OFFICE OF 

INSPECTOR GENERAL 

U.S.DEPARTMENT OFTHE INTERIOR 

U.S. FISH AND WILDLIFE SERVICE WILDLIFE AND 

SPORT FISH RESTORATION PROGRAM 

Grants Awarded to the State of Minnesota, Department of 

Natural Resources, From July 1, 2016, Through 

June 30, 2018 

AUDIT

Report No.: 2019-CR-016 March 2020 
 

 

 

 

 

 

 

 

 

 

OFFICE OF 

INSPECTOR GENERAL 

U.S.DEPARTMENT OF THE INTERIOR 

Memorandum 

To: Aurelia Skipwith 

Director, U.S. Fish and Wildlife Service 

From: Amy R. Billings 

Regional Manager, Central Region 

Subject: Final Audit Report – U.S. Fish and Wildlife Service Wildlife and Sport Fish 

Restoration Program Grants Awarded to the State of Minnesota, Department of 

Natural Resources, From July 1, 2016, Through June 30, 2018 

Report No. 2019-CR-016 

This final report presents the results of our audit of costs claimed by the State of 

Minnesota, Department of Natural Resources (Department) under grants awarded by the U.S. 

Fish and Wildlife Service (FWS). The FWS provided the grants to the State under the Wildlife 

and Sport Fish Restoration Program. The audit included claims totaling approximately $153 

million on 43 grants that were open during the State fiscal years that ended June 30, 2017, and 

June 30, 2018 (see Appendix 1). The audit also covered the Department’s compliance with 

applicable laws, regulations, and FWS guidelines, including those related to the collection and 

use of hunting and fishing license revenues and the reporting of program income. 

We found that the Department complied, in general, with applicable grant accounting and 

regulatory requirements. We did, however, question costs totaling $56,089 for potential 

diversion of license revenue related to the disposition of surplus equipment. We found the 

Department did not identify or report all its earned program income, and we found the 

Department had not reconciled its real property records with the FWS’ real property inventory. 

We issued a draft report to the FWS for its response to our recommendations. In its 

response to our draft report, the FWS concurred with our recommendations and will work with 

the Department to implement the recommendations (see Appendix 4). 

Please provide us with a corrective action plan based on our recommendations by June 

22, 2020. The plan should provide information on actions taken or planned to address the 

recommendations, as well as target dates and title(s) of the official(s) responsible for 

implementation. Formal responses can be submitted electronically. Please address your response 

to me and submit a signed PDF copy to aie_reports@doioig.gov. 

The legislation creating the Office of Inspector General requires that we report to

Congress semiannually on all audit reports issued, actions taken to implement our 

recommendations, and recommendations that have not been implemented. 

Office of Audits, Inspections, and Evaluations | Lakewood, CO 
 

 

If you have any questions regarding this report, please contact me at 303-236-9243 or 

you can email aie_reports@doioig.gov. 

cc: Regional Director, Region 3, U.S. Fish and Wildlife Service 

2 
Table of Contents 

Introduction......................................................................................................................................1 

Background...............................................................................................................................1 

Objectives.................................................................................................................................1 

Scope ........................................................................................................................................1 

Methodology.............................................................................................................................2 

Prior Audit Coverage................................................................................................................3 

Results of Audit ...............................................................................................................................4 

Audit Summary ........................................................................................................................4 

Findings and Recommendations...............................................................................................4 

Appendix 1.....................................................................................................................................11 

Appendix 2.....................................................................................................................................13 

Appendix 3.....................................................................................................................................14 

Appendix 4.....................................................................................................................................15 
 

 

 

 

 

 

 

Introduction 

Background 

The Pittman-Robertson Wildlife Restoration Act and the Dingell-Johnson Sport Fish Restoration 

Act1 established the Wildlife and Sport Fish Restoration Program. Under the Program, the U.S. 

