Semiannual Report to Congress

September 2006
OIG Points of Contact

Inspector General......................................(202) 482-4661

Legislative and 

Intergovernmental Affairs...........................(202) 482-2187

Office of Audits...........................................(202) 482-1934

Office of Administration..............................(202) 482-2637

Office of Counsel........................................(202) 482-5992

Office of Inspections and Program Eval. ....(202) 482-2754

Office of Investigations ...............................(202) 482-0934

Office of Systems Evaluation......................(202) 482-6186

Media Inquiries ...........................................(202) 482-4661

OIG Internet Home Page

www.oig.doc.gov

OIG HOTLINE:

Telephone...................................................(202) 482-2495

 or (800) 424-5197

TDD............................................................(202) 482-5923

Internet e-mail....................................hotline@oig.doc.gov

REQUESTS FOR REPORTS:

Telephone................................................ (202) 482-1243

Internet e-mail..................................oigweb@oig.doc.gov

Office of Inspector General

Organizational Chart

Inspector

General

Deputy 

Inspector General

Office of

Investigations

Office of

Audits

Office of

Systems Evaluation

Office of

Counsel

Office of

Administration

Office of

Inspections and

Program Evaluations

Business &

 Science Division

Atlanta Regional Office

Denver Regional Office

Seattle Regional Office

Investigative

Resident Offices

Investigative

Field Offices

Investigative

Services

Regional

Audits

Financial Statements

& Accountability 

Audits

Atlanta Resident Office

Denver Resident Office

Seattle Resident Office

Contract Audits 

Division
IG’s


Semiannual Report


to Congress


September 2006 

UNITED STATES DEPARTMENT OF COMMERCE 

The Inspector General 

Washington, D.C. 20230 

September 2006 

The Honorable Carlos M. Gutierrez 

Secretary of Commerce 

Washington, D.C. 20230 

Dear Mr. Secretary: 

I am writing to submit to you, in accordance with the Inspector General Act of 1978, this semiannual report outlining the 

work and activities of the Office of Inspector General for the 6-month period April 1, 2006, through September 30, 2006. 

The act requires that we prepare this report twice each year to summarize our assessments of Commerce operations and 

that you transmit it, with any comments you may wish to add, to Congress within 30 days of receiving it. 

This report highlights a number of key issues that continue to warrant management’s attention, among them, security of 

information technology resources. In addition, it includes our recent work in the important areas of the Census Bureau’s 

preparations for the 2010 decennial and management of the environmental satellites program by the National Oceanic and 

Atmospheric Administration. Both are major initiatives with substantial price tags and large numbers of people involved, 

and they will surely benefit from close management oversight to correct any problems already in existence and prevent 

new ones from occurring. Finally, I hope you will take special note of the outstanding investigative work this office has 

done in this semiannual period. 

It is also important to note that Commerce has made substantial progress in addressing some of the top management challenges in recent years. We will continue to work closely with you and other senior Commerce managers to ensure that 

Department resources are always used effectively and efficiently. 

It is a pleasure to work with you and your management team, and I extend my personal thanks for partnering with us in a 

spirit of cooperation. 

Sincerely, 

Johnnie E. Frazier 

ContentS


IG’s Message to Congress ......................................................................................................................................................................1

Major Challenges for the Department .................................................................................................................................................3

Strengthen Department-Wide Information Security..........................................................................................................................3

Effectively Manage Departmental and Bureau Acquisition Processes..............................................................................................6

Strengthen Internal Controls over Financial, Programmatic, and Business Processes......................................................................6

Ensure that USPTO Uses Its Authorities and Flexibilities as a Performance-Based Organization to Achieve Better Results.........7

Control the Cost and Improve the Accuracy of the Decennial Census..............................................................................................7

Effectively Manage the Development and Acquisition of Environmental Satellites ........................................................................9

Promote Fair Competition in International Trade............................................................................................................................10

Effectively Manage NOAA’s Stewardship of Ocean and Living Marine Resources ......................................................................11

Aggressively Monitor Emergency Preparedness, Safety, and Security Responsibilities ................................................................11

Enhance Export Controls for Dual-Use Commodities ....................................................................................................................12

Agency Overviews 

Economic Development Administration..........................................................................................................................................15

Economics and Statistics Administration ........................................................................................................................................21

International Trade Administration..................................................................................................................................................25

National Oceanic and Atmospheric Administration ........................................................................................................................29

Technology Administration..............................................................................................................................................................39

Department-Wide Management.......................................................................................................................................................43

Office of Inspector General .................................................................................................................................................................47

Office of Investigations....................................................................................................................................................................47

Other OIG Activities........................................................................................................................................................................50

Tables and Statistics.........................................................................................................................................................................53

Reporting Requirements ..................................................................................................................................................................62

Types of OIG Work Products ..............................................................................................................................................................64

IG’s Message to Congress


I am proud to send you this compilation of the work our office 

has completed during the second semiannual period of fiscal year 

2006. My staff continues to perform audits, inspections, and other 

work that result in significant returns to the American people, 

either in actual dollars returned to the U.S. Treasury or through 

far-reaching systemic improvements in programs and operations 

that yield better delivery of services to American taxpayers and 

increased efficiency and accountability. Our investigators also have 

continued their outstanding work, having, for example, pursued 

and won a conviction with long prison time for a former National 

Oceanic andAtmospheric Administration employee who had used 

government computer resources to view child pornography. 

and well behind schedule. Yet, the contractor had received more 

than $123 million in award fees. We uncovered two overarching 

management and contract weaknesses that contributed to the 

unchecked cost and schedule overruns. 

First, we found that while the sensor problems were communicated 

to the program’s executive committee (EXCOM), the EXCOM 

did not effectively challenge the integrated program office’s 

optimistic assessment of their impact. Though it was clear by 

December 2002 that both costs and delays were increasing, the 

program director—a NOAA employee—maintained that these 

problems would be solved within available funding reserves and 

Prevention is the underlying reason for much of what we do and what 

the IG Act expects us to do. It is the reason we spend so much staff 

time working with recipients of Commerce grants to make sure they 

understand the importance of using the funds properly. And prevention is the reason we hold many one-on-one and, often, informal—but 

most effective—meetings with Commerce managers and stakeholders, 

who understand very well the old saying, “An ounce of prevention is 

worth a pound of cure.” 

Although the Department of Commerce has made great strides 

in improving an array of critical activities during these past 

months—as evidenced by our removal of one issue from the list 

of top management challenges earlier this year—we have identified issues that require sustained management attention and close 

oversight. Clearly, there can be no doubt that the NOAA’s triagency 

environmental satellite program is an example of management 

weakness, as shown by testimony before Congress in May 2006. 

Our audit showed the program suffered systemic problems that 

led to soaring overruns of the project’s costs. 

NPOESS Program Failings 

The National Polar-orbiting Operational Environmental Satellite 

System (NPOESS) is intended to replace the current generation 

of civilian and military weather satellites as they reach the end of 

their useful lives. Largely as a result of problems with a critical 

sensor, by September 2005 NPOESS was $3 billion over budget 

that NPOESS remained on schedule, and his assessment was 

never effectively challenged. Three years later it was clear the 

first satellite launch was going to be delayed, but it was too late 

to turn the program around. 

Second, the NPOESS experience shows that the incentive structure used to reward contractors does not always result in top 

performance as intended. Despite ongoing, significant delays 

and cost overruns, we found the prime contractor was awarded 

nearly the maximum fee amounts for the first five billing periods. These payments were the result of a flawed award fee plan 

which, among other things, contained evaluation criteria that did 

not sufficiently tie award fees to completion of the most critical 

or high-risk tasks. 

Since our report was released, the Deputy Secretary of Commerce 

has stressed the importance of NPOESS to the Department’s mission and national responsibilities and noted that he now receives 

September 2006/Semiannual Report to Congress  
IG’s Message to Congress 

monthly NPOESS progress reports from NOAA. He is working 

with the Under Secretary for Oceans and Atmosphere and the 

EXCOM partners to ensure NPOESS is managed, operated, and 

monitored in a way that meets the intent of our recommendations 

as well as those of the Nunn-McCurdy review process of the FY 

1982 National Defense Authorization Act, which determined that 

the program should continue with a reduced number of satellites 

with scaled-back capabilities. 

NOAA and Department officials have provided a detailed action 

plan to address the management and contract weaknesses we 

identified. We also have identified the development and acquisition 

of environmental satellites as a top management challenge for the 

Department and plan to monitor both NPOESS and the Geostationary Operational Environmental Satellite (GOES) program for as 

long as necessary to ensure the billions spent provide value to the 

government and the nation. 

Prevention Is the Foundation of Our Work 

Prevention is the lynchpin of my philosophy as Commerce’s Inspector General. A sustained effort to prevent problems whenever 

opportunity presents itself, to nip in the bud the worrisome things 

that could become major resource drains, and to offer wise counsel 

when a program seems to work but is hampered by strings of small 

inefficiencies that add up to overall ineffectiveness all characterize 

the outstanding work our office has consistently performed. 

Prevention is the underlying reason for much of what we do and 

what the IGAct expects us to do. It is the reason we spend so much 

staff time working with recipients of Commerce grants to make 

sure they understand the importance of using the funds properly. 

And prevention is the reason we hold many one-on-one and, often, 

informal—but most effective—meetings with Commerce managers and stakeholders, who understand very well the old saying, 

“An ounce of prevention is worth a pound of cure.” 

Prevention by Deterrence 

Prevention also serves as the motivation for our dedicated investigators who have to dig deep into the uglier side of human activity 

on occasion in the hope that shutting down one bad guy would 

serve as a warning to any others who might be tempted to betray 

the trust of their government position. It is not with pleasure, but 

a grim satisfaction, that I must note that Commerce OIG investigators’ dogged pursuit of one case drew national media attention 

and ended with the unsavory perpetrator being sentenced to many 

years in prison. 

On May 19, 2006, a former NOAA employee entered a guilty 

plea to federal charges of possession and production of child pornography. The man admitted to using government computers to 

download child pornography for approximately 10 years at work. 

The investigation, which was conducted by forensic experts in our 

Computer Crimes Unit, revealed more than 1 million pornographic 

images of children on his home and office computers. A search of 

his residence also uncovered evidence that he also was involved 

in the production of child pornography. 

The suspect fled the United States after his December 21, 2005, 

indictment and was featured on the television show America’s Most 

Wanted in January 2006. A few days after the program aired, he 

turned himself in to U.S. officials in Rome, Italy. He was sentenced 

on August 30, 2006, to 15 years in prison, followed by 3 years 

of supervised release, and ordered to pay restitution to a victim 

identified during our investigation. 

This disturbing case is now complete and the perpetrator incarcerated. But we are challenged to find ways to prevent such things, 

as well as go after any new instances of wrongdoing as they come 

to light. 

Collaboration Is Key to Future Success 

And finally, I am encouraged by the active role Secretary Gutierrez 

and Deputy Secretary Sampson have taken to improve the overall 

management of the Department. Not only have they promulgated 

a set of priority issues requiring the Department’s sustained attention, several of which complement our list of management 

challenges, they also have stressed their desire that their management team should actively collaborate with us to address areas of 

mutual concern. 

I look forward to deepening our working relationship with Secretary Gutierrez, Deputy Secretary Sampson, Congress, and senior 

Department officials as we take on the important challenges 

facing Commerce. Meeting the goals of the Inspector General 

Act requires that we act only in sincere partnership to provide 

the American people the highest quality and highest functioning 

government possible. Working together, I am confident that we 

can achieve that goal. 

 U.S. Department of Commerce/Office of Inspector General 
Major Challenges for the Department


This section highlights OIG’s Top 10 Management Challenges 

that faced the Department at the close of this semiannual period. 

Each challenge meets one or more of the following criteria: (1) it is 

important to the Department’s mission or the nation’s well-being, 

(2) it is complex, (3) it involves sizable resources or expenditures, 

or (4) it requires significant management improvements. Because 

of the diverse nature of Commerce activities, these criteria sometimes cut across bureau and program lines. Experience has shown 

that by aggressively addressing these challenges, the Department 

can enhance program efficiency and effectiveness; eliminate serious operational problems; decrease fraud, waste, and abuse; and 

achieve substantial savings. 

Challenge 1 

Strengthen Department-Wide 

Information Security 

Since enactment of the Federal Information Security Management 

Act (FISMA), government agencies have devoted significant resources to improving the security of information stored on their 

computer systems. The problem is long standing: GAO has identified information security as a government-wide high-risk issue 

every year since 1997. At Commerce, it is the No. 1 challenge and 

has been a material weakness since 2001. 

To eliminate the material weakness, Commerce has emphasized 

improving its certification and accreditation (C&A) process for 

IT systems. In February 2005, the chief information officer (CIO) 

issued a plan to produce acceptable quality C&A packages for all 

national-critical systems and some mission-critical systems by the 

end of FY 2005 and for all other systems by the end of FY 2006. 

In light of that plan, our approach to the C&A portion of our 2005 

FISMA evaluation was to review all improved packages available 

by August 31, 2005. Only five were ready—three from NOAA 

and two from Census. Those packages showed some noteworthy 

improvements. However, with such a low number of packages 

available for review and considering the deficiencies we found, we 

concluded that the Department’s C&A process had not improved 

to the point where authorizing officials had sufficient details about 

remaining system vulnerabilities to make fully informed accreditation decisions, and the IT security material weakness remained. 

In early FY 2006, the acting CIO worked with the operating units 

to reassess the schedule and give units more latitude on time frames 

Top 10 Management Challenges 

.	 Strengthen Department-wide information security. 

.	 Effectively manage departmental and bureau acquisition processes. 

.	 Strengthen internal controls over financial, program­


matic, and business processes.


4.	 Ensure that uSpto uses its authorities and flexibilities 

as a performance-based organization to achieve better 

results. 

5.	 Control the cost and improve the accuracy of the de­


cennial census.


6.	 Effectively manage the development and acquisition of 

environmental satellites. 

7.	 promote fair competition in international trade. 

8.	 Effectively manage noaa’s ocean and living marine


resources stewardship.


9.	 aggressively monitor emergency preparedness, safety, 

and security responsibilities. 

0. Enhance export controls for dual-use commodities. 

for completing improved C&Apackages, which recognized that the 

amount of time necessary to complete the C&A process correctly 

had been continually underestimated. When revised schedules were 

finalized in June 2006, the Department’s Office of the CIO (OCIO) 

expected a total of 28 C&A packages to be completed by the end 

of July, 27 of which were for high- or moderate- impact systems.1 

OCIO reviewed completed packages and worked with the bureaus 

to address concerns, as necessary. If OCIO determined a package 

was of sufficient quality, it was forwarded to OIG for FISMA 

review. As of August 24, 2006, our agreed-upon cutoff date, the 

CIO’s office had received packages for 22 high- and moderateimpact systems, 12 of which were forwarded to us. We evaluated 

a total of 15 C&Apackagesfor FY2006 FISMAreporting. Eleven 

of these packages were Commerce-owned systems that had gone 

through the improvement process, and 4 were high- and moderate 

1 Commerce systems were previously categorized as national critical, mission 

critical, or business essential. With the publication of NIST Federal Information 

Processing Standard 199, Standards for Security Categorization of Federal Information and Information Systems, agencies must now categorize information and 

information systems as low, moderate, or high impact, based on the potential consequences to organizations and individuals should there be a breach of security. 

September 2006/Semiannual Report to Congress  
Major Challenges for the Department 

Source: http://csrc.nist.gov/policies/WhatAgencycandonow-OMB-memo.pdf 

impact contractor systems that had not. (FISMA requires OIGs to 

review contractor systems.) 

