DEPARTMENT OF THE INTERIOR OFFICE OF INSPECTOR GENERAL JUSTIFICATION OF UNCONTROLLABLE AND RELATED CHANGES 1999 | 2000 Change $5,500/+$192 1999 Pay Raises.. This adjustment is for the additional amount needed in FY 2000 to fund the remaining 3-month portion of the estimated cost of the, on average, 3.68 percent pay increases effective in January 1999. 1999 | 2000 2000 Pay Raises.. $15,500/+$751 The amount displayed represents the additional costs of funding an estimated 4.4 percent January 2000 pay increase for 1999 | 2000 $1,722/+$100 Rental Payments to GSA. This adjustment is for changes in costs payable to the General Services Administration resulting from changes in rates for office space and non-office space as estimated by GSA. 1999 | 2000 FERS-One-time Open Season.. $0/+$66 This adjustment is for employees who change from the CSRS retirement system to FERS during this one-time open season. CSRS/FERS Retirement Costs.. 1999 | 2000 $810 +$30 This adjustment is for changes in estimated retirement costs paid by the bureau. It results from changes in the relative proportion of FERS employees in the work force, including the effect of the recent CSRS-to-FERS conversion open season. Workers Compensation Payments. 1999 | 2000 $77/-$51 This adjustment is for changes in the costs of compensating injured employees and dependents of employees who suffered accidental deaths while on duty. Costs for FY 2000 are for the 12-months ending June 1998 and are paid to the Department of Labor, Federal Employees Compensation Account, pursuant to 5 U.S.C. 8147(b) as amended by P.L. 94-273. Unemployment Compensation Payments. 1999 | 2000 $6/-$1 The adjustment is for changes in the costs of unemployment compensation claims to be paid to the Department of Labor, Federal Employees. Compensation account, in the Unemployment Trust Fund, pursuant to P.L. 96-499. Departmental Working Capital Fund. 1999 2000 $622/+41 This change reflects expected changes in the charges for Department services and other services through the Working Capital Fund. The Inspector General Act of 1978 authorizes the Office of Inspector General to audit the programs and operations of the U.S. Department of the Interior. In addition, in the insular areas of Guam, American Samoa, the U.S. Virgin Islands, and the Commonwealth of the Northern Mariana Islands, the OIG is responsible for "establishing an organization which will maintain a satisfactory level of independent audit oversight" for these insular areas in accordance with the Insular Areas Act of 1982 (48 U.S.C. 1422). The OIG has additional audit responsibilities in the Federated States of Micronesia, the Republic of the Marshall Islands, and the Republic of Palau pursuant to the Compact of Free Association Act of 1985 (Public Law 99-239). Further, the OIG executes the program responsibility of negotiating indirect cost rates for approximately 450 entities, which consist of 350 Indian tribes and 100 state agencies. Objectives Under the general guidance of the Inspector General, the Assistant Inspector General for Audits (AIGA) manages, supervises, coordinates, and conducts financial and performance audits and evaluations of the Department and insular area government programs and operations based on statutory and regulatory requirements and requests for audits from the Congress and Departmental managers. The AIGA allocates the remaining resources to audits considered the most critical based on factors such as dollar amount involved and Congressional, Departmental, and public concerns. This allocation of resources is designed to promote economy, efficiency, and effectiveness in the administration of the Departmental and insular areas programs and operations by enabling the OIG to: -detect and prevent fraud, waste, and abuse; - identify opportunities for savings, efficiencies, and economies in the administration of Departmental and insular area government programs; and, - assist Departmental bureaus and insular area governments in strengthening operations to improve program results and enhance customer services. The OIG Audit activity is requesting a program increase of $450,000 in its FY 2000 budget request to support an additional eight full-time auditors. This increase would provide additional resources to support our strategic goal of: (1) efficiently and effectively conducting the increasing number of audits and reviews mandated by Congress and the Office of Management and Budget; (2) providing timely responses to requests for audits by the Administration, Congress, and Departmental managers; and (3) increasing our ability to conduct discretionary (planned by the OIG) audits, which historically have identified significant cost savings and program management improvements. Below is a description of the OIG's mandatory audit activities: Chief Financial Officers (CFO) Act of 1990 and the Government Management Reform Act of 1994, which require that the OIG conduct audits of the Department's annual financial statements and implement the General Accounting Office's Financial Audit Manual; Implementation of the new requirements of the Federal Financial Management Improvement Single Audit Act of 1984, as amended, which requires that the OIG review the quality of single audit reports of state and local governments' and tribal agencies' expenditures and the conformity of the audit reports with the Act. In addition, a Federal task force is considering increasing OIGs' single audit quality assurance requirements; Insular Areas Act of 1982, which requires the OIG to establish "an organization which will Compact of Free Association Acts of 1985, which requires that the OIG maintain an audit presence in the Federated States of Micronesia, the Republic of the Marshall Islands, and the Republic of Palau; Title XI of the Education Amendments of 1978, as amended by Public Law 103-382, which requires that Interior's Inspector General establish a system to ensure that financial and compliance audits are conducted of each Bureau school at least once every three years. During the school year 1997-1998, the Bureau of Indian Affairs operated 79 school facilities. To comply with the three-year cycle apparently intended by the legislation for Bureau schools only, the OIG would have to dedicate sufficient resources to audit approximately 26 schools per year. However, existing resources permit us to audit only about