Background

The Department of the Interior has jurisdiction over more than 500 million  acres of land—about one-fifth of the total U.S. landmass—and over 1.8  billion acres of the Outer Continental Shelf. As the guardian of these  resources, the department is entrusted to preserve the nation’s most awe- inspiring landscapes, such as the wild beauty of the Grand Canyon,  Yosemite, and Denali national parks; our most historic places, like  Independence Hall and the Gettysburg battlefield; and such revered  national icons as the Statue of Liberty and the Washington Monument. At  the same time, Interior is to provide for the environmentally sound  production of oil, gas, minerals, and other resources found on the nation’s  public lands; honor the nation’s obligations to American Indians and  Alaskan Natives; protect habitat to sustain fish and wildlife; help manage  water resources in western states; and provide scientific and technical  information to allow for sound decision-making about resources. In recent  years, the Congress has appropriated about $10 billion annually to meet  these responsibilities. With these resources, Interior employs about 73,000  people in eight major agencies and bureaus at over 2,400 locations around  the country to carry out its mission.
Interior’s management of this vast federal estate is largely characterized by  the struggle to balance the demand for greater use of its resources with  the need to conserve and protect them for the benefit of future  generations. GAO, among others, have identified management problems  facing the department and have made many recommendations to improve  its agencies and programs. In some cases, Interior has made significant  improvements; in others, progress has been slow. As a result, several  major management challenges remain.

	Management of Resource Protection Efforts Needs to Be Improved

Although Interior, working with USDA’s Forest Service, has taken steps to  help manage perhaps the most daunting challenge to its resource  protection mission—protecting lives, private property, and federal  resources from the threats of wildland fire—concerns remain. In addition,  Interior’s programs for managing hardrock mining, oil, and gas operations  have not adequately protected federal resources from the environmental  effects of these activities.

		Wildland Fire Management Challenges Persist

The wildland fire problems facing our nation continue to grow. The  average number of acres burned by wildland fires annually from 2000 to  2005 was 70 percent greater than the average number burned annually  during the 1990s, and appropriations for the federal government’s wildland  fire management activities tripled from about $1 billion in fiscal year 1999  to nearly $3 billion in fiscal year 2005. Experts believe that catastrophic  damage from wildland fire will continue to increase until an adequate long- term federal response is implemented and has had time to take effect.  While USDA’s Forest Service receives the majority of fire management  resources, Interior agencies—the National Park Service, BIA, FWS, and,  particularly, BLM—are key partners in responding to the threats of  wildland fire. Consequently, most of our work and recommendations on  wildland fire management address both departments.
The Interior agencies and the Forest Service have not yet developed a  cohesive strategy that identifies long-term options and associated funding  estimates for addressing wildland fire threats, as we first recommended in  1999; nor have they developed a tactical plan that outlines the critical  steps and time frames needed to complete such a strategy, as we  recommended in 2005. While the agencies together issued a document in  February 2006 titled Protecting People and Natural Resources: A Cohesive  Fuels Treatment Strategy, it does not identify long-term options or  associated funding estimates. Also, although the agencies have  undertaken some tasks over the past 7 years that they stated are important  to developing the cohesive strategy that we recommended, we have  concerns about when and whether such tasks will be completed as  planned. For example, the agencies began developing two modeling  systems to help them (1) allocate resources to respond to wildland fires  and (2) identify the extent, severity, and location of wildland fire threats to  our nation’s communities and ecosystems; these systems are slated for  completion in 2008 and 2009, respectively. We are concerned, however,  that the agencies’ recent endorsement of significant, mid-course design  changes to the resource allocation model may not fulfill key project goals,  including determining the most cost-effective allocation of resources. In  addition, the agencies currently have no plans to routinely update data in  the threat modeling system—this would be necessary, for example, after  major fires, hurricanes, or other factors have significantly altered the  landscape. Such updated data are necessary to accurately capture the  nature of wildland fire threats and to optimize allocation of resources over  time. For these reasons, we continue to believe that a cohesive strategy  and tactical plan would be helpful to the Congress and the agencies in  making informed decisions about effective and affordable long-term  approaches to addressing the nation’s wildland fire problems.
In addition, in 2006, we reported that the agencies needed to develop  better guidance on sharing the costs of suppressing fires among federal  and nonfederal entities. In some cases, these entities used different cost- sharing methodologies for fires with similar characteristics, which  resulted in inconsistent sharing of costs among federal and nonfederal  entities. The cost-sharing method used can have consequences in the  millions of dollars for the entities involved. As of January 2007, the  agencies were updating their guidance on possible cost-sharing methods  and when each typically would be used, but it is unclear how the agencies  will ensure that the guidance is followed.
Finally, as we testified last month, preliminary findings from our ongoing  work indicate that the effectiveness of the agencies’ efforts to contain  wildfire suppression costs may be limited because the agencies have not  clearly defined their cost-containment goals, developed a strategy for  achieving those goals, or developed related performance measures. In  addition, for efforts to contain wildfire suppression costs to be effective,  once the agencies have defined their cost-containment goals, they need to  integrate them with other goals of the wildland fire program—such as  protecting life and property—and to recognize that trade-offs will be  needed to meet desired goals within the context of fiscal constraints.

		Hardrock Mining Operations Lack Needed Financial Assurances

Under BLM regulations, hardrock mining operators who extract gold,  silver, copper, and other valuable mineral deposits from land belonging to  the United States are required to provide financial assurances, before they  begin exploration or mining, to guarantee that the costs to reclaim land  disturbed by their operations are paid. However, we reported in June 2005  that BLM did not have a process for ensuring that adequate assurances  were in place. As a result, some assurances may not fully cover all future  reclamation costs, some operators do not have financial assurances, and  some have either outdated reclamation plans and cost estimates or none at  all. When operators with insufficient financial assurances fail to reclaim  BLM land disturbed by hardrock mining operations, BLM is left with  public land that poses risks to the environment and public health and  safety, and requires millions of federal dollars to reclaim. For example, we  reported that 48 hardrock operations had ceased to operate and had not  been reclaimed since the financial assurance requirement began in 1981;  for 43 of these sites, BLM identified a total of about $56 million in  unfunded reclamation costs. We also reported that BLM’s system for  managing financial assurances did not have current information or track  certain information critical to managing the program.
In response to our 2005 recommendations, BLM has taken substantial  steps to correct these problems. In 2006, the agency modified its system  for managing financial assurances to track key data.  BLM also began  requiring its state office directors to use a newly created report available  from the system to ensure that adequate financial assurances are in place,  and to (1) develop corrective action plans to address any financial  assurance deficiencies with operators and (2) certify that reclamation cost  estimates are adequate. If implemented properly, these efforts should  ensure that appropriate financial assurances are in place to pay for  necessary reclamation of federal lands.