We found a larger percentage of C&A packages met the requirements of Commerce’s IT security policy and applicable National 

Institute of Standards and Technology (NIST) standards and 

guidance (33 percent) as compared to last year (13 percent). But 

progress has been slow. Overall, we found that security plans and 

risk assessments have continued to improve. Security plans have 

shown particular improvement in the identification of network 

components. To be consistent with NIST standards and guidance 

and better support selection and tailoring of security controls, risk 

assessments now need to focus on specific threats and vulnerabilities for a given system instead of considering all possible risks. 

We also found significant improvement in testing of the five systems we reported as certified and accredited, as well as in testing 

of a system granted interim authorization to operate. However, the 

remaining nine systems had serious deficiencies in the assessment 

of security controls, particularly in the testing of operational and 

technical controls needed to determine whether the security controls 

for network components are in place and operating as intended. That 

being the case, neither the certification agent nor the authorizing official had adequate information on the remaining vulnerabilities, and 

we again found this to be a material weakness within Commerce. 

Our review included two draft C&Apackages for USPTO contractor systems, which we found to be of poor quality. Therefore, we 

also recommended that USPTO, which submits its performance 

and accountability report separately, report IT security as a material weakness. 

Protection of Sensitive 

Agency Information 

After a recent series of incidents throughout the federal government 

involving the compromise or loss of sensitive personal information, 

the Office of Management and Budget (OMB) issued Memorandum M-06-16 on June 23, 2006. The memorandum emphasized the 

need to protect personally identifiable information that is remotely 

accessed or physically removed from an agency location, required 

agencies to ensure that appropriate safeguards were in place within 

45 days, and asked inspectors general to conduct reviews. 

OMB defines personally identifiable information as “any information about an individual maintained by an agency, including, but 

not limited to, education, financial transactions, medical history, 

and criminal or employment history and information which can be 

used to distinguish or trace an individual’s identity, such as their 

name, social security number, date and place of birth, mother’s 

maiden name, biometric records, etc., including any other personal 

information which is linked or linkable to an individual.”2 

OMB’s memorandum included a checklist prepared by NIST for 

protection of remote information and recommended four additional 

actions: (1) encrypting all sensitive agency data on mobile computers/devices, (2) allowing remote access only with two-factor 

authentication,3 (3) using a “time-out” function for remote access 

and mobile devices requiring user reauthentication after 30 minutes 

of inactivity, and (4) logging all computer-readable data extracts 

from databases holding sensitive information and verifying such 

extracts have been erased within 90 days if no longer needed. 

The President’s Council on Integrity and Efficiency (PCIE) prepared a review guide for inspectors general and was to provide a 

government-wide report to OMB in October based on input from 

IG reviews of their agencies.

4 To evaluate Commerce, we selected 

a sample of 10 systems. This represents 16 percent of all systems 

identified by Commerce bureaus as storing or processing person2 OMB Memorandum M-06-19, Reporting Incidents Involving Personally Identifiable Information and Incorporating the Cost for Security in Agency Information 

Technology Investments, July 14, 2006. 3 Two-factor authentication is achieved by authenticating two of the following three 

factors: 1) “something you know” (e.g. a password), 2) “something you have” (i.e. 

in your possession at the time of the authentication), or 3) “something you are” 

(e.g., a biometric such as your fingerprint) 

4 The PCIE was established by Executive Order 12805, May 11, 1992, to address 

integrity, economy, and effectiveness issues that transcend individual government 

agencies, and increase the professionalism and effectiveness of IG personnel 

throughout the government. 

 U.S. Department of Commerce/Office of Inspector General 
ally identifiable information and accessed remotely or physically 

removed from an agency location. We reviewed the current system security plan and all test results verifying that the applicable 

controls are in place for each of these systems. 

Because of the short time available to perform our work (results 

were due to PCIE on September 22), our review was limited 

in scope, relying primarily on a comprehensive examination of 

security control test results provided by the operating units. Our 

FISMAwork plan for FY 2007 includes actual testing of applicable 

security controls. 

We found that in most cases bureaus could not demonstrate that the 

necessary steps have been taken to ensure that personally identifiable information is adequately safeguarded. None of the system 

documentation reviewed indicated that personally identifiable 

information was stored or processed, a step needed to determine 

the required safeguards. The Department’s IT security policy 

does not explicitly address the protection needs associated with 

personally identifiable information that is accessed remotely or 

physically removed. The Department’s OCIO has indicated that 

a revised policy addressing personally identifiable information 

requirements will be available during FY 2007. Most of the systems we reviewed showed no evidence that required protections 

for personally identifiable information transported and stored 

offsite, such as encryption, are implemented. There also was no 

evidence that protections are in place for remote access of personally identifiable information, such as virtual private networks or 

controls on downloading and storage of such data. 

To address the loss of sensitive personal information from laptop 

computers and related equipment at the Census Bureau, the Secretary of Commerce asked OIG to determine the extent of problems 

in protecting sensitive personal information at Census, including 

whether property management policies and practices are adequate 

in light of the bureau’s unique workforce and mission. We plan to 

report on the results of our evaluation in the next semiannual. 

NOAA C&A 

In this semiannual period, we reported on findings from our FY 

2005 review of three NOAAC&Apackages: the Search and Rescue 

Satellite-Aided Tracking system (SARSAT), the Polar Operational 

Environmental Satellite Ground System (POES), and the Office 

of Response and Restoration Seattle Local Area Network (Seattle 

LAN). Each of these systems was certified by NOAA personnel 

and accredited by a senior NOAA official as part of NOAA’s C&A 

improvement effort. 

Our report focused on two problem areas: incomplete system 

descriptions and inadequate security control assessments. Insufficiently complete system descriptions can yield inadequate 

identification and examination of system components in security 

Major Challenges for the Department 

control assessments. The security control assessments did not 

evaluate many of the system controls and were conducted without 

adequate test procedures. Consequently, NOAA’s certification 

process did not provide sufficient information to authorizing officials on remaining system vulnerabilities. 

In its response, NOAA stated that it had completed C&A activities 

for POES and SARSAT nearly 14 months ago, had made immediate changes to its C&A process after our December 2005 exit conference, and has implemented most of the changes recommended 

in our report. However, as we noted in our report, we prepared 

the report because some of the problems we identified in our FY 

2005 and previous reviews were still evident in the additional five 

NOAA C&A packages we reviewed early in FY 2006. We hope 

that documenting our concerns in this report and making formal 

recommendations for improvement will facilitate complete correction of these issues, many of which have persisted for some 

time. (See page 33.) 

NOAA E-Authentication 

E-authentication is the process of electronically verifying the 

identities of users accessing government services over the Internet 

and is crucial to the Department’s ability to properly authorize 

access to data and hold users accountable for their actions. We 

evaluated the quality of NOAA’s e-authentication risk assessment 

and controls for SARSAT—the U.S. portion of an international 

program that uses satellites to coordinate search and rescue activities. These controls, implemented for two SARSAT web-based 

applications, provide a first line of defense for beacon registration 

data that is protected under the Privacy Act. According to NOAA’s 

e-authentication risk assessment, one consequence of unauthorized use of the SARSAT beacon registration system is that search 

and rescue personnel could waste valuable time using incorrect 

or misleading data. 

The objectives of our review were to determine if the risk assessment adequately identified the requirements for e-authentication 

controls and whether the controls had been implemented and properly certified prior to the system’s accreditation. Our evaluation 

found that SARSAT’s e-authentication controls do not provide adequate assurance of users’identities and recommended that NOAA 

redo the e-authentication risk assessment to better characterize 

and assess authentication risk, improve the system security plan 

to identify e-authentication requirements and appropriate controls, 

test controls, and take actions to correct deficiencies. 

NOAAdisagreed with our conclusion that SARSAT’s e-authentication controls do not provide adequate assurance of users’identities, 

but agreed with all but one of our recommendations. After we 

clarified the meaning of that recommendation—to document any 

deficiencies identified as a result of performing e-authentication 

control testing—NOAA agreed with it as well. (See page 31.) 

September 2006/Semiannual Report to Congress 5 
Major Challenges for the Department 

IT Security Clauses in Contracts 

We conducted an evaluation to determine whether NOAA is incorporating the two information security clauses prescribed by the 

Department into contracts and to evaluate implementation of the 

clause requirements. Clause 73 requires contractors to comply with 

the Department’s IT security policy and have their IT resources 

certified and accredited if they connect to a Commerce network 

or process or store government information. Clause 74 requires 

contractor personnel to undergo appropriate background screening 

and IT security awareness training. 

We reviewed a judgmental sample of 16 NOAA service contracts 

and interviewed managers and staff from NOAA’s Office of 

Acquisition and Grants, Office of the Chief Information Officer, 

and line offices. Because some problematic aspects of Clause 73 

contributed to issues we identified at NOAA and in a previous review at USPTO, we also made recommendations to Departmental 

officials. Our report highlighted the need to clarify the requirement to include Clause 73 in all contracts in which contractor IT 

resources are either connected to a government trusted network or 

are allowed privileged access to government information. For the 

Department, the evaluation identified needed improvements to the 

IT security clause and the Commerce Acquisition Manual as well 

as the need for developing additional guidance to aid contracting 

officers and contracting officer representatives in their oversight of 

contractor information security. For NOAAwe identified improvements needed for ensuring the certification and accreditation, as 

appropriate, of contractor IT resources. 

Both the Department and NOAA agreed with our recommendations. On September 27, 2006, in response to our recommendations, the Department’s director of acquisition management and 

procurement executive issued a procurement memorandum and 

Commerce Acquisition Manual notice with revisions to the clause 

and changes to the approach to determine the level of contract risk 

so that personnel receive background investigations commensurate 

with the risk level. (See page 35.) 

Challenge 2 

Effectively Manage 

Departmental and Bureau 

Acquisition Processes 

Commerce spends nearly $2 billion annually on goods and services—roughly a third of its annual appropriation—and each year 

relies more on contractors to support its mission-critical work. 

Adequate oversight of acquisition planning and execution is essential to ensuring that taxpayers dollars are spent effectively and 

efficiently and procurement laws and regulations are followed. 

For example, the Census Bureau’s contracting for products and 

services to support 2010 decennial operations continues to bear 

watching. The bureau estimates that 17 percent ($1.9 billion) of its 

2010 budget will be spent on contracts for information technology 

systems, advertising, and leases for local office space. One key 

IT program—Field Data Collection Automation (FDCA)—will 

develop the handheld mobile computers that field staff will use 

to collect 2010 decennial information. This is a critical piece of 

the bureau’s reengineered strategy. Census originally planned to 

develop this equipment in-house but determined in early 2004 

that it lacked the management and technical resources to do so, 

and on March 31, 2006, awarded a system development contract. 

However, the late decision to use a contractor and the initial slow 

pace in planning the acquisition shortened the amount of time 

available for awarding the contract and developing FDCA. This 

will delay address canvassing, the first major field operation of 

the dress rehearsal for the 2010 census. 

Challenge 3 

Strengthen Internal Controls 

Over Financial, Programmatic, 

and Business Processes 

Internal controls are the steps agencies take to make sure their 

operations are effective, efficient, and in compliance with laws 

and regulations. Internal controls also ensure that financial reporting is reliable, and assets are safeguarded from waste, loss, 

or misappropriation, according to the Office of Management and 

Budget (OMB). Two documents, the Federal Managers’Financial 

Integrity Act (FMFIA) and the 2004 revision of OMB Circular 

A-123 (Management’s Responsibility for Internal Control), set out 

internal control requirements for the federal government: Commerce and all federal agencies must define and document major 

financial internal control processes and test key financial controls 

to determine whether they are effective as of June 30, 2006. 

Although we noted recent improvement in the Department’s 

management and financial accountability as well as in program 

and operational effectiveness, our audits continually indicate more 

work is needed to strengthen internal controls over programs, 

operations, and administrative areas. 

We expect the new federal emphasis on strong internal controls to 

create a number of new demands for OIG reviews in the coming 

years. For example, the Digital Television Transition and Public 

Safety Act of 2005 puts NTIA, one of the Department’s smaller 

agencies, in a position of having to manage an enormous national 

project with an even larger budget than had been anticipated. Successfully implementing this act will constitute a significant management challenge for the Department. We will share lessons learned 

6 U.S. Department of Commerce/Office of Inspector General 
from our work in other areas to help the agency design strong, 

well-structured programs and minimize opportunities for fraud. 

Challenge 4 

Ensure that USPTO Uses Its 

Authorities and Flexibilities 

as a Performance-Based 

Organization to Achieve 

Better Results 

Since March 2000 when the Patent and Trademark Office Efficiency 

Act transformed USPTO into a performance-based organization designed to operate more like a private corporation than a government 

agency, OIG has paid close attention to a number of aspects of the 

organization’s internal management structures and practices. 

USPTO faces numerous challenges, such as a continuing increase in 

applications, training about 1,000 newly hired examiners in Patents 

and Trademarks, and transitioning to an electronic processing environment. In addition, USPTO’s expanded authority over personnel 

decisions and processes, procurement, and information technology 

operations needs to be effectively and efficiently utilized. 

OIG has issued nearly a dozen reports examining problems at 

USPTO since 2001. The bureau has generally taken decisive action to address some problems we identified in the past, and we 

have been pleased that USPTO has been receptive to our recommendations. But ultimately, we believe that many of the problems 

USPTO suffers are serious and require the sustained commitment 

of senior managers to resolve. OIG will continue to monitor the 

bureau’s progress. 

A USPTO trademark information specialist assists customers. 

Source: uSpto 

Major Challenges for the Department 

Challenge 5 

Control the Cost and Improve 

the Accuracy of the Decennial 

Census 

Even after adjusting for inflation, the 2010 census will be the 

country’s most expensive decennial ever—estimated to cost 

$11.3 billion. The Census Bureau’s redesigned decennial plan, 

established after the 2000 Census, is heavily dependent on automating critical field operations to accurately count the nation’s 

population within budget. The bureau has established a rigorous 

testing schedule to monitor development and implementation of 

the strategy, identify problems, and incorporate solutions in time 

for the decennial. 

During the last 6 months, we built on the work we did in 2005 and 

early 2006, which reviewed the 2006 test’s address canvassing 

operation. This semiannual report details our review of Census’s 

test to enumerate the group quarters population (see page 21). 

Although most U.S. residents live in residential housing units such 

as single-family houses, apartments, and mobile homes, more than 

7 million people live in situations such as college dormitories, 

nursing homes, prisons, and group homes, collectively known as 

group quarters. We reviewed the group quarters testing operation 

at the Census Bureau’s test site in Travis County, Texas. The area 

is ideal for testing the group quarters operation because it is home 

to four universities and colleges, a state prison, and numerous other 

group living facilities. 

New Methods, New Challenges 

Our review found that although the bureau is working on new methods to better enumerate the group quarters population, it continues 

to face a number of challenges. For example, nontraditional student 

housing, such as private dorms and student cooperative housing, did 

not easily fit into any of Census’s group quarters definitions. Sometimes these units were defined as private residences and received 

housing unit questionnaires. In those cases, there was an increased 

likelihood that the unresponsive students had already moved out of 

their residence before the follow-up operation. When this occurred, 

enumerators relied on records kept in administrative offices, which 

often lacked Hispanic origin and race information. We also found 

that 42 percent of the validation workload was associated with large 

apartment complexes erroneously identified as potential group quarters during address canvassing. This caused problems in the group 

quarters validation and the nonresponse follow-up operations. 