Fish and Wildlife Service (FWS) provides grants to States to restore, conserve, manage, and 

enhance their wildlife and sport fish resources. The Acts and Federal regulations contain 

provisions and principles on eligible costs and allow the FWS to reimburse States up to 

75 percent of the eligible costs incurred under the grants. The Acts also require that hunting and 

fishing license revenues be used only for the administration of the States’ fish and game 

agencies. Finally, Federal regulations and FWS guidance require States to account for any 

income they earn using grant funds. 

Objectives 

We conducted this audit to determine if the Minnesota Department of Natural Resources 

(Department): 

• Claimed the costs incurred under the Program grants in accordance with the Acts and

related regulations, FWS guidelines, and grant agreements

• Used State hunting and fishing license revenues solely for fish and wildlife program

activities

• Reported and used program income in accordance with Federal regulations

Scope 

Audit work included claims totaling approximately $153 million on the 43 grants open during 

the State fiscal years (SFYs) that ended June 30, 2017, and June 30, 2018 (see Appendix 1). We 

report only on those conditions that existed during this audit period. We performed our audit at 

the Minnesota Department of Natural Resources headquarters located in St. Paul, MN, and 

visited three regional offices, two field offices, two fish hatcheries, five wildlife management 

areas, three public access/boat ramps, and one subrecipient (see Appendix 2). 

We performed this audit to supplement—not replace—the audits required by the Single Audit 

Act. 

1 16 U.S.C. §§ 669 and 777, as amended, respectively. 

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Methodology 

We conducted this audit in accordance with Generally Accepted Government Auditing 

Standards. Those standards require that we plan and perform the audit to obtain sufficient, 

appropriate evidence to provide a reasonable basis for our findings and conclusions based on our 

audit objectives. We believe that the evidence obtained provides a reasonable basis for our 

findings and conclusions based on our audit objectives. 

Our tests and procedures included: 

• Examining the evidence that supports selected expenditures charged to the grants by

the Department

• Reviewing transactions related to purchases, direct costs, drawdowns of

reimbursements, in-kind contributions, and program income

• Interviewing Department employees to ensure that personnel costs charged to the

grants were supportable

• Conducting site visits to inspect equipment and other property

• Determining whether the Department used hunting and fishing license revenues

solely for the administration of fish and wildlife program activities

• Determining whether the State passed required legislation assenting to the provisions

of the Acts

We also identified the internal controls over transactions recorded in the labor- and license-fee 

accounting systems and tested their operation and reliability. Based on the results of initial 

assessments, we assigned a level of risk to these systems and selected a judgmental sample of 

transactions for testing. We did not project the results of the tests to the total population of 

recorded transactions or evaluate the economy, efficiency, or effectiveness of the Department’s 

operations. 

We relied on computer-generated data for other direct costs and personnel costs to the extent that 

we used these data to select Program costs for testing. Based on our test results, we either 

accepted the data or performed additional testing. For other direct costs, we took samples of 

costs and verified them against source documents such as purchase orders, invoices, receiving 

reports, and payment documentation. For personnel costs, we selected Department employees 

who charged time to Program grants and verified their hours against timesheets and other 

supporting data. 

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Prior Audit Coverage 

On December 19, 2014, we issued Final Audit Report – U.S. Fish and Wildlife Service Wildlife 

and Sport Fish Restoration Program Grants Awarded to the State of Minnesota, Department of 

Natural Resources, From July 1, 2011, Through June 30, 2013 (Report No. R-GR-FWS-0002-

2014). 

We followed up on all five recommendations in the report and found that the U.S. Department of 

the Interior, Office of the Assistant Secretary for Policy Management and Budget (PMB) 

considered four recommendations resolved and implemented and one recommendation resolved 

but not implemented. As discussed in the “Findings and Recommendations” section of this 

report, we are repeating the unimplemented recommendation related to real property 

reconciliation, and we will keep the tracking of the unimplemented recommendation with the 

prior audit report. 

We reviewed single audit reports for SFYs 2017 and 2018. None of these reports contained any 

findings that would directly affect the Program grants. 

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Results of Audit 

Audit Summary 

We found that the Department complied, in general, with applicable grant agreement provisions 

and requirements of the Acts, regulations, and FWS guidance. We identified, however, the 

following conditions that resulted in our findings including questioned costs totaling $56,089. 