		Increases in Oil and Gas Permitting Activities Lessen BLM’s Ability to Meet Its Environmental Protection Responsibilities

The number of oil and gas operations occurring on or under federal lands  and private lands for which the federal government retains mineral rights  that are permitted by BLM, has increased dramatically—more than tripling  from fiscal year 1999 to fiscal year 2004—in part as a result of the desire to  reduce the country’s dependence on foreign sources of oil and gas. In June  2005, we reported that BLM has struggled to deal with this permitting  workload increase while also carrying out its responsibility to mitigate the  impacts of oil and gas development on land that it manages. Overall, BLM  officials told us that staff had to devote increasing amounts of time to  processing drilling permits, leaving less time to ensure mitigation of the  environmental impacts of oil and gas development. For example, two field  offices we visited that had the largest increases in permitting activity were  each able to meet their annual environmental inspection goals only once in  the past 6 years. BLM has authority to assess and charge fees to cover its  expenses for processing oil and gas permits, which would enable it to  supplement its program resources. While the agency had not exercised  this authority at the time of our report, it had begun taking steps to  develop a fee structure for these permits. To help BLM better respond to  its increased workload, we recommended that the agency finalize and  implement this fee structure to recover its costs for processing  applications for oil and gas drilling permits.
In response to our recommendation, BLM issued a proposed regulation in  July 2005 that included a $1,600 fee for processing oil and gas permits.  However, the next month, the Congress prohibited Interior from initiating  the new fee in the Energy Policy Act of 2005, and the final regulation did  not include the proposed fee. Nevertheless, the department has  continued to express interest in initiating such a fee and has proposed that  the Energy Policy Act be amended to allow the fee to move forward.

		FWS Oversight of Oil and Gas Activities in Wildlife Refuges Needs Improvement

Similar to the concerns we have about BLM’s protection of environmental  resources from oil and gas activities, we reported in 2003 that FWS’s  oversight of oil and gas operations on wildlife refuge lands was not  adequate. For example, we found that some refuge managers took  extensive measures to oversee operations and enforce environmental  standards, while others exercised little or no control. We found that such  disparities occurred for two primary reasons. First, FWS had not officially  determined its authority to require permits—which would include  environmental conditions to protect refuge resources—of all oil and gas  operations in refuges; we believe the agency has such authority. Second,  refuge managers lacked guidance, adequate staffing levels, and training to  properly oversee oil and gas activities. We also found that FWS was not  collecting complete and accurate information on damage to refuge lands  as a result of oil and gas operations and what steps were needed to  address that damage.
FWS has taken some steps to address recommendations we made to  resolve these problems. For example, the agency has implemented training  for staff overseeing oil and gas activities and has begun collecting better  data on the nature and extent of oil and gas activities. However, FWS has  not implemented two key recommendations that would strengthen its  ability to protect refuge resources.
First, because FWS had not formally clarified its authority to oversee all  types of oil and gas operations on refuges, we recommended that the  agency (1) determine its authority to oversee such operations and report  that determination to the Congress and (2) seek from the Congress any  additional authority that might be needed to apply a consistent and  reasonable set of controls over all oil and gas activities occurring on  national wildlife refuges. To date, FWS has not finalized its determination,  but it has indicated that it does not believe it has the authority to require  permits of all oil and gas operations that would include steps that must be  taken to protect refuge resources. Further, FWS has indicated that it does  not believe it needs additional authority to effectively manage oil and gas  operations on refuges. We continue to believe, however, that FWS does  have the authority to require such permits of all operators. Moreover,  because of the effects of oil and gas activities on refuge resources that we  previously reported, we also continue to believe that if FWS ultimately  determines that it does not have the authority to require permits, it should  seek this authority from the Congress in order to adequately protect  refuges.
Second, although FWS has taken steps to identify the level of staffing it  needs to adequately oversee oil and gas activities occurring on national  wildlife refuges, it has not—as we recommended—sought the funding to  meet those needs through appropriations, its authority to assess fees, or  other means.

	Management Problems in Indian and Island Community Programs Persist

GAO has reported on management weaknesses in Indian programs for a  number of years. While the department has taken significant steps in the  last 10 years to address these weaknesses, it is still in the process of  implementing key trust fund reforms, and several concerns exist about the  completion of these reforms. We have also reported on serious delays in  BIA’s program for determining whether the department will accept land in  trust. In addition, the department could be doing more to assist seven  island communities—four U.S. territories and three sovereign island  nations—with long-standing financial and program management  deficiencies.