One of the objectives of our review was to independently assess 

the completeness of the group quarters listing prepared for the 

Census 2006 test. The bureau used four sources to develop a list 

of all potential group quarters for the 2006 test, which was then 

September 2006/Semiannual Report to Congress 7 
Major Challenges for the Department 

Group Quarters Activities in the 2006 Census Test 

Operation Group Quarters 

List Development Address Canvassing 

Group Quarters 

Validation/Advance 

Visit 

Group Quarters 

Enumeration 

Dates June 004—with updates 

throughout 006 Census test 

July 005— 

September 005 

December 005— 

January 006 

april 006— 

May 006 

Description List created using 

• 000 group quarters 

• administrative records 

• address canvassing (other 

Living Quarters) 

• other Census survey work 

Identified potential 

“other Living Quarters” 

(oLQs) 

Ensured addresses were 

correct and/or made 

changes to update the 

Master address File 

Listers visited ,778 

oLQs in austin and 84 

oLQs on the Cheyenne 

River Reservation to 

designate address status 

as a 

• GQ 

• Housing unit 

• nonresidential 

• Vacant 

• transient 

• Duplicate 

• other 

Group quarters 

administrators contacted 

regarding upcoming 

group quarters 

enumeration; privacy 

and confidentiality were 

discussed 

Enumeration of all 

identified group quarters 

facilities 

Source: u.S. Census Bureau, 2006 Census Test Project Management Plan, 00 Census Memoranda Series no. 8 (Reissue) December 005 

refined by the group quarters validation operation, resulting in a 

final list of group quarters to be enumerated. We found a number 

of group quarters that were not on the final enumeration list by 

conducting a limited Internet search and speaking with administrators. We also found duplicates—addresses that appeared on 

both the enumeration and housing unit lists or group quarters that 

appeared twice on the enumeration list. These errors can result in 

an inaccurate count of the population because individuals living 

in group quarters enumerated via the household questionnaire 

may be missed and duplicates on the list can result in people being counted twice. 

We also found that Census should take additional steps to count 

the student population, such as working closely with fraternity 

and sorority campus oversight organizations and exploring the 

use of the Internet as a response option for this computer-oriented 

generation. Finally, we noted that some additional group quarters 

processes and procedures warrant management attention. 

Looking Ahead 

We continue to look at the update/enumerate operation at the 

Cheyenne River Reservation and Off-Reservation Trust Land in 

South Dakota. During this operation, which is used in communities 

where residents are less likely to return a completed questionnaire, 

More than a dozen group quarters—and possibly many more—were not 

on the Census Bureau’s enumeration list. This home is one of 15 missing 

from the list that we found by conducting a limited Internet search. 

Source: oIG 

8 U.S. Department of Commerce/Office of Inspector General 
enumerators update the address lists and maps and interview a 

resident to complete a questionnaire for each housing unit. We 

are assessing whether the update/enumerate operation obtained 

complete and accurate enumerations, especially with respect to 

large households, and if it resulted in improved address lists and 

maps. We are also assessing the bureau’s method for designating 

which communities require this type of enumeration. 

Challenge 6 

Effectively Manage the 

Development and Acquisition 

of Environmental Satellites 

Over the next 5 years, the Department, through NOAA, will spend 

several billion dollars in contracts for the purchase, construction, 

and modernization of environmental satellites.5 These systems, 

operated by NOAA’s National Environmental Satellite, Data and 

Information Service (NESDIS), collect data to provide short- and 

long-range weather forecasts and a variety of other critical environmental and climate information. 

Complex, high-cost acquisitions such as these are extremely difficult to manage within cost and schedule goals, as was revealed 

in our audit during this reporting period of the National Polarorbiting Operational Environmental Satellite System (NPOESS) 

(see page 29). This system—a joint project of NOAA, NASA, and 

Defense—is critical to the nation’s ability to provide continuous 

weather and environmental data for civilian and military needs 

through the coming 2 decades. Initially projected to cost $6.5 billion, the program recently underwent a mandatory congressional 

review to see if it should be continued, given its troubling history 

of huge cost increases and schedule delays. 

Congress Approves a Scaled-Back 

NPOESS Program 

Last November, the Department of Defense reported that NPOESS 

costs had grown by 25 percent over original estimates—triggering the Nunn-McCurdy recertification provision of the FY 

1982 National Defense Authorization Act. In addition to these 

staggering cost increases, the program was running 17 months 

behind schedule yet the contractor had received $123 million in 

incentive payments. 

We sought to determine how cost and schedule overruns had grown 

so dramatically while the contractor had been so well rewarded. 

We identified serious shortcomings in the contract’s incentive 

structure as well as in program oversight from NPOESS’ executive committee, which consists of top leadership from NOAA, 

NASA, and Defense. 

Major Challenges for the Department 

Source: http://goes.gsfc.nasa.gov/images/GoES-R_Color_Lg.jpg 

Commerce IG Johnnie E. Frazier reported our findings to the 

House Science Committee in May (see page 50), as the recertification process was in progress. In June, the Committee accepted 

a triagency proposal to continue the program with the following 

changes:6 

• Total acquisition costs were revised to $11.5 billion to support 

NPOESS satellite coverage through 2026. 

• The number of satellites was reduced from six to four, with the 

U.S. relying on European satellites to fill in any gaps resulting 

from the reduction. 

• The first satellite will launch in 2013 rather than 2010, as 

proposed in the original program. 

• The number of sensors will drop from seven to five. 

• Management reforms, including our recommendations for 

improving EXCOM oversight and revising the award fee 

contract, will be implemented. 

This program will continue to bear close watching as it restructures 

and attempts to stay within its new cost and schedule goals, and 

we intend to follow its progress and keep Congress apprised of 

our findings. 

GOES-R Costs, Schedule, and Capabilities 

Are Being Redefined 

The GOES-R series is the next generation of geostationary satellites that will replace existing GOES satellites in the next decade. 

The new series will have enhanced sensing capabilities that are 

expected to offer an uninterrupted flow of high-quality data to 

support weather forecasting, severe storm detection, and climate 

research vital to public safety. GOES-R is a multicontract, mul5 http://www.osec.doc.gov/bmi/Budget/05APPR/PAR05.pdf, page 210 6 http://www.house.gov/science/hearings/full06/June%208/charter.pdf 

September 2006/Semiannual Report to Congress 9 
Major Challenges for the Department 

tiyear program wholly funded by Commerce, though the new 

satellites will be developed and acquired with help from NASA. 

The Department’s investment for GOES-R for fiscal years 2006 

to 2010 is projected at about $2 billion. 

Planning for the new series, which has been under way for the 

past 5 years, has given long and careful focus to the many risks 

inherent in developing satellite programs. Even so, the NPOESS 

experience has put new pressure on agency senior officials and 

program planners to have strong mechanisms in place for tracking 

every phase of the program and promptly mitigating problems 

that arise. 

During this semiannual period, we initiated a joint review of the 

GOES-R program with NASA’s Office of Inspector General. Our 

shared objective is to determine whether the Department and 

NASA have created a management structure to ensure effective 

oversight of the many risks associated with the GOES-R program. 

In preparing for the review, we learned that the Department, 

NOAA, and NASAare restructuring major aspects of the program 

as part of detailed risk reduction activities. GOES-R leadership is 

reassessing planned satellite capabilities and the timing of launches 

in response to input on costs and technological risks provided by 

an independent review team and contractors involved in defining 

the program’s major aspects. In addition, program officials are 

considering changing approaches to managing the program and 

acquiring the satellites. 

At Commerce, the oversight component of our work will look at the 

Department and NOAA’s efforts to establish effective monitoring 

organizations, policies, and procedures and the mechanisms NOAA 

will use to leverage NASA’s oversight expertise. We will also 

consider whether program staff report significant issues to senior 

Department and NOAA oversight officials in a timely fashion and 

whether those officials take appropriate action. 

Our acquisition focus will be on the program office’s overall approach to procuring key satellite instruments, identifying potential 

risks, and implementing associated mitigation strategies. We will 

also assess the acquisition contracts’ award fee plans to determine 

whether they are structured to promote excellent performance. 

NASA OIG plans to determine whether NASA program management councils effectively identify and review program issues and 

progress, and whether procedures and processes are in place to 

recognize, mitigate, and report technical risks in accordance with 

NASA policy. 

Challenge 7 

Promote Fair Competition in 

International Trade 

The Department of Commerce accomplishes its goals of promoting 

trade, opening overseas markets toAmerican firms, and protecting 

U.S. industry from unfair competition by imports primarily through 

the work of the International Trade Administration (ITA). ITA 

also works with USPTO and NIST to assist U.S. companies with 

intellectual property rights and standards. Over the past several 

years, OIG has focused a number of reviews on the Department’s 

Source: u.S. Census Bureau 

0 U.S. Department of Commerce/Office of Inspector General 
efforts to increase U.S. market opportunities, provide assistance 

to U.S. exporters, and overcome trade barriers in difficult foreign 

markets. 

In September 2006, in response to OIG recommendations made to 

ITAin several recent reports, the bureau’s Commercial Service (CS) 

announced extensive changes in its procedures for verifying export 

success claims, its primary performance measure. CS stated that the 

new procedures were necessary because, in a significant number of 

cases, OIG had found discrepancies in the reported export successes. 

These discrepancies raised doubts about the integrity of the data 

CS reports to Congress and the administration on its accomplishments. The new CS procedures require improved documentation, 

supervisory confirmation of a sample of export success reports, and 

verification that CS provided value-added assistance. 

In response to a request from the House Small Business Committee, we are reviewing coordination and information sharing 

between Commerce and other U.S. government agencies with 

responsibility for trade promotion. The review, which we will 

discuss in our next semiannual report, will assess Commerce’s 

efforts to match export opportunities with export-ready companies, 

with a focus on trade promotion agencies’ use of the Internet to 

communicate leads and other relevant trade information. 

U.S. Trade Promotion in South America 

During this semiannual period, we conducted on-site inspections 

of CS posts in Brazil, Argentina, and Uruguay. Significant export 

opportunities are opening in these countries as Brazil’s large 

economy continues its steady growth, Argentina recovers from 

its 2001-2002 economic crisis, and Uruguay pursues closer trade 

relations with the United States. Our inspections focused on the 

management, program operations, and financial and administrative practices of these three South American posts. We issued our 

report on CS’ operations in Argentina and Uruguay in September 

with 20 recommendations, and we will publish our report on CS’ 

larger post in Brazil before the end of the calendar year. 

Our review of CS Argentina and CS Uruguay found that the posts 

are providing useful export assistance to U.S. companies and have 

established collaborative relationships with key U.S. government 

offices and nongovernmental organizations both in those countries 

and in the United States. Our review found effective administrative 

management practices at both posts, but we also identified some 

financial management and accounting concerns that warrant the 

attention of Commerce managers (see page 25). 

Major Challenges for the Department 

Challenge 8 

Effectively Manage NOAA’S 

Stewardship of Ocean and 

Living Marine Resources 

The National Oceanic and Atmospheric Administration is charged 

with monitoring the health of our nation’s ocean, coastal, and 

Great Lakes resources; administering civilian ocean programs; 

and protecting and preserving the nation’s living marine resources 

through scientific research, fisheries management, enforcement, 

and habitat conservation. 

During the past year, we followed up on our audit of the National 

Marine Fisheries Service’s (NMFS’) preparation of a biological 

opinion for California’s Central Valley Project, one of the nation’s 

major water conservation efforts. In response to our audit recommendations, NOAA received three reviews of the opinion. One 

review concluded that NMFS used the best scientific information 

for the biological opinion, but two reviews concluded that NMFS 

did not. In light of these findings, we asked NOAA officials to 

submit to us a plan that identifies actions they will take to address 

the deficiencies and implement the related recommendations made 

by the independent review organizations. 

NOAA’s future challenges include its efforts as a steward of marine 

resources, the agency’s consultation process, and its management 

of fisheries and marine mammals. 

Challenge 9 

Aggressively Monitor 

Emergency Preparedness, 

Safety, and Security 

Responsibilities 

The Department of Commerce has a dual responsibility in the 

area of emergency preparedness, safety, and security; not only 

must it be ready to protect 35,000+ employees and hundreds of 

facilities, but because several Commerce programs are critical to 

national preparedness and recovery efforts, it must support U.S. 

efforts to prepare for, respond to, and promote recovery from 

major disasters. 

We continue to monitor Commerce’s progress in resolving departmental emergency preparedness and security weaknesses we 

identified in assessments conducted in 2002 and 2005. Although 

Commerce has made significant improvement in emergency 

preparedness to address some of the vulnerabilities, we found, 

September 2006/Semiannual Report to Congress  
Major Challenges for the Department 

Source: OIG 

among other things, the need for better departmental guidance 

and oversight of emergency programs, risk assessments, occupant 

emergency plans, and security forces at its domestic operations, as 

well as better oversight of security upgrades and greater attention 

to security at its overseas offices. 

More recently, in our review of the Commerce workers’compensation program, we recommended that the Department consolidate 

and analyze bureau safety data to help officials and managers 

identify and correct problems. We also recommended the Department use this data to find ways to help prevent workplace injuries 

and lower the number of employees who file claims for workers’ 

compensation benefits. 

Finally, we are working with other PCIE members to publish 

a guide for evaluating emergency preparedness programs. The 

guide should be a useful tool for conducting future OIG or management reviews of emergency preparedness in Commerce and 

other federal agencies. 

Challenge 10 

Enhance Export Controls for 

Dual-Use Commodities 

The Department’s Bureau of Industry and Security (BIS) oversees 

the federal government’s export licensing system for dual-use 

commodities and technology and is charged with advancing U.S. 

national economic security interests by administering and enforcing export controls. The primary goal of the licensing and enforcement system is to prevent hostile nations and terrorist groups from 

acquiring sensitive technologies and materials that have both 

civilian and military applications by controlling their export. 

The National Defense Authorization Act (NDAA) for Fiscal 

Year 2000, as amended, directed the inspectors general of the 

departments of Commerce, Defense, Energy, and State, in consultation with the directors of Central Intelligence7 and the FBI, 

to report to Congress by March 30, 2000, and annually until the 

year 2007, on the adequacy of export controls and counterintelligence measures to prevent the acquisition of sensitive U.S. 

technology and technical information by countries and entities 

of concern. (The Office of Inspector General at the Department 

of Homeland Security also has participated since its establishment in 2003.) In addition, the NDAA for FY 2001 requires 

the IGs to discuss in their annual interagency report the status 

or disposition of recommendations made in prior-year reports 

submitted under the act. 

Some Export Control Topics Covered 

by Interagency OIG Reviews 

Federal automated export licensing systems 

Commerce Control List and U.S. Munitions List 

Deemed exports 

Export enforcement 

Export licensing process for chemical and biological 

agents 

U.S. dual-use export controls for China 

U.S. dual-use export controls for India (Commerce 

only) 

7 The Intelligence Reform and Terror Prevention Act of 2004 [Public Law 108-

458], dated December 17, 2004, established the Director of National Intelligence 

to serve as the head of the U.S. intelligence community. 

12 U.S. Department of Commerce/Office of Inspector General 
Major Challenges for the Department 

We have initiated our eighth and final NDAA required review, 

this time looking at the effectiveness of U.S. controls on dual-use 

exports to India. India presents unique challenges to U.S. commercial interests and export control policy. As one of the fastest 

growing economies in the world, India offers expanding trade 

opportunities for U.S. exporters but also increased competition 

for U.S. industry and labor. 

We will detail the findings of our India evaluation in our March 

2007 semiannual report. And though this will conclude our statutory reporting requirements under NDAA, we will continue to 

monitor BIS’ efforts to implement and enforce dual-use export 

controls, given the importance of this mission to the nation’s 

security. We will also follow up on our previous NDAA recommendations and report on BIS’ progress in implementing them in 

our next semiannual report. 

These nuclear reactors are among 16 in operation throughout India, and the 

country has plans to build 6 more over the next 2 years. Under the terms 

of a July 2006 agreement, the United States will give India greater access 

to dual-use technology to expand its civilian nuclear program and meet its 

burgeoning energy needs. 

