[Audit Report on Special Drug Reduction Funds, Bureau of Land Management  99-I-917]
[From the U.S. Government Printing Office, www.gpo.gov]

Title: Audit Report on Special Drug Reduction Funds, Bureau of
       Land Management  99-I-917  

               Report No:     99-I-917

               Title:         Special Drug Reduction Funds, Bureau of Land Management

               Date:          September 1999


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C-IN-BLM-001-99
  
  
AUDIT REPORT
                              
Memorandum
  
          To:       Assistant Secretary for Land and Minerals Management
                              Assistant Secretary for Policy, Management and Budget
  
          From:     Robert J. Williams
                                        Assistant Inspector General for Audits
 
          Subject:  Audit Report on Special Drug Reduction Funds, Bureau of Land Management 
                                        99-I-917  
  
INTRODUCTION
  
This report presents the results of our audit of special drug reduction funds that were
provided to the Bureau of Land Management by the Department of the Interior's Office of
Managing Risk and Public Safety in fiscal year 1997.  We performed this audit at the request
of the Office of Managing Risk.  The objective of our audit was to determine whether the
Bureau properly managed the special funds that were provided for the purpose of reducing
illegal methamphetamine production activity in the Bureau's California Desert District. 
Specifically, the Office of Managing Risk and Public Safety requested that the Office of
Inspector General determine the number of arrests and evidence seizures that resulted from
the funds and whether the Bureau properly accounted for the funds and provided sufficient
oversight of the expenditures.
  
BACKGROUND
  
The Bureau of Land Management's California Desert District encompasses more than
10 million acres in southern California and, according to the Bureau, has the largest amount
of illegal methamphetamine production in the state.  To counter this illegal drug activity, the
Bureau and the Office of Managing Risk and Public Safety entered into a reimbursable
support agreement in July 1997 in which the Office provided special funds of $80,000 for
the Bureau's Law Enforcement Program to conduct a Methamphetamine Reduction Project
in the Desert District.  The California State Office, which has administrative responsibility
for the Desert District, transferred $40,000 each to the Bureau of Narcotics Enforcement of
the State of California's Department of Justice and the Riverside County Sheriff's
Department in November 1997 under separate law enforcement agreements, and the
cooperating agencies conducted their first drug operations in January 1998 and March 1998,
respectively.  At the end of our fieldwork in February 1999, the cooperating agencies had
expended about $54,700 (68 percent) of the funds.
 
The Acting Director, Office of Managing Risk and Public Safety, in his October 27, 1998,
request for us to audit the Bureau's management of the funds, said that based on a June 1998
quality control review known as the Law Enforcement Policy Compliance Evaluation, "it
appeared that" the funds were not being spent in an appropriate manner.  The Acting Director
said that the funds "were not expended in accordance with predetermined guidelines" and
instead were transferred to the Riverside County Sheriff's Department and the California
Bureau of Narcotics Enforcement without advance approval from the Department of the
Interior and the Executive Office of the President's Office of National Drug Control Policy.
 
SCOPE OF AUDIT
  
Our audit scope included a review of the special drug reduction funds provided in fiscal year
1997 by the Office of Managing Risk and Public Safety.  Our audit fieldwork was conducted
at the Bureau's California State Office in Sacramento, California, where we interviewed
relevant Law Enforcement Program officials and reviewed applicable documents relating to
the Methamphetamine Reduction Project, including project plans, agreements, activity
reports, billings, expenditures, and correspondence files.  In addition, we contacted cognizant
officials from the Bureau's California Desert District Office in Riverside, California; the
Palm Springs Field Office in Palm Springs, California; and the National Law Enforcement
Offices in Washington, D.C., and Boise, Idaho.  We also contacted cognizant officials from
the Office of Managing Risk and Public Safety in Washington, D.C., and reviewed
documents provided by that office.

Our audit was made in accordance with the "Government Auditing Standards," issued by the
Comptroller General of the United States.  Accordingly, we included such tests of records
and other auditing procedures that were considered necessary under the circumstances.  As
part of the audit, we reviewed the internal controls to the extent considered necessary to
accomplish our audit objective.  We also reviewed the Secretary's Annual Statements and
Reports to the President and the Congress for fiscal years 1993 through 1995, which are
required by the Federal Managers' Financial Integrity Act; the Departmental Reports on
Accountability for fiscal years 1996 and 1997, which include information required by the
Act; and the Bureau's annual assurance statement on management controls for fiscal year
1998.  We determined that none of the reported weaknesses were directly related to the
objective and scope of this audit.
 
