and  (3)  establish  the controls necessary to ensure
that land exchanges are processed  in  full  accordance with
applicable  laws,  regulations,  and Bureau procedures.   We
further  recommended  that,  at  a minimum,  these  controls
ensure  that  land  to be acquired is  in  conformance  with
approved   land-use  plans   or   properly   executed   plan
amendments;  that  land acquired and disposed of is properly
valued; and that all  significant  decisions  involving  the
exchange  transactions,  particularly  those  affecting land
valuation,  are  fully  justified  and  documented  in   the
exchange file.

In  addition, the report stated that the Nevada State Office
exchanged  rather  than  sold land within the land sale area
designated  by  the  Santini-Burton   Act.    We   therefore
concluded that because of the Nevada State Office's decision
to  exchange  rather  than  sell lands within the designated
area, the U.S. Treasury did not  receive  revenues  of  $7.8
million  for  repayment of incurred costs for acquiring land
within  the Lake  Tahoe  Basin.   We  recommended  that  the
Director of the Nevada State Office take appropriate actions
to ensure  that  (1)  the  accounting  reports of income and
expenditures required by Section 2(e) of  the Santini-Burton
Act  are  prepared and submitted to Bureau headquarters  for
submission   to   the  appropriate  Congressional  oversight
committees and (2) the  Nevada  State Office uses, except in
compelling  circumstances,  the  land   sales  process  when
disposing of its Santini-Burton Act lands  until  the  sales
revenues  generated closely approximate the Lake Tahoe Basin
acquisition  costs.   We further recommended that any future
exchange proposals be closely  monitored  to ensure that the
exchange  is  justified  and  that the costs incurred  as  a
result of the Santini-Burton Act remain relatively nominal.

RESULTS OF AUDIT

Of the five recommendations made in our July 1996 report, we
found  that  the  Bureau  of  Land  Management   had   fully
implemented  three recommendations (Nos. A.2, B.1, and B.2),
had partially  implemented one recommendation (No. A.1), and
had   not  implemented   one   recommendation   (No.   A.3).
Specifically,  to implement Recommendation A.2, the Bureau's
Washington Office issued an instruction memorandum providing
new guidance regarding  the removal of encumbrances prior to
a public land sale or exchange.  To implement Recommendation
B.1, the Bureau issued an  instruction  memorandum directing
its  National  Business  Center  to  provide  the   required
biannual  accounting  information to the Washington Office's
Legislative Affairs Group for transmittal to the appropriate
Congressional committees.  On April 14, 1997, the report was
prepared  and submitted  to  the  Committee  on  Energy  and
Natural Resources.   To  implement  Recommendation  B.2, the
Bureau's Washington Office obtained legal guidance from  the
Solicitor,  and  the  Nevada State Office instructed the Las
Vegas  Field  Office  that  Santini-Burton  Act  lands  were
available for sale only.   On  March  4, 1998, the Las Vegas
Field  Office notified an exchange proponent  that  selected
Santini-Burton Act land would be excluded from the exchange.

The  Bureau  partially  implemented  Recommendation  A.1  by
selecting  a  modified  auction  process to provide a viable
approach  for  incorporating  competition   into   the  land
disposal  process.   Since the Bureau had not developed  and
tested a pilot project using this new process, we considered
the recommendation only partially implemented.

Regarding  the unimplemented  recommendation,  we  concluded
that the Bureau's  efforts  to establish and follow controls
to ensure that Nevada land exchanges  are  processed in full
accordance with applicable laws, regulations, and procedures
were generally unsuccessful for the exchanges reviewed.  Our
followup  review  found  that controls associated  with  the
processing of Nevada land  exchanges  were not adhered to or
consistently complied with by management,  which resulted in
significant   monetary  losses  to  the  Federal  Government
because the lands exchanged were not properly valued or were
not in conformance  with the Bureau's current land use plan.
We also determined that  the Bureau's Land Exchange Handbook
and Instruction Memorandum  No.  97-113  contained  guidance
that  appeared  to conflict with language in Section 206  of
the Federal Land  Policy  and  Management Act or regulations
implementing the requirements of  the  Act  or that weakened
the Bureau's organizational controls over the  appraisal and
valuation process for exchanges.

As a result of these inadequate implementation efforts,  the
Bureau  continued  to experience significant monetary losses
in   its   Nevada   land   exchanges   (see   Appendix   1).
Specifically,  we believe that  (1) about  $5.9 million  was
lost on the Deer  Creek  exchange  because  the Nevada State
Office  did  not  comply with the established delegation  of
authority  requirements   associated  with  land  valuation;
(2) about $12.3 million was  lost  because the private lands
included  in the Cashman and Dreyfus/Zephyr  Cove  exchanges
were not, in  our opinion, appraised in full accordance with
the   "Uniform  Appraisal   Standards   for   Federal   Land
Acquisitions";  and  (3) about  $3.4 million could have been
put  to  better  use if the Bureau had  not  acquired  three
parcels  of land that  were  not  in  conformance  with  the
current land  use  plan  and  did  not  have  a  discernible
mission-related  purpose.   We  also noted that the Bureau's
Washington Office did not follow  established  standards and
controls  for  appraisals  and land valuations and  did  not
justify or document the propriety of its actions for the Del
Webb exchange.  The Government  would have lost $9.1 million
based on the initial "development-based"  appraisal  of  the
selected  Federal lands had the Bureau not obtained a second
appraisal that  was  in  conformance  with  the  "Standards"
because the appraisal was based on comparable sales.

Because  of  the  recurrence  of  deficiencies noted in  the
Bureau's  program  and  because  the program  has  not  been
operated  in a manner that protects  the  interests  of  the
Government,  we  believe that the Bureau should identify not
only the administration  and  oversight  of  the Nevada land
exchange appraisal process but also the entire land exchange
program  as a material control weakness in the  Departmental
Accountability  Report.   In  addition,  we believe that the
Bureau should place a temporary moratorium on land exchanges
in the State of Nevada and establish a land  exchange review
team that includes non-Bureau experts to provide  the Bureau
with  advice  concerning  compliance with established  laws,
regulations,  and  procedures   for   all  significant  land
exchanges.

Prior Audit Report Recommendations

Recommendation A. 1.  Institute competitive procedures (sale
or competitive exchange) into the land  disposal  process to
the maximum extent practicable.

In  our  July  1996 report, we noted that Clark County  land
records indicated  that  exchange  proponents were realizing
large profits by quickly selling the  Las  Vegas  area lands
obtained  in  land  exchanges  with the Nevada State Office.
Consequently,  we concluded that  the  Nevada  State  Office
could maximize the public benefit by introducing competition
into the land disposal  process  for  Las  Vegas area lands.
The  Bureau agreed to implement the recommendation,  stating
that it  would develop a strategy to incorporate competitive
procedures  (competitive  sale  or  exchange)  into the land
disposal  process.  The Nevada State Office was to  evaluate
different competitive approaches and recommend an option for
a prototype  competitive land exchange by June 1, 1997.  The
Bureau stated  that,  depending  on  the  results,  a  pilot
project was to be developed and tested.

During  our  followup review, we found that the Nevada State
Office had completed  the evaluation and  selected an option
that  called  for  a  modified   auction   process   to   be
implemented,   which  we  believe  could  provide  a  viable
approach  for  incorporating   competition   into  the  land
disposal process.  However, the Bureau had not developed and
tested  a  pilot  project.   Accordingly,  we consider  this
recommendation only partially implemented.

Recommendation A. 2.  Direct that all easements  on  Federal
lands  proposed  for  disposal be reviewed to verify grantee
needs and that actions be taken to remove any easements that
are not needed before Federal lands are exchanged or sold.

In our July 1996 report, we noted that the Government's best
interests were not fully protected because Bureau management
did not adequately verify  the  need  for an easement on the
Federal  land prior to exchanging the land  with  a  private
entity.  In  the  case  presented in our report, an easement
encumbering the Federal land  caused  it  to be appraised at
only $550,000, whereas without the easement,  the  appraised
value  would  have  been  10 times that amount.  We reported
that this exchange resulted  in  a  significant  loss to the
Government  and  a  windfall gain for the proponent and  the
City of Las Vegas when  the  City  accepted  cash  and other
inducements  from  the proponent as part of an agreement  to
relinquish the encumbering  easement  on  a large portion of
the property.

In   our   followup  review,  we  found  that  the  Bureau's
Washington Office issued Instruction Memorandum No. 97-08 on
October 10,  1996, which provided new guidance regarding the
removal of encumbrances  before  public  land  was  sold  or
exchanged.   The  guidance  requires that all rights-of-way,
easements, permits, or other  encumbrances  be  reviewed  as
part  of  the case processing procedures and that actions be
taken to clear  encumbrances  which  are  no  longer  needed
before the Federal lands are transferred.  The guidance also
directs  field  offices  to maintain documentation verifying
the need for or release of such encumbrances in the exchange
or sale case files.  Based on this guidance, we consider the
recommendation implemented.

Recommendation A. 3.  Establish  the  controls  necessary to
ensure that land exchanges are processed in full  accordance
with applicable laws, regulations, and Bureau procedures.

In our July1996 audit report, we noted that the Nevada State
Office  did  not  consistently  follow  the  prescribed land
exchange procedures and regulations and ensure that fair and
equal  value  was received in completing three of  the  four
exchanges we reviewed.  Based on this conclusion, we further
recommended that,  at  a  minimum, sufficient controls be in
place to ensure that land to  be acquired is within approved
land-use plans or properly executed  plan  amendments;  that
land  acquired  and disposed of is properly valued; and that
all   significant   decisions    involving    the   exchange
transactions,  particularly those affecting land  valuation,
are fully justified  and  documented  in  the exchange file.
The Bureau concurred with this recommendation,  stating that
its  Washington Office would review the Nevada State  Office
exchange  process  to ensure that controls were adequate and
that it would finalize a Bureauwide Land Exchange Handbook.

In  our  followup  review,   we   found  that  the  Bureau's
Washington Office completed the control review and finalized
a  new  Handbook.   However,  in our opinion,  the  Bureau's
conclusions and its reported improvements for the processing
of exchanges were not substantiated  by documentation in the
exchange files or evidence gathered during  our  review.  We
also found that the Bureau's new Handbook contained guidance
on appraisal reviews and dispute resolutions which  appeared
to  be  in conflict with language in the applicable laws  or
implementing  regulations or which would weaken the Bureau's
organizational   controls   over  the  critically  important
appraisal and valuation process.  In addition to the agreed-
upon corrective actions, the Bureau performed an alternative
management control review of  the  appraisal process between
March  and  May  1997 that focused on Nevada  land  exchange
appraisals.  Based on the results of this review, the Bureau
identified the administration  and  oversight  of the Nevada
land  exchange  appraisal  process  as  a material weakness.
However,  in  our  opinion, this review did  not  adequately
address the significant appraisal problems identified by our
review of the Bureau's  most  recent  Las  Vegas  area  land
exchanges.  Accordingly, as discussed in the paragraphs that
follow, we consider the recommendation unimplemented.

    Bureau  Technical  Procedures Review.  In November 1996,
the Bureau's Washington  Office  formed  a  review  team  to
perform  a  "technical  procedures  review"  of  "case  file
processing"  for  the  Nevada  land  exchange  program.  The
review team consisted of three employees, none of  whom were
qualified   appraisers,   selected   from  different  Bureau
offices.   Two  members of the technical  procedures  review
team  told us during  our  followup  review  that  they  had
requested  the Bureau to include an appraiser on the team to
address  appraisal   and  valuation  issues.   However,  the
members said that the  Washington Office did not honor their
request and that Washington  Office  personnel  told them to
consult instead with the Washington Office appraiser.