Source: http://as.wn.com/i/d5/8c93997c11de00.jpg and 

http://www.icjt.org/npp/podrobnosti.php?drzava=11&lokacija=718 

September 2006/Semiannual Report to Congress 13 

September 2006/Semiannual Report to Congress 15

Economic Development 

Administration

Chicago Area Nonprofit Managing 

RLF Grant Poorly

In September 1995, the Economic Development Administration awarded a $500,000 long-term 

economic deterioration assistance grant to a nonprofit community development corporation in Chicago to remedy actual or threatened economic dislocation in the city and six 

surrounding suburbs. The grant allocated $450,000 for a revolving loan fund (RLF) 

and $50,000 for salaries and other expenses. It required $150,000 in matching funds 

from the recipient.

In August 2001, EDA awarded the organization a second grant for $787,500, 

allocating $750,000 for the RLF, $37,500 for salaries and expenses, and requiring $787,500 in matching share for similar purposes.

We audited the two grants, which were combined for reporting purposes, 

for the 10-year period covering September 1995 through December 2005 

to assess the financial management of the RLF, verify the allowability of 

administrative costs, and determine whether the grantee complied with applicable laws and regulations. 

What We Found

Our audit disclosed the community development corporation is not managing 

the RLF effectively. At the end of December 2005, the organization had not 

met the 75 percent capitalization standard required by EDA regulations and had 

$419,655 in excess cash. It also had $199,432 in undisbursed grant funds. 

The RLF had six active loans with a total outstanding principal balance of $446,251 

and funds available for new loans of $708,290. Our audit showed the group had $199,432 

of undisbursed grant funds as of December 31, 2005. In the 10-year history of the RLF, 

the group had made only 12 loans, but it stated in its RLF plan that it expected to make 49 

loans in the first 5 years of the RLF. At the time of our audit, the organization had not made 

an RLF loan since April 2003. 

The organization made only one loan ($112,000 EDA portion) within the first 3 years of the financial assistance award, when all $450,000 of EDA loan funding should have been disbursed. The community development corporation’s officials said the original award was based on financing manufacturing businesses on the west side 

of Chicago, which declined precipitously in the mid-to-late 1990s. The surviving firms were averse to taking on more debt. In 2001, 

the corporation began lending to businesses outside the manufacturing sector, but although it broadened its lending base, it still has a 

large balance of remaining grant funds.

The Economic Development Administrationwas established by the Public 

Works and Economic Development 

Act (PWEDA) of 1965 to generate new 

jobs, help retain existing jobs, and stimulate 

private investment in economically distressed 

regions of the United States. EDA continues 

to fulfill this mission under the authority of 

PWEDA, as amended by the Economic Development Reauthorization Act of 2004. Based on local 

and regional comprehensive economic development 

strategies, EDA works in partnership with state and 

local governments, regional economic development 

districts, public and private nonprofit organizations, 

and Indian tribes to help distressed communities address problems associated with long-term economic 

deterioration and sudden and severe economic 

dislocations, including recovery from the economic 

impact of natural disasters, the closure of military 

installations and other federal facilities, changes 

in trade patterns, and the depletion of natural 

resources. EDA provides eligible recipients 

with technical assistance, as well as grants 

for public works, planning, training and 

research, and economic adjustment assistance.
Economic Development Administration 

Unallowable interest Expense 

The group’s management said it accrued $142,018 in interest 

expense from a secondary low-interest loan from the Ford Foundation, which was used to provide part of its required nonfederal 

matching share. OMB regulations do not allow interest expense 

to be charged to an RLF. 

As of December 31, 2005, EDA award disbursements exceeded 

EDA’s portion of loans made by $29,567. From September 1995 

through December 2005, EDA made eight RLF disbursements to 

the organization totaling $1,000,567. During that period, the group 

made 12 loans totaling $1,639,000 (including refinancing of some 

of the loans). The EDA portion of the 12 loans totaled $971,000, 

and the organization’s matching portion of the 12 loans totaled 

$668,000. According to EDA RLF standard terms and conditions, 

an RLF grant recipient must request disbursements from EDAonly 

at the time and in the amount immediately needed to close a loan 

or disburse funds to a borrower. 

inaccurate reports 

We found a number of discrepancies in the organization’s semiannual 

reports to EDA, and they did not reconcile from period to period. 

For example, the semiannual report dated March 31, 2004, showed 

26 loans made. But beginning September 30, 2004, and continuing 

forward, reports show only 12 loans had actually been made. The 

cumulative amount of administrative expenses should have increased 

over time; however, the amount shown from one period to the next 

decreased at times. These errors cast doubt on the accuracy of all the 

RLF data, including the amount of excess cash. 

What We recommended 

We recommended that the EDA Chicago regional director require 

the community development organization to place $419,655 in 

excessive cash reserves in an interest-bearing account and remit 

the interest earned to the U.S. Treasury. We also recommended 

that EDAdeobligate $199,432 of undisbursed grant funds, require 

$142,018 in unallowable interest expense be returned to the RLF, 

and take back $29,567 in excess grant disbursements. Finally, 

EDA should require the organization to correct its most current 

semiannual report. 

Grantee response 

In its response to our draft audit report, the community development corporation agreed with all of our findings and stated it would 

take the actions we recommended. (Denver Regional Office of 

Audits: DEN-17932) 

three california Audits 

show mixed results 

During this semiannual period, the Office ofAudits reviewed EDA 

grants in three California localities suffering from economic stress. 

Although all three grantees completed their public works construction projects satisfactorily, none had made significant progress 

toward expected long-term economic development. 

Audit Finds california Business 

park Grantee complied with terms 

In early 2000, EDAawarded a California city a $3.8 million public 

works grant under Title II of the Public Works and Economic Development Act to fund infrastructure at a research and technology 

business park. The award period extended from February 2000 to 

January 31, 2004. The federal share was $2,794,000, and the local 

match was $1 million. 

The city is located in central Fresno County and agriculture is the 

dominant element in the local economy. Fresno County had the 

largest number of welfare recipients of all central California counties, and with an unemployment rate that consistently hovered in 

double digits in the 1980s and 1990s, it needed thousands of new 

jobs. The city had proposed to create a business park and recruit 

industries geared toward research, technology, and manufacturing 

to provide jobs for people from a wide geographical area. The 

specific project included widening roads, installing curb-and-gutter 

and utilities, extending water and sewer lines, and installing storm 

drains. When construction bids came in lower than anticipated, 

the city requested and EDA approved an award amendment that 

extended the originally approved roadway improvements beyond 

the limits defined in the original grant application. 

This is one of two new buildings in the research and technology business park being developed by a California city to help alleviate unemployment. The EDA grant funded infrastructure for the park. 

Source: OIG 

16 U.S. Department of Commerce/Office of Inspector General 
We conducted a final performance audit of the award to determine 

whether costs claimed were reasonable, allowable, and allocable to 

the sponsored project; whether award objectives had been achieved; 

and whether accounting, procurement, and project management 

practices and controls complied with award requirements. 

our Findings 

We found the costs claimed under the EDA award were reasonable and allowable and that infrastructure improvements had been 

completed as intended. But although years have passed since 

construction was completed and the award was closed, the park 

remains nearly vacant. 

However, the city has an active marketing strategy involving a 

variety of venues and has demonstrated continued commitment to 

park expansion. Recently, we followed up with a visit to the park 

and found development on two park parcels. The city’s efforts 

meet the intent of the EDA project, and we have determined the 

city complied with the terms and conditions of the award. 

We had no negative findings and did not recommend any corrective actions for the city or EDA. (Seattle Regional Office of 

Audits: STL-17578) 

california city Handled Grant 

Well but more Work needed 

to meet Economic Goals 

In April 2001, EDA awarded a California city a $5 million grant 

to construct a regional vocational training center intended to teach 

residents new skills and reduce reliance on agriculture. The original award consisted of a federal share not to exceed $3.25 million 

and a local match of $1.75 million. The award was subsequently 

amended four times. The third amendment increased total estimated project costs to $5,420,101, with the federal share standing 

at $3.25 million but the local share being increased $2,170,101. 

The award period extended through August 2004. 

The city had always relied on farming products such as grapes 

and oranges for its economic base, but after decades of economic 

setbacks, the locality ended up with a 15.9 percent unemployment rate by 2000. The training center was to provide remedial 

education, specific training, and retraining for adults looking to 

enter the job market. It also was intended to work with the private 

industry council

12 and local employers to develop job-specific 

training programs. 

12 Private industry councils were formed under the Job Training Partnership Act 

of 1982 and replaced in July 2000 by broad-mandated Workforce Invest Boards. 

The councils planned job training and employment service programs and conducted 

oversight in cooperation with local elected officials. 

Economic Development Administration 

The California city using an EDA grant to build a regional vocational 

training center finished the second floor only to “vanilla shell” stage, 

which reduced the building’s training capacity. 

Source: OIG 

We conducted a final performance audit of the award to determine 

whether costs claimed under the EDA award were reasonable, allowable, and allocable to the project, and whether grant objectives 

were achieved. We also wanted to determine if accounting, procurement, and project management practices and controls complied 

with award requirements, assured efficient grant administration, 

and resulted in an acceptable final project. 

our Findings 

We found that the costs claimed under the award were reasonable, allowable, and allocable to the project, and the city had 

complied with the basic terms and conditions of the award. The 

city constructed its regional vocational training center, but by 

April 2006 when we performed our audit, nearly 2 years after the 

award ended, the economic benefits expected of the project had 

yet to fully materialize. 

Because of escalating construction cost estimates, the city did not 

complete the second floor of the center. With EDA’s approval, 

the building was finished only to “vanilla shell” stage, which effectively reduced the center’s training capacity by half. A vanilla 

shell is a completed external structure with minimal interior partitioning walls, paint, or floor covering. The city did not adjust its 

performance targets to account for the reduced capacity. The city 

also did not have a system for identifying and tracking training 

accomplishments and progress or a strategic marketing plan to 

meet its economic development goals. 

The city had taken some steps to promote the center by assigning 

center responsibility to an administrator who worked with individuals and businesses in the community. Most center promotion 

and management duties were assigned to the city’s administrative 

services director who spent half her time on center-related activiSeptember 2006/Semiannual Report to Congress 17
Economic Development Administration 

ties in addition to her primary duties of managing city budgeting 

and grants, financial services, and human resources. 

In mid-2005, the city also convened a site committee to promote the 

center and a marketing committee to inform the public of services 

available from its tenants. Center tenants provide a number of 

training courses and programs, but the city was unable to provide 

evidence that these courses are part of an orchestrated curriculum 

designed to lead to nonagricultural jobs. Without a student profiling 

and job tracking system and a documented curriculum, there is no 

way to be sure the center’s training programs are systematically migrating students from agricultural employment to new job fields. 

our recommendations 

We recommend EDA require the city to revise the project performance goals because of the center’s reduced capacity, implement a 

system for tracking and reporting center training accomplishments, 

and develop a strategic marketing plan to define, organize, and 

solidify the city’s marketing vision. The plan should include time 

frames and milestones and identify target student categories and 

prospective training vendors. The city also should develop and 

document the assigned responsibilities for marketing, managing, 

and operating the center. 

Grantee response 

Overall, city officials concurred with our findings and recommendations and described for us the corrective actions they had taken 

or that were in progress. We eliminated one finding in the report 

based on the city’s evidence that it had taken required corrective 

action in response to our draft report. We encouraged the city to 

seek guidance from and coordinate its ongoing corrective actions 

with EDAto ensure they are properly completed. (Seattle Regional 

Office of Audits: STL-17579) 

Audit Finds california 

Water and sewer project 

performance Deficient 

In 2001, EDA awarded a $3.2 million grant to a California county 

and adjacent city for a water and sewer project to build 7,400 linear 

feet of sewer lines and 4,800 linear feet of water lines to connect 

city utility systems to two large parcels of property. The award 

included a federal share of $2.2 million (70 percent) and a local 

match of $986,000 (30 percent). After amendments, the award 

was extended to November 30, 2004. 

The 217.5-acre project consisted of two privately owned properties: a 106.5-acre redevelopment project zoned for light industrial 

and commercial use inside the city limits and a 111-acre parcel in 

the county to be developed as an airplane museum, a recreational 

This schematic shows the development area where two California 

localities used an EDA grant to extend water and sewer utilities to two 

privately owned properties. The lands are being developed as an airplane museum, RV park, hotel, fast food restaurants, spa, and winery to 

generate 400 jobs. 

Source: OIG 

vehicle (RV) park, hotel, fast food restaurants, spa, and winery. 

Local officials believed the proposed developments would generate 400 or more jobs in tourism-related businesses anticipated to 

cluster on the lands serviced by the project improvements. 

We conducted a final performance audit to determine whether 

costs claimed under the EDA award were reasonable, allowable, 

and allocable; whether award objectives were achieved; and if 

the project’s accounting, procurement, and project management 

practices were proper. Our audit revealed the city’s performance 

was deficient in several ways: 

$130,692 is Due to the Government 

Our review disclosed that the city failed to ensure that its administration of the grant adhered to applicable federal cost principles 

and uniform administrative requirements. We questioned $186,702 

of $2,832,834 in claimed costs and we recommended recovery of 

the federal share of $130,692. 

project Was Built, Economic 

Benefits Did not come 

Before the infrastructure project was complete, the city rezoned 

11.77 acres of the 106.5-acre redevelopment area from light 

industrial and commercial to residential, which reduced the 

18 U.S. Department of Commerce/Office of Inspector General 
Economic Development Administration 

acreage available to generate the predicted long-term economic 

development. 

At the time of our audit in August 2005, a year had passed since 

construction was completed and the 111-acre tract in the unincorporated area of Monterey County that belonged to the prime 

project beneficiary was still vacant. When we followed up in 

August 2006, the project was still undeveloped, and its county 

development permit was set to expire in October 2006. In addition, 

the localities did not have a viable marketing strategy in place to 

help meet the economic development goals. 

our recommendations 

We recommended the EDA regional director take a number of 

actions: 

•	 Inform the grant recipients that the remaining redevelopment property must remain zoned for light industrial and 

commercial use for the entire economic life of the project. 

•	 Require the grantees to develop and implement a long-term 

development strategy and a comprehensive marketing 

plan. 

•	 Inform the recipients of the risk of having to refund the 

grant and be designated “high-risk” recipients because of 

unsatisfactory performance. 

•	 Disallow questioned costs of $186,702. 

Grantees’ responses 

In general, the recipients concurred with our findings and recommendations and described corrective actions in progress or 

proposed. However, the city disagreed with the number of acres 

rezoned from light industrial and commercial to residential use 

and provided support for its revised number. We accepted the 

city’s support and have adjusted the final report and questioned 

costs accordingly. We did not agree with the city’s assertion that a 

rezoning of 5 percent of the total area should not result in ineligible 

costs and stand by our report. 

The city agreed to create and implement project development 

strategies that promote timely accomplishment of the long-term 

job generation requirements necessary to achieve the full economic 

potential of the project and noted that it had increased staff time 

devoted to the marketing and developing of the EDA project. 