PRIOR AUDIT COVERAGE
  
The Office of Inspector General has not issued any audit reports specifically related to the
Bureau's drug reduction activities during the past 5 years.  However, in September 1998, the
General Accounting Office issued the report "Drug Control: Information on High Intensity
Drug Trafficking Areas Program" (No. GAO/GGD-98-188), which evaluated the Federal
Government's drug-control efforts in geographic areas having a high concentration of illegal
drug activities.  The report contained no recommendations; however, 2 of the 20 drug
trafficking regions identified were within the California Desert Conservation Area, which
included the area covered by the Bureau's Methamphetamine Reduction Project.  The report
found that the Office of National Drug Control Policy satisfactorily implemented the High
Intensity Drug Trafficking Program and made progress in evaluating the effectiveness of the
Program.  The report concluded that interagency cooperation between Federal, state, and
local law enforcement agencies was a primary factor in reducing drug trafficking in the
United States.

RESULTS OF AUDIT
  
We found that the Bureau of Land Management's California State Office properly accounted
for the special methamphetamine reduction funds and generally used the funds as intended.
With approximately two-thirds of the funds expended at the end of our fieldwork, the project
had resulted in five arrests for illegal methamphetamine-related incidents, the removal of six
methamphetamine laboratories, and the identification of two organizations operating illegal
methamphetamine laboratories on public land.  The State Office also stated that the increased
amount of intelligence data gathered on illegal drug activities on public land should help
improve its drug reduction efforts in the future.  However, project oversight was not adequate
in that the State Office did not prepare operational plans or report its activities to the Office
of Managing Risk and Public Safety, as required by the reimbursable support agreement.  In
addition, the State Office did not retain ownership of equipment purchased under the
agreement or enforce budget spending limits for the equipment.  The reimbursable support
agreement provided general planning, reporting, and spending criteria for the
Methamphetamine Reduction Project.  However, in our opinion, these deficiencies occurred
because the agreement did not clearly specify how frequently progress reports should be
submitted to the Office of Managing Risk and Public Safety and did not address the transfer
of funds to other law enforcement organizations.  Also, adequate communications between
the two Departmental agencies were not maintained, and the State Office did not adequately
monitor expenditures of the funds under its law enforcement agreements with cooperating
agencies.  Although the intended purpose of the reimbursable support agreement did not
appear to have been affected, neither the Office of Management Risk and Public Safety nor
the Bureau had full assurance that agreement requirements were met.  Further, equipment
with a total cost of $21,809 was not procured properly and therefore will not be available for
future Bureau drug operations (the monetary impact of the $21,809 is in Appendix 1).
 
Project Oversight
  
The California State Office did perform certain important project oversight functions.  For
example, knowing that property lines of the California Desert District are often difficult to
identify, the State Office ensured that the drug operations were conducted solely on Bureau
land by having Bureau law enforcement officers accompany the patrols made by the
Riverside County Sheriff's Department and the California Bureau of Narcotics Enforcement. 
Additional assurance was provided through the use of electronic positioning devices that
verified the exact geographic locations of the operations.  However, we found that the State
Office did not comply with the provisions of the reimbursable support agreement regarding
the planning, reporting, and approval of funds for the project.

Planning and Reporting.  The Methamphetamine Reduction Project plan, which
was incorporated into the reimbursable support agreement between the Bureau and the Office
of Managing Risk and Public Safety, required that the State Office prepare a Plan of
Operation before the start of each methamphetamine reduction operation and an after action
report upon completion of the operation.  Both documents were to be approved by the State
Office's Special Agent in Charge or designee.  These documents were intended to help
ensure the effectiveness of the drug operations by requiring a formal review and approval
process of the objectives and the anticipated resource requirements, costs, and results. 
However, we found that the State Office had prepared only one of seven plans of operation,
which represented about 3 percent of the funds expended, and had produced no after action
reports.  Cognizant State Office officials could not provide a sufficient reason why these
documents were not prepared.
  
The Bureau also did not provide progress reports to the Office of Managing Risk and Public
Safety, as required by the reimbursable support agreement.  However, the agreement did not
specify the frequency of the reports but required that the Bureau provide progress reports "on
a regular basis."  Moreover, the Office of Managing Risk and Public Safety did not take
action to direct the Bureau to provide the reports.  We believe that the agreement should have
clearly specified each party's reporting responsibilities.
  