		Indian Trust Funds and Assets Need to Be More Effectively Managed

The Secretary of the Interior administers the government’s trust  responsibilities to tribes and individual Indians, including maintaining  about 1,450 trust fund accounts for more than 250 tribal entities with  assets of about $2.9 billion and about 300,000 individual Indian trust fund  accounts with assets of about $400 million. Management of Indian trust  funds and assets has long been plagued by inadequate financial  management, such as poor accounting and information systems; untrained  and inexperienced staff; backlogs in appraisals, determinations of  ownership, and record-keeping; lack of a master lease file or accounts- receivable system; inadequate written policies and procedures; and poor  internal controls.
In response to these problems, the Congress enacted the American Indian  Trust Fund Management Reform Act of 1994, which among other things,  established the Office of the Special Trustee (OST) to oversee and  coordinate the department’s implementation of trust fund management  reforms. In December 2006, we reported that OST had made progress  implementing reforms, and it estimated that almost all key reforms needed  to develop an integrated trust management system and to provide  improved trust services would be completed by November 2007.  However, OST also estimated that data verification for leasing activities  would not be completed for all Indian lands until December 2009.  Furthermore, OST’s most recent strategic plan, issued in 2003, did not  include a timetable for implementing trust reforms or a date for OST’s  termination, as required by the reform act. As a result, we recommended,  among other things, that the department provide the Congress with a  timetable for completing the trust fund management reforms. The  department agreed with our recommendation and stated that it expects to  have a timetable for implementing the remaining trust reforms by late June  2007, including a date for the proposed termination or eventual deposition  of OST. Although the department’s consolidated financial statements for  the fiscal year ending September 30, 2006, received an unqualified audit  opinion, the management of Indian trust funds continued to be reported as  a material internal control weaknesses, and information security was  reported as an internal control weakness.

		Improvements Needed in BIA’s Processing of Land in Trust Applications

BIA is the primary federal agency charged with implementing federal  Indian policy and administering the federal trust responsibility for 1.9  million American Indians and Alaska Natives. BIA provides basic services  to 561 federally recognized Indian tribes throughout the United States,  including social services, child welfare services, and natural resources  management on about 54 million acres of Indian trust lands. Trust status  means that the federal government holds title to the land in trust for tribes  or individual Indians; land taken in trust is no longer subject to state and  local property taxes and zoning ordinances. Many Indians believe that  having their land placed in trust status is fundamental to safeguarding it  against future loss and ensuring their sovereignty. In 1980, the department  established a regulatory process intended to provide a uniform approach  for taking land in trust. While some state and local governments support  the federal government’s taking additional land in trust for tribes or  individual Indians, others strongly oppose it because of concerns about  the impacts on their tax base and jurisdictional control.
We reported in July 2006 that while BIA generally followed its regulations  for processing land in trust applications, it had no deadlines for making  decisions on them. Specifically, the median processing time for the 87  land in trust applications with decisions in fiscal year 2005 was 1.2 years— ranging from 58 days to almost 19 years. We also found that while there  was little opposition to applications with decisions in fiscal year 2005 from  state and local governments, some state and local governments we  contacted said (1) they did not have access to sufficient information about  the land in trust applications and (2) the 30-day comment period was not  sufficient. We recommended, among other things, that the department  move forward with adopting revisions to the land in trust regulations that  include (1) specific time frames for BIA to make a decision once an  application is complete and (2) guidelines for providing state and local  governments more information on the applications and a longer period of  time to provide meaningful comments on the applications. The department  agreed with our recommendations, and BIA has developed a corrective  action plan to implement them by June 30, 2007.

		Improve Effectiveness and Accountability for Island Programs

The Secretary of the Interior has varying responsibilities to the island  communities of American Samoa, Guam, the Commonwealth of the  Northern Mariana Islands, and the U.S. Virgin Islands, all of which are U.S.  territories—as well as to the Federated States of Micronesia, the Republic  of the Marshall Islands, and the Republic of Palau, which are sovereign  nations linked with the United States through Compacts of Free  Association. The Office of Insular Affairs (OIA) carries out the  department’s responsibilities for the island communities. OIA’s mission is  to assist the island communities in developing more efficient and effective  government by providing financial and technical assistance and to help  manage relations between the federal government and the island  governments by promoting appropriate federal policies. The island  governments have had long-standing financial and program management  deficiencies. Specifically, island governments experience difficulties in  accurately accounting for expenditures, collecting taxes and other  revenues, controlling the level of expenditures, and delivering program  services.
In December 2006, we reported on serious economic, fiscal, and financial  accountability challenges facing the U.S. insular areas of American Samoa,  Guam, the Commonwealth of the Northern Mariana Islands, and the U.S.  Virgin Islands. The economic challenges stem from dependence on a few  key industries, scarce natural resources, small domestic markets, limited  infrastructure, shortages of skilled labor, and reliance on federal grants to  fund basic services. To help diversify and strengthen their economies, OIA  sponsors conferences and business opportunities missions to the areas to  attract U.S. businesses; however, there has been little formal evaluation of  these efforts. In addition, efforts to meet formidable fiscal challenges and  build strong economies are hindered by financial reporting that does not  provide timely and complete information to management and oversight  officials for decision making. The insular area governments have also  submitted required audits late, received disclaimer or qualified audit  opinions, and had many serious internal control weaknesses identified. As  a result of these problems, numerous federal agencies have designated  these governments as “high-risk” grantees. Interior and other federal  agencies are working to help these governments improve their financial  accountability, but more should be done.
To increase the effectiveness of the federal government’s assistance to the  U.S. insular areas, we recommended, among other things, that the  department (1) increase coordination activities with officials from other  federal grant-making agencies on issues of common concern relating to  the insular area governments, such as single audit reports, high-risk  designations, and deficiencies in financial management systems and  practices and (2) conduct formal periodic evaluations of OIA’s  conferences and business opportunities missions, assessing their impact  on creating private sector jobs and increasing insular area income. The  department agreed with our recommendations, stating that they were  consistent with OIA’s top priorities and ongoing activities. We will  continue to monitor OIA’s actions on our recommendations.
Also in December 2006, we reported on challenges facing the Federated  States of Micronesia and the Republic of the Marshall Islands. In 2003, the  United States amended a 1986 compact with the countries by signing  Compacts of Free Association with the two governments. The amended  compacts provide the countries with a combined total of $3.6 billion from  2004 to 2023, with the annual grants declining gradually. We found that for  2004 through 2006, compact assistance to the respective governments was  allocated largely to the education, infrastructure, and health sectors, but  that neither country has planned for long-term sustainability of the grant  programs, taking into account the annual decreases in grant funding. In  addition, both countries’ single audit reports for 2004 and 2005 indicated  (1) weaknesses in their ability to account for the use of compact funds and  (2) noncompliance with requirements for major federal programs. For  example, the Federated States of Micronesia’s audit report for 2005  contained 57 findings of material weaknesses and reportable conditions in  the national and state governments’ financial statements for sector grants  and 45 findings of noncompliance. We recommended, among other things,  that the department work with the countries to establish plans to minimize  the impact of declining assistance and to fully develop a reliable  mechanism for measuring progress towards program goals. The  department concurred with our recommendations.