The county took exception to the recommendation to develop a 

marketing plan for private property. We appreciated that concern 

and encouraged EDA to ensure the county implements the safeguards proposed to protect EDA’s interest. The county has agreed 

to recommend that the developer post a faithful performance 

bond, which would be used to repay a proportionate share of the 

grant attributable to the unincorporated portion of the utilities 

project if the development fails. (Seattle Regional Office of Audits: 

STL-17580) 

September 2006/Semiannual Report to Congress 19

Economics 

AnD stAtistics 

ADministrAtion 

Group Quarters Enumeration continues 

to challenge the census Bureau 

The Economics and 

Statistics Administration analyzes economic We are closely monitoring the Census Bureau’s preparations leading up to the 2010 national 

developments, formulates policy decennial census. In the March 2006 Semiannual Report to Congress (pages 19-22), we 

options, and produces a major share of reported on the opportunities the Census Bureau missed during its test of the automated 

U.S. government economic and demo- address canvassing operation with handheld computers. 

graphic statistics. The chief economist The Census Bureau has reengineered its strategy for the 2010 decennial to im- monitors and analyzes economic develop- prove accuracy, reduce risks, and contain costs. Part of that strategy includes ments and directs studies that have a bearing a program of early planning, development, and site testing culminating with a on the formulation of economic policy. ESA 2008 dress rehearsal of the actual 2010 census. A site test is a partial census of has two principal agencies: population and housing under realistic conditions in selected areas to determine 

U.S. Census Bureau is the country’s preeminent if procedures and systems are effective prior to a decennial census. The Census Bureau is conducting the 2006 test in two locations—a portion of Travis statistical collection and dissemination agency. It County, Texas, that includes parts of the city of Austin and its suburbs, and the publishes a wide variety of statistical data about 

the nation’s people and economy, conducting ap- Cheyenne River Reservation and Off-Reservation Trust Land in South Dakota. 

proximately 200 annual surveys, in addition to the 

The bureau chose these two sites because their demographics and geography 

decennial census of the U.S. population and the support test objectives. 

quinquennial census of industry. counting Group Quarters residents proved Difficult 

Bureau of Economic Analysis prepares, 

develops, and interprets the national income Most residents in the United States live in single family houses, apartments, and 

and product accounts (summarized by mobile homes. But according to Census 2000 data, more than 7.8 million people 

the gross domestic product), as well as live in situations called group quarters, such as college dormitories, nursing homes, 

aggregate measures of international, prisons, migrant worker dormitories, convents, and group homes. Since the 1970 deregional, and state economic ac- cennial, the bureau has used different procedures to enumerate this population, because 

tivity. counting group quarters differs from enumerating other types of housing units. 

Enumerating group quarters in the 2006 test consisted of developing the group quarters list, 

validating the list to verify and define the type of group quarters, and enumerating group quarters 

residents. Census employees visited every address on the list to determine whether the address is actually 

a group quarters and, if so, what type. After validation, a final list was produced for enumeration. We conducted 

our review at the Travis County site, where residential housing units received a Census questionnaire in the mail. But 

enumerators visited each group quarters by appointment to either complete the Individual Census Report or drop it off to be filled out 

by residents or the group quarters administrator. Once a form for each resident had been completed and reviewed, the forms were taken 

to the local census office to be shipped for processing at the National Processing Center in Jeffersonville, Indiana. 

We reviewed the group quarters operations in Austin to determine (1) whether the recommendations made by internal and external 

evaluations following the 2000 Census and 2004 test for the 2010 decennial were addressed, (2) whether there were new or continuing 

problems in the operation, and (3) whether all existing group quarters in the test area had been identified and enumerated. Although 

the bureau is clearly testing new methods to better enumerate the group quarters population, we concluded that it still has a number of 

problems to overcome in enumerating group quarters. 

September 2006/Semiannual Report to Congress 21
Economics and Statistics Administration 

census Addressed many Group 

Quarters problems from 2004 but 

2006 test revealed new ones 

After the 2000 decennial census and the 2004 census test, a number 

of operational assessments and evaluations were issued by the 

Census Bureau, the National Research Council of the National 

Academy of Sciences, the GovernmentAccountability Office, and 

the Office of Inspector General. We found the bureau addressed 

most of those recommendations including attempting to improve 

the group quarters list and reduce list duplication, revising group 

quarters definitions and the group quarters questionnaire, better 

tracking of the group quarters questionnaire, and counting people 

where they sleep (as in dorms) rather than where administrative 

records are kept (e.g., University of Texas). 

The Travis county site includes four large universities and colleges, making it an ideal test site for the student population. But 

students proved a particularly challenging population for enumerators, especially those living in fraternities and sororities. We 

recommended Census find better ways to count students living in 

college/university group quarters, such as using campus resources 

(e.g., student Greek life offices) to obtain administrative records 

for fraternity/sorority students. 

incorrect Designations 

Hampered Enumeration 

During the 2006 Census test, the group quarters list-building activities identified 1,778 addresses to be verified as a group quarters, 

Small residential group quarters often blend into single family neighborhoods. This ordinary looking house in Austin turned out to be a convent. 

Source: OIG 

Census uses a database program to select every 10th group quarters 

for a quality check. Batch envelopes not checked for quality are placed 

in a checkout box. Then the envelopes and records are rescanned and 

shipped out to Jeffersonville, Indiana. 

Source: OIG 

housing unit, or nonresidential address. We reviewed more than 

1,500 validation questionnaires and discovered that some residents 

and managers of nontraditional student housing, such as private 

dorms and student cooperative housing, self-identified themselves 

as a group quarters facility even though they did not fit into any 

of Census’s group quarters definitions. As a result, the number of 

facilities and population counts for that type of group quarters is 

likely inaccurate. 

If these nontraditional student housing units were defined as private 

residences that received housing unit questionnaires, there was 

an increased likelihood that students who did not respond had 

moved out of their residence prior to the follow-up operation. In 

those cases, enumerators relied on records kept in administrative 

offices, which often lacked Hispanic origin and race information. 

It took more time and effort to enumerate these facilities than if 

the building had originally been defined as a group quarters. 

Apartment complexes Were 

incorrectly identified 

We found that 42 percent of the 1,778 addresses to be validated were 

associated with large apartment complexes. During address canvassing, individual apartments in large complexes were erroneously 

identified as potential group quarters. This consumed an inordinate 

amount of lister and enumerator time, wasted resources (such as other 

living quarters validation questionnaires), and antagonized apartment 

managers by having several enumerators visit them multiple times. 

The processes used to enumerate large apartment complexes appear 

unwieldy, although Census has identified a change that will reduce 

the number of enumerators visiting an apartment complex. 

22 U.S. Department of Commerce/Office of Inspector General 
Final list Did not include more than 

a Dozen Existing Group Quarters 

The validation operation was supposed to refine the list into a final 

group quarters enumeration list. But we found an additional 15 

group quarters that had not been included on the list just by doing 

a limited Internet search, something that had been recommended 

after the 2000 Census, and speaking with group home administrators. We also found three facilities that appeared twice on the 

list and six addresses on both the group quarters enumeration and 

housing unit lists, which could cause inaccurate counts. 

Census’s oversight and evaluation methods do not adequately address the problems associated with the group quarters validation 

and enumeration lists. Census should use online tools (e.g., state 

licensing web sites) to identify additional group quarters facilities 

and do a better job of verifying lists. 

census needs to improve some of 

the Administrative procedures of 

the Group Quarters operation 

We found some group quarters enumeration processes and procedures that should be improved in preparation for the 2008 dress 

rehearsal and the 2010 decennial. For example, during the 2000 

census, some forms were unaccounted for or could not be associated with a particular group quarters. The bureau implemented a 

procedure to scan all forms when they arrived at the local Census 

office and then scan them again when they were shipped out to the 

National Processing Center. This ensured forms could be returned 

to the correct batches if they were inadvertently separated. 

However, scanning every form twice will increase the document 

scanning workload in the 2010 census by at least 15 million over 

the 2000 local Census office workload and may not be necessary 

if the forms and batch envelopes are unopened from the time they 

were scanned in to the time they are shipped. We recommended 

the bureau find a way to more efficiently track the forms, such as 

using a sealed envelope system. 

Bureau response 

The Census Bureau concurred with some of our findings and recommendations, but took issue with others. In particular, the bureau 

believes that its quality assurance methods to identify, quantify, 

and rectify problems are sufficient. The bureau also disagrees with 

exploring the use of the Internet as a possible response option for 

campus student enumeration. In light of the results of Census 2000 

and three other tests of responding online, the bureau has eliminated the Internet option because of low usage, increased security 

risk of census data, and high implementation costs. However, we 

had suggested only that the bureau explore using the Internet to 

Economics and Statistics Administration 

contact a small, specific population—students—via e-mail and allow them the option to respond electronically. The bureau did agree 

with our recommendation to use the Internet and other resources 

to improve the group quarters list. 

Census also did not agree with our finding that the double scanning 

process for the group quarters enumeration forms was unnecessary except for those that were opened for quality control. The 

bureau only partially agreed to review and revise, as necessary, 

the methods used to evaluate the accuracy of and reduce duplications on the group quarters list. We asked Census to provide us 

with additional support and reasoning in an action plan. (Office of 

Inspections and Program Evaluations: IPE-18046) 

The local Census office clerk scans the barcode label on each batch 

envelope of forms in the check-in box, then scans the barcode of each 

individual record in the envelope. 

Source: OIG 

Audits Unresolved for 

more than 6 months 

its services, inc. 

In March 2005, we reported that 3 of the 32 task orders awarded 

under a Virginia IT services contract were audited to determine 

whether the costs billed by the firm were reasonable, allowable, and 

allocable under contract terms and conditions and federal regulations. We found that the firm had failed to comply with numerous 

contract and federal requirements, and we questioned more than 

$8.5 million in direct labor and reimbursable costs. 

September 2006/Semiannual Report to Congress 23
Economics and Statistics Administration 

computer & High tech 

management, inc. 

We reported in our September 2005 Semiannual Report (page 14) 

the results of audits of 2 of the 21 task orders for another Virginia 

firm providing IT services to Census. We sought to determine 

whether the firm had complied with contract terms and conditions 

and federal regulations and had billed Census for work performed 

in accordance with specifications of the task order. We found that 

the firm failed to comply with numerous contract and federal requirements, which caused us to question more than $10.7 million 

in direct labor and other reimbursable costs. 

We have suspended audit resolution on both of these contract 

audits pursuant to an agreement with Census. 

24 U.S. Department of Commerce/Office of Inspector General 
September 2006/Semiannual Report to Congress 25

International Trade

Administration

ITA’s Commercial Service Operations in 

and Uruguay Operate Well, but 

Processes Need Attention

OIG regularly inspects U.S. Commercial Service (CS) overseas posts. In 

we inspected the five CS China offices. Our report, CS China Generally 

ms Well but Opportunities Exist for Commerce to Better Coordinate Its 

ple China Operations (IPE-17546), was profiled in the March 2006 

miannual Report to Congress (pages 23-26).

In June 2006, we inspected CS’ offices in Argentina and Uruguay, focusing on management, program operations, and financial and administrative practices. These offices have a combined management structure, 

both being managed by the senior commercial officer in Argentina. 

CS’ staff in Uruguay also coordinates with the State Department 

economic counselor in Uruguay on day-to-day matters. 

Our review found that CS Argentina and CS Uruguay are providing useful export assistance to U.S. companies and have 

established collaborative relationships with key U.S. government 

offices and nongovernmental organizations. CS Argentina’s River 

Plate regional initiative promotes the Uruguay market to U.S. 

exporters, and the office collaborates effectively on export control 

activities with Commerce’s Bureau of Industry and Security.

Posts Have Effective Administration, 

but Face Future Challenges

Both posts generally work well. During FYs 2005 and 2006, feedback 

from CS Argentina and CS Uruguay’s clients was generally positive. 

Most clients said they were satisfied with the quality and timeliness of the 

vices they received. CS Argentina’s management of human resources, 

ical office space, information technology, and other administrative 

s is effective overall. However, we found a few concerns at both posts 

ant management action. 

gement, particularly in Uruguay, needs improvement. We recommended 

ance on property and inventory management, including the disposal 

her property so that both posts can properly dispose of obsolete and 

surplus items.

CS Argentina also needs to plan ahead for the approaching retirements of its senior commercial specialists. 

Both CS Argentina and CS Uruguay should develop effective partnerships with Commerce’s Brazil-based regional 

programs to promote compatible technical standards and intellectual property rights protection. 

The International Argentina 

Trade Administra- Financial

tion is responsible for trade 

promotion and policy issues associ- Commerce 

ated with most nonagricultural goods and late 2005, services. ITA works with the Office of the U.S. Perfor Trade Representative to coordinate U.S. trade Multi

policy and with other agencies to coordinate U.S. Se

trade promotion efforts. ITA has four principal units:

Market Access and Compliance develops and implements international economic policies of a bilateral, 

multilateral, or regional nature, and participates in trade 

negotiations. Its main objectives are to obtain market access 

for American firms and workers and to ensure full compliance by foreign nations with trade agreements signed with the 

United States. 

Manufacturing and Services undertakes industry trade analysis,

shapes U.S. trade policy, participates in trade negotiations, organizes trade capacity-building programs, and evaluates the impact 

of domestic and international economic and regulatory policies 

on U.S. manufacturers and service industries.

Import Administration defends American industry against 

injurious and unfair trade practices by administering the antidumping and countervailing duty laws of the United States 

and enforcing other trade laws and agreements negotiated to 

address such trade practices. 

U.S. Commercial Service seeks to promote economic 

prosperity, enhance U.S. job creation, and strengthen ser

national security through a global network of phys international trade professionals. CS promotes matter

and protects U.S. commercial interests abroad that warr

and delivers customized solutions to help 

U.S. businesses, especially small and Property mana medium-sized enterprises, compete CS improve guid effectively in the global mar- of computers and ot ketplace.
International Trade Administration 

posts should improve Documentation 

of Export successes 

Since CS’handling of this important performance measurement has 

been a recurring problem over the last several years, we reviewed 

a sample of the export successes reported by both posts during 

FYs 2005 and 2006. We found that most of the reported successes 

complied with most aspects of CS’ export success guidance, and 

the narratives describing the export successes generally contained 

sufficient detail. CS officers did review all reported export successes and did verify the pertinent facts for some of the reported 

transactions. But the posts did not always maintain sufficient 

documentation to fully substantiate reported export transactions 

and CS’ value-added export-related assistance. 

The posts were able to provide full documentation substantiating 

only 49 percent of the export successes in our sample and partial 

documentation for another 34 percent of the sample. There was no 

documentation for the remaining 17 percent. We recommended CS 

2005 Country Profiles 

Argentina Uruguay 

Population:	 39.9 million Population: 3.4 million 

Size: 1.07 million Size: 68,040 sq. mi. 

sq. mi. GDP: $32.9 billion 

GDP:	 $518 billion purchasing 

purchasing power parity 

power parity Major industries: beverages, chemicals, electrical Major industries: con- machinery, food processing, sumer durables, chemicals petroleum products, and and petrochemicals, food textiles 

processing, motor vehicles, 

metallurgy, and textiles Leading agricultural 

exports: barley, corn, fish, 

Leading agricultural livestock, rice, and wheat


exports: fruits, corn, to­


bacco, peanuts, wheat, and Leading sectors for U.S. 


livestock exports and investment:


agriculture, chemicals, tele- Leading sectors for U.S. communications, fertilizers, 

exports and investment: and infrastructure projects

agricultural machinery, 

electric power systems, 

information technology, 

medical equipment and 

supplies, and mining machinery 

Sources: CIA World Fact Book (2006) and CS Argentina’s Country Commercial 

Guide 2006, and CS Uruguay’s Country Commercial Guide 2006 

Argentina management comply with CS’export success guidelines, 

which require posts to retain documentation verifying the accuracy 

of reported successes. 

Accounting and Financial 

management need Attention 

CS management had requested that we review the advantages and 

disadvantages of CS Argentina’s current process of certifying its 

own payments in Argentina. Specifically, CS management sought 

more information on the process in Argentina as it considered 

whether it should seek to have other posts certify their payments 

in order to reduce charges for administrative services provided by 

the State Department. 

In 2000 CS Argentina partially opted out of the State Department’s 

payment certification and accounting services. We found that CS 

slightly reduced the amount that it pays to the State Department 

by certifying its own vouchers, but current ITA and Commerce 

policies prohibit this. Select CS Argentina staff who were certifying payments when we inspected the post, though trained, were 

not properly authorized to do so. CS headquarters permitted 

certification of payments but did not have the authority to make 

that decision. 