Funding.  The reimbursable support agreement stipulated that the Project
Coordinator (designated as the Chief of the Bureau's National Law Enforcement Office)
determine the amount of funds to be expended by the California State Office for each
operation.  Although the Project Coordinator approved the general concept of the
Methamphetamine Reduction Project as described in the project plan, the Project
Coordinator did not determine the amount of funds needed for each operation.  Cognizant
Bureau officials could not explain why this provision of the agreement was not followed. 
However, the officials noted that the Bureau's National Law Enforcement Office has no
direct line authority over the State Office.  In our opinion, this absence of direct line authority
negatively impacted the communications between the State Office and the Office of
Managing Risk and Public Safety concerning project activities because the Project
Coordinator could only advise and not hold the State Office accountable. 

Further, the State Office prepared but did not provide the Office of Managing Risk and
Public Safety with a plan that explained that the State Office would transfer the special funds
to other law enforcement agencies.  The State Office's original request of $162,000 to
conduct the Methamphetamine Reduction Project was funded at $80,000.  Accordingly, the
State Office prepared a revised plan which explained that  the reduced funds would be
transferred to cooperating agencies.  However, the State Office did not submit the revised
plan to the Office of Managing Risk and Public Safety and provided no reason for not
submitting the revised plan.  Consequently, the Office of Managing Risk and Public Safety
was not informed that the funds would be transferred to cooperating agencies.  Office
officials said that they believed the transfer was not allowable under the reimbursable support
agreement without prior approval from the Department.

We found that a contributing factor for the deficiencies in the management of the special
funds was a lack of specificity in the reimbursable support agreement.  Specifically, the
Office of Managing Risk and Public Safety requested this audit in part because the Bureau
did not obtain approval before transferring the funds to the Riverside County Sheriff's
Department and the California Bureau of Narcotics Enforcement.  However, the 
reimbursable support agreement between the Office and the Bureau neither prohibited the
transfer of funds nor required prior approval before transferring the funds.

Administration of Funds
  
Although we found that the State Office generally used the funds for the project as intended,
we found inadequacies in administering the expenditure of funds as follows: 
  
- The State Office allowed the Riverside County Sheriff's Department and the
California Bureau of Narcotics Enforcement to retain equipment purchased with the funds. 
The $21,809 of equipment consisted of four laptop computers with software and accessories,
four Global Positioning System (GPS) receivers, and two video cameras.  The reimbursable
support agreement did not address the issue of who would retain the equipment purchased
under the contract, but we believe that the agreements between the State Office and the
cooperating agencies were governed by regulations known as the Uniform Administrative
Requirements for Grants and Cooperative Agreements to State and Local Governments.  As
defined under these regulations (43 CFR 12.43 and 12.73(a)), the equipment purchased with
the special funds would be considered supplies and  title to the supplies vests with the
cooperating agency upon acquisition.  However, the regulations (43 CFR 12.73(b)) state,  "If
there is a residual inventory of unused supplies exceeding $5,000 in total aggregate fair
market value upon termination or completion of the award, and if the supplies are not needed
for any other federally sponsored programs or projects, the grantee or subgrantee shall
compensate the awarding agency for its share."  Because the useful life of this
equipment/supplies should extend beyond the period when the Methamphetamine Reduction
Project is completed, the equipment could be used by the cooperating agency on other
Federally sponsored programs or projects.  However, in accordance with the regulations (43
CFR 12.73(b)), if the supplies are not needed for such activities and they are retained by the
cooperating agency, the Bureau should be compensated.  At the end of our site visit, State
Office officials stated that they agreed with our recommendation to purchase equipment in-
house under future cooperative agreements and to lend it to cooperating agencies.
 
- The State Office did not enforce the spending limits contained in the budgets
submitted by the Riverside County Sheriff's Department and the California Bureau of
Narcotics Enforcement.  Although these budgets were not formally incorporated into the law
enforcement agreements with the cooperating agencies, we believe that the Bureau should
have enforced the budgets to ensure that the funds were expended as proposed.  With
approximately two-thirds of the funds spent, the Sheriff's Department had exceeded its
budget for computer purchases by $4,286 (71 percent), supplies by $499 (17 percent), and
helicopter surveillance by $302 (6 percent).  Similarly, the Bureau of Narcotics Enforcement
had exceeded its budget for computer purchases by $2,024 (34 percent).  The combined
computer and supply purchases for the two law enforcement agencies totaled $21,809 and
represented about 40 percent of the funds expended.  As a result, less funds were available
for law enforcement personnel to conduct other needed drug operations (see Appendix 2).
 