The  team  was  directed  to review the Nevada land exchange
program and provide assurance  that  the Nevada State Office
processed land exchanges in accordance  with applicable laws
and  regulations  and  Bureau procedures.  In  accomplishing
this  work,  the  review  team  selected  and  reviewed  six
exchanges processed by the  Las  Vegas Field Office and four
exchanges processed by the Elko District  Office.   The  Las
Vegas   exchanges   consisted  of  two  completed  exchanges
(Cashman and the first part of Dreyfus/Zephyr Cove) and four
ongoing  exchanges  (Del   Webb,   Permabilt/American   Land
Conservancy, Falcon Point, and Volkmar).

On  February  3,  1997,  the  Bureau  provided the Office of
Inspector   General   with  its  final  response   regarding
Recommendation A.3 of the  July  1996  audit report.[3]  The
response stated that the review team had  completed its work
and  had  "found  that  there  are  sufficient guidance  and
controls in Nevada District offices and  the State Office to
conduct exchanges" and that the Bureau was  "confident  that
the case work being conducted today follows written guidance
and the files are being well documented."

Based on our followup review of the same exchanges, we found
that  the  applicable laws, regulations, and Bureau policies
and procedures  were  not  adhered  to consistently and that
significant    decisions   to   deviate   from    procedural
requirements, which affected land valuations, were not fully
justified and documented  in  the exchange files.  Moreover,
we noted instances in which, in  our opinion, acquired lands
were  not  valued in accordance with  recognized  standards.
Specifically,  for the transactions analyzed by the Bureau's
review team, we noted the following:

    -  Substantive  deficiencies  existed  relating  to  the
appraisal  and  valuation  of the private lands for both the
Cashman  and  Dreyfus/Zephyr Cove  exchanges,  although  the
review team reported that "lands acquired and disposed of by
exchange are valued  in  accordance with approved standards"
and that "the appraisal reports  reviewed  by  the  TPR Team
[review   team]   were   prepared  in  accordance  with  the
regulations and the Uniform  Appraisal Standards for Federal
Land  Acquisitions."   In  particular,  we  found  that  the
private lands were not valued  on the basis of their "as is"
condition and existing development  potential.  Instead, the
appraisals  valued  these  lands  based on  the  appraisers'
assertions that it was likely  that  use  permits  could  be
obtained  or that land use restrictions could be overcome to
allow the property  to  be  developed with a more profitable
"highest and best use."  However,  we  concluded  that these
assertions  were not substantiated by credible evidence,  as
required  by   the  "Standards."[4]   As  a  result  of  the
acceptance  of  the  unsubstantiated  assertions, we believe
that  the  lands  acquired  in  these  two  exchanges   were
substantially  overvalued and that the Government lost about
$12.3 million on these exchanges.

Specifically, we  found  that  the  appraised  value  of the
Cashman property was based on the appraiser's assertion that
it was "legal and likely" that Clark County would approve  a
use  permit  for  a  650-lot subdivision on a portion of the
property, but comments  of  a Clark County planning official
were the only support for this assertion.  However, based on
our review of Clark County's  land use plan for the area and
other  documentation[5]  and  on our  discussions  with  the
Nevada  State  Water  Engineer,  we  found  that  a  650-lot
subdivision  could  not  be built on  the  Cashman  property
because  the  water  supply  required   to   serve   such  a
development  was  unavailable.   Further,  we found that the
Clark County Board of Commissioners denied a  use permit for
a  smaller  243-lot  subdivision  on  the nearby Deer  Creek
property in June 1995, based  in part on  concern  about the
availability of water.[6]  Thus, we concluded that there was
no  credible  evidence  to support the assertion that a  use
permit allowing development  of a 650-lot subdivision on the
Cashman property could be obtained  from  Clark  County,  as
required  by  the  "Uniform  Appraisal Standards for Federal
Land  Acquisitions."   Because  the   Bureau  accepted  this
unsubstantiated assertion, the approved  exchange  value  of
the  private  land  was $8.5 million, which was $2.5 million
more than the amount  initially  approved  by  a  Government
appraisal review team.

We also found that the appraisals of the Dreyfus/Zephyr Cove
property  were  based on the appraiser's assertion that  the
Tahoe Regional Planning  Agency  would  allow  the  existing
single  parcel  of  land to be subdivided into five separate
parcels and sold as separate  lots, but the only support for
this assertion was a letter from the Tahoe Regional Planning
Agency's legal counsel.  However, based on our review of the
Tahoe Regional Planning Agency's ordinances, land use plans,
and  planning  records  and  on  our  discussions  with  the
Agency's legal counsel, we concluded that such a subdivision
of  land  was not permissible under  the  Agency's  Code.[7]
Further, from  our  review of Tahoe Regional Planning Agency
records and our discussions  with  the proponent's appraiser
and  consultant, we found no documentation  supporting  that
the Agency  had  approved any such residential subdivisions.
Therefore,  we  concluded   that  the  asserted  development
potential  of  the  Dreyfus/Zephyr  Cove  property  was  not
substantiated  by credible  evidence,  as  required  by  the
"Standards."    Because    the    Bureau    accepted    this
unsubstantiated  assertion,  the  approved exchange value of
the portion of the private property  acquired  by the Bureau
was $37.8 million, which was $9.8 million more than  the $28
million  price  the  exchange  proponent paid for the entire
property.[8]

    -  For the Del Webb exchange, we found that the Bureau's
Washington  Office  did  not fully  conform  to  established
standards, procedures, and  controls for appraisals and land
valuations and did not justify  or document the propriety of
its  actions.   Our  findings  relative   to   the  Bureau's
processing of this exchange were discussed in detail  in our
March 1998 report on the Del Webb land exchange.  Generally,
we concluded that the Bureau's Washington Office (1) allowed
Del  Webb  to use an appraiser that was not  preapproved  by
the Nevada State  Office,  which  was not in accordance with
established State of Nevada procedures  and  practices;  (2)
allowed    the    Del    Webb   appraiser   to   perform   a
development-based appraisal  of  the  selected Federal land,
which  was  not  in  accordance with the "Standards,"  which
required that comparable  sales  be  relied on when adequate
sales data were available; and (3) relieved the Nevada State
Chief Appraiser of his appraisal review responsibilities for
this   exchange,   which  was  contrary  to  the   Statewide
procedures and guidance  in the Bureau Manual.  In addition,
the Bureau issued a contract  for  an  appraisal review to a
firm nominated by Del Webb.  As a result,  if the Bureau had
not obtained a second appraisal, the Government  would  have
lost  $9.1 million on the Federal land selected for exchange
because  the  development  approach  was used in the initial
appraisal.

The  State Chief Appraiser said that he  believed  extensive
reliance on the development approach was not appropriate for
this  exchange   because  the  "Standards"  states  a  clear
preference for the  use  of  comparable  sales when adequate
sales data are available.  According to Section  A-8  of the
"Standards,"  the  development  approach  should not be used
when comparable sales are available because  the development
approach  is  "highly  speculative,  prone  to  error,   and
reflects  not so much value as the highest price a developer
can afford  to  pay and still earn the desired profit."  The
State Chief Appraiser  said  that  he deemed the development
approach  to  be  inappropriate  because  he  believed  that
comparable  sales  were available for  use  in  valuing  the
property.  The State  Chief  Appraiser's  position  in  this
matter  was  subsequently  validated  by  a second appraisal
firm,  contracted  for by the Bureau, which also  determined
that the comparable  sales  approach should be relied on for
estimating  the  value of the selected  Federal  land.   The
second appraisal report  commissioned  by  the Bureau valued
the  Federal land at $52.1 million, which was  significantly
higher   than   the  $43 million  value  determined  by  the
appraisal  firm  hired   by   the  proponent.   Given  these
circumstances, we believe that  the  Government  would  have
lost   $9.1 million   had  the  second  appraisal  not  been
obtained.

    -   On  April  25, 1997,  the  Las  Vegas  Field  Office
acquired three parcels  of  land  within the Las Vegas urban
area  for  $3.4 million as part of the  Dreyfus/Zephyr  Cove
exchange.  However,  we believe that the decision to acquire
these   lands  was  not  in   compliance   with   the   Code
(43 CFR 2200.0-6(g)),  which states, "The authorized officer
shall consider only those  exchange  proposals  that  are in
conformance  with  land  use plans or plan amendments."  The
Bureau's notice of decision  for  this  exchange stated that
the  lands  to  be  acquired "have high value  for  wildlife
habitat  and public recreation."   However,  we  found  that
these parcels  were  located  between  existing  residential
subdivisions  and  Federally  owned land that was identified
for disposal in the Bureau's pertinent land use plan for the
area,  the  Clark County Management  Framework  Plan,  dated
1984.  Regarding  the  Federally  owned  land identified for
disposal, the Plan stated, "The lands are  not identified as
needed  for  any  Federal  program. . . .  The  problems  of
illegal occupancy, dumping, and other trespass are  rampant,
and  would  be  eliminated  by disposal.  Retention of these
lands puts the Bureau in the  de  facto position of being an
urban  planning  agency,  for  which it  is  ill  equipped."
Consequently, we concluded that  there  was  no  discernible
mission-related purpose documented to reasonably support the
acquisition of the adjacent parcels of land.

    -  The Nevada State Office allowed a U.S. Forest Service
regional  appraiser  to review the appraisal report  and  to
approve the land values for the private property included in
the  first  Dreyfus/Zephyr  Cove  exchange  transaction,  an
action that was  contrary  to  requirements contained in the
Bureau Manual.  Specifically, Section  1203,  Appendix 1, of
the Manual, which was in effect at the time of  the  review,
limited  the  delegation  of  authority  for  reviewing  and
approving  exchange  values  to  the  "State Chief Appraiser
only."  This action was also contrary to  the  Bureau review
team's  finding  that  "the delegated official [State  Chief
Appraiser] reviews each  appraisal  report  and approves the
value."  A member of the Bureau's review team  said that the
team initially concluded that land exchange values  could be
approved  only  by  the  State  Chief Appraiser or the State
Director but that the issue was not  included  in  the final
technical procedures report based on consultations with  the
Bureau's  Washington  Office appraiser, who also assisted in
writing the team's report.

We also noted that a private citizen protested this exchange
partially because he questioned   the  Bureau's authority to
redelegate  its appraisal review and approval  authority  to
the U.S. Forest  Service.  This protest was dismissed by the
Assistant Secretary  for  Land and Minerals Management in an
October 7, 1996, dismissal  notice,  which  stated  that the
Bureau's   exchange   regulations   "only  require  that  an
appraisal report be reviewed by a qualified  appraiser"  and
that  "regulations were followed in assigning responsibility
for appraisal  review  of  the  offered  lands to the Forest
Service  Review  Appraiser."  The dismissal  notice  further
stated that the Assistant Secretary's office "analyzed [the]
protest  to this exchange,  and  have  determined  that  BLM
[Bureau of  Land Management] regulations and procedures were
followed in processing  this transaction." However, we found
that Bureau procedures delineated  in  Section  1203  of the
Bureau  Manual  restricted  appraisal  review  and  approval
authority to the State Chief Appraiser only.

