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Semiannual Report to Congress Office of Inspector General U.S. Department of the Interior SEMIANNUAL REPORT Highlights Allegations of Misconduct by Employees Involved in the Cobell Litigation (page 3) Security of Departmental IT Systems Falls Short (page 7) Transfer of Water Project Responsibilities Places Federal Revenues at Risk (page 20) MMS Gainsharing Awards Found Unreasonably High (page 24) October 2002 Cover: Photo taken by H.A. McGill, of Darnestown, MD Message from the Inspector General I am pleased to present the results and accomplishments of the Office of Inspector General (OIG) from April 1, 2002 through September 30, 2002. During this reporting period, we concentrated our efforts on helping the Department of the Interior (DOI or Department) Bureaus and offices address their most serious management challenges. To this end, over the last six months, our audit and evaluation staff focused on a number of programs that we identified as at-risk or that were brought to our attention by Departmental management as areas of concern. We highlight our findings related to the Information Technology (IT) Security within the Department, the Minerals Management Service's (MMS) gainsharing awards program, and the Bureau of Reclamation's (BOR) agreements with the California Water Authority. I am proud to report that the results of these audits and evaluations were well-received by the Department, which has already taken action to correct many of the deficiencies we found. During this reporting period, our investigators brought to fruition investigations that resulted in 27 indictments, 15 convictions, and 19 sentencings, with nearly a million dollars in criminal judgments and restitutions. While these numbers are remarkable statistically, they tend to be concentrated in the Bureau of Indian Affairs (BIA) and tribal governments, areas in which we reported disturbing trends of fraud and corruption in our last Semiannual Report. Our investigations into tribal corruption resulted in numerous charges of embezzlement, money laundering, conspiracy, theft, bribery, and false claims. As we remain concerned about this trend, we are working with the Department to develop strategies to combat the widespread corruption and integrity problems within the tribes and BIA. Following the issuance of two reports in July and August 2001 by the Court Monitor in Cobell, et al. v. Gale A. Norton, Secretary of the Interior, et al. (Cobell), the Solicitor, William G. Myers, III, referred to the OIG seven issues relating to allegations that DOI senior managers and attorneys engaged in misconduct. Following preliminary investigation, the OIG determined that further investigation was not warranted in four of the seven issues and so advised the Solicitor in October 2001. The OIG pursued an aggressive investigation into the remaining three issues, however, and conducted 66 interviews at various locations throughout the country. In the end, we found no criminal behavior or administrative misconduct on the part of any current DOI employees; however, we did not have an opportunity to interview many key former employees that played a role and, therefore, were not able to draw a conclusion concerning their conduct. We also reported in the last Semiannual Report management and financial accountability deficiencies in the Insular Area (IA) governments. Unfortunately, that trend remains a concern. Insular Area governments, for the most part, continue to ignore our audit recommendations and fail to sufficiently respond to our audit reports. We again identified severe deficiencies in controlling and accounting for Federal monies and in one case found that transactions for one facility were so mismanaged that the situation could serve as a case study on the misuse and waste of public funds. Because IA governments have not adequately responded to our report findings, we are working with the Department's Office of Insular Affairs to encourage adoption and implementation of our Semiannual Report to the Congress: April 1, 2002 - September 30, 2002 Message from the Inspector General (continued) recommendations. We are also urging other Federal agencies that provide funds to IA governments to perform better fiscal oversight. Additionally, we recently appointed a dedicated advisor with audits background to work closely with IA governments, public auditors, and local authorities to expand their capability and expertise in managing both Federal and local funds. We believe that this collaborative effort will serve as a catalyst to improve accountability in the Insular Areas for Federal dollars. Our office will continue to target these and other significant issues affecting the Department and its Bureaus and offices. We are dedicated to ensuring that our efforts result in much-needed changes to reduce and prevent the waste of taxpayers' money and improve the accountability of government to the American public. Earl E. Devaney Inspector General Semiannual Report to the Congress: April 1, 2002 - September 30, 2002 Contents Page Statistical Highlights.............................................................................................................. ii Organization ......................................................................................................................1 Mission and Top Management Challenges .......................................................................2 Significant Investigations and Audit Activities ......................................................................3 Department of the Interior..................................................................................................3 Bureau of Indian Affairs.....................................................................................................8 Bureau of Land Management ...........................................................................................17 Bureau of Reclamation.....................................................................................................19 Insular Areas.....................................................................................................................21 Minerals Management Service .........................................................................................24 National Park Service.......................................................................................................26 Office of the Special Trustee for American Indians.........................................................29 U.S. Fish and Wildlife Service.........................................................................................30 U.S. Geological Survey ............................................................................................................ 31 Appendices 1 - Summary of Audit and Related Activities from April 1, 2002 through September 30, 2002 ......................................................................................................32 2 - Audit Reports Issued or Processed and Indirect Cost Proposals Negotiated During the 6-Month Period ended September 30, 2002 ...............................................33 - Internal Reports .....................................................................................................33 - Contract and Grant Audits .....................................................................................35 - Single Audits..........................................................................................................35 - Indirect Cost Proposals ..........................................................................................45 3 - Monetary Impact of Audit Activities from April 1, 2002 through September 30, 2002 ......................................................................................................60 4 - Non-Federal Funding Included in Monetary Impact of Audit Activities During the 6-Month Period ended September 30, 2002...............................................61 5 - Audit Resolution Activities...........................................................................................62 - Table I - Inspector General Reports with Questioned Costs..................................62 - Table II - Inspector General Reports with Recommendations that Funds be Put to Better Use ....................................................................................63 - Table III - Inspector General Reports with Lost or Potential Additional Revenues .............................................................................................64 6 - Summary of Audit Reports over 6 Months Old Pending Management Decisions .......65 - Internal Audits........................................................................................................65 - Contract and Grant Audits .....................................................................................65 - Single Audits..........................................................................................................67 7 - Summary of Internal Audit Reports over 6 Months Old Pending Corrective Action .........................................................................................................70 8 - Summary of Insular Area Reports over 6 Months Old .................................................74 - Internal Audits........................................................................................................74 - Single Audits..........................................................................................................76 9 - Program Integrity
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