	Land Appraisals Continue to Fall Short of Standards

Over the years, we and Interior’s IG have reported on the difficulties BLM  and other federal land management agencies have had in managing land  appraisals. Conducting appraisals is an important function—between  November 2003 and May 2006, for example, Interior appraised more than  6.5 million acres of land that was valued at over $7 billion. Land appraisals  are needed when Interior agencies are buying, exchanging, or leasing land.  Such transactions are an integral part of Interior’s land management in  order to achieve specific purposes, such as consolidating existing  holdings, acquiring land deemed important for wildlife habitat or  recreational opportunities, and opening land to the development of energy  and mineral resources. Interior generally requires land acquisitions to be  based on market value and, thus, objective land appraisals are essential.  Past reports, however, have identified serious problems with Interior  agencies’ appraisal programs, particularly with regard to appraisal  independence, and have identified millions of dollars that the federal  government had lost because of inadequate appraisals.
While Interior has made major program changes, significant problems  continue. Specifically, to remedy decades of problems with the quality and  objectivity of its land appraisals, Interior removed the land appraisal  function from its land management agencies and consolidated it into a  departmental office—the Appraisal Services Directorate—in November  2003. This was a substantial move in the right direction to help ensure the  independence of the appraisal function, and we reported in September  2006 that the objectivity of appraisals has improved since the directorate’s  inception. However, we also identified two major remaining challenges.
First, there is still wide variation in the quality of appraisals for land  transactions involving potentially billions of dollars. For example, about 40  percent of Interior’s appraisals for land transactions that we reviewed did  not comply with recognized appraisal standards. This lack of compliance  occurred, in large part, because appraisers appeared not to apply the  specialized skills needed to perform their duties for certain appraisals. In  addition, peer reviews of appraisals were cursory, with reviewers  approving appraisals without considering property characteristics that can  impact the value of land, such as the presence of roads.
Second, the directorate does not have a system for ensuring that it sets  and meets realistic time frames for appraisal delivery. Of the 3,500  appraisals completed since the directorate was created, over 70 percent  missed their deadlines, with an average delay of 4 months. Delays in  delivery of appraisals can impact the ability of land management agencies  to carry out land acquisition missions, and some land deals have been  scuttled as a result.
Since our report last fall, Interior has taken encouraging steps to address  our recommendations. For example, Interior has stated that it has  implemented a compliance inspection program for appraisals that are  considered “high risk” to help ensure that such appraisals comply with  recognized appraisal standards. We will continue to monitor the  department’s progress in this area. In addition, we currently we have a  review under way to evaluate Interior’s management of land exchanges.

	Deferred Maintenance Backlog Needs to Be Addressed

In addition to the challenges the department faces in adequately  maintaining the natural resources under its stewardship, it also faces a  challenge in adequately maintaining its facilities and infrastructure. The  department owns, builds, purchases, and contracts services for assets  such as visitor centers, schools, office buildings, roads, bridges, dams,  irrigation systems, and reservoirs; however, repairs and maintenance on  these facilities have not been adequately funded. The deterioration of  facilities can adversely impact public health and safety, reduce employees’  morale and productivity, and increase the need for costly major repairs or  early replacement of structures and equipment. In 2003, we reported that  the department estimated that the deferred maintenance backlog was  between $8.1 billion and $11.4 billion. In November 2006, the department  estimated that the deferred maintenance backlog for fiscal year 2006 was  between $9.6 billion and $17.3 billion, an increase of between 18 to 51  percent (see table 1).
Interior is not alone in facing daunting maintenance challenges. In fact, we  have identified the management of federal real property, including  deferred maintenance issues, as a governmentwide high-risk area since  2003. While Interior has made progress addressing prior  recommendations to improve information on the maintenance needs of  Park Service facilities and BIA schools, the challenge of how the  department will secure the significant funding needed to reduce this  maintenance backlog to a manageable level remains.
While some programs have improved information on their deferred  maintenance needs, in February 2006, we reported that similar information  is still needed for 16 BIA irrigation projects with an estimated $850 million  in deferred maintenance. For example, we found that some of the  irrigation projects classified items as deferred maintenance when they  were actually new construction, and some had incomplete information on  their deferred maintenance needs. To further refine the deferred  maintenance estimate for the 16 irrigation projects, BIA plans to hire  experts in engineering and irrigation to conduct thorough condition  assessments of all 16 irrigation projects every 5 years. The first such  assessment was completed in July 2005, with all 16 assessments expected  to be completed by 2010.

	Revenue Collection Needs More Management Attention

For many years, Interior’s IG has identified revenue collection as a top  management challenge for the department because of the significant  potential for underpayments given that it collects, on average, over $10  billion annually. Work we have conducted in the past 2 years also raises  questions about how and when Interior is collecting authorized revenues  from oil and gas leases, geothermal leases, recreational uses, and grazing  and whether funds are properly controlled and accounted for.