- The Bureau's law enforcement agreements with the Riverside County Sheriff's
Department and the California Bureau of Narcotics Enforcement expired on September 30,
1998, and were therefore not enforceable beginning on October 1, 1998.  During our site visit
in December 1998, we informed the responsible State Office contracting officer of this
matter, who subsequently extended the operating periods of the agreements to September 30,
1999, to continue the agencies' cooperative efforts.
 
- Two employees of the California Desert District Office, in purchasing two
computers to be used by the California Bureau of Narcotics Enforcement, split the $8,024
cost of the computers between their respective Government charge cards into four
transactions because the maximum limit for each cardholder was $2,500.  The Code of
Federal Regulations (48 CFR 13.003(d)) prohibits individuals from splitting purchases or
making multiple purchases to avoid exceeding the card's spending limit.  Additionally, the
BLM (Bureau of Land Management) National Training Center's Internet training program
for Government credit cards states, "Don't exceed your assigned limit . . . [don't] split
charges to avoid buying from required sources, or to exceed single purchase limit."  The
splitting of the procurement may have prevented a procurement specialist from purchasing
the computers at a lower price.
  
- The State Office had not paid two monthly billings submitted in August 1998 by the
California Bureau of Narcotics Enforcement in the total amount of $1,238.  The Code of
Federal Regulations (48 CFR 32.905(a)) requires invoices to be paid either 30 days after the
invoice from the contractor has been received or 30 days after supplies are delivered or
services are performed by the contractor, "whichever is later."  At the time of our site visit
in December 1998, the two unpaid bills were 3 months past due.  We informed the
responsible State Office contracting officer of this matter, and the California Bureau of
Narcotics Enforcement was reimbursed for the two vouchers in February 1999.
 
In summary, we found that the State Office appropriately used the special funds to reduce
illegal methamphetamine production on Bureau land.  However, there were various
deficiencies regarding project oversight and fund administration that were due to an
inadequate agreement and inadequate management oversight of the expenditures of funds. 
  
 Recommendations
  
We recommend that the Director, Bureau of Land Management:
  
1.  Ensure that required operation plans and after action reports are prepared, 
progress reports are submitted, changes in overall operation plans are submitted to
supervisors and to other involved offices, and spending limits of cooperative agreements are
enforced.
  
2.  Direct the State Office to seek appropriate compensation in accordance with the
requirements of the Code of Federal Regulations (43 CFR 12.73(b)) for equipment/supplies
retained by the cooperating agencies.
  
3.  Direct the State Office to purchase, when feasible, equipment/supplies for use by
other agencies under its future cooperative agreements so that title to such equipment is
retained by the Bureau.
  
4.  Ensure that cooperative agreements are updated as needed and that official
procurement procedures are followed.  Specifically, reimbursement payments should be
made timely and charge card spending limits should not be exceeded, particularly by splitting
orders.
  
We recommend that the Director, Office of Managing Risk and Public Safety:
  
5.  Require that the Office's written reimbursable agreements with Departmental
agencies define the specific reporting procedures and state that any changes or modifications
to Plans of Operations incorporated as part of the agreement are required to be submitted to
the Office for approval prior to implementation of the changes.
  
6.  Ensure that the Office requires that recipients of its funding submit required
reports.
  
Bureau of Land Management Response and Office of Inspector General
Reply
  
In the September 10, 1999, response (Appendix 3) from the Acting Director, Bureau of Land
Management, through the Assistant Secretary for Land and Minerals Management, the
Bureau concurred with the four recommendations (Nos. 1, 2, 3, and 4) addressed to the
Bureau.  Based on the response, we consider all four of the recommendations resolved but
not implemented.  Accordingly, the recommendations will be referred to the Assistant
Secretary for Policy, Management and Budget for tracking of implementation, and no further
response from the Bureau to the Office of Inspector General is required (see Appendix 5).
  
 Office of Managing Risk and Public Safety Response and Office of
Inspector General Reply
  
In the September 10, 1999, response (Appendix 4) to the draft report from the Director,
Office of Managing Risk and Public Safety, the Office concurred with the two
recommendations (Nos. 5 and 6) addressed to the Office.  In  subsequent communications,
the Team Leader, Law Enforcement and Security Team, said that he was the official
responsible for implementing both recommendations but that the target dates could not be
determined because of the uncertainty of receiving further funding.  Based on the response
and the subsequent information, we consider Recommendations 5 and 6 resolved and 
implemented.  Therefore, no further response to this report from the Office is required (see
Appendix 5).
  
Section 5(a) of the Inspector General Act (Public Law 95-452) requires the Office of
Inspector General to list this report in its semiannual report to the Congress. 
  
We appreciate the assistance of Bureau and Office personnel in the conduct of our audit.
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