A. Potential Diversion of License Revenue—$56,089. We questioned $56,089 of

revenue from the sale of surplus equipment that was originally purchased with license

revenue (see Appendix 3). The Department did not deposit the proceeds from the sale

of the surplus equipment back into the license revenue account.

B. Improper Accounting for Program Income. We found that the Department’s Parks

and Trails Division did not have policies or procedures in place to adequately identify

or report program income in accordance with regulations.

C. Unreconciled Real Property Records. We found that the Department has not

reconciled its Program-funded real property records with those of the FWS.

Findings and Recommendations 

A. Potential Diversion of License Revenue—$56,089

The Department sells hunting and fishing licenses and collects license fees from hunters and 

anglers throughout the State. Under the Program, the Department must use revenue from these 

sales only to administer its fish and wildlife programs. During our audit scope, SFYs 2017 and 

2018, the Department potentially diverted hunting and fishing license revenue for non-fish and 

game activities. 

The Department sold $56,089 of surplus equipment that was originally purchased with license 

revenue (see Figure 1). The Department, however, did not deposit the proceeds back into its Fish 

and Wildlife Division license revenue account. Rather, the Department used the sales proceeds 

to minimize the net cost to the Fleet Fuel Program that services the entire Department, which 

consists of six divisions. 

4 
Figure 1: Sold Surplus Equipment Originally Purchased with License Revenue 

Salvage 

Equipment Description* Amounts ($)† 

Carstens Bluebill 248 

Bombardier 70 HP 1,449 

2001 EZ Loader 171 

1999 Shorelander 224 

1998 Yacht Club R1715 233 

1989 Spartan R1716 270 

1998 Arctic Cat JAG 340 450 

1988 Shorelandr RD1821 450 

1999 Newman Mfg 450 

2007 Bear Track BTU5396 492 

1989 Spartan R1716 179 

2007 Tiger 540 

2006 Yacht Club R18G 618 

2003 Clark 895 

1997 Toro Groundmaster 1,530 

2000 Arctic Cat Panther 1,800 

Johnson 10 HP 338 

2009 Mercury 630 

Mercury 50 HP 720 

1986 Spartan WRC120 90 

1988 Spartan MMMMM 157 

1988 Spartan R18 197 

2001 Karavan KKB160064HD 313 

2002 McClain 1813GD 460 

2002 Yacht Club R1818 690 

2006 Yacht Club R18G 1,007 

2001 Continentl MMMMM 1,170 

1999 John Deere 425 3,600 

1997 Nissan P50KLPT767 7,229 

John Deere 676 675 

Carstens Pintail 338 

Polar Kraft 16ft Alum Pwr Boat 360 

Yamaha 50 HP 1,575 

Mercury 50 HP 1,800 

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Salvage 

Equipment Description* Amounts ($)† 

Evinrude 40 HP 162 

Evinrude 70 HP 2,070 

Lund 16ft Alum Pwr Boat 4,140 

River Pro 18ft Alum Pwr Boat 3,623 

2011 Mercury 60HP 2,909 

Clark 20ft Alum Pwr Boat 2,685 

2004 Shorelander SLB24S 1,208 

Go Devil 18ft Alum Pwr Boat 2,760 

Polar Kraft 16ft Alum Pwr Boat 720 

Crestliner 16ft Alum Pwr Boat 918 

Smith Root 4666 98 358 

Peterson FiberGlass 23 

Mercury 25 HP 225 

Suzuki 140 HP 45 

Alumacraft 14ft Alum Pwr Boat 322 

1990 Spartan XLB170 54 

1999 H & H US081 135 

1987 Spartan WRC21538 143 

1993 Built Rite BR490F 200 

1988 Spartan 200 

2009 Clark CB18RTR 269 

2005 Shorelander 360 

2006 Yacht Club R18G 540 

Polar Kraft 16ft Alum Pwr Boat 520 

Mercury 50 HP 157 

Total $56,089‡ 

*Items listed as they appeared on the equipment

inventory.