		Substantial Revenue May Be Forgone Because of Royalty Relief

We testified in January 2007 on ongoing work investigating the Minerals  Management Service’s (MMS) implementation of the Outer Continental  Shelf Deep Water Royalty Relief Act of 1995 and other authorities for  granting royalty relief for oil and gas leases. We reported that MMS had  issued lease contracts in 1998 and 1999 that failed to include price  thresholds above which royalty relief would no longer be applicable. As a  result, large volumes of oil and natural gas are exempt from royalties,  which significantly reduces the amount of royalty revenues that the federal  government can collect. At least $1 billion in royalties has already been  lost because of this failure to include price thresholds. MMS has estimated  that forgone royalties from leases issued between 1996 and 2000 under the  act could be as high as $80 billion. However, there is much uncertainty in  MMS’s estimate as a result of, for example, the inherent difficulties in  estimating future production and prices, as well as ongoing litigation  addressing MMS’s authority to set price thresholds for some leases. Other  authorities for granting royalty relief may also affect future royalty  revenues. Specifically, under discretionary authority, the Secretary of the  Interior administers programs granting relief for certain deep water leases  issued after 2000, certain deep gas wells drilled in shallow waters, and  wells nearing the end of their productive lives. In addition, the Energy  Policy Act of 2005 mandates relief for leases issued in the Gulf of Mexico  during the 5 years following the act’s passage, provides relief for some gas  wells that would not have previously qualified for royalty relief, and would  provide relief in certain areas of Alaska where there currently is little or no  production.
The U.S. Comptroller General has highlighted royalty relief as an area  needing additional oversight by the 110th Congress. Currently, we are  assessing MMS’s estimate of forgone royalties in light of changing oil and  gas prices, revised estimates of future oil and gas production, and other  factors. We are also seeking to identify comprehensive studies that  quantify the potential benefits of royalty relief. We intend to issue a report  on these issues later this year.

		Revenue from Geothermal Leases May Change

In May 2006, we reported that a change in how royalties on geothermal  leases are disbursed may result in a change in the amount of royalties  collected by the federal government. Specifically, while the Energy Policy  Act of 2005 included provisions to encourage geothermal development, it  also reduced the royalty percentage the federal government receives.  Despite this, the act directs the Secretary of the Interior to seek, for most  leases, to maintain the same level of royalty revenues as before the act.  This could be accomplished by negotiating different royalty rates based on  past royalty history, provided that electricity prices remain constant.  Although it is impossible to predict with reasonable assurance how these  prices will change in the future, Interior must make its best effort to  mitigate the impact of changing prices if federal royalty revenue is to  remain the same. This mitigation can only be achieved if there is timely  and accurate knowledge of the revenues that lessees collect when they sell  electricity. However, we reported that MMS does not routinely collect  revenue data from electricity sales. Without such knowledge, MMS will  have difficulty collecting the same level of royalties from lessees under the  new royalty process. To demonstrate its commitment to collect the same  level of royalty revenues as prior to passage of the act, we recommended  that MMS routinely collect future sales revenues for electricity when  royalty payments are due. MMS has plans to address these issues, and we  will continue to monitor their efforts.

		Interior Has Not Maximized Revenue Collections from Recreational and Other Uses

Interior agencies are authorized—and in some cases required—to collect  fees for a variety of uses. For example, the Park Service collects fees from  air tour operators at selected national parks and from individuals and  companies conducting commercial filming. However, we found that the  agencies were not collecting such fees in the following cases:  In May 2006, we reported that the Park Service was not collecting all  required fees from companies conducting air tours in or around three  highly visited national parks because of (1) an inability to verify the  number of air tours conducted over the three national parks and,  therefore, to enforce compliance and (2) confusion resulting from  differing geographic applicability of legislation governing air tours in  national parks.
In May 2005, we reported that the Park Service could be collecting more  revenue through the permits it issues for special park uses, such as special  events, but was not doing so because park units were not consistently  applying criteria for charging permit fees. In addition, the Park Service  had not implemented a May 2000 law that required the collection of  location fees for commercial filming and still photography, resulting in  significant annual forgone revenues. In response to our recommendation,  the Park Service began collecting location fees in May 2006.
In September 2006, we reported that Interior agencies have been slow to  implement authorities for charging fees for recreational uses of federal  lands and waters. We also reported that some agencies lacked adequate  controls and accounting procedures for collecting fees.

		Additional Revenue Could be Generated Through an Adjustment to BLM Grazing Fees

Ten federal agencies manage grazing on over 22 million acres, with BLM  and the Forest Service managing the vast majority of this activity. In total,  federal grazing revenue amounted to about $21 million in fiscal year 2004,  although grazing fees differ by agency. For example, in 2004, BLM and the  Forest Service charged $1.43 per animal unit month, while other federal  agencies charged between $0.29 and $112 per animal unit month. We  reported in 2005 that while BLM and the Forest Service charged generally  much lower fees than other federal agencies and private entities, these  fees reflect legislative and executive branch policies to support local  economies and ranching communities. Specifically, BLM fees are set by a  formula that was originally established by a law that expired, but use of  the formula has been extended indefinitely by Executive Order since 1986.  This formula takes into account a rancher’s ability to pay and, therefore,  the purpose is not primarily to recover the agencies’ costs or capture the  fair market value of forage. Instead, the formula is designed to set a fee  that helps support ranchers and the western livestock industry. Other  federal agencies employ market-based approaches to setting grazing fees.
Using this formula, BLM collected about $12 million in receipts in fiscal  year 2004, while its costs for implementing its grazing program, including  range improvement activities, were about $58 million. Were BLM to  implement approaches used by other agencies to set grazing fees, it could  help to close the gap between expenditures and receipts and more closely  align its fees with market prices. We recognize, however, that the purpose  and size of BLM’s grazing fee are ultimately for the Congress to decide.

	Contract and Grant Management Lack Needed Controls

Interior’s management of contracts and grants has been identified as a  management challenge by Interior’s IG for a number of years. Our recent  work echoes some of the IG’s concerns, in particular with regard to  interagency contracting and grant management for the Chesapeake Bay  Gateways grant program.