    -  The Las Vegas Field Office issued notices of decision
to  proceed  with  the  Del  Webb,  Dreyfus/Zephyr Cove, and
Permabilt/American Land Conservancy exchanges  before all of
the  land  appraisals  and  other  required  analyses   were
completed, which was contrary to requirements of the Code of
Federal  Regulations  (43 CFR 2201).[9]  The Bureau's review
team did not identify this  area  of  noncompliance  in  its
review  report  but instead stated that "[l]and exchanges in
Nevada are processed  in  full  accordance  with  applicable
laws,  regulations,  and  BLM  [Bureau  of  Land Management]
procedures."

On February 11, 1997, after the notices of decision  and the
review   team's   report  were  issued,  the  Bureau  issued
Instruction Memorandum  No. 97-74, which reaffirmed that the
Bureau's policy and regulations  required appraisals and all
other  documentation  to be completed  before  a  notice  of
decision  was  issued  and   to   be  available  for  public
inspection during the subsequent comment  period.   However,
we  found  that  the  Las  Vegas  Field Office did not fully
comply with this instruction.  While the notices for the Del
Webb and Permabilt/American Land Conservancy  exchanges were
reissued after appraisals and other required documents  were
completed   and   approved,   the   second   phase   of  the
Dreyfus/Zephyr  Cove  exchange  was  completed  on April 25,
1997,  without a new notice of decision and opportunity  for
public review.  We believe that the Field Office's continued
noncompliance   with   Bureau  regulations  and  Instruction
Memorandum No. 97-74 was  significant  because  new  offered
land  was  added  to  the  second  phase of the exchange and
appraisals  were completed and approved  subsequent  to  the
issuance of the  first  notice on May 20, 1996.  Because the
regulations and the instruction  were not properly followed,
the Field Office's determination that  the proposed exchange
was in the public interest was not properly substantiated at
the time the exchange was announced, and  the public did not
have  the  full  opportunity to review and analyze  relevant
exchange data, which,  in  our  opinion,  may have adversely
impacted the public's ability to prepare meaningful protests
within  the  45-day  period  established  in  the  governing
regulations (43 CFR 2201.7-1(b)).

Regarding the Deer Creek exchange, which the review team did
not  analyze,  we  noted  that  a significant value  dispute
existed between the exchange proponent  (the  American  Land
Conservancy) and the Government's appraisal review team.[10]
Specifically, the proponent wanted more than $12 million for
the  private  land,  whereas  the review team established an
approved value of about $4.6 million  for the property.  The
State  Director's authority to conduct bargaining  over  the
disputed  appraised  value  was  subsequently redelegated to
U.S. Forest Service officials.  The  Bureau  Manual (Section
1203,  Appendix  1,  page 54)  states  that  the Secretary's
authority  to  "approve  all actions, subject to  the  title
opinion of the Field or Regional  Solicitor,  in all matters
relating to the exchange of lands" is delegated to the State
Director.   In addition, our Office of General Counsel  said
that (1) delegations  to  outside  entities  are permissible
only  "where the agency retains and exercises its  power  to
review  and  make the ultimate decisions with respect to the
findings or conclusions  of the outside entity" and (2) "the
delegation will be deemed  improper  if  the  agency  simply
`rubberstamps' the work product of the outside entity."

In   reviewing   the   exchange   file  and  discussing  the
redelegation  and  bargaining  with  Nevada   State   Office
officials,  we found that the Bureau provided only a cursory
review  of  the   conclusions   reached  by  Forest  Service
officials before accepting these  conclusions and proceeding
with the exchange.  For example, despite  the  fact that the
appraisals  valued  the land using the development  approach
and that the Forest Service's  negotiations  revolved around
several disputed financial and economic factors  used by the
appraisers  and appraisal reviewers under this approach,  we
found that the  Nevada  State Office did not have the Forest
Service bargaining team's  conclusions reviewed by the State
Chief  Appraiser  or  any other  Government  appraiser.   In
addition, we noted that  the  Nevada  State  Office accepted
title to the property on March 19, 1996, only  1  day  after
the  Forest  Service  provided the Bureau with a copy of its
bargaining agreement,[11]  thus  limiting the possibility of
an  adequate  and  effective  review  by   the  State  Chief
Appraiser  and State Office management.  Finally,  we  found
that both of  these  actions  were  consistent  with  verbal
agreements  between  the  Bureau  and  the Forest Service as
described in the bargaining agreement, which stated, "It was
the  understanding  of  both agencies that  the  FS  [Forest
Service]  would represent  the  Federal  Government  in  the
dispute resolution  and  in  completing  the  remaining work
associated  with  this transaction."  As such, we  concluded
that the Bureau did  not  provide  an adequate and effective
review of the Forest Service's negotiation documentation and
appraisal  review.   Consequently,  we   believe   that  the
redelegation to the U.S. Forest Service without adequate and
effective  review by the Bureau was an improper action  that
resulted in a significant loss to the Government because the
proponent  subsequently   received   $10.5 million  for  the
acquired lands, which was about $5.9 million  more  than the
$4.6 million  value  determined  to  be  appropriate  by the
Government's appraisal review team.[12]  The redelegation of
Bureau  authorities and responsibilities to outside entities
is discussed further in the paragraphs that follow.

     Land Exchange Handbook.  On August 14, 1997, the Bureau
issued its Land Exchange Handbook (Bureau of Land Management
Manual  Handbook   H-2200-1,   Release  No.  8/4/97),  which
provided detailed information regarding  the  land  exchange
process.   However,  we  noted  that  this document included
certain procedural changes related to appraisal  reviews and
dispute  resolutions which, in our opinion, weaken  controls
over a critical aspect of the exchange process and appear to
be inconsistent  with  the  requirements of the Federal Land
Policy Management Act of 1976  or applicable regulations (43
CFR 2200) as follows:

    -  Appraisal Review.  Before  April 21, 1997, the Bureau
Manual  limited  delegated  authority   for   reviewing  and
approving land exchange values to the "State Chief Appraiser
only."   Based  on our analyses of the exchange process,  we
considered this limitation  on appraisal review and approval
authority  to  be the most critical  organizational  control
instituted by the Bureau to ensure compliance with the legal
requirement (the  Federal Land  Policy and Management Act of
1976) that exchanges  must be for equal value.  However, the
Bureau's Washington Office issued Instruction Memorandum No.
97-113,[13] which amended  the Bureau Manual to allow "other
qualified  federal  review  appraisers,"   including   those
working for agencies outside the Department of the Interior,
to  perform  the  critical  appraisal  review  and  approval
function.    The   revised   delegation   of  authority  was
subsequently expanded and made permanent in Chapter 7 of the
Handbook,  which  states  that  a  "BLM  [Bureau   of   Land
Management]  staff  appraiser,  a  qualified  reviewer  from
another  Federal agency, or a contract review appraiser" can
review appraisals  and  approve  market  values.   (Emphasis
added.)  Thus, the Handbook guidance allows Bureau officials
to  proceed with an exchange based on appraised land  values
determined  entirely  by  non-Bureau  appraisers without the
appraisal  having  been reviewed and approved  by  a  Bureau
appraiser, such as the State Chief Appraiser.

According to the Instruction Memorandum, the Bureau's intent
in  revising  the  delegation  of  authority  for  reviewing
appraisals and approving  exchange  values  was to allow the
sharing  of  agencies'  scarce  appraisal  resources   while
retaining  final  decision making by the Bureau.  In support
of this, the Handbook  states  that  "the decision to accept
the [appraisal] review or approve the  appraised  value is a
BLM  [Bureau  of  Land  Management] decision that cannot  be
delegated outside the agency."   However,  we concluded that
this  control  would  not  be  effective because  the  state
directors or field office managers  authorized  to  make the
final  decisions  are not likely to be trained and qualified
appraisers.  In our opinion, Bureau decisions concerning the
acceptability of appraisals  and  exchange  values should be
made based only on the advice of Bureau appraisers  who,  by
virtue  of  their position, are expected to have an interest
in ensuring compliance  with  the  Federal  Land  Policy and
Management  Act's  requirement  for  fair  and  equal  value
exchanges  and  the  professional  education,  training, and
experience  necessary  to determine when an appraised  value
satisfies this requirement.

We  believe  that  the  changes   in   delegated   authority
implemented  through  the Handbook significantly weaken  the
Bureau's controls over  the  valuation  process.   Moreover,
given  the  recurrence  of  the deficiencies in the Bureau's
exchange program disclosed by  our  audits,  we believe that
the  Bureau should be implementing more management  controls
rather than instituting changes that result in the lessening
of critical existing controls.  Accordingly, we believe that
the Handbook  and Memorandum No. 97-113 should be revised to
ensure  that  any  appraisal  review  reports  submitted  by
individuals not  employed  by  the  Bureau  are reviewed and
approved by the State Chief Appraiser.

    -  Dispute Resolution.  Chapter 8 of the Handbook allows
exchange  parties  to use bargaining or other processes  "in
place  of an appraisal"  to  resolve  value  disputes.   The
chapter further states that the other processes can "include
discussion  of  factors  or  elements  that  are outside the
normal appraisal process," including subjective factors such
as  the "consideration of public benefits that  result  from
the transaction."   However,  these  statements appear to be
contrary to the Federal Land Policy and Management Act.  The
Act and its implementing regulations require that bargaining
and other processes be used only to reconcile differences in
appraisal values rather than as substitutes  for  appraisal.
The  Act  (43 U.S.C. 1716(d)) contemplates the use of  other
processes to  resolve value disputes only after an appraisal
has been completed,  providing  that  the parties submit the
appraisal  to arbitration or "[i]nstead  of  submitting  the
appraisal to an arbitrator . . . the Secretary concerned and
the other party  or  parties  involved  in  an  exchange may
mutually  agree  to employ a process of bargaining  or  some
other process to determine  the  values  of  the  properties
involved  in  the  exchange."   Bureau  regulations  (43 CFR
2201.4(a)(1)) also make clear that the use of bargaining  or
other  processes  is  not to be used in lieu of an appraisal
but  rather  "shall contain  a  reference  to  all  relevant
appraisal information  and  state how the parties reconciled
or  compromised  appraisal  information   to  arrive  at  an
agreement based on market value."

Neither the Bureau official responsible for  finalizing  the
Handbook  nor the Bureau's Washington Office appraiser could
identify a  legislative  or  regulatory authority that would
support  the  use  of  another  process  "in  place"  of  an
appraisal.  Accordingly, we believe  that  the Bureau should
revise   its  Handbook  to  make  it  consistent  with   the
requirements  of  the  enabling legislation and the exchange
regulations.

Recommendation B. 1.  The  accounting  reports of income and
expenditures required by Section 2(e) of  the Santini-Burton
Act  are  prepared and submitted to Bureau headquarters  for
submission   to   the  appropriate  Congressional  oversight
committees.

Our  July 1996 report  stated  that  Bureau  officials  were
unable  to provide us with accounting  reports of income and
expenditures  which  were  required  by  Section 2(e) of the
Santini-Burton   Act.    The   Bureau   agreed   with   this
recommendation,  and  on  September 10,  1996,  the Bureau's
Washington  Office issued Instruction Memorandum No. 96-179,
which directed  its  National Business Center to provide the
required biannual accounting  information  to the Washington
Office's  Legislative Affairs Group for transmittal  to  the
appropriate  Congressional  committees.   On  September  23,
1996,  the  Washington  Office  amended  the  instruction to
clarify  that  the  accounting  information  should  include
cumulative   Bureau   receipts   and   U.S.  Forest  Service
expenditures  since  the passage of the Santini-Burton  Act.
On April 14, 1997, the  Assistant  Secretary  for  Land  and
Minerals  Management  submitted  the  first  such accounting
reports  to  the Committee on Energy and Natural  Resources.
Accordingly, we consider the recommendation implemented.