†Salvage amounts have been rounded.

‡Total based on original amounts.

Source: Minnesota Department of Natural 

Resources. 

Federal regulations (50 C.F.R. § 80.10(c)(1) and (2)) require that license revenue be controlled 

only by the State fish and wildlife agency and be used only for the administration of the State 

fish and wildlife agency. In addition, 50 C.F.R. § 80.20(b) states that license revenue includes 

personal property acquired with license revenue. By depositing receipts from the sale of fleet 

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equipment purchased with license revenue into its Fleet account instead of its Fish and Wildlife 

Division license revenue account, the State did not have controls in place to ensure the funds 

returned would benefit only fish and wildlife activities, as required by regulation. 

Without controls in place to ensure that funds from the sale of equipment originally purchased 

with license revenue return to benefit only fish and wildlife activities, the Department could 

potentially divert more funds to other unrelated activities. 

Recommendations 

We recommend that the FWS work with the Department to: 

1. Require the Department to establish policies and procedures to ensure that

proceeds from sales of equipment purchased with license revenue are

deposited to the license revenue account

2. Resolve the diversion of license revenue totaling $56,089

Department Response 

The Department agreed with the finding and committed to updating its property management 

policy and procedures to ensure proceeds from the sale of equipment purchased with license 

revenue are directed back to the original division. In addition, the Department reported 

transferring $56,089 of revenue generated from the sales of license revenue-funded assets from 

the Fleet account to the Fish and Wildlife Division license revenue account. It did not, however, 

provide supporting documentation confirming the transfer. 

FWS Response 

The FWS concurred with the recommendations and will work with the Department to develop a 

corrective action plan. 

OIG Comment 

Based on the responses from the Department and the FWS, we consider both recommendations 

resolved but not implemented. 

B. Improper Accounting for Program Income

Under the Program, States are encouraged to earn program income to reduce program costs. 

States must report and use program income in accordance with Federal regulations. The FWS 

awarded the Department’s Parks and Trails Division (Division) two grants for Statewide Boat 

Access Operations and Maintenance, one in 2014 (Grant No. F14AF00596) and one in 2017 

(Grant No. F17AF00056). We found that the Division earned program income during each 

grant’s period of performance, but the Division did not properly identify, track, or report the 

program income in accordance with regulations. 

We found that the Division identified some of the program income earned during the grant 

period for Grant No. F17AF00056 and deducted it from expenditures prior to drawing down 

7 
 

 

 

 

 

 

reimbursement from the FWS. The Division, however, did not report program income on the 

Federal Financial Report (Standard Form 425), as required. When we brought this issue to the 

Division’s attention, it identified additional program income earned during the period of 

performance for Grant No. F14AF00596. The Division did not identify nor deduct this program 

income from the expenditures prior to reimbursement from the FWS. As a result, the Division 

submitted a revised Standard Form 425 to the FWS reporting the recently identified program 

income and provided the FWS a reimbursement of $38,992. 

According to regulations, States must identify and deduct program income from expenditures 

before the State can request reimbursement from the FWS. We found that the Division requested 

several reimbursements from the FWS before the end of the grant’s period of performance 

without identifying earned program income. 

Federal regulation 2 C.F.R. § 200.80 defines program income as gross income earned by the 

non-Federal entity that is directly generated by a supported activity or earned as a result of the 

Federal award during the period of performance. In addition, Federal regulation 50 C.F.R. § 

80.123(b)(1) requires an agency to use program income for current costs. 

Federal regulation 2 C.F.R. § 200.307(e)(1) states that if the Federal awarding agency does not 

specify how program income is to be used in its regulations or the terms and conditions of the 

Federal award, program income must be deducted from total allowable costs to determine the net 

allowable costs. 

Finally, Federal regulation 2 C.F.R. § 200.305(b)(5) requires that grantees disburse program 

income before requesting additional cash payments, and 2 C.F.R. § 200.327 describes the 

responsibilities for financial reporting. The Federal awarding agency may solicit only the 

standard governmentwide data elements approved by the Office of Management and Budget to 

collect financial information on the Federal Financial Report. 