		Interior’s Management of Interagency Contracting Activities Needs Improvement

The Department of Defense (DOD) has used interagency contracting to  help support the war in Iraq, including contracting with Interior.  Governmentwide, the use of interagency contracts to procure goods and  services has continued to increase over the past several years. Because of  this continued growth, limited expertise in using these contracts, and  unclear lines of responsibility, GAO has designated interagency  contracting as a governmentwide high-risk area. In our review of 11 task  orders Interior issued on behalf of DOD—amounting to about $66  million—we found numerous breakdowns in management controls.   Specifically, we found that Interior  issued task orders that were beyond the scope of the contract, in violation  of federal competition rules;   did not comply with additional DOD competition requirements when  issuing task orders for services on existing contracts;   did not comply with ordering procedures meant to ensure the best value  for the government; and inadequately monitored contractor performance.
Moreover, we found that the contractor was allowed to play a role in the  procurement process normally performed by the government because the  officials at Interior and DOD responsible for the orders did not fully carry  out their roles and responsibilities. In response to the concerns identified,  Interior and DOD initiated actions to strengthen management controls. In  our report, we made recommendations to further refine their efforts.
In 2005, we also reported on weaknesses in Interior’s GovWorks.   GovWorks is a government-run, fee-for-service organization that provides  various services, including contracting services, on which DOD has  relied. Specifically, Interior did not always ensure that GovWorks  contracts received fair and reasonable prices and may have missed  opportunities to achieve savings from millions of dollars in purchases. In  addition, GovWorks added substantial work—as much as 20 times above  the original value of a particular order—without determining that prices  were fair and reasonable. We made recommendations to Interior to  improve the manner in which GovWorks funds are used to ensure value  and compliance with procurement regulations. Interior concurred with our  recommendations and identified actions to take to address them. We will  continue to monitor their implementation of these actions.

		Chesapeake Bay Gateways Grant Program Lacks Needed Controls

In September 2006, we reported on weaknesses in the Park Service’s  management of grants provided to nonfederal entities under its  Chesapeake Bay Gateways Program. In 1998, Congress passed the  Chesapeake Bay Initiative Act to establish (1) a network of locations  where the public can access and experience the bay and (2) a grant  program to accomplish this objective. From 2000 through 2005, the Park  Service awarded 189 grants totaling over $6 million to support the  network. However, our review revealed several accountability and  oversight weaknesses in the Park Service’s management of these grants,  including (1) inadequate training of Park Service staff, (2) a lack of timely  grantee reporting on progress and finances, (3) continuing awards to  nonperforming grantees, and (4) a backlog of uncompleted grants. To  enhance accountability and oversight, we recommended that the  department    develop and implement a process to determine the extent to which grants  are effectively meeting program goals;   ensure that staff responsible for grant management are adequately trained;    ensure that grantees submit progress and financial reports in a timely    ensure that grants are awarded only to applicants who completed any  previous grants they received or to applicants who have demonstrated the  capacity for completing a grant on schedule.
Interior concurred with our recommendations and has plans to implement  them.

	Concluding Observations

To conclude, Mr. Chairman, I would like to note that in 1993, GAO testified  at a broad oversight hearing on Interior before this Committee, similar to  today’s hearing. At that time, we testified that Interior faced serious  challenges to addressing the declining condition of the nation’s natural  resources and related infrastructure under its responsibility.  Unfortunately, almost 15 years later, the message in my testimony today is  very similar. While some of the programs we evaluated in the past have  improved, evaluations of additional programs reveal many of the same  persistent management problems—a lack of adequate data to understand  the condition of its natural resources and infrastructure and the actions  necessary to improve them, a lack of adequate controls and accountability  to ensure federal resources are properly used and accounted for, and a  lack of adequate strategic planning and guidance for program  implementation. Clearly the department needs to address management  and control gaps in its programs and ensure its activities are carried out in  the most cost-effective and efficient manner, but difficult choices remain  for improving the condition of the nation’s natural resources and the  department’s infrastructure in light of the federal deficit and long-term  fiscal challenges facing the nation. Either new sources of funding need to  be identified and pursued, or the department must determine the services  it can continue and the standards it will use for maintaining its facilities  and lands. As we stated in our testimony nearly 15 years ago, we believe  that in reaching these decisions, policy makers should know the full extent  of the resource shortfalls facing federal natural resource management  agencies. In addition, it is essential for the department to identify the  impacts on services and infrastructure that would occur should serious  cutbacks be necessary in order to maintain a certain standard of quality.
Mr. Chairman, this concludes my prepared statement. I would be pleased  to answer any questions that you or other Members of the Committee may  have at this time.

	GAO Contact

For further information about this testimony, please contact me at  (202) 512-3841 or nazzaror@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement.

Related GAO Products

	Performance and Accountability Series

High-Risk Series: An Update. GAO-07-310. Washington, D.C.: January  2007.
Major Management Challenges at the Department of the Interior (2005  Web-based Update—http://www.gao.gov/pas/2005/doi.htm).
High-Risk Series: An Update. GAO-05-207. Washington, D.C.: January  2005.
Major Management Challenges and Program Risks: Department of the  Interior. GAO-03-104. Washington, D.C.: January 2003.
High-Risk Series: An Update. GAO-03-119. Washington, D.C.: January  2003.
High-Risk Series: Federal Real Property. GAO-03-122. Washington, D.C.:  January 2003.
Major Management Challenges and Program Risks: Department of the  Interior. GAO-01-249. Washington, D.C.: January 2001.
High-Risk Series: An Update. GAO-01-263. Washington, D.C.: January  2001.
Major Management Challenges and Program Risks: Department of the  Interior. GAO/OCG-99-9. Washington, D.C.: January 1999.
High-Risk Series: An Update. GAO/HR-99-1. Washington, D.C.: January  1999.