Recommendation  B. 2.  The Nevada State Office uses the land
sales  process, except  in  compelling  circumstances,  when
disposing  of  its  Santini-Burton Act lands until the sales
revenues generated closely  approximate the Lake Tahoe Basin
acquisition costs.  Any exchange  proposals  from  that time
should  be closely monitored to ensure that the exchange  is
justified  and  that  the  costs incurred as a result of the
Santini-Burton Act remain relatively nominal.

Our July 1996 report stated  that  the  Nevada  State Office
exchanged  rather  than  sold  land  within  the  sale  area
designated  by  the  Santini-Burton  Act.  We concluded that
this decision deprived the U.S. Treasury  of $7.8 million in
revenues for repayment of incurred costs for  acquiring land
within  the  Lake  Tahoe Basin.  Before responding  to  this
recommendation, the  Bureau alternatively proposed to obtain
legal guidance from the  Office  of  the Solicitor regarding
the  disposal of Santini-Burton lands.   We  concurred  with
this approach, and the Bureau received the legal guidance in
June 1997.   The  Solicitor stated that while the Bureau has
the authority to dispose  of land in the Santini-Burton area
under other laws, the Santini-Burton legislation expressed a
"strong preference for disposal  by  sale."   The  Solicitor
therefore  advised  the  Bureau  to dispose of lands in  the
Santini-Burton area by other than  sale  "only when doing so
would not frustrate the Act's purposes."  To ensure that the
Bureau complied with this legislation, the Solicitor further
advised the Bureau that it should "set forth  in writing, as
part  of  its  decision-making  documentation  on   non-sale
disposals in the Santini-Burton area, persuasive reasons why
the sale method is not being used."

On August 8, 1997, the Nevada State Director issued guidance
to  the  Las Vegas Field Office that public land within  the
boundary established  by  the  Santini-Burton  Act  would be
available  for  sale only, utilizing competitive procedures,
and that any exceptions to this policy would require written
concurrence  of  the   State  Director.   Only  one  of  the
exchanges actively being  processed  by  the Las Vegas Field
Office,  the  Volkmar  exchange, sought to acquire  Santini-
Burton Act land.  After we provided the preliminary draft of
our report to the Bureau  in  February  1998,  the Las Vegas
Field  Office  notified  the  Volkmar exchange proponent  on
March  4, 1998, that the Santini-Burton  Act  land  selected
would  be  excluded  from  the  exchange.   Accordingly,  we
consider the recommendation implemented.

Recommendations

We recommend that the Director, Bureau of Land Management:

    1. Identify the Bureau's entire land exchange program as
a material weakness in the Departmental Accountability
Report.

    2. Establish   a   "land  exchange  review  team"  which
includes  representatives  who  are   non-Bureau  personnel.
This team should  provide  advice concerning compliance with
established  laws,  regulations,   and  procedures  for  all
significant  land  exchanges before lands  are  acquired  or
disposed of through  an exchange.  Also, team members should
possess the technical  skills  and  proficiency, including a
thorough  knowledge  of  the  appraisal  process   and   the
applicable  appraisal  standards,  required  to  conduct  an
effective review of proposed exchanges.

    3. Establish a moratorium on land exchanges in the State
of  Nevada  pending  establishment  of  the independent land
exchange review team identified in Recommendation 2.

    4. Ensure  that  appraisals  are supported  by  credible
evidence,  as required by the "Uniform  Appraisal  Standards
for Federal  Land Acquisitions," when the appraised value is
based on an assertion  that  the property's highest and best
use is different from its current zoning or use.

    5. Revise  the Land Exchange  Handbook  and  Instruction
Memorandum 97-113  to ensure that all appraisal reports used
in a land exchange are  reviewed  and  approved by the State
Chief Appraiser and to ensure that the described  procedures
for  dispute resolution are consistent with the requirements
of the  Federal  Land  Policy and Management Act of 1976 and
the Code of Federal Regulations (43 CFR 2200).

Bureau of Land Management  Response  and  Office  of
Inspector General Reply

In  the  June  29, 1998, response (Appendix 5) to the  draft
report from the  Director,  Bureau  of  Land Management, the
Bureau concurred with Recommendations 1 and  4, nonconcurred
with  Recommendations 3  and  5,  and neither concurred  nor
nonconcurred with Recommendation 2.   Also, the draft report
was discussed in July 13 and 15 meetings  between the Bureau
and the Office of Inspector General.  On July  24, 1998, the
Bureau  provided  a supplemental response (Appendix  4),  in
which it concurred  with  Recommendations 1, 2, 4, and 5 and
nonconcurred with Recommendation 3.  Based on the responses,
we consider Recommendations 1,  4,  and  5  resolved but not
implemented.  Accordingly, the unimplemented recommendations
will  be  forwarded to the Assistant Secretary  for  Policy,
Management  and Budget for tracking of implementation.  Also
based on the  responses,  we request that the Bureau provide
additional information for  Recommendation 2  and reconsider
its  response to Recommendation 3, which is unresolved  (see
Appendix 6).

Recommendation 1.  Concurrence.

    Bureau   of  Land  Management  Response.   In  its  July
response, the  Bureau  said that it would "identify the land
exchange program as a material weakness" in the Departmental
Accountability Report.   The  July  response  identified the
Assistant   Director,   Minerals,   Realty,   and   Resource
Protection,  as  the official responsible for implementation
and September 30,  1998, as the target date for submittal of
the plan required by the Accountability Report.

    Office  of  Inspector   General  Reply.   Based  on  the
Bureau's response, we consider  the  recommendation resolved
but not implemented.

Recommendation 2.  Concurrence.

    Bureau  of  Land  Management  Response.    In  its  June
response,  the  Bureau  said  that it had "taken actions  to
improve the land exchange program,"  but  it  did not make a
specific commitment on the establishment of a land  exchange
review  team  and  the possible roles, responsibilities,  or
organization of such  a  review team.  In the July response,
the Bureau stated that it had "prepared and submitted to the
Department for review a proposal  to  establish  a  National
Land Exchange Evaluation and Assistance Team" to review land
exchange  actions  and  decisions  and that the Bureau would
proceed with implementation of the Team  upon concurrence of
the Department.  However, the Bureau also  stated  that  its
proposal  "does  not  include  non-Bureau representatives as
members of the Team" because such  a  proposal "would create
potentially troubling issues regarding  compliance  with the
Federal   Advisory   Committee   Act   (FACA),  Departmental
delegations . . . ,  appropriate  handling  of  confidential
information, and other issues that  might  arise  if the BLM
[Bureau  of Land Management] used non-federal personnel  for
performing  functional responsibilities in the land exchange
process."  The  Bureau further stated that it will "continue
to evaluate options  to  consider  other means of increasing
objective input in the review of land  exchanges,"  such  as
"participation  by  the  FACA  chartered  Resource  Advisory
Councils  in  the  review of land exchange actions, or other
federal  agency  representation  on  land  exchange  program
evaluation  teams."    Further,  the  Bureau  announced  the
formation of the Team in an August 14, 1998, press release.

    Office of Inspector  General Reply.  Although the Bureau
concurred with our recommendation,  it  did  not  commit  to
include  independent  representation  on  the  National Land
Exchange Team.  Regarding the Bureau's comments  on  the use
of  "non-federal  personnel" on the Team, it should be noted
that we did not suggest  the use of "non-federal personnel."
Further, at our July 13, 1998, meeting with the Director, we
suggested that one method  for  ensuring the independence of
the Bureau's National Land Exchange  Review Team would be to
include Team members who are employees of other Departmental
bureaus or other Federal agencies or departments that do not
benefit from the land exchange.  We believe  that  inclusion
of  non-Bureau  representation on the National Land Exchange
Team is the most  viable  method  for  the  Bureau to obtain
consistent and unbiased advice on land exchanges.  In regard
to  the  Federal  Advisory  Committee  Act,  the  Office  of
Inspector  General's  General  Counsel advised that the  Act
would not be applicable provided  that the Team was composed
exclusively  of  Federal  employees.    The  Act  (5 U.S.C.,
App. 2, section 3) states that the term "advisory committee"
excludes "any committee which is composed  wholly  of  full-
time  officers  or  employees  of  the  Federal Government."
Accordingly,  we  believe  that  the  Bureau  should  obtain
written  advice  from the Office of the Solicitor  regarding
any legal limitations  on  the  participation of non-Federal
personnel on the National Land Exchange Team.

We also believe that the Bureau's  suggested use of Resource
Advisory Councils to review land exchange actions could help
ensure that land exchanges are consistent with existing land
use  plans.   However,  the most significant  land  exchange
problem identified by our  followup  audit  was  that  lands
exchanged  were  not  properly  valued  in  accordance  with
approved   standards   (see   discussion   of  the  Cashman,
Dreyfus/Zephyr Cove, and Del Webb exchanges on pages 8 to 10
of  the  report).   Accordingly,  in order for the  Resource
Advisory Councils to be a viable option  as  an  independent
reviewer   of  land  exchange  actions,  membership  of  the
Councils must include individuals who "possess the technical
skills and proficiency,  including  a  thorough knowledge of
the   appraisal   process   and  the  applicable   appraisal
standards,  required  to  conduct  an  effective  review  of
proposed  exchanges."   In  addition,   the   Bureau  raised
concerns  about  the use of non-Federal personnel  regarding
compliance  with  Departmental   delegations,   handling  of
confidential information, and other issues.

Our insistence on the need for an independent review of land
exchange   actions  is  based  on  the  Bureau's  continuing
inability to  ensure  that  exchanges  are  accomplished  in
accordance   with  prescribed  regulations  and  procedures.
Specifically,  in  our  July  1996 audit report "Nevada Land
Exchange Activities, Bureau of  Land  Management,"  we found
that   the   Nevada   Office  did  not  consistently  follow
prescribed  land  exchange  regulations  or  procedures  and
ensure that fair and  equal value was received in completing
three of the four exchanges we reviewed.  In response to the
audit, the Bureau stated  that  its  Washington Office would
"review the Nevada BLM [Bureau of Land  Management] exchange
process to assure that adequate controls  are  in  place  to
comply   with   applicable   laws,   regulations   and   BLM
procedures."   After  completing  its  review of Nevada land
exchange procedures, the Bureau's Washington Office reported
that  "there  are sufficient guidance and  controls  in  the
Nevada District  offices  and  the  State  Office to conduct
exchanges" and that the Bureau was "confident  that the case
work being conducted today follows written guidance  and the
files are being well documented."  However, as discussed  in
our  report  (pages  6 through 13), we found that the Bureau
had   not  identified  significant   deficiencies   in   the
processing of Nevada land exchanges that were the subject of
the technical  procedures  review  performed by the Bureau's
Washington  Office.   These  deficiencies   resulted  in  an
$18.2 million  loss  to  the  Federal  Government   and  the
acquisition   of  $3.4 million  of  land  that  was  not  in
conformance with  the  current  land  use plan.  Further, as
discussed  in  our  advisory  report on the  Del  Webb  land
exchange, we found that the Bureau's  Washington  Office did
not  follow  established standards, procedures, and controls
for appraisals  and  land  valuations and did not justify or
document the propriety of its actions, which almost resulted
in  another $9.1 million loss  to  the  Federal  Government.
Accordingly, we believe that there is a need for independent
representation on the Bureau's National Land Exchange Review
Team  for  us to consider the recommendation fully resolved.
In  that  regard,  we  request  the  following  information:
(1) the Team's  charter showing the specific authorities and
responsibilities given to the Team, including information on
the  criteria  by which  the  Bureau  will  determine  which
exchanges will be  referred  to the Team for review, and (2)
the  membership of the Team, including  information  on  the
qualifications of non-Bureau members.