The Division did not have a formal policy or procedure in place to track or account for program 

income in accordance with regulations. Division staff told us that they did not report program 

income as required due to a misunderstanding within the Division. Division staff were not aware 

that they should have identified and reported earned program income throughout the course of 

the grant or deduct the program income prior to receiving reimbursement. 

The Division did not identify or report all the program income earned for Grant Nos. 

F14AF00596 and F17AF00056 in accordance with regulations. As a result, the Division 

requested excess reimbursement of funds and had to reimburse the FWS for those funds. Without 

a formal policy or procedure in place, we have no assurance that the Division identified and 

accounted for all program income in accordance with regulations. 

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Recommendations 

We recommend that the FWS work with the Department to: 

3. Develop and implement formal policies or procedures to identify, track, and

report program income in accordance with grant agreements and regulations

4. Identify and account for program income earned on Federal Financial Reports

(Standard Form 425)

Department Response 

The Department agreed with the finding and committed to developing procedures to identify, 

track, and report program income in accordance with grant agreements and regulations. Further, 

the Department submitted a revised Federal Financial Report for program income relating to 

Grant Nos. F14AF00596 and F17AF00056. 

FWS Response 

The FWS concurred with the recommendations and will work with the Department to develop a 

corrective action plan. 

OIG Comment 

Based on the responses from the Department and the FWS, we consider Recommendation 3 

resolved but not implemented, and Recommendation 4 resolved and implemented. 

C. Unreconciled Real Property Records

We found the Department has not reconciled its Program-funded real property records with those 

of the FWS since 2009. In our 2009 report (R-GR-FWS-0004-2009), we found that 

reconciliation had not yet been completed. In our 2014 report (R-GR-FWS-0002-2014), we 

noted the same finding and again recommended that the FWS ensure that the Department 

reconciled its real property records with the FWS’ records, and in addition, certify that grantfunded real property is being used for its intended purposes. 

Federal regulation 50 C.F.R. § 80.90(f) requires that the Department maintain control of all 

assets acquired under Program grants to ensure that they serve the purpose for which they were 

acquired throughout their useful life. 

Department staff informed us they had made progress on the real property reconciliation, though 

they still had significant work left. As such, the Department submitted a request to the FWS for 

an extension of the 2014 audit’s corrective action plan for land reconciliation. On January 14, 

2019, the FWS approved the extension of the land reconciliation until December 31, 2020. 

Without reconciliation, neither the Department nor the FWS can ensure that lands acquired under 

the Program are used for their intended purposes. We are therefore, repeating the 

recommendations from our prior audit report. The FWS should submit any documentation to the 

PMB to track implementation using the previous report number. 

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Repeat Recommendations (Tracked Under Report No. R-GR-FWS-0002-2014, 

Recommendation No. 1) 

We recommend that the FWS: 

• Ensure that the Department reconciles its real property records with FWS’

records

• Require the Department to certify that grant-funded real property is being

used for its intended purposes

Department Response 

The Department agreed with the finding and has been working on reconciling its real property 

records with FWS records since we issued our 2014 report. The Department received an 

extended deadline from the FWS until December 2020. Once the land reconciliation is complete, 

the Department will certify that grant-funded real property is being used for its intended purpose. 

FWS Response 

The FWS concurred with the recommendations and is working with the Department to 

implement the actions in the previous corrective action plan. 

OIG Comment 

Based on the responses from the Department and the FWS, we consider the repeat 

recommendations resolved but not implemented. The repeat recommendations are being tracked 

under Report No. R-GR-FWS-0002-2014, Recommendation No. 1, and the prior corrective 

action plan. 