	Resource Protection Efforts

		Wildland Fires

Wildland Fire Management: Lack of a Cohesive Strategy Hinders  Agencies’ Cost-Containment Efforts. GAO-07-427T. Washington, D.C.:  January 30, 2007.
Wildland Fire Suppression: Better Guidance Needed to Clarify Sharing  of Costs between Federal and Nonfederal Entities. GAO-06-896T.  Washington, D.C.: June 21, 2006.
Wildland Fire Suppression: Lack of Clear Guidance Raises Concerns  about Cost Sharing between Federal and Nonfederal Entities. GAO-06- 570. Washington, D.C.: May 30, 2006.
Wildland Fire Management: Update on Federal Agency Efforts to Develop  a Cohesive Wildland Fire Strategy. GAO-06-671R. Washington, D.C.: May  1, 2006.
Wildland Fire Management: Timely Identification of Long-Term Options  and Funding Needs Is Critical. GAO-05-923T. Washington, D.C.: July 14,  2005.
Wildland Fire Management: Important Progress Has Been Made, but  Challenges Remain to Completing a Cohesive Strategy. GAO-05-147.  Washington, D.C.: January 14, 2005.
Wildland Fires: Forest Service and BLM Need Better Information and a  Systematic Approach for Assessing the Risks of Environmental Effects.  GAO-04-705. Washington, D.C.: June 24, 2004.
Wildland Fire Management: Additional Actions Required to Better  Identify and Prioritize Lands Needing Fuels Reduction. GAO-03-805.  Washington, D.C.: August 15, 2003.
Wildland Fire Management: Reducing the Threat of Wildland Fires  Requires Sustained and Coordinated Effort. GAO-02-843T. Washington,  D.C.: June 13, 2002.
Severe Wildland Fires: Leadership and Accountability Needed to Reduce  Risks to Communities and Resources. GAO-02-259. Washington, D.C.:  January 31, 2002.
Western National Forests: A Cohesive Strategy is Needed to Address  Catastrophic Wildfire Threats. GAO/RCED-99-65. Washington, D.C.: April  2, 1999.

		Other Resource Protection Products

Endangered Species: Many Factors Affect the Length of Time to Recover  Select Species. GAO-06-730. Washington, D.C.: September 6, 2006.
Endangered Species: Time and Costs Required to Recover Species Are  Largely Unknown. GAO-06-463R. Washington, D.C.: April 6, 2006.
Wind Power: Impacts on Wildlife and Government Responsibilities for  Regulating Development and Protecting Wildlife. GAO-05-906.  Washington, D.C.: September 16, 2005.
Hardrock Mining: BLM Needs to Better Manage Financial Assurances to  Guarantee Coverage of Reclamation Costs. GAO-05-377. Washington,  D.C.: June 20, 2005.
Oil and Gas Development: Increased Permitting Activity Has Lessened  BLM’s Ability to Meet Its Environmental Protection Responsibilities.  GAO-05-418. Washington, D.C.: June 17, 2005.
Oil and Gas Development: Challenges to Agency Decisions and  Opportunities for BLM to Standardize Data Collection. GAO-05-124.  Washington, D.C.: November 30, 2004.
Endangered Species: More Federal Management Attention Is Needed to  Improve the Consultation Process. GAO-04-93. Washington, D.C.: March  19, 2004.
National Wildlife Refuges: Opportunities to Improve the Management  and Oversight of Oil and Gas Activities on Federal Lands. GAO-03-517.  Washington, D.C.:  August 28, 2003.
Invasive Species: Clearer Focus and Greater Commitment Needed to  Effectively Manage the Problem. GAO-03-1. Washington, D.C.: October 22,  2002.

	Managing Indian Trust Responsibilities and Island Communities

		Indian Trust Funds

Office of the Special Trustee for American Indians: Financial Statement  Audit Recommendations and the Audit Follow-up Process. GAO-07-295R.  Washington, D.C.: January 19, 2007.
Indian Issues: The Office of the Special Trustee Has Implemented  Several Key Trust Reforms Required by the 1994 Act, but Important  Decisions about Its Future Remain. GAO-07-104. Washington, D.C.:  December 8, 2006.
Indian Trust Funds: Individual Indian Accounts. GAO-02-970T.  Washington, D.C.: July 25, 2002.
Indian Trust Funds: Tribal Account Balances. GAO-02-420T. Washington,  D.C.: February 7, 2002.

		Indian Land Management

Indian Issues: BLM’s Program for Issuing Individual Indian Allotments  on Public Lands Is No Longer Viable. GAO-07-23R. Washington, D.C.:  October 20, 2006.
Indian Issues: BIA’s Efforts to Impose Time Frames and Collect Better  Data Should Improve the Processing of Land in Trust Applications.  GAO-06-781. Washington, D.C.: July 28, 2006.
Indian Irrigation: Numerous Issues Need to Be Addressed to Improve  Project Management and Financial Sustainability. GAO-06-314.  Washington, D.C.: February 24, 2006.
Alaska Native Allotments: Conflicts with Utility Rights-of-way Have Not  Been Resolved through Existing Remedies. GAO-04-923. Washington,  D.C.: September 7, 2004.
Columbia River Basin: A Multilayered Collection of Directives and Plans  Guides Federal Fish and Wildlife Plans. GAO-04-602. Washington, D.C.:  June 4, 2004.
Alaska Native Villages: Most Are Affected by Flooding and Erosion, but  Few Qualify for Federal Assistance. GAO-04-142. Washington, D.C.:  December 12, 2003.

		Island Communities

Compacts of Free Association: Micronesia and the Marshall Islands Face  Challenges in Planning for Sustainability, Measuring Progress, and  Ensuring Accountability. GAO-07-163. Washington, D.C.: December 15,  2006.
U.S. Insular Areas: Economic, Fiscal, and Financial Accountability  Challenges. GAO-07-119. Washington, D.C.: December 12, 2006.
Compacts of Free Association: Development Prospects Remain Limited  for Micronesia and Marshall Islands. GAO-06-590. Washington, D.C.: June  27, 2006.
U.S. Insular Areas: Multiple Factors Affect Federal Health Care Funding.  GAO-06-75. Washington, D.C.: October 14, 2005.
Compacts of Free Association: Implementation of New Funding and  Accountability Requirements Is Well Underway, but Planning  Challenges Remain. GAO-05-633. Washington, D.C.: July 11, 2005.
American Samoa: Accountability for Key Federal Grants Needs  Improvement. GAO-05-41. Washington, D.C.: December 17, 2004.
Compact of Free Association: Single Audits Demonstrate Accountability  Problems over Compact Funds. GAO-04-7. Washington, D.C.: October 7,  2003.
Compact of Free Association: An Assessment of the Amended Compacts  and Related Agreements. GAO-03-890T. Washington, D.C.: June 18, 2003.
Foreign Assistance: Effectiveness and Accountability Problems Common  in U.S. Programs to Assist Two Micronesian Nations. GAO-02-70.  Washington, D.C.: January 22, 2002.
Foreign Relations: Kwajalein Atoll Is the Key U.S. Defense Interest in  Two Micronesian Nations. GAO-02-119. Washington, D.C.: January 22,  2002.