Recommendation 3.  Nonconcurrence.

    Bureau   of  Land  Management  Response.   In  its  June
response, the Bureau disagreed with the recommendation for a
full moratorium  but  stated  that  it  would  continue  the
existing  limited  moratorium  on  new  exchanges in the Las
Vegas area.  In the July response, the Bureau stated that it
"does not agree to a moratorium on land exchanges in Nevada.
However, BLM [Bureau of Land Management]  does  not  plan on
processing  additional land exchanges in the Las Vegas  area
until  the existing  priority  exchanges  are  substantially
completed  and  the  National  Land  Exchange Evaluation and
Assistance Team, as identified above [Recommendation No. 2],
is approved by the Department and established  and available
to  assist the BLM Nevada State Director."  The Bureau  also
stated  that  existing priority exchanges would be processed
subject to recently  established  review procedures and that
no additional lands would be acquired  in the Las Vegas area
unless  they  were  consistent  with  the  final  Las  Vegas
Resource Management Plan expected to be effective in October
1998.

    Office  of Inspector General Reply.  We acknowledge  the
reported actions  taken  as  efforts  to  improve management
oversight  of  land  exchange  activities and the  appraisal
process.  However, we believe that a temporary moratorium on
Nevada land exchanges, including  any  expansion of existing
exchanges,  is needed to ensure that no additional  monetary
losses occur  prior  to  an independent land exchange review
team  being  established  to   review  such  exchanges.   As
discussed in the report (pages 6  through  13)  and  in  our
reply to the Bureau's response to Recommendation 2, previous
reviews  of Nevada land exchanges by the Bureau's Washington
Office had not disclosed significant processing deficiencies
that we found  resulted  in  significant financial losses to
the Federal Government.  Further, the Bureau could amend the
existing exchange agreements to  add  millions of dollars of
additional offered and selected lands that  were not part of
the   exchanges   when  the  Bureau  announced  its  partial
moratorium on July 19, 1996.  If the existing agreements are
amended,  the  risk of  additional  losses  could  increase.
Also, the length  of  the  moratorium is within the Bureau's
control.   The establishment  and  the  empowerment  of  the
Review  Team  identified  in  Recommendation 2  satisfy  the
conditions   that   led   us   to  recommend  a  moratorium.
Therefore,  we  request  that  the  Bureau   reconsider  its
response to the recommendation.

Recommendation 4.  Concurrence.

    Bureau  of  Land Management Response.  In its  June  and
July   responses,   the    Bureau    concurred    with   the
recommendation,  stating in the June response that it  "will
coordinate  development   of   an  appraisal  course  to  be
presented  to  BLM [Bureau of Land  Management]  appraisers,
contract appraisers, and other agency appraisers involved in
land exchange appraisals.   The course will be developed and
presented  by  the  Appraisal  Institute  and  the  American
Society of Farm Managers and Rural  Appraisers.   The course
will  focus  on  highest  and  best  use,  how  to  document
'reasonable probability,' and improving the effectiveness of
the appraisal review function."  The Bureau also stated that
its Washington Office would conduct followup reviews  of the
appraisal  function  during  fiscal  year  1999.   The  July
response   identified   the  Assistant  Director,  Minerals,
Realty, and Resource Protection, as the official responsible
for implementation and June  1, 1999, as the target date for
implementation.

    Office of Inspector General Reply. Based on the
Bureau's response, we consider  the recommendation  resolved
but not implemented.

Recommendation 5.  Concurrence.

    Bureau   of  Land  Management  Response.   In  its  June
response, the  Bureau  did  not  agree  to  revise  the Land
Exchange Handbook and Instruction Memorandum 97-113, stating
that  the current delegation of authority, which allows  the
State  Director  "to  re-delegate  authority  for  approving
market value  to  the  State Office Chief Appraiser or other
qualified review appraisers"  from  other  agencies  or  the
private  sector  is  a  "practical  way  to handle appraisal
review  workload and is also consistent with"  the  exchange
regulations.

The  Bureau   also   stated  that  it  "disagrees  with  the
recommendation regarding  `bargaining.'"   However,  in  the
July response, the Bureau said that it will "revise the Land
Exchange  Handbook  to clarify that all appraisals used in a
land exchange will be  subject  to administrative acceptance
by a BLM [Bureau of Land Management]  State  Chief Appraiser
or an officially designated Bureau Appraiser prior  to being
submitted  to  the  authorized officer."  The Bureau further
stated, "The Handbook  will  also be revised to clarify that
bargaining will only be conducted  after  an  appraisal  has
been  prepared  and  the  Bureau and exchange proponent have
been unable to reach agreement on the appraised value."  The
July response identified the  Assistant  Director, Minerals,
Realty, and Resource Protection, as the official responsible
for  implementation and September 30, 1998,  as  the  target
date for implementation.

    Office   of  Inspector  General  Reply.   Based  on  the
Bureau's response,  we  consider the recommendation resolved
but not implemented.

General Comments on Audit Report

In  the  Bureau's  July  24,   1998,  supplemental  response
(Appendix  4)  to  the draft report,  the  Bureau  generally
concurred  with  the  recommendations  and  agreed  to  take
corrective actions.  However,  the supplemental response did
not alter the Bureau's June 29,  1998, response (Appendix 5)
regarding the Bureau's nonconcurrence  with the audit report
findings and conclusions and the monetary  impacts  included
in  Appendix  1 of the report.  The Bureau expressed similar
statements  of  nonconcurrence  in  its  February 24,  1998,
review comments on  the  preliminary  draft  of the advisory
report  for  the  Del  Webb land exchange and its  March 26,
1998, review comments on the preliminary draft of this audit
report.  We considered each of the Bureau's earlier comments
and made changes to the  reports  as appropriate, but we did
not alter our conclusions.  The most  significant  areas  of
disagreement  identified  in  the Bureau's responses and our
replies to those comments are presented  in  the  paragraphs
that follow.

Bureau Actions Taken To Improve Land Exchange Program

    Bureau   of  Land  Management  Response.   In  the  June
response, the  Bureau stated, "We want to focus attention on
the larger management  issues  involved in the Bureau's land
exchange program, and at the same  time  respond  to many of
the  concerns  addressed  in  the draft Audit Report."   The
Bureau identified issues that it said "appear to fall within
several  broad  areas of concern."   These  areas  were  (1)
management  oversight,   (2)   land  exchange  policies  and
procedures, and (3) appraisal procedures.   The  Bureau then
summarized  20 actions that it had taken or was planning  to
take to improve the overall management oversight of its land
exchange  program,  ensure  compliance  with  land  exchange
policies and  procedures,  and improve administration of the
appraisal function (Appendix 5, pages 1 through 4).

    Office of Inspector General  Reply.   We acknowledge the
Bureau's  reported  efforts and believe that  these  actions
have the potential to  improve  controls  over  Nevada  land
exchange activities and the appraisal process.  However,  we
found   that   some  of  the  Bureau's  actions  which  were
implemented prior  to  or  during our followup audit did not
ensure that land exchanges were processed in accordance with
established procedures.  For  example, in its June response,
the  Bureau  stated  that it had "completed  an  Alternative
Management Control Review (AMCR) of the Nevada land exchange
program  in  1997."   This   review   was  undertaken  as  a
corrective  action to resolve Recommendation  A.3  from  our
July 1996 audit  of  Nevada land exchange activities and was
therefore a primary focus of our followup audit.  Generally,
the  Bureau's  review concluded  that  the  Nevada  District
Offices and the  Nevada State Office had sufficient guidance
and controls to conduct exchanges, that exchanges were being
processed in accordance  with  written  guidance,  and  that
files  were  being  well documented.  However, we found that
the applicable laws and  regulations and Bureau policies and
procedures  were  not  adhered   to  consistently  and  that
significant    decisions   to   deviate   from    procedural
requirements which  adversely  affected land valuations were
not fully justified and documented  in  the  exchange files.
Moreover,  we  noted  instances  in  which, in our  opinion,
acquired lands were not valued in accordance with recognized
standards  (pages  8  through  10).   Our concern  that  the
Washington  Office's Alternative Management  Control  Review
did not identify  the  significant  continuing problems with
Las Vegas area land exchanges was a primary  factor  in  our
decision  to  recommend  the establishment of an independent
land exchange review team  and  a  temporary  moratorium  on
Nevada  land  exchanges  (Recommendations  2  and  3 in this
report).

     Appraisal Issues

     Bureau of Land Management Response. In its June
     response, the Bureau stated:

     The  BLM  [Bureau   of   Land   Management]  takes
     particular   exception   to  the  implication   in
     Appendix  1  of the draft Audit  Report  that  the
     appraisal   decisions    for    several   exchange
     transactions  resulted in lost revenues  of  $18.2
     million.  The appraisal reports on the Cashman and
     Dreyfus/Zephyr  Cove  land exchanges were prepared
     by highly qualified appraisers,  and  reviewed and
     approved by BLM [Bureau of Land Management] review
     appraisers.  The appraisers and review  appraisers
     diligently  gathered,  verified, and analyzed  the
     best  information  available,  in  reaching  their
     conclusion  of  value.    We  believe  the  review
     appraiser performed the due diligence necessary to
     reach  a  conclusion of value.  [See  Appendix  5,
     page 4.]

    Office  of  Inspector   General   Reply.   The  Bureau's
statement  that  the  Dreyfus/Zephyr  Cove   appraisal   was
reviewed  and  approved  by  Bureau review appraisers is not
accurate.  As discussed in our  report  (page  11), we found
that  the Nevada State Office allowed a U.S. Forest  Service
regional  appraiser  to  review  the appraisal report and to
approve the land values for the private property included in
the  first  Dreyfus/Zephyr  Cove  exchange  transaction,  an
action that was contrary to requirements  contained  in  the
Bureau  Manual.  Further, we found (pages 8 through 10) that
private lands  were not valued on the basis of their "as is"
condition and on  existing  development potential but rather
on unsubstantiated assertions  that  use  permits  could  be
obtained  or that land use restrictions could be overcome to
allow the property  to  be  developed with a more profitable
"highest and best use."

    Bureau of Land Management Response.  The Bureau stated:

         The draft Audit Report  finds  that `there was
         no credible evidence to support  the assertion
         that  a use permit allowing development  of  a
         650-lot  subdivision  on  the Cashman property
         could be obtained' and therefore  the property
         was   overvalued   by   $2.5   million.    The
         appraisers   and  reviewers  made  a  diligent
         effort   to  thoroughly   and   professionally
         evaluate all  of  the valuation issues related
         to the Cashman property.   The  appraisal  and
         the   review   statement  for  the  appraisal,
         documents  the  appraisers'   and  the  review
         team's deliberations regarding  these  issues.
         After  an  examination of the comparable sales
         and discussions with the Clark County Planning
         and   Zoning   staff   and   the   engineering
         contractor,   the   appraisers   and    review
         appraisers concluded  there  was  a reasonable
         likelihood  that  water could be obtained  and
         developed  and  that  potential  buyers  would
         conclude the same.   The appraisers knew water
         was  a  problem, but after  looking  into  the
         issue and considering information presented by
         zoning officials  and engineering consultants,
         they decided that the  availability  of  water
         was   not   an  insurmountable  problem.  [See
         Appendix 5, pages 7 and 8.]