We also found that CS Argentina does not receive full accounting services from the State Department. This may compromise 

Commerce’s internal controls for overseas accounting because 

ITA’s accounting practices partially rely on the State Department’s 

internal control procedures to verify the overseas transactions reported to ITA through State’s accounting system. CS Argentina’s 

accounting procedures are also inconsistent with ITA policy, as 

clarified by ITA during the course of our review. That policy 

requires overseas posts to receive their accounting services from 

the State Department. 

We recommended CS change its financial management practices 

in Argentina to comply with ITA and Commerce policies. CS 

headquarters should coordinate any future financial management 

initiatives with ITA to ensure that the initiatives are permitted 

and have adequate controls and oversight. CS headquarters and 

ITA’s Office of Financial Management should also improve their 

coordination and communication to ensure that all CS officials 

at headquarters and posts understand overseas financial management policies. 

Bureau response 

ITA agreed with most of our findings and provided responses detailing actions it will take to correct problems we found. The initial 

response represents a positive step, but we have asked ITA to take 

additional steps to adequately respond to our recommendations. 

For example, ITA’s response said that the May 18, 2006, changes 

26 U.S. Department of Commerce/Office of Inspector General 
to its export success verification and documentation guidance 

were made to establish clear standards for export success claims. 

However, that guidance was not clear on verification methods to 

be used by first-level approvers of export successes. CS has since 

issued more detailed export success verification procedures that 

adequately address our concerns. 

ITA stated that CS Argentina has discontinued the practice of 

certifying its own payments. However, CS Argentina’s partial 

participation in State’s accounting services calls into question the 

effectiveness of internal controls for accounting at overseas posts. 

ITA must either ensure that the accounting services provided by 

State for CS Argentina are consistent with established internal 

controls for overseas posts, or it must establish separate oversight 

processes for the post. Since the release of our final report, CS has 

reported to us that it has fully subscribed to the State Department’s 

accounting services. 

ITA did not agree that CS Uruguay should transfer user fees that it 

collects for services provided by the State Department back to that 

department. ITA said the spirit of cooperation between the Commerce and State staffs in Uruguay “could be damaged by a new 

emphasis on division of collections.” Despite this close working 

relationship, CS does not have the authority to retain user fees that 

it collects for the State Department. CS should develop procedures 

consistent with applicable rules on user fees and similar to procedures followed for collections at other partnership posts. 

Source: http://www.cdc.gov/travel/images/map_temsam.jpg 

International Trade Administration 

ITA’s response said authority to dispose of property is granted via 

e-mail messages from regional offices, but those instructions are 

not consistent with guidance provided in the Office of International 

Operations Administrative Manual. Providing accurate guidelines 

for securing information technology assets is necessary to protect 

sensitive information stored on government computers, handheld 

devices, and other equipment. (Office of Inspections and Program 

Evaluations: IPE-18111) 

oiG makes recommendations 

to improve travel Briefings 

After learning Commerce employees were not routinely receiving 

formal counterintelligence briefings prior to traveling to certain 

foreign countries, we held a number of discussions with the director 

for security and other senior officials from the Office of Security. 

We also issued a report with recommendations we believe would 

improve the process. Department officials responded with only 

partial agreement to our suggested improvements. In May 2006, we 

met with Department officials again.As a result, we modified some 

of our recommendations, but we requested an action plan within 

60 days. That action plan has now been submitted by the Office of 

Security and is under review. We will continue to monitor the issue 

to ensure all Commerce travelers receive appropriate counterintelligence preparation prior to going overseas on official business. 

(Office of Inspections and Program Evaluations: IPE-17954) 

suitability review process 

needs improvements 

During this semiannual period, we conducted a classified examination of Commerce’s review process that determines the suitability 

of staff assigned to certain overseas posts. We recommended that 

ITA and Commerce’s Office of Security better define the procedures and coordinate the timing of such reviews. (Office of Inspections and Program Evaluations: IPE-17546, Appendix F) 

September 2006/Semiannual Report to Congress 27

nAtionAl ocEAnic 

AnD AtmospHEric 

ADministrAtion 

soaring costs, Delays plague 

The National triagency satellite program Oceanic and Atmospheric Administration

studies climate and global change; The National Polar-orbiting Operational Environmental Satellite System (NPOESS), a 

ensures the protection of coastal oceans joint project of NOAA, Defense, and NASA, is intended to monitor global environand the management of marine resources; pro- mental conditions and disseminate climate data to support military, civilian, and 

vides weather services; and manages worldwide scientific needs. NPOESS will combine existing polar-orbiting satellites into a 

environmental data. NOAA does this through the single state-of-the-art system.

13 NOAAhas overall management responsibilfollowing organizations: ity for the converged system; Defense is the lead on acquisition matters; 

and NASA is the lead for promoting transition to new technologies. 

National Weather Service reports the weather of the 

United States and provides weather forecasts and warnings NPOESS’ original acquisition plans entailed, among other things, 

to the general public. development of seven instruments under a single satellite integration contract worth $4.5 billion awarded to a prime contractor. The 

contract included an incentive arrangement that made it possible National Ocean Service provides products, services, and in- for the contractor to be paid lucrative bonuses (“award fees”) of formation that promote safe navigation, support coastal communities, sustain marine ecosystems, and mitigate coastal hazards. as much as 20 percent of the total estimated contract cost. Initial 

estimates put life-cycle costs for the entire system at $6.5 billion 

National Marine Fisheries Service conducts a program of and set a deadline of March 2008 for the first satellite launch. 

management, research, and services related to the protection and In September 2005, satellite program officials notified Congress rational use of living marine resources. that NPOESS costs had grown by at least 15 percent, largely 

National Environmental Satellite, Data, and Information because of problems with the Visible/Infrared Imager Radiometer 

Service observes the environment by operating a national Suite (VIIRS)14

—one of four sensors considered critical to the 

program. In November 2005, the GovernmentAccountability Office satellite system. (GAO) informed Congress that life-cycle cost estimates for NPOESS 

Office of Oceanic and Atmospheric Research conducts were likely to grow to $9.7 billion, and the launch of the first NPOESS 

research related to the oceans and Great Lakes, the satellite was at least 17 months behind schedule.15 That same month, 

lower and upper atmosphere, space environment, and DoD’s Cost Analysis Improvement Group estimated that NPOESS cost 

the Earth. growth had exceeded 25 percent, triggering the Nunn-McCurdy provision 

of the 1982 National DefenseAuthorizationAct. Nunn-McCurdy requires the 

Office of Marine and Aviation Operations Defense Secretary to certify in writing that the program is essential to national 

security; an alternative, less costly option does not exist; new cost estimates have operates NOAA’s ships and aircraft and been developed and are reasonable; and a management structure is in place to keep provides NOAA programs with trained costs in check. Without such certification, DoD’s involvement in the program would technical and management personnel from the nation’s seventh be terminated and program funding cut in half. 

uniformed service. 

NPOESS was at this point some $3 billion over budget and well behind schedule, yet the contractor 

had received more than $123 million—84 percent—of available award fees. Our audit sought to determine 

how cost and schedule overruns had grown to such proportions without apparent penalty to the contractor. We 

13 In 1994, by Presidential Decision Directive, NOAA merged its Polar Operational Environmental Satellite (POES) Program with the Department of Defense’s Defense 

Meteorological Satellite Program to produce the National Polar-orbiting Operational Environmental Satellite System (NPOESS). 

14 VIIRS collects visible/infrared imagery and radiometric data, such as sea-surface temperature readings and ocean color measurements. 

15 U.S. GovernmentAccountability Office, November 2005. Polar-Orbiting Environmental Satellites—Technical Problems, Cost Increases, and Schedule Delays Trigger 

Need for Difficult Trade-off Decisions, GAO-06-249T. Washington, D.C: GAO. 

September 2006/Semiannual Report to Congress 29
National Oceanic and Atmospheric Administration 

looked at how the contractor identifies and communicates problems 

with NPOESS to the integrated program office—the entity within 

NOAA responsible for day-to-day management of the satellite 

program; how that office in turn communicates problems to NOAA 

officials; and whether award fees allowed under the integration 

contract were administered effectively. 

major Findings 

We uncovered two overarching management and contract weaknesses that contributed to the unchecked cost and schedule overruns. 

the npoEss Executive committee Did 

not challenge optimistic Assessments 

of the impact of viirs problems 

Reports that problems with the VIIRS sensor would delay the 

NPOESS launch took observers of the program by surprise, 

prompting our concerns that the integrated program office either 

was unaware of the VIIRS problems or failed to bring them to the 

attention of senior management, particularly the NPOESS executive committee (EXCOM). EXCOM is made up of top leadership 

from each agency: the Under Secretary of Commerce for Oceans 

and Atmosphere, the Under Secretary of Defense for Acquisition 

and Technology, and the NASA Deputy Administrator. 

In fact, we found that information sharing was not effective between the contractor, the VIIRS subcontractor, and the program office at the outset of the program. But as VIIRS problems persisted, 

the program office and prime contractor took steps to improve 

communication and increase oversight of the VIIRS subcontractor. 

Beginning in December 2002, the integrated program office submitted monthly status reports to EXCOM that explicitly described 

the growing costs and delays attributable to VIIRS. Yet until March 

2005 the program director—a NOAA employee—maintained that 

these problems would be solved within available funding reserves 

and that NPOESS remained on schedule. 

Despite mounting evidence of the seriousness 

of the VIIRS problems, 

EXCOM did not challenge the director’s optimistic assessments, 

and rarely convened 

during the first years of 

the program to consider 

its status. Finally, in 

2005, after the program 

office reported that VIIRS problems would 

indeed delay the first 

Under the revamped NPOESS program, the U.S. will launch four orbiters 

instead of six, and rely on European satellites to fill any resulting gaps in 

satellite coverage. 

Source: http://eic.ipo.noaa.gov/IPOarchive/ED/graphics_kit/npoess_orbiter_ 

300DPI.jpg 

satellite launch, EXCOM began meeting more often to investigate 

the issues and their impact. Unfortunately, by then it was too late 

to turn the program around: EXCOM’s long-term inattention had, 

in effect, postponed critical evaluations and decisions needed 

to replan the program’s faltering elements and contain cost and 

schedule overruns. 

We recommended that the Deputy Secretary ensure the Under 

Secretary for Oceans and Atmosphere works with the other 

members of EXCOM to obtain regular, independent evaluations 

of the status of NPOESS that thoroughly assess progress toward 

completing critical tasks. 

contractor received Excessive 

Award Fees 

Award fees are supposed to motivate a contractor to strive for 

excellence. But the NPOESS experience shows that this incentive 

structure does not always result in the intended caliber of performance. Despite ongoing, significant delays and cost overruns, the 

prime contractor received close to the maximum fee amounts for 

the first five billing periods—an average 90 percent of available 

incentive payments. It was only in period six—which covered the 

6 months prior to the Nunn-McCurdy breach—that the contractor’s 

performance was rated unsatisfactory. Even so, the prime received 

48 percent of the potential fee amount—$10.7 million. 

These payments were permissible because the award fee plan’s 

evaluation criteria do not sufficiently tie incentive earnings to 

30 U.S. Department of Commerce/Office of Inspector General 
National Oceanic and Atmospheric Administration 

completion of the most critical or high-risk tasks. And the potential fee pool—20 percent of total estimated costs—is atypical: a 

GAO review of Defense award fee contracts found that less than 

1 percent of these arrangements allowed fee pools to exceed 15 

percent of estimated costs. Finally, the NPOESS plan gives total 

authority for setting fee amounts to a “fee determining official” 

who in the case of NPOESS is also the program director. This 

individual’s objectivity in assessing the contractor may well 

be compromised by his responsibility for NPOESS’ day-to-day 

management and his stake in the program’s success. The payments approved by the fee determining official for periods two 

through five routinely exceeded the recommendations made by 

the NPOESS review board. 

The Under Secretary for Oceans andAtmosphere and his EXCOM 

counterparts should revise the NPOESS award fee plan to (1) tie 

incentive payments to the most critical tasks and contractor performance, and (2) assign responsibility for determining fee awards 

to an official who does not directly manage the program. 

responses from the Department 

and noAA 

In responding to our report, the Deputy Secretary of Commerce 

stressed the importance of NPOESS to the Department’s mission 

and national responsibilities, noting that he now receives monthly 

NPOESS progress reports from NOAA. He stated that he will 

work with the Under Secretary for Oceans andAtmosphere and the 

EXCOM partners to ensure NPOESS is managed, operated, and 

monitored in a way that meets the intent of our recommendations 

as well as those of the Nunn-McCurdy process. 

The Under Secretary for Oceans and Atmosphere generally 

agreed with the intent of our recommendations but stated that 

the report does not (1) adequately acknowledge the complexity of the NPOESS program, (2) represent the ongoing level of 

EXCOM’s direct involvement in overseeing both NPOESS and 

the integrated program office, (3) fully characterize the contract’s 

award fee structure, and (4) adequately recognize Defense’s role 

in administering the contract. 

We assessed our report in light of NOAA’s comments and determined that it did in fact present in enough detail the information 

NOAA believed was lacking. We worked with NOAA to develop 

a suitable action plan for resolving the weaknesses we identified. 

(Offices of Audits and Systems Evaluation: OIG-17794) 

search and rescue satellite 

system Does not provide 

Adequate Assurance 

of Users’ identities 

The security of information exchanged over the Internet is critical 

to the effectiveness of e-government operations and to the public’s 

willingness to use online government services. OMB requires 

agencies to formally assess the degree to which this information 

must be protected. These risk assessments measure the harm that 

would result from the data’s unauthorized release or modification. 

The level of harm dictates the level of “assurance,” or confidence, 

in a user’s identity a system must establish before allowing access 

and determines how rigorous the electronic authentication process 

for verifying user identities must be. We evaluated the quality of 

an assessment NOAA conducted on the e-authentication process 

that controls user access to its Search and Rescue Satellite-Aided 

Tracking system (SARSAT). 

SARSAT is the U.S. portion of an international search and rescue 

program. It collects emergency information that is transmitted from 

beacons carried on ships, planes, and search and rescue personnel to satellites. The information is then sent to the appropriate 

Life-saving SARSAT operations begin with distress signals transmitted 

from beacons carried by people, planes, or ships to the global network of 

search and rescue satellites. The personal locator beacons pictured here 

use GPS technology to alert rescue personnel within 3 minutes of signal 

transmission. 

Source: http://www.noaanews.noaa.gov/stories/images/plb-groupshot2.jpg 

http://www.omao.noaa.gov/aviationsafety/pdf/AviationLifeSupportEquipmentProgram.pdf#search=%22SARSAT%20beacons%22 

September 2006/Semiannual Report to Congress 31
National Oceanic and Atmospheric Administration 

U.S.-based rescue coordination centers and international entities. 

SARSAT maintains databases of registered beacons and incident 

histories, both accessible to authorized users via web-based applications. 

Our evaluation sought to determine if the SARSAT risk assessment 

identified the appropriate level of e-authentication controls and 

whether the controls had been implemented and properly certified 

prior to the system’s accreditation. 

Determining E-Authentication needs 

OMB established four assurance levels for agency applications, 

depending on the business being conducted, with level 1 requiring 

little or no confidence in the user’s identity and level 4 requiring 

very high confidence. 

The risk assessment 

measures the potential 

adverse impact on individuals or an organization’s operations or 

assets in six categories: 

inconvenience, financial 

loss, harm to agency 

programs, unauthorized release of sensitive 

information, personal 

safety, and criminal or 

civil violations. Each assurance level correlates 

with specific control requirements established 

by the National Institute 

of Standards and Technology in NIST Special Publication 800-63, 

Electronic Authentication Guideline. 