	Managing Federal Land Appraisals

Interior’s Land Appraisal Services: Action Needed to Improve  Compliance with Appraisal Standards, Increase Efficiency, and  Broaden Oversight. GAO-06-1050. Washington, D.C.: September 28, 2006.
Land Acquisitions: Agencies Generally Used Similar Standards and  Appraisal Methodologies in CALFED and CVPIA Transactions. GAO-02- 278R. Washington, D.C.: January 23, 2002.

	Deferred Maintenance Backlog

Indian Irrigation Projects: Numerous Issues Need to Be Addressed to  Improve Project Management and Financial Sustainability. GAO-06-314.  Washington, D.C.: February 24, 2006.
Recreation Fees: Comments on the Federal Lands Recreation  Enhancement Act, H.R. 3283. GAO-04-745T. Washington, D.C.: May 6,  2004.
National Park Service: Efforts Underway to Address Its Maintenance  Backlog. GAO-03-1177T. Washington, D.C.: September 27, 2003.
Bureau of Indian Affairs Schools: Expenditures in Selected Schools Are  Comparable to Similar Public Schools, but Data Are Insufficient to  Judge Adequacy of Funding and Formulas. GAO-03-955. Washington,  D.C.: September 4, 2003.
Bureau of Indian Affairs Schools: New Facilities Management  Information System Promising, but Improved Data Accuracy Needed.  GAO-03-692. Washington, D.C.: July 31, 2003.
National Park Service: Status of Agency Efforts to Address Its  Maintenance Backlog. GAO-03-992T. Washington, D.C.: July 8, 2003.
National Park Service: Status of Efforts to Develop Better Deferred  Maintenance Data. GAO-02-568R. Washington, D.C.: April 12, 2002.

	Revenue Collection Opportunities

Oil and Gas Royalties: Royalty Relief Will Likely Cost the Government  Billions, but the Final Costs Have Yet to Be Determined. GAO-07-369T.  Washington, D.C.: January 17, 2007.
Recreation Fees: Agencies Can Better Implement the Federal Lands  Recreation Enhancement Act and Account for Fee Revenues. GAO-06- 1016. Washington, D.C.: September 22, 2006.
Renewable Energy: Increased Geothermal Development Will Depend on  Overcoming Many Challenges. GAO-06-629. Washington, D.C.: May 24,  2006.
National Parks Air Tour Fees: Effective Verification and Enforcement  Are Needed to Improve Compliance. GAO-06-468. Washington, D.C.: May  11, 2006.
Oil and Gas Development: Increased Permitting Activity Has Lessened  BLM’s Ability to Meet Its Environmental Protection Responsibilities.  GAO-05-418. Washington, D.C.: June 17, 2005.
National Park Service: Revenues Could Increase by Charging Allowed  Fees for Some Special Uses Permits. GAO-05-410. Washington, D.C.: May  6, 2005.

	Weaknesses in Contracts and Grants Management

Chesapeake Bay Gateways Program: National Park Service Needs Better  Accountability and Oversight of Grantees and Gateways. GAO-06-1049.  Washington, D.C.: September 14, 2006.
Interagency Contracting: Franchise Funds Provide Convenience, but  Value to DOD Is Not Demonstrated. GAO-05-456. Washington, D.C.: July  29, 2005.
Interagency Contracting: Problems with DOD’s and Interior’s Orders to  Support Military Operations. GAO-05-201. Washington, D.C.: April 29,  2005.
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Summary:
Why GAO Did This Study

The Department of the Interior is responsible for managing much of the nation's vast natural resources. Its agencies implement an array of programs intended to protect these precious resources for future generations while also allowing certain uses of them, such as oil and gas development and recreation. In some cases, Interior is authorized to collect royalties and fees for these uses. Over the years, GAO has reported on challenges facing Interior as it implements its programs. In addition to basic program management issues, the department faces difficult choices in balancing its many responsibilities, and in improving the condition of the nation's natural resources and the department's infrastructure, in light of the federal deficit and long-term fiscal challenges facing the nation. This testimony highlights some of the major management challenges facing Interior today.

What GAO Found

The Department of the Interior has made progress in addressing challenges that GAO has identified in such areas as developing and maintaining better data to manage the department's programs and strengthening internal controls. However, numerous important problems remain, as discussed below. Management of resource protection efforts needs to be strengthened. Interior has undertaken steps to improve some of its resource protection efforts, but it has yet to develop a cohesive national strategy to address wildland fire issues, as GAO has recommended. In addition, Interior agencies that manage hardrock mining and oil and gas production on their lands have not effectively carried out their environmental protection responsibilities. Management problems in Indian and island community programs persist. While Interior has implemented major reforms to address weaknesses in managing Indian trust funds and other assets, concerns remain about finalizing organizational changes and delays in decisions about land that the department will take into trust status. In addition, island community programs continue to lack accountability measures. Land appraisals continue to fall short of standards. While Interior has consolidated the land appraisal function into a departmental office to address serious problems with the quality of its appraisals and the millions of dollars that had been lost as a result, a large portion of appraisals that GAO reviewed still did not comply with recognized appraisal standards. Deferred maintenance backlog needs to be addressed. Interior has implemented improved inventory and asset management systems for some programs, but it is not clear how it will address the estimated $17 billion in deferred maintenance. Other programs continue to lack information required to accurately estimate needs. Revenue collection needs more management attention. Interior may not be collecting billions of dollars of revenue from oil and gas royalties; geothermal royalties; and fees from individual recreational uses, air tour operations in and around national parks, and commercial filming and still photography in national parks. Contract and grant management lack needed controls. Because it lacks adequate controls over management of grants and contracts, Interior cannot ensure that millions of dollars in grant and contract funding were used appropriately.