Office of Inspector  General Reply.  As discussed in our
report (page 9), we found  that  the  appraisers did not
consider specific credible evidence indicating  that  it
was unlikely that a use permit could be obtained for the
development  scenario  on  which the appraisal was based
and that they relied instead on the verbal statements of
a local planning official as  their  exclusive  support.
Further, while the documentation we obtained as part  of
our  review  of  this exchange confirmed that the review
appraisers  did  deliberate  over  whether  or  not  the
appraisal report and  its  value  of  $8.5  million were
adequately supported and prepared in accordance with the
"Uniform    Appraisal   Standards   for   Federal   Land
Acquisitions,"  we  found  that  this documentation also
demonstrated that the appraisers ultimately  approved an
appraisal   that   was   not   in  compliance  with  the
"Standards."   Specifically,  in  a  November 28,  1995,
facsimile  sent  just  6 days  before  he  approved  the
appraisal, the Bureau's review appraiser  discussed  the
fact  that  the  appraisal  report  was still based on a
number  of  unknowns  and  speculation and  stated,  "If
management feels it is appropriate,  the  $8.5 [million]
could  be the agreed upon value.  The favorable  outcome
or resolution  of  all  the  negatives  listed above are
within the realm of possibility, but are too speculative
to  support a Uniform Appraisal Standards  determination
of  FMV   [fair   market   value]."   (Emphasis  added.)
Further, in a March 29, 1996,  message sent 2 days after
the  Bureau  acquired  the  Cashman   property  for  the
approved exchange value of $8.5 million, the U.S. Forest
Service's review appraiser stated, "It occurs to me that
we need to be prepared to discuss why the  appraisal was
approved  with  bogus engineering information  that  the
appraiser was not  made  aware  of  due  to  the 4:30 PM
deadline that the reviewers were working under."

Bureau of Land Management Response.  The Bureau stated:

     The   draft   Audit  Report  finds  that  'the
     asserted   development    potential   of   the
     Dreyfus/Zephyr   Cove   property    was    not
     substantiated   by   credible   evidence'  and
     therefore the property was overvalued  by $9.8
     million.  The best available information  from
     real    estate    professionals,    attorneys,
     consultants,  and  the  local zoning authority
     (Tahoe Regional Planning  Agency)  was used in
     the determination by the appraiser and  review
     appraiser    that    there    was   reasonable
     probability  the  property could  be  divided.
     The BLM [Bureau of  Land  Management] accepted
     the  assertion  of  development  potential  in
     accordance   with   the   'Uniform   Appraisal
     Standards for Federal Land Acquisitions' which
     states,  ' . . .  if the property  is  clearly
     adaptable to a use  other  than  the  existing
     use,  its  marketable  potential for such  use
     should  be  considered  in   determining   the
     property's  fair  market value.' In many other
     areas, reasonableness  of the determination of
     highest  and  best  use  may  be  'tested'  by
     indications of similarly approved  development
     in   the   vicinity  of  a  subject  property.
     However, in  the  Lake Tahoe area this form of
     'testing' is inconclusive  due  to the lack of
     similar  properties.   The draft Audit  Report
     also fails to recognize  at  least  two  other
     conditions  which influenced the disparity  in
     value.  First,  the  entire  property  was not
     acquired at one time and the appraisal reports
     and  review  approvals  reflect  the  separate
     values  of  Phase I  and  Phase  II as 'stand-
     alone'  parcels.   Second,  Phase  II  of  the
     exchange  occurred  almost  a  year after  the
     exchange   proponent   acquired   the   entire
     property  and  during  this time period  sales
     data shows marked increases  in  the  value of
     lakefront property. [See Appendix 5, page 8.]

Office of Inspector General Reply.  As discussed  in our
report  (pages  9  and  10),  we  found  that  the  best
available  information was not used in the determination
made by the  appraiser  and  review appraiser that there
was reasonable probability that  the  property  could be
divided.   In  this  instance,  we believe that the best
available  information  was  (1) the  initial  appraisal
report  submitted by the appraiser,  which  stated  that
"new subdivisions  were generally prohibited" after 1980
and that "it would be very difficult to receive approval
for  a  new  residential   subdivision  on  the  subject
property"  unless  the  Tahoe Regional  Planning  Agency
agreed that the property  consisted  of  several legally
existing  parcels created prior to 1972; (2)  the  Tahoe
Regional Planning  Agency's  ordinances, land use plans,
and planning records, which documented that the Agency's
Counsel did not recognize the existence of more than one
legal parcel on the subject property,  that  the type of
subdivision  proposed  in  the  final appraisal was  not
permissible, and that no similar  subdivisions  had been
authorized;   and   (3) that  this  property,  including
significant residential  improvements  with  substantial
value,  was  marketed for more than 1 year at an  asking
price of $30 million  and  was purchased by the exchange
proponent for $28 million.

The  Bureau  stated  that  it  accepted   the   asserted
development  potential  of  this  property in accordance
with the "Standards," which states that "if the property
is clearly adaptable to a use other  than  the  existing
use,  its  marketable  potential for such use should  be
considered in determining  the  property's  fair  market
value."   However, the "Standards" immediately qualifies
this requirement  with the statement that the property's
value "cannot be predicated upon potential uses that are
speculative and conjectural;  as  the  Supreme Court has
said: `Elements affecting value that depend  upon events
or  combinations of occurrences which, while within  the
realm  of  possibility,  are  not  fairly  shown  to  be
reasonably    probable    should    be   excluded   from
consideration,   for   that  would  be  to  allow   mere
speculation and conjecture  to  become  a  guide for the
ascertainment of value.'"  Further, as discussed  in the
report  (page 8,  footnote 4),  the "Standards" requires
the appraiser to show that any alternative  use selected
as the highest and best use is legally permissible.

In  this  case,  the  appraiser  did  not show that  the
proposed highest and best use was legally permissible in
accordance  with  the  Tahoe Regional Planning  Agency's
land use plans and ordinances.  In his initial appraisal
report,  the appraiser discussed  the  local  regulatory
restrictions  on  development of the property and stated
that "it would be very difficult to receive approval for
a new residential subdivision  on the subject property."
The appraiser subsequently revised  his appraisal report
to conclude that the property could be  subdivided  into
five  individual residential parcels based on statements
made in a letter provided by the Tahoe Regional Planning
Agency's legal counsel.  However, based on our review of
the Tahoe  Regional  Planning  Agency's ordinances, land
use plans, and planning records  and  on our discussions
with the Agency's legal counsel, we concluded  that such
a  subdivision  of  land  was not permissible under  the
Agency's Code for this or any other property in the Lake
Tahoe Basin (see footnote 7).

The  Bureau  also  stated  that  our  report  "fails  to
recognize at least two other conditions which influenced
the disparity in value."  These conditions were that the
Dreyfus/Zephyr Cove property  was appraised and acquired
by the government as two "stand-alone"  parcels and that
the  second  "stand-alone"  parcel was acquired  by  the
Government almost a year after  the  exchange  proponent
purchased  the  entire property.  We agree that the  two
factors mentioned  by  the Bureau may have had some part
in the $9.8 million loss  on this exchange.  However, we
concluded  that  the most significant  valuation  errors
were associated with  the  appraisal  used for the first
phase   of   the  exchange,  in  which  the  appraiser's
assertion  that  the  entire  parcel  could  be  legally
subdivided into  five  separate  residential parcels was
not substantiated by credible evidence.   Based  on  the
use  of  this assertion, the approved appraised value of
the undeveloped 35.4 acres acquired by the Bureau in the
first phase  of  the  exchange was $24.25 million, which
closely  approximated  the   $28  million  the  exchange
proponent paid for the entire  47.2-acre  property.  Had
the appraisal not been based on the asserted legality of
such a subdivision, we believe that the appraised  value
of  the undeveloped portion of the property (35.4 acres)
as a  "stand-alone" parcel would have been significantly
less because of its limited development potential.

Bureau of Land Management Response.  The Bureau stated:

     The  draft Audit Report finds that 'the Bureau
     did not  provide  an  adequate  and  effective
     review  of  the  Forest  Service's negotiation
     documentation and appraisal  review'  for  the
     Deer Creek exchange and therefore the property
     was  overvalued  by  $5.9 million.   The draft
     Audit  Report  recognizes  that the value  for
     this   transaction  was  reached   through   a
     bargaining   effort   by   a   Forest  Service
     bargaining team.  It should be noted  that the
     BLM  [Bureau of Land Management] Nevada  State
     Director   had   officially   delegated  these
     appraisal   responsibilities  to  the   Forest
     Service  in  March  1995.   The  authority  to
     utilize  bargaining   or  another  process  to
     resolve disputes over value is provided for by
     Section  3  (a) of the Federal  Land  Exchange
     Facilitation  Act  of  1988.   The  bargaining
     effort  is  based  on an analysis of appraisal
     reports, assumptions  made  by the appraisers,
     the  adequacy of market information,  and  the
     reasonableness  of  the  conclusions of value.
     The   Forest   Service  bargaining   agreement
     clearly considered  these factors.  Any offer,
     settlement,  or  agreed  upon  value  must  be
     approved by a management  official,  which  in
     this  case  was the BLM Nevada State Director,
     not the State Chief Appraiser.  The BLM Nevada
     State Director  accepted the negotiated value.
     The bargaining effort  was  successful in that
     the negotiated value was some  $2 million less
     than   the  value  asserted  by  the  exchange
     proponent. [See Appendix 5, page 10.]

Office of Inspector  General Reply.  As discussed in our
report  (pages  12  and 13),  our  issue  was  with  the
adequacy of the Bureau's  review of the Forest Service's
bargaining efforts rather than  with  the  delegation to
the   Forest  Service.   The  Bureau  stated  that   the
bargaining  effort  is  to  be  based  on an analysis of
appraisal  reports,  appraisal  assumptions  and  market
information, and  appraisal conclusions.   Further,  the
Bureau  stated  that  the  Forest  Service's  bargaining
agreement clearly considered these factors and therefore
was approved by the Nevada State Director.  As discussed
in  this  report  (pages  12 and 13), we found that  the
Bureau provided no more than  a  cursory  review  of the
Forest   Service   bargaining   agreement  and  that  no
Government  appraiser  from either  the  Bureau  or  the
Forest Service was consulted  on the technical appraisal
issues resolved through bargaining.   We  found that the
only  appraiser  consulted  as  part  of  the bargaining
effort  was a private appraiser who provided  advice  on
the disputed  appraisal  issues  to the private exchange
parties  several months before the  bargaining  meetings
were held.   We  also  do  not  agree  with the Bureau's
categorization of the bargaining effort as "successful,"
considering that the Forest Service-bargained  price  of
$10.5 million was more than double the Bureau's approved
appraised value of $4.6 million established by a Federal
appraisal  review  team.   Consequently, we believe that
the  redelegation  to  the U.S. Forest  Service  without
adequate  and effective review  by  the  Bureau  was  an
improper action  that  resulted in a significant loss to
the Government.