10 
 

 

 

Appendix 1 

State of Minnesota 

Department of Natural Resources 

Grants Open during the Audit Period 

July 1, 2016, Through June 30, 2018 

FBMS Grant Grant Claimed 

Number Amount ($) Costs ($) 

F13AF00585 860,000 51,180 

F14AF00404 9,416,796 8,019,198 

F14AF00596 3,750,000 4,221,429 

F14AF01220 354,500 236,731 

F15AF00162 16,692,000 20,912,380 

F15AF00243 15,210,000 15,349,342 

F15AF00251 1,462,159 1,563,645 

F15AF00252 1,044,950 596,791 

F15AF00287 5,822,000 5,010,507 

F15AF00289 23,020,000 23,342,402 

F15AF00298 5,324,906 4,131,850 

F15AF00912 3,950,000 4,332,284 

F16AF00051 1,530,000 1,269,727 

F16AF00107 2,070,000 1,448,882 

F16AF00141 1,166,702 829,590 

F16AF00173 100,000 0 

F16AF00175 16,000,000 10,189,361 

F16AF00211 1,600,000 0 

F16AF00276 5,004,000 4,862,785 

F16AF00398 7,661,500 7,565,805 

F16AF00442 259,650 178,655 

F16AF00692 750,100 0 

F16AF00694 347,296 141,991 

F17AF00056 4,532,800 2,738,255 

F17AF00121 16,000 0 

F17AF00161 897,202 562,265 

F17AF00190 19,080,000 10,295,147 

11 
 

 

FBMS Grant Grant Claimed 

Number Amount ($) Costs ($) 

F17AF00281 5,472,000 2,528,337 

F17AF00282 22,020,000 11,995,042 

F17AF00294 14,650,000 6,544,662 

F17AF00454 815,275 98,034 

F17AF00456 2,159,804 691,037 

F17AF00457 4,626,974 1,377,602 

F17AF00943 4,410,000 1,190,629 

F17AF00983 250,000 192,141 

F17AF01287 210,000 181,254 

F17AF01288 285,000 265,745 

F18AF00035 1,197,500 200,000 

F18AF00036 2,070,000 182,847 

F18AF00039 16,000,000 0 

F18AF00046 1,600,000 0 

F18AF00144 585,175 0 

F18AF00436 19,000 0 

Totals $224,293,289 $153,297,533 

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Appendix 2 

State of Minnesota 

Department of Natural Resources 

Sites Visited 

Headquarters 

St. Paul, MN 

Regional Offices 

Aitkin Area Office/Fisheries 

Duluth Fisheries 

Mille Lacs Fisheries 

Field Offices 

Brainerd Area Office/Fisheries Wildlife Office 

Two Harbors Area Office 

Fish Hatcheries 

Crystal Springs 

Lanesboro 

Wildlife Management Areas 

Carlos Avery 

Mille Lacs 

Swan Lake 

Vermillion River 

Whitewater 

Public Access/Boat Ramps 

Borden Lake Public Access 

McQuade Small Craft Harbor Boat Ramp 

Mille Lacs Public Access 

Subrecipient 

Trust for Public Lands 

13 
 

 

 

Appendix 3 

Potential Diversion of License Revenue 

Finding Area Amount ($) 

Sale of Surplus Equipment Without 56,089 Returning Income to the Program 

Total $56,089 

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4 

Appendix 4 

State of Minnesota 

Department of Natural Resources 

Status of Audit Recommendations 

Recommendation Status Action Required 

1 – 3, 

Repeat 

Recommendation 1 

(Report No. R-GRFWS-0002-2014) 

We consider the 

recommendations resolved 

but not implemented. 

U.S. Fish and Wildlife Service 

(FWS) regional officials 

concurred with the findings 

and recommendations and 

will work with the Minnesota 

Department of Natural 

Resources to develop and 

implement a corrective action 

plan. 

Complete a corrective action plan 

that includes information on 

actions taken or planned to 

address the recommendations, 

target dates and title(s) of the 

official(s) responsible for 

implementation, and verification 

that FWS Headquarters officials 

reviewed and approved the actions 

taken or planned by the State. 

We will refer the 

recommendations not 

implemented at the end of 90 

days (June 22,2020) to the 

Assistant Secretary for Policy, 

Management and Budget for 

tracking of implementation. 

We consider the 

recommendation resolved No action is required. 

and implemented. 

15 
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