Once the risk assessment has determined the 

Responding to a distress signal picked up 

by SARSAT, a U.S. Coast Guard helicopter airlifts the stranded crew of a grounded 

ship off the coast of Texas. 

Source: http://www.sarsat.noaa.gov/ 

level of confidence, agencies must prepare system security plans 

that fully document requirements for authenticating users and the 

controls they have planned or in place for doing so. They must 

test controls and have them independently certified prior to the 

system’s accreditation, develop a plan of action for eliminating 

the deficiencies, and set milestones for tracking and monitoring 

their resolution. They must submit to the official responsible for 

authorizing a system’s operation, a security assessment report that 

describes the extent to which controls are implemented correctly, 

operating as intended, and meeting security requirements. 

sArsAt’s E-Authentication controls Fall 

short 

We found problems with SARSAT’s e-authentication risk assessment and system security plan, and found that certification 

activities did not appropriately examine e-authentication controls. 

We also identified unmitigated deficiencies in the controls for the 

web applications. 

noAA Did not Accurately Assess 

Assurance levels 

Agencies determine required assurance levels by comparing the 

impact profile from their risk assessment with impact profiles in 

OMB’s guidance, and selecting the level that meets or exceeds the 

potential impact to their system in every category. For example, 

if an agency determines an authentication error could have a 

moderate or high impact on personal safety, it should meet level 

4 e-authentication requirements, even if all other consequences 

are minimal. 

For one of the SARSAT databases, the risk assessment rated the 

potential impact of unauthorized access to personal safety as 

moderate. But NOAA assigned an assurance level of 2 for both 

databases, rather than level 4, as OMB requires. 

The assessment incorrectly assigned a low level for the impact 

category unauthorized release of sensitive information: beacon 

registration data is protected under the Privacy Act, and as such 

requires a higher impact rating. The SARSAT system security plan, 

in keeping with Privacy Act requirements, describes a moderate 

level of impact from breaches in the confidentiality of this information. Because the assessment incorrectly considered confidentiality 

objectives for beacon registration information, assurance levels 

were miscalculated and the risk to data in both applications was 

mischaracterized. The assessment failed to provide any justification for the lower assurance levels. 

Finally, OMB guidance requires agencies to (1) consult with 

their office of counsel regarding legal issues that may impact 

authentication requirements, and (2) consider the risk posed by 

users’ denial (or repudiation) of having electronically transmitted 

or received information. We found no evidence of legal consultation in SARSAT’s risk assessment, and scant consideration of 

nonrepudiation. 

32 U.S. Department of Commerce/Office of Inspector General 
National Oceanic and Atmospheric Administration 

the system security plan Did not 

Adequately Address E-Authentication 

controls 

A system security plan should provide an overview of security 

requirements, including those for e-authentication, and detail the 

controls that are in place or planned for meeting them before the 

system is authorized to operate. The SARSAT security plan did 

not address these requirements, and did not adequately explain the 

established or planned authentication controls. 

For example, level 2 systems must have an identity-proofing 

process that validates enough information to uniquely identify 

new users. The SARSAT plan did not describe such a process, 

and the system security officer confirmed that identity proofing 

does not occur. The security plan also did not detail mechanisms 

for authenticating web-based users. OMB does allow agencies 

to reduce control requirements given certain cost/benefit considerations, but they must justify their decisions to do so. NOAA’s 

system accreditation package contained no such justification. At 

present, the controls in place for the web applications fail to meet 

even level 1 requirements. In addition, a login vulnerability in 

one of the web applications identified by the risk assessment had 

not been corrected, and our own examination of the other web 

application revealed the same vulnerability. 

The plan’s failure to document requirements and controls resulted 

in inadequate system certification: e-authentication controls were 

not sufficiently tested, the security assessment report was incomplete, and the authorizing official was not informed of e-authentication deficiencies that may, in fact, increase the risk of harm to 

both individuals and agency operations. 

recommendations and noAA 

response 

We recommended that NOAA, among other things, redo the e-authentication risk assessment to address the shortcomings we identified and improve the system security plan; correct vulnerabilities 

in the web applications’login processes; and test e-authentication 

controls, document deficiencies, and track their resolution. 

NOAAdisagreed with our conclusion that SARSAT’s e-authentication controls do not provide adequate assurance of users’identities, 

but accepted all but one of our recommendations (after we clarified 

the meaning of one of them). NOAA reported that it has already 

corrected the login vulnerabilities we identified. The agency plans 

to (1) update the e-authentication risk assessment and include justification for why it did not implement minimum e-authentication 

controls; (2) revise the system security plan in accordance with 

NIST SP 800-53 requirements; (3) test SARSAT e-authentication 

controls; and (4) track gaps between required and implemented 

controls. (Office of Systems Evaluation: OSE-18020) 

FismA review reveals 

officials need more 

information for c&A Decisions 

As a part of our FY 2005 Federal Information Security Management Act reporting, we evaluated two important parts of NOAA’s 

certification and accreditation process: (1) system security plans/ 

risk assessments, and (2) security control assessments. Although 

our report details findings from work NOAA did in FY 2005, it 

was issued because our preliminary review of five C&A packages earlier in FY 2006 revealed that these packages had similar 

problems. 

On February 24, 2005, the Department’s chief information officer 

issued a plan to have improved C&A packages by the end of FY 

2005 for all national-critical systems, along with 

a substantial number of What Is C&A and Why 

mission-critical systems, Does It Matter? 

as a way to eliminate Certification is a compre- Commerce’s IT security hensive assessment of secu­ material weakness. All rity controls implemented in Commerce systems were a computer system. It docu­ to have acceptable C&A ments whether controls are 

packages by the end of implemented correctly, operFY 2006. Accordingly, ating as intended, and meetin FY 2005, NOAA be- ing the security requirements 

gan an effort to improve for the system. Through the 

its certification and ac- formal assessment of concreditation process. trols, the system certifier 

identifies any vulnerabilities 

that have not been eliminated For FY 2005, we re- by security controls.

viewed the C&A documentation for three Accreditation is manageNOAA systems: the ment’s formal authorization 

Search and Rescue Sat- to allow a system to operate. 

ellite-Aided Tracking It includes an explicit acsystem, the Polar Op- ceptance of the risks posed 

erational Environmental by any identified remaining vulnerabilities. Through Satellite Ground System accreditation, senior agency (POES), and the Office officials take responsibility for

of Response and Res- the security of systems they

toration Seattle Local manage and for any adverse

Area Network (Seattle impacts should a breach in 

LAN). Each of these security occur. 

systems was certified 

and accredited as part of 

NOAA’s C&A improvement effort. 

In 2004, we had reported that NOAA had significantly improved 

risk assessments, security plans, and security control assessments, 

but needed to improve its C&Aprocess. Our FY 2005 independent 

September 2006/Semiannual Report to Congress 33
National Oceanic and Atmospheric Administration 

FISMA evaluation found that C&A packages for NOAA’s Seattle 

area LAN and SARSAT were compliant with FISMA, but POES 

was not. However, even for SARSAT and the Seattle LAN, several 

important aspects of the C&A process needed to be improved. 

NOAA has categorized SARSAT and POES as high-impact systems because a security breach would potentially have severe or 

catastrophic adverse effects. The certification and accreditation of 

SARSAT and POES should therefore reflect the highest degree of 

rigor. The Seattle LAN, as a moderate impact system, would be 

held to a somewhat lesser standard but a significant degree of due 

diligence should be manifest in the C&A process. 

system security plans and risk 

Assessments somewhat improved 

NOAA security plans, which form the basis for certification activities by outlining the security requirements for a system and the 

controls in place, were improved from those we saw in our FY2004 

review with more accurate accreditation boundaries and better 

identification of software components and interconnections. But 

the plans did not accurately depict network components—raising 

the possibility that certification efforts may not adequately account 

for such devices. Current interconnection agreements were not in 

place for POES and SARSAT, which could pose increased risks 

to agency operations. 

Risk assessments for all three systems provided useful information for NOAA system owners to determine appropriate security 

controls, but we noted some flaws in the assessment methods. 

Assessed threats and vulnerabilities were either vague or broad 

generalizations, and analyses at times confused the definitions of 

some terms. There was no analysis of how controls would mitigate 

specific adverse events. 

We recommended that NOAA require security plans to include a 

complete and accurate account of all system components and to 

ensure interconnection agreements are in place. NOAAshould use 

risk assessments to tailor security controls and provide analysis 

and justifications for resource-intensive changes to the security 

features of information systems. 

security control Assessments insufficient 

The POES, SARSAT, and Seattle LAN security control assessments covered only a few of the minimum security controls 

described in NIST guidance. Generally, the C&A packages did 

not include specific procedures used to evaluate the controls or 

complete documentation of the results. In addition, the approach 

used to select network components for technical control assessments did not provide for complete testing of all operating system 

variants running on servers, workstations, laptops, routers, and 

switches. 

Describing the System Environment and 

Interconnections 

The security plan provides information that is essential 

for determining the scope of security control assessments and associating a security deficiency identified 

during testing with a specific network component. In 

describing the system environment and interconnections the plan should include the following: 

•	 Detailed topology graphic that depicts system 

boundary and key components (e.g., perimeter security devices, firewalls, routers, switches, servers). 

•	 Complete listing of hardware and software components. 

•	 Discussion of interconnections with other (both 

untrusted and trusted) systems, referencing and 

including copies of memoranda of understandings 

(MOUs) and other agreements for provision of IT 

security for the connections. 

Source: U.S. Department of Commerce IT Security Program Policy and Minimum 

Implementation Standards, June 30, 2005, pages 178–179. Similar requirements 

were part of the System Security Plan Certification and Accreditation Package 

Requirements Inspection Checklist, version 2, June 30, 2003 

ineffective vulnerability scans 

NOAA’s use of vulnerability scans to assess the adequacy of security controls was incomplete and ineffective. NOAA’s designated 

scanning tool was unable to evaluate many network components 

for all three systems. POES scans were successfully completed on 

only 4 of 14 components residing on its development network, and 

the operational network was not scanned at all. On the SARSAT 

system, key components such as firewalls, routers, and switches 

were not scanned but the system still was accredited. And additional scans of POES and SARSAT done in response to our 

concerns also were incomplete. 

NOAAdid not analyze or correct potentially serious vulnerabilities 

on the Seattle LAN. Two additional scanning tools were used and 

identified a significant number of vulnerabilities, but the vulnerabilities were not analyzed or corrected prior to the accreditation 

decision, and they were not identified to the authorizing official. 

no penetration testing on poEs and 

sArsAt 

Penetration testing shows how vulnerable an organization’s network is and the level of damage that could result from a system 

34 U.S. Department of Commerce/Office of Inspector General 
National Oceanic and Atmospheric Administration 

breach. POES and SARSAT are high-impact systems but, though 

required, no penetration testing was done. 

our recommendations 

We recommended NOAA undertake comprehensive vulnerability 

scanning, analyze and document scan results, and plan and implement penetration testing on high-impact systems such as POES and 

SARSAT. NOAA should comprehensively test all management, 

operational, and technical controls; perform technical control tests 

on each operating system variant; and clearly document remaining 

vulnerabilities for benefit of the authorizing official. 

Bureau response 

In its response to our report, NOAA stated that it had completed 

C&Aactivities for POES and SARSAT, made immediate revisions 

to its C&A process after our December 2005 exit conference, and 

implemented most of our recommended changes. We note that we 

issued this report because several of the problems we identified in 

our FY 2005 and previous reviews were evident in the additional 

five NOAA C&A packages we reviewed early in FY 2006. (Office 

of Systems Evaluation: OSE-18019) 

C&A of Contractor IT Resources: 

Alternative Approaches 

1.	 Contractor personnel perform the activities, and the 

system is accredited by a government official as a 

contractor system. 

2.	 Government personnel and contractor share responsibility for performing the activities, and the 

system is accredited by a government official as a 

contractor system. 

3.	 The contractor’s IT resources are incorporated into 

a government system accreditation boundary, and 

government personnel perform the majority of the 

activities. 

Better oversight of 

contractor information 

security is needed 

FISMA requires agencies to develop and implement programs to 

protect government information and information technology systems. With the government’s growing reliance on contractors for 

services, agencies need to perform careful oversight of contractors’ 

information security to avoid misuse of government information 

or disruption to government IT systems and operations. 

In 2002, we reported that Commerce contracts frequently lacked 

adequate security provisions and we called for IT security clauses 

to be included.16 In response to that report, the Department’s Office of Acquisition Management and Financial Assistance issued 

two contract clauses in 2003. Clause 73 requires contractors to 

comply with the Department’s IT security policy and have their IT 

resources certified and accredited if they connect to a Commerce 

network17 or process or store government information. Clause 74 

requires contractor personnel to undergo appropriate background 

screening and IT security awareness training. 

To fulfill our charge under FISMA’s requirements, we evaluated 

a judgmental sample of 16 NOAA service contracts to determine 

whether NOAA is incorporating the two information security 

clauses into contracts and to evaluate whether their requirements 

are implemented. Our review also included interviews with managers and staff from NOAA’s Office of Acquisition and Grants, 

Office of the Chief Information Officer, and line offices. 

16 U. S. Department of Commerce, Office of Inspector General. May 2002, Information Security Requirements Need to Be Included in the Department’s Information 

Technology Service Contracts. OSE-14788. A subsequent OIG evaluation found 

that the Department had made progress in incorporating the new IT security clauses 

into contracts, but provisions for controlling contractor access to Department systems and networks were generally absent, and there was little evidence of contract 

oversight or of coordination among contracting, technical, and information security 

personnel. (U.S. Department of Commerce Office of Inspector General, September 2004. Information Security in Information Technology Security Contracts Is 

Improving, but Additional Efforts Are Needed, OSE-16513.) 

17 C&A is required if the connection is to a trusted government network. Trusted 

networks are the networks inside an organization’s network security perimeter, 

with the exception of virtual private networks (VPNs). These networks are the 

ones the organization is trying to protect. CISCO Systems Glossary, http://www. 

cisco.com/univercd/cc/td/doc/product/iaabu/centri4/user/scf4glo.htm (accessed 

June 13, 2006). 

September 2006/Semiannual Report to Congress 35
National Oceanic and Atmospheric Administration 

our Findings 

We discovered some problems with aspects of clauses 73 and 74, 

which contributed to issues we identified at NOAA this year and 

in a review at USPTO in 2005.18 

scope and content of clause 73 should 

Be revised 

We learned that some NOAA officials and contractors incorrectly 

interpret Clause 73 to apply only to IT service contracts. Federal 

information security requirements apply to any organization—including federal assistance recipients or contractors—that has access to government information. Clause 73 is also outdated and 

contains ambiguous phrases that are interpreted in various ways, 

which causes some inconsistencies in application. 

noAA Does not Ensure contractor it 

resources Are certified and Accredited 

Seven of the 16 contracts in our sample required certification 

and accreditation, but only 2 had fulfilled the requirement. C&A 

had not been performed in the other 5 instances because NOAA 

officials either did not recognize it was required or, if the need 

was recognized, did not follow through to complete the C&A. 

The remaining 9 contracts did not require C&A of contractor IT 

resources because the place of performance was a NOAA facility 

and the contractors used government IT resources. 

Better Guidance is needed 

It was clear to us that there was some confusion among acquisition 

and IT security personnel on Clause 73’s requirements, the types 

of contracts it applies to, and the conditions that trigger the need 

for contractors to certify and accredit their IT resources. 

Revising Clause 73 should go a long way toward addressing this 

issue. But to make sure the clause is properly applied, in addition 

to updating Clause 73, the Department must develop guidance to 

assist in resolving four key issues in the acquisition planning stage: 

whether Clause 73 applies, which Clause 73 requirements apply, 

the C&A level of effort, and who will perform the C&A. 

clause 74 requirements 

Are not Documented 

Contractor personnel generally receive IT security awareness 

training prior to being granted access to NOAA IT resources. Contracting officer representatives are determining contract risk levels, 

18 Department of Commerce Office of Inspector General, September 2005. 

Information Security in Contracts Needs Better Enforcement and Oversight, 

OSE-17455. 