Land Use Plan

Bureau of Land Management Response.  The Bureau stated:

     The draft Audit Report  also  suggests that an
     additional  $3.4 million of funds  could  have
     been put to better  use  since  there  was  no
     mission-related purpose for the acquisition of
     three  parcels of land in the Sunrise Mountain
     area  as   part  of  the  Dreyfus/Zephyr  Cove
     exchange.  The  environmental  assessment  and
     decision  record  for  the Dreyfus/Zephyr Cove
     exchange clearly documented  the determination
     of public interest in the acquisition of these
     offered  lands  adjacent to Sunrise  Mountain.
     [See Appendix 5, page 4.]

Office of Inspector General  Reply.  Based on our review
of the environmental assessment,  the  decision  record,
and the exchange case file, we concluded that the Bureau
did  not  clearly  document the specific public interest
served by the acquisition  of  these parcels.  Moreover,
we found that the exchange case  file  did  not have any
documentation that would justify the Bureau's  decision.
After  we  asked staff why the Bureau planned to acquire
this property,  the Las Vegas Office placed a memorandum
in the file which stated that the lands had recreational
potential for development of parking lots, picnic areas,
and trail heads.  However, the author of this memorandum
also told us  that  the  Bureau  had no plans as to when
such improvements might be made.

Based on the documents reviewed, we  concluded  that the
acquisition   of   the   Sunrise   parcels  was  not  in
conformance with the current plan, which  identified the
adjacent  public  land as being available for  disposal.
As  discussed in our  report  (page  11),  the  Bureau's
pertinent  land  use  plan  for the area stated that the
adjacent public land was "not  identified  as needed for
any  Federal  program.  .  .  .  The problems of illegal
occupancy, dumping, and other trespass  are rampant, and
would be eliminated by disposal."  However, the Bureau's
draft  resource  management  plan  indicated   that  the
adjacent  public  land  will no longer be available  for
disposal.  As such, if the  Bureau  had  determined that
the  current  plan  was  outdated, that the problems  of
illegal occupancy and dumping  on  the adjacent land had
been  resolved, and that there was a  specific  need  to
acquire these new parcels, Bureau regulations provided a
mechanism  for  accomplishing the acquisition.  That is,
the Bureau could  have (1) amended the existing land use
plan,   as   it   is   doing    to    accommodate    the
Permabilt/American  Land  Conservancy  exchange,  or (2)
finalized  the  draft  resource management plan, as with
its  efforts  to  accommodate  the  Del  Webb  exchange.
However, the Bureau  did  not  take  either  action  and
proceeded  despite  the provision of the Code of Federal
Regulations  (43  CFR  2200.0-6(g))  that  states,  "The
authorized officer shall  consider  only  those exchange
proposals that are in conformance with land use plans or
plan amendments."

Del Webb Exchange

Bureau  of  Land Management Response.  The Bureau  noted
that the draft  audit  report included references to our
previous advisory report  on  the  Del Webb exchange and
stated,   "We   strongly  disagree  with  the   concerns
expressed in the  Advisory  Report  and suggestions that
there could have been a $9.1 million loss to the Federal
government from this exchange."  The  Bureau also stated
that the Bureau's decision to obtain a  second appraisal
of   the   selected   Federal  land  demonstrated   that
appropriate management safeguards were in place and that
the  Bureau "takes particular  issue  with  the  implied
criticism  that  there  is something inappropriate about
elevating decisions on high  priority,  high  visibility
and/or  sensitive  issues  from a field organization  to
Headquarters."  (See Appendix 5, page 4.)

Office of Inspector General  Reply.   As  stated in  the
advisory  report (pages 3, 12, and 14) on the  Del  Webb
land exchange,  we  believe  that  procedural safeguards
established  by  the  Nevada  State Office,  which  were
designed to ensure that fair value  was  established and
that  the  appraisal  was  conducted in accordance  with
recognized Federal appraisal  standards, were overridden
by the Washington Office in February  and March 1996 and
that the exchange would have been consummated  for  $9.1
million  less  had  the  Bureau  not  been  subjected to
external factors that exerted pressure on it to obtain a
second appraisal.  As such, we were not critical  of the
elevation of decisions to the Headquarters level but  of
the  Washington Office's nonconformance with established
standards    and   controls   without   explanation   or
justification.

Notice of Decision

Bureau of Land Management Response.  The Bureau stated:

     The draft  Audit Report concludes that Notices
     of  Decision   were  issued  on  several  land
     exchanges before appraisals and other required
     analyses were completed.   This issue involves
     exchange     transactions     that    predated
     discussions  of  the requirements  of  43  CFR
     2201.7-1 with the Department Solicitor in late
     1996.   The BLM [Bureau  of  Land  Management]
     issued a  clarification  of  Bureau  policy by
     Instruction  Memorandum  97-74, dated February
     11,  1997.   The  BLM  Nevada  State  Director
     subsequently  provided  supplemental  guidance
     that  Notices  of  Decision   would   not   be
     published  until  all  the  required  reports,
     including  the  appraisal,  are  complete  and
     available  for  public  inspection  during the
     comment  period. [See Appendix 5, pages 9  and
     10.]

Office of Inspector  General Reply.  In our report (page
12), we acknowledge that  the  Bureau issued Instruction
Memorandum  No.  97-74  after  the  initial  Notices  of
Decision   for   these  three  exchanges  were   signed.
However,  the  memorandum   primarily   reaffirmed   the
requirements  of  the Bureau's existing regulations.  As
such,  the  initial Notices  of  Decision  were  not  in
compliance with the Bureau's exchange regulations, which
state that a decision to approve an exchange is required
to  be  made  "upon   completion  of  all  environmental
analyses and appropriate  documentation, appraisals, and
all  other  supporting  studies   and   requirements  to
determine  if  a  proposed  exchange  is  in the  public
interest  and  in  compliance  with applicable  law  and
regulations."    More  significantly,   the   Washington
Office's  technical   procedures  review  team  did  not
identify this noncompliance  issue in its review report.
Further, we found that the Las  Vegas  Field  Office did
not  fully  comply  with the Bureau's instruction  (page
12).   While  the  notices   for   the   Del   Webb  and
Permabilt/American   Land   Conservancy  exchanges  were
reissued after appraisals and  other  required documents
were  completed and approved, the second  phase  of  the
Dreyfus/Zephyr  Cove exchange was completed on April 25,
1997, without a new notice of decision and public review
opportunity.  The  Las  Vegas  Field  Office's action of
proceeding  with the second phase of the  Dreyfus/Zephyr
Cove exchange  without  issuing a new notice of decision
was therefore contrary to  both the Bureau's regulations
and Instruction Memorandum No. 97-74.

In accordance with the Departmental Manual (360 DM 5.3),
we are requesting a written  response  to this report by
November  6,  1998.   The  response  should provide  the
information requested in Appendix 6.

The  legislation,  as amended, creating  the  Office  of
Inspector General requires  semiannual  reporting to the
Congress  on  all  audit  reports  issued, the  monetary
impact of audit findings (Appendix 1),  actions taken to
implement  audit recommendations, and identification  of
each  significant  recommendation  on  which  corrective
action has not been taken.

We appreciate  the assistance of Bureau personnel in the
conduct of our review and the timeliness of the Bureau's
response to our draft report.


**FOOTNOTES**

[1]:The Bureau prefers to acquire lands through exchanges
because of the relatively low impact that exchanges have on
local government tax revenues.

[2]:The difference in land values does not represent a profit
to the Bureau. For the most part, the additional value
received by the Bureau was to cover the difference in value
from previous transactions in which  the same proponent received
land  that  was more valuable than the land  acquired by the Bureau.

[3]:The response memorandum was processed through the
Assistant Secretary for Land and Minerals Management and was
signed by the former Deputy Director for the Director, Bureau of Land
Management.

[4]:The  "Standards" states that (1) a property must be valued
based  on  its highest  and  best  use  but  that the proposed
highest and best use  "cannot  be predicated upon potential  uses  that
are speculative  and  conjectural"  (Standard  No.  A-3);  (2)  a
more profitable use that is  precluded by existing zoning restrictions or
regulations should  not be  considered  unless the appraiser demonstrates
that there is a reasonable  possibility that  zoning  would be changed or
permits would be issued by  the regulating authority (Standard  No.  A-23);  (3)
before it  can be  concluded that any use of the property is its
highest and best use, that  use  must  be  "physically  possible,  legally
permissible, financially  feasible, and must result in the highest value"
(Standard  No. B-1.14);

(4) the appraiser must investigate, analyze, and discuss the
probability  of  obtaining  a  rezone of the property or the
issuance of a permit  by  which he concludes  that  it  is appropriate to
employ a more profitable  highest and best use (Standard  No.  B-1.14); and
(5) typical methods of  investigating the probability of a rezone  or
permit  issuance include  interviews  with  zoning  administrators  and members
of the legislative  body that make final zoning decisions, a review
of rezoning activity of  nearby property, determining neighborhood
attitudes  concerning rezoning  and  permit  issuance,  and  analyzing provisions of
land  use planning  documents (Standard No. B-3).

[5]:Our review of documents that  governed and restricted
development of  the   Cashman   property  included   Clark
County's   Mt. Charleston  Comprehensive Land Use Plan; Clark County Ordinance
1402 (dated July 21,  1992); Title 28 of  the  Clark  County Code
("Subdivisions"); the Nevada  State Engineer's Amended Order No. 1054; and the
Nevada State Engineer's  February 4, 1993, letter to the Clark County
Department of Comprehensive  Planning.

[6]:The owner of the Deer Creek property  challenged  the
denial of the  Board of County Commissioners of its application
for a use permit in the  District  Court  of  Nevada.   The  County
successfully argued that  the  Board's decision was consistent with  the  Mt.
Charleston Comprehensive  Land Use Plan, and on October 12, 1995, the
District Court affirmed the  Board's denial of a use permit for the Deer Creek
property.

[7]:The Agency's legal counsel told us that subdividing  any
land within  the  Tahoe  Basin  for  the  purpose  of selling
the resultant lots  for  residential development is not permissible  under
the Agency's Code, and  we  verified that the Agency's restriction on
residential subdivisions  had been  in  place  since  at  least  1987.  The
Agency's legal counsel  stated  that  she  used  "poor  wording"  to
describe  the development  potential  of the Dreyfus/Zephyr Cove property in
her  July 18,  1996,  letter.

[8]:The proponent  purchased the entire Dreyfus/Zephyr Cove
property for  $28 million in July  1996 for purposes of
exchange.  The Bureau acquired  the land only for $37.8 million in a two-phased
exchange in October 1996  and April 1997.

[9]:The Code (43 CFR 2201.7-1(a))  states  that a decision to
approve an  exchange is required to be made "upon completion
of  all environmental  analyses  and  appropriate  documentation,
appraisals,  and all  other  supporting studies and requirements to determine if
a proposed exchange  is  in  the  public  interest  and in compliance with
applicable law and  regulations."

[10]:The review team consisted of  the Bureau's Nevada and
Arizona Chief  Appraisers  and  the U.S. Forest Service's
Intermountain Region  Chief  Review Appraiser.

[11]:The Forest Service's  bargaining agreement described the
bargaining  process used, the principal  appraisal issues
addressed in negotiations,  and the manner in which these  issues  were
resolved  to arrive  at an  exchange  value  acceptable  to  both  the
exchange proponent and Forest  Service officials.