three to four schools per year without adversely affecting our ability to perform other required audits; Superfund Amendments and Reauthorization Act of 1986, Public Law 99-499, which requires the OIG to audit Environmental Protection Agency superfund monies that are directly apportioned to the Department and those monies received through interagency agreements; Federal Oil and Gas Royalty Management Act of 1982, which requires that the OIG conduct biennial royalty management program audits; General Accounting Office Act of 1996, which requires that the OIG audit the Central Utah OMB Circular A-131, which requires that the OIG audit the Department's value engineering program. In addition, there are proposed amendments to the Government Performance and Results Act that would require OIG to review the Department's efforts to develop and use performance measures for determining progress toward achieving the performance goals and program outcomes described in the agency's annual performance plans and performance reports under the Act. The amendments would also require the OIG to submit a Results Act Review Plan on how these reviews will be conducted. However, Congress has expressed its interest in having the OIG conduct the review regardless of whether these amendments become law. The OIG has also been informed by the General Accounting Office that, based on its review of our work on evaluating the effectiveness of management and internal control structures of the Department's bureaus' mainframe computer systems (primarily Statement on Auditing Standards No. 70 reviews), the OIG needs to assess options for increasing Electronic Data Processing (EDP) audit staff, develop strategies for providing technical training to EDP audit staff, and seek alternatives for obtaining EDP audit tools Ongoing Program Activities The OIG Audit activity has historically identified millions of dollars in potential cost savings for the Department -- including potential increased revenues and funds that could be put to better use. In FY 1998, we identified potential cost savings of $306 million -- an average savings of close to $2 million per audit employee. Put another way, the OIG identified savings at a rate of approximately $21 for every $1 invested in the OIG audit activity. In addition, the Audit activity also issued or processed 507 audit reports and negotiated 207 cost proposals during FY 1998. The OIG has been conducting audits of the eight individual bureau financial statements and has devoted considerable time and resources to the identification and correction of financial accounting system weaknesses and financial management deficiencies in the various bureaus. The combined efforts of OIG auditors and bureau and Departmental personnel have resulted in significant improvements in the financial management systems within the individual bureaus and, thus, in the Department of the Interior. However, the requirements associated with the CFO Act are increasing steadily, as are other Congressional requirements and requests, and the personnel-intensive nature of these and other mandatory audits continues to strain OIG audit resources. While we recognize and adhere to the importance of these mandatory audits, discretionary audits (planned by the OIG) - which have historically identified significant cost savings and increased potential revenues - have, at times, been postponed or not performed to meet the requirements of mandatory audits. These mandated audits limit our ability to be proactive in our audit activities in areas of greatest Government need and vulnerability. Below are examples of significant results of OIG audit activities during fiscal year 1998: Utility Systems Costs Not Recovered - National Park Service. In an April 1998 follow up audit, we found that NPS had not implemented the recommendations contained in our January 1991 audit report "Utility Rates Imposed by the National Park Service" (No. 91-1-133), which discussed measures needed to ensure that concessioners and other non-Governmental users of park utility systems reimbursed NPS for the operational and capital costs of these systems. Specifically, the April 1998 audit found that NPS had not revised its procedures to include specific guidelines for recovering the capital investment costs of utility systems from nonGovernmental users, provided adequate oversight to ensure compliance with NPS utility systems cost recovery guidance, ensured that training was provided to NPS employees who were responsible for establishing utility rates, or ensured that adequate internal controls were implemented on the receipt and deposit of utility systems cost reimbursements. We recommended that NPS revise its guidelines to allow the parks to recover capital investment costs through the monthly billing process and clarify the guidelines regarding the retention and use of utility cost reimbursements. Based on analyses of utility costs at 15 parks, we concluded that NPS did not seek recovery of utility systems capital investment and operational costs totaling $6.3 million for the period of January 1991 through August 1997 and may not recover additional capital investment costs of as much as $31.3 million unless it corrects deficiencies in its guidance, training, and oversight. Based on NPS's response, we considered the report's six recommendations resolved but not implemented. Weaknesses in Award and Administration of Contracts Noted - Bureau of Reclamation. We determined that BOR generally awarded and administered contracts for the programmatic environmental impact statement for implementation of the Central Valley Project Improvement Act in accordance with the Federal Acquisition Regulation and that it planned to capitalize the associated costs in accordance with Reclamation laws. However, BOR did not ensure that all contract award and administration requirements of the Federal Acquisition Regulation were followed. For example, BOR had not developed a well-defined statement of work, it accelerated the contract award in an effort to meet the mandated completion date for the programmatic statement, and it did not always have experienced or sufficient staff to adequately administer the contract. We also noted that BOR had to modify the contract because of State of California and Interior decisions which affected environmental alternatives in the programmatic statement after |