[12]:The U.S. Forest Service's involvement in the Deer Creek
exchange is  included  in  the August 1998 audit report
"Forest  Service, Humboldt-  Toiyabe National  Forest,  Land Adjustment Program,
Fiscal Years 1990 to  1997, Sparks, Nevada" (No. 08003-02-SF),  issued
by the U.S. Department  of Agriculture's Office of Inspector General.

[13]:Instruction  Memorandum  No.  97-113,  "Roles and
Responsibilities  Regarding Value Determination for Bureau of
Land  Management (BLM) Land  Exchanges,"  was  signed  by  the former Deputy
Director and expires  on  September 30, 1998.



CLASSIFICATION OF MONETARY AMOUNTS
APPENDIX 1

                                              Funds To Be
    Put
      Finding Lost Revenues To Better Use

    Exchange Processing

   Exchange No. N-57877
     Fair Market Value $5,900,000 [1]

   Exchange No. N-59728
     Fair Market Value $2,500,000 [2]

   Exchange No. N-60731
     Fair Market Value $9,800,000 [3]
     Land Use Plan                      $3,400,000 [4]

       Total                  $18,200,000       $3,400,000

**FOOTNOTES**

  [1]:Represents the amount by which the Deer Creek property
  acquired  by  the  Bureau  was  overvalued  because the Nevada
  State Office improperly  redelegated the State Director's  authority  to
  bargain over a disputed  appraised value to U.S. Forest Service officials.

  [2]:Represents the amount by which the Cashman property
  acquired by the  Bureau was overvalued because the asserted
  development potential  of the  property  was  not  adequately
  substantiated  in  accordance with  the  "Uniform Appraisal
  Standards for Federal Land Acquisitions."

  [3]:Represents  the  amount  by  which  the Dreyfus/Zephyr Cove
  property  acquired by the Bureau was overvalued because  the
  asserted development  potential of the property was not adequately
  substantiated in accordance  with the "Uniform Appraisal Standards
  for Federal Land Acquisitions."

  [4]:Represents the exchange value of three parcels of
  private land acquired by the Bureau within the Las Vegas
  urban  area. The parcels  were  located  within  the identified
  land disposal area of the Bureau's  current land use plan.   Therefore,
  the  Bureau's acquisition of these  parcels was not in conformance with
  the land use plan and  was not in compliance with the Bureau's land exchange
  regulations (43 CFR 2200.0-  6(g)).

                                                                           APPENDIX 2
                                                                           Page 1 of 2

                  STATUS OF RECOMMENDATIONS AND
               CORRECTIVE ACTIONS FOR AUDIT REPORT
                "NEVADA LAND EXCHANGE ACTIVITIES,
                   BUREAU OF LAND MANAGEMENT"
                         (No. 96-I-1025)

----------------------------------------------------------
|                             |Status of Recommendations
|    Recommendations          | and Corrective Actions
----------------------------------------------------------
A.1  Institute competitive    A.1  Partially implemented.
procedures     (sale    or    The    Bureau   agreed   to
competitive exchange) into    implement               the
the  land disposal process    recommendation           by
to   the   maximum  extent    developing  a  strategy  to
practicable.                  incorporate     competitive
                              procedures  into  the  land
                              disposal   process.    This
                              required the  evaluation of
                              different  approaches,  the
                              selection of an option, and
                              the development and testing
                              of    a    pilot   project.
                              However, we  found that the
                              pilot project  had not been
                              developed and tested.
----------------------------------------------------------
A.2    Direct   that   all    A.2    Implemented.     The
easements on Federal lands    Bureau's  Washington Office
proposed  for  disposal be    issued          Instruction
reviewed to verify grantee    Memorandum   97-08,   which
needs  and that actions be    required  all  encumbrances
taken    to   remove   any    on  public lands considered
easements   that  are  not    for  exchange or sale to be
needed    before   Federal    reviewed  as  part  of  the
lands   are  exchanged  or    case-processing procedures.
sold.
----------------------------------------------------------
A.3 Establish the controls    A.3  Not  implemented.  The
necessary  to  ensure that    Bureau     completed    the
land     exchanges     are    control      review     and
processed      in     full    finalized   its   new  land
accordance with applicable    exchange          handbook.
laws,   regulations,   and    However,  we found that the
Bureau procedures.            conclusions that the Bureau
                              reached  as a result of its
                              control  review   were  not
                              substantiated     by    the
                              available   evidence.    We
                              also  found  that  the  new
                              Handbook contained guidance
                              that  appeared   to  be  in
                              conflict   with  applicable
                              laws  and  regulations   or
                              that     weakened    Bureau
                              controls over the appraisal
                              and valuation  process.  In
                              addition,  the  Bureau  was
                              not complying with existing
                              controls over the appraisal
                              and valuation process.
----------------------------------------------------------
B.1    Ensure   that   the    B.1    Implemented.     The
accounting    reports   of    Bureau's  Washington Office
income   and  expenditures    issued          Instruction
required  by  Section 2(e)    Memorandum    No.   96-179,
of  the Santini-Burton Act    which directed its National
are prepared and submitted    Business  Center to provide
to Bureau headquarters for    the    required    biannual
submission      to     the    accounting information, and
appropriate  Congressional    the   Assistant   Secretary
oversight committees.         submitted  the  first  such
                              report  to  the appropriate
                              Congressional     oversight
                              committee in April 1997.
---------------------------------------------------------
                                               APPENDIX 2
                                              Page 2 of 2


  ---------------------------------------------------------------
  --------
  |                                    |  Status of
  Recommendations
  |       Recommendations              |    and Corrective
  Actions
  ---------------------------------------------------------------
  --------
  B.2    Ensure  that  the  Nevada     B.2 Implemented.
  After receiving
  State Office uses the land sales     guidance from the
  Office                              of
  the
  process,  except  in  compelling     Solicitor, the
  Bureau's
  Nevada
  circumstances, when disposing of     State Director
  instructed                           the
  Las
  Santini-Burton  Act  lands until     Vegas Field Office
  that
  public
  the   sales  revenues  generated     lands within the
  Santini-Burton
  closely   approximate  the  Lake     Act land sale area
  should                             only
  be
  Tahoe  Basin  acquisition costs.     sold using
  competitive
  Any exchange proposals from that     procedures.  On
  March                             4,
  1998,
  time   on   should   be  closely     the Las Vegas Field
  Office
  monitored  to  ensure  that  the     notified the
  Volkmar
  exchange
  exchange  is  justified and that     proponent that the
  Santini-Burton
  the  costs  incurred as a result     Act land he had
  selected
  was
  of the Santini-Burton Act remain     being excluded from
  the
  exchange.
  relatively nominal.
  ---------------------------------------------------------------
  --------



                         LAND EXCHANGES REVIEWED

-----------------------------------------------------------------
-------------------------
Exchange                                                  Land
Land
                         Transaction         Acquisitions
                         Disposals
-----------------------------------------------------------------
-------------------------
Number    Exchange Name1   Number              Acreage
Acreage
                                   Date                 Value
                                   Value
-----------------------------------------------------------------
-------------------------
-----------------------------------------------------------------
-------------------------
Exchanges With Completed Transactions
-----------------------------------------------------------------
-------------------------
N-57877  Deer Creek        1       11/13/95    1,013.49
$1,600,000
                           2       12/04/95
                           105.12 $1,810,000
                           3       12/13/95       32.50
                           339,000
                           4       03/19/96      458.98
                           10,520,000
                           5       03/31/97
                           5.00    550,000
-----------------------------------------------------------------
-------------------------
N-59728  Cashman           1        03/27/96 1,297.51   8,500,000
947.50     8,787,509
-----------------------------------------------------------------
-------------------------
N-60167  Del Webb          1        07/29/97 5,328.00
10,990,000   922.00     11,452,639
-----------------------------------------------------------------
-------------------------
N-60731  Dreyfus/Zephyr    1       10/09/96       35.42
24,250,000    1,357.38 27,474,618
         Cove              2       04/25/97      138.94
         969.54
                                                        17,435,00
                                                        0
                                                        14,364,07
                                                        5
-----------------------------------------------------------------
-------------------------
  Total Land Exchanged                       8,304.84
  $73,634,000   4,306.54 $64,438,841
                                                                   2
-----------------------------------------------------------------
-------------------------
-----------------------------------------------------------------
-------------------------
Exchanges Without Completed Transactions
-----------------------------------------------------------------
-------------------------
N-55975  Permabilt/American Land
         Conservancy
-----------------------------------------------------------------
-------------------------
N-58331  Falcon Pointe
-----------------------------------------------------------------
-------------------------
N-58563  Volkmar
-----------------------------------------------------------------
-------------------------
N-59905  Lake Las Vegas
-----------------------------------------------------------------
-------------------------






1The "exchange name" used by the Bureau generally
reflects either one of the significant properties
involved in the exchange or the proponent's name.

2The difference in land values does not represent
a profit to the Bureau.  The additional value
received by the Bureau generally was used to cover
the difference in value from previous transactions
in which the proponent received land that was more
valuable than the land acquired by the Bureau.

                     APPENDIX 3

                     APPENDIX 4




BLM's SUPPLEMENTAL RESPONSE TO DRAFT REPORT
            DATED JULY 24, 1998

                 (3 Pages)
                                        APPENDIX 5




       BLM's RESPONSE TO DRAFT REPORT
            DATED JUNE 29, 1998

                 (14 Pages)






                           APPENDIX 6

     STATUS OF AUDIT REPORT RECOMMENDATIONS


--------------------------------------------------------
 Finding/
Recommendation
Reference   Status               Action Required


1, 4,     Resolved;     No further response to the
and 5     not           Office of Inspector General is
          implemented.  required.  The recommendations
                        will be referred to the
                        Assistant Secretary for
                        Policy, Management and Budget
                        for tracking of
                        implementation.
------------------------------------------------------
  2       Management    Provide a plan for ensuring
          concurs;      non-Bureau representation on
          additional    the proposed National Land
          information   Exchange Evaluation and
          needed.       Assistance Team. In addition,
                        the following information
                        should be provided:  the
                        Team's charter showing the
                        specific authorities and
                        responsibilities given to the
                        Team, including information on
                        the criteria by which the
                        Bureau will determine which
                        exchanges will be referred to
                        the Team for review, and the
                        membership of the Team,
                        including information on the
                        qualifications of non-Bureau
                        members.
------------------------------------------------------
  3       Unresolved.   Reconsider the recommendation,
                        and establish a temporary
                        moratorium on new and/or
                        expanded Nevada land exchange
                        activity until a National Land
                        Exchange Evaluation and
                        Assistance Team that includes
                        non-Bureau representation is
                        established and available to
                        assist the Bureau's Nevada
                        State Director.





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

Sending written documents to:



Within the Continental United States

U.S. Department of the Interior
Office of Inspector General
1849 C Street,N.W.
Mail Stop 5341
Washington, D.C. 20240

Calling:

Our 24 hour
Telephone HOTLINE
1-800-424-5081 or
(202) 208-5300

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



Outside the Continental United States


Caribbean Region

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

Calling:
(703) 235-9221


North Pacific Region

U.S. Department of the Interior
Office of Inspector General
North Pacific Region
238 Archbishop F.C. F'lores Street
Suite 807, PDN Building
Agana, Guam 96910


Calling:
(700) 550-7428 or
COMM 9-011-671-472-7279