Key Issues in Performing Contractor Information 

Security Oversight 

1.	 Application of Clause 73. Contractors need to comply with federal information security policy if they 

have privileged access to government information, access to government IT resources, or their IT 

resources are connected to a government trusted 

network. 

2.	 Clause 73 Requirements. Clause 73 contains two 

requirements: if the clause applies, the contractor 

must comply with relevant portions of the DOC IT 

security policy, but the C&A requirement only applies if contractor IT resources contain government 

information or provide connection to a government 

trusted network. 

3.	 C&A Level of Effort. Solicitations need to inform 

contractors whether their IT resources will be 

accredited at the low-, moderate-, or high-impact 

level. 

4.	 C&A Activities. Solicitations need to inform 

contractors what work is expected to certify and accredit its IT resources. 

and contractor personnel are receiving background investigations 

commensurate with those risk levels as required by Clause 74. 

However, we found the risk levels were not documented in contracts or identified in contract files, which made it difficult to 

determine whether the appropriate risk level had been assigned. 

In addition, the Commerce Acquisition Manual should be updated 

to reflect the Department’s revised IT security policy and the most 

recent guidance from NIST. 

What We recommended 

We recommended the Under Secretary of Commerce for Oceans 

and Atmosphere and NOAA Administrator primarily address 

improving the certification and accreditation of contractor IT 

resources that are either connected to a NOAA trusted network or 

allow privileged access to government information. 

We also recommended the Department’s chief financial officer 

and chief information officer initiate an update of Clause 73 

and the Commerce Acquisition Manual to be consistent with the 

Department’s IT security policy and NIST standards and guidance. 

The Department also needs to clarify to which contracts Clause 73 

applies and provide additional guidance to assist contracting offi36 U.S. Department of Commerce/Office of Inspector General 
cers, contracting officer representatives, and IT security officers in 

implementing information security for contractor IT resources. 

positive responses from 

noAA and the Department 

Both NOAA and the Department agreed with our recommendations. The Department’s director of acquisition management issued 

a revised Clause 73 as well as a procurement memorandum that 

National Oceanic and Atmospheric Administration 

included an information security checklist to assist in determining 

whether the clause applies to a contract, and if so which provisions 

apply. The Department also revised the Commerce Acquisition 

Manual section on contract risk designations to be in alignment 

with the Department’s IT security policy. NOAA stated that it 

will take the appropriate steps to identify contractor IT resources 

requiring certification and accreditation and implement the C&A 

process. (Office of Systems Evaluation: OSE-18028) 

September 2006/Semiannual Report to Congress 37

September 2006/Semiannual Report to Congress 39

Technology 

Administration

Audit Recommends Return of Nearly 

$800,000 from Cultural Group

In July 2002, the National Institute of Standards and Technology awarded a $1.3 million grant to a not-for-profit organization dedicated to the creation, operation, and 

administration of cultural and artistic programs. The grant was to pay for real 

estate and develop programs to create the Puerto Rican Historical, Cultural, 

and Activities Center (also known as CASA Cultural Puertorriquena), which 

would include a museum, library, and town hall center to depict the migration of the Puerto Rican people and culture to New York City. 

Originally, the NIST award was for a 1-year period beginning July 

2002, but the award was amended twice and extended. The first 

amendment allowed costs incurred prior to the award making the 

effective start date of the award February 2, 2002. The second 

amendment extended the award period another year with a new 

ending date of June 30, 2004. Neither amendment included any 

additional funds or changes to the award budget. NIST allowed a 

90-day closeout period at the end of the award.

Allegations of Wrongdoing

The cultural organization put $500,000 of the award in escrow for 

a building site and spent more than 2 years trying to purchase the 

Old Bronx Courthouse to use for the CASA project. The organization 

finally concluded it did not have sufficient funds to buy the building, 

the price of which ranged from an initial quote of $1.2 million to $4.8 

million. It was considering an alternative site when allegations that the 

organization had misspent federal funds appeared in New York City newspapers, drawing congressional interest. A New York congressman contacted 

NIST and asked that the cultural organization be prohibited from spending any 

more of the grant money.

Since a building had not been acquired, the organization returned the escrowed $500,000 

to NIST and submitted a closeout report for the 90-day period July 1 through September 30, 

2004, following the end of the award. We audited the organization to determine the financial status 

of the award, whether the group had complied with all applicable laws and regulations, and whether the 

expenses charged against the award were allowable. 

While the majority of the funding came from NIST and other federal sources over the period of the award, the organization had expended funds for several different projects during this same time period. Only the costs associated with the acquisition of real estate 

and development programs to create the cultural museum should have been charged to the NIST award but some of the organization’s 

personnel worked on a separate theater renovation project originally funded by the Department of Housing and Urban Development, 

fund-raising campaigns, and general management along with the CASA project. Expenses were paid based on the money available at 

the time, not on the source and appropriate use of funds.

The Technology Administration serves the needs of 

technology-based industry, advocates 

federal actions and policies to speed the 

transfer of technology from the laboratory to 

the marketplace, and removes barriers for commercializing new technologies. It includes three 

major organizations: 

Office of Technology Policy works in partnership with 

the private sector to develop and advocate national policies and initiatives that use technology to build America’s 

economic strength, promote the creation of high-wage jobs, 

and bring about improvements in our quality of life. 

National Institute of Standards and Technology promotes 

U.S. economic growth by working to develop and apply 

technology, measurements, and standards. NIST manages four programs: the Advanced Technology Program, 

the Manufacturing Extension Partnership program, the 

Baldrige National Quality Program, and NIST Research 

Laboratories.

National Technical Information Service is a 

self-supporting agency that promotes the nation’s 

economic growth and job creation by providing 

access to information that stimulates innovation 

and discovery. NTIS accomplishes this mission through information collection and 

dissemination to the public and through 

information and production services to federal agencies.
Technology Administration 

The Old Bronx Courthouse was the desired site for a center dedicated to 

Puerto Rican history, but the price was too high for the cultural organization spearheading the project. 

Source: OIG 

no Effective controls 

Our audit revealed that the cultural organization did not have 

effective controls over the NIST funds or adequate procedures 

to determine allowability of costs for the grant or to allocate 

expenditures to the four separate cost centers it operated. It filed 

only four financial status reports, all with the same date, covering 

the period of August 2002 through March 2004. The organization 

was unable to explain how the financial status reports had been 

prepared and could not provide reconciliation of the accounting 

records or itemized costs. 

The organization withdrew a total of $1,290,210 in NIST funds 

through the award and closeout period. (It drew down the $500,000 

for the purchase of real estate during the final month of the award.) 

The remaining NIST funds drawn down for the award period and 

closeout period totaled $790,210. During this audit, we repeatedly 

requested the remaining financial status reports and reconciliation 

of the group’s accounting records to no avail. 

The organization also was unable to provide adequate documentation 

to support the outstanding drawdowns of $790,210 in NIST funds or 

to substantiate the $607,345 of costs claimed on the financial status 

reports. We recommended the NIST grants officer recover the full 

amount of $790,210, which includes questioned costs of $607,345 

and excess drawdowns of $182,865. We did not make further recommendations because the award period has expired. 

In consideration of the organization’s use of its personnel and resources on the CASAproject, OIG developed a possible allocation 

of costs and included it in the appendixes of the audit report. The 

costs were allocated using OIG’s judgment based on discussions 

with personnel and review of available documentation. 

Grantee’s response 

In their response to our report, officials of the cultural organization 

disagreed with the way we allocated costs in our report and said 

all funds were properly accounted for and all government money 

was spent for the intended projects. They gave some additional 

background information, but still did not provide the missing 

financial status reports or the documentation needed to identify 

the costs claimed for the award period. 

After thoughtful consideration of their objections, our finding that 

this organization’s financial management system was inadequate 

remains unchanged. We also continue to recommend that NIST 

disallow the $607,345 in questioned costs and recover the $182,865 

in excess drawdowns, a total of $790,210 of funds disbursed. We 

also have not changed the recommended allocation of costs to 

CASA that NIST may want to use as an alternative position to disallow a lesser amount of questioned costs since the organization’s 

personnel and resources were used on the CASA project. (Atlanta 

Regional Office of Audits: ATL-17744) 

nist’s Advanced 

technology program 

As part of its efforts to spur technological development, NIST 

administers the Advanced Technology Program (ATP) to provide 

financial assistance through cooperative agreements, with the goal 

of transferring cutting-edge technology to industrial uses. Between 

1990 and September 2004, ATP awarded $2.3 billion to support 

projects to develop promising, high-risk technologies. Industry has 

matched this funding with $2.1 billion in cost-sharing. 

During this semiannual period, we audited three ATP cooperative 

agreements to determine whether recipients were complying with 

federal regulations, NISTATP requirements, and award terms and 

conditions. In all, we questioned nearly $500,000 in costs submitted for federal reimbursement. Here are the details of what we 

found and recommended. 

Questioned costs, premature 

Withdrawals Found in 

california project 

A biotech firm received a 3-year ATP award to develop a genetic 

engineering technology that would increase commercial production of plant compounds used in vitamins, pharmaceuticals, and 

40 U.S. Department of Commerce/Office of Inspector General 
other products. Total estimated costs of the project were $2.8 million, with the federal share capped at $1,987,774 in direct costs. 

During the project’s first 20 months, the firm reported incurring 

direct costs of $672,161 but made $800,000 in withdrawals against 

the award via the government’s automated payment system. We 

identified two problems with this transaction: first, the firm violated 

ATP program requirements by withdrawing more money than 

it needed to cover immediate expenses. Second, costs claimed 

included $195,116 in lab supplies, which the firm calculated as 

a portion of its company-wide supply costs. This amount is an 

indirect cost because it was not expended solely on the ATP project. Since indirect costs are not subject to federal reimbursement 

under this agreement, the firm should have received $477,045 

($672,161-$195,116). We questioned the $195,116 in claimed 

costs and recommended that NIST recover $322,955 in excess 

federal funds based on the following calculations: 

Direct costs claimed . . . . . . . . . . $672,161 

Less questioned costs . . . . . . . . . . 195,116 

Costs accepted. . . . . . . . . . . . . . . . 477,045 

Federal funds disbursed . . . . . . . $800,000 

Less costs accepted. . . . . . . . . . . . 477,045 

Amount due NIST . . . . . . . .$322,955 

We also recommended that NIST take action to ensure that the 

firm does not withdraw more funds than it needs to cover its immediate costs. 

Finally, we found that the firm did not have written standards for 

employee conduct or written procedures for minimizing the time 

between receipt and disbursement of federal funds, making procurements with award dollars, and determining whether costs are 

allowable. We recommended that NIST direct the firm to develop 

and enforce the required written standards and procedures. (Denver 

Regional Office of Audits: DEN-17931) 

colorado Firm Bills for 

nonproject Expenses, 

miscalculates Federal share 

A Boulder firm is using ATP funds to develop laser technology for 

measuring optical frequencies far faster and more accurately than 

is currently possible. The technology has potential application and 

benefits for a range of U.S. industries—optical communications, 

Technology Administration 

aerospace, semiconductor manufacturing, and medical diagnostics, to name a few. The 2-year project has total estimated costs 

of $2,199,076, with the federal share not to exceed $2 million 

(93.8 percent). 

From June 2004 through September 2005, the firm reported costs 

of $1,302,263 and received $1,273,369 in reimbursement. Our 

interim audit questioned $12,466 in costs claimed, consisting 

of $8,966 for equipment purchased outside of the award period 

and $3,500 in unallowable relocation expenses. The firm also 

had calculated reimbursement at a higher rate than allowed for 

by the award (98.7 percent versus 93.8 percent) and as a result 

received excess reimbursement totaling $63,539, which includes 

the questioned amount. Finally, we found that the company had 

not labeled equipment purchased with federal funds to indicate 

government ownership. 

We recommended that NIST disallow the questioned costs, recover $63,539 in excess reimbursement, and direct the recipient to 

properly tag all project-related equipment purchased with federal 

funds. (Denver Regional Office of Audits: DEN-17832) 

software costs at issue in 

california/nevada Joint venture 

In April 2004, a California company and a Nevada firm received 

$1.5 million in ATP funding to develop a prototype diesel engine 

built on a thermal technology that—if successful—promised 

huge gains in fuel efficiency along with reduced emissions. The 

2-year award capped federal contributions to the California firm at 

42.02 percent of allowable costs. The federal share to the Nevada 

firm was capped at 36.53 percent. We audited costs claimed by 

the companies during the project’s initial 20 months (May 2004 

through December 2005). 

The California firm incurred $789,271 in costs and received 

$374,377 in federal reimbursement. We questioned $84,424 in 

unsupported costs for, among other things, software that had been 

developed prior to the 

award, as well as tools 

and equipment that 

had been previously 

purchased. We recommended that NIST disallow the questioned 

costs and recover the federal share of $78,200. 

The Nevada firm submitted costs of $393,210 and received 

$149,943 in reimbursement. We questioned $130,181, largely 

in unsupported software development expenditures, and recommended that NIST disallow the full amount as well as recover 

$53,859 in excess federal disbursements. (Denver Regional Office 

of Audits: DEN-17933-6-0001 and 0002) 

September 2006/Semiannual Report to Congress 41
Technology Administration 

Audits Unresolved for 

more than 6 months 

massachusetts mEp 

We are continuing to work with NIST officials toward resolution of an MEP cooperative agreement, which we reported on 

in our September 2004 Semiannual Report (page 37) as being 

unresolved for more than 6 months. Our audit had recommended 

that NIST disallow questioned costs of $8,177,606, recover the 

federal share of $1,599,349, and require the recipient to implement improvements to its financial reporting system. In its audit 

resolution proposal, NIST disallowed $715,097 and reinstated 

$7,462,509 in costs questioned in the audit report. In July 2004, 

after detailed analyses of NIST’s audit resolution proposal and 

other documents provided by NIST and the recipient, we advised 

NIST that we concurred with its decision to disallow $715,097, 

but did not concur with reinstatement of the remaining $7,462,509. 

OIG is reviewing a revised audit resolution proposal that NIST 

submitted in June 2005. 

computer Aided surgery 

inc., new york 

An OIG audit of this NIST cooperative agreement (see September 

2004 issue, page 35, and March 2005 issue, page 33—ATL-16095) 

questioned costs totaling $547,426 in inappropriately charged rent, 

utilities, and certain salary, fringe benefit, and other expenses, 

because these costs were unallowable, in excess of budgetary 

limits, or incorrectly categorized. This audit remains unresolved 

because we have postponed NIST’s submission of an audit resolution proposal. 

FastvDo llc, maryland 

A financial assistance audit of this NIST cooperative agreement 

(see March 2006 issue, page 35, DEN-17410) recommended that 

NIST disallow $51,838 in questioned costs, recover excess federal disbursements of $29,409, and ensure the recipient, among 

other things, (1) implements an adequate method for capturing 

time directly spent on the ATP project, (2) bills only for that time, 

(3) develops written financial management procedures, and (4) 

tracks and inventories grant-funded purchases as required by 

federal regulations and ATP program terms. This audit remains 

unresolved because we have postponed NIST’s submission of an 

audit resolution proposal. 

42 U.S. Department of Commerce/Office of Inspector General 
DEpArtmEnt-WiDE 

mAnAGEmEnt 

commerce implemented reasonable The United 

States Depart- precautions for special Hurricane 


ment of Commerce procurements


promotes job creation and 

improved living standards for all In the aftermath of the 2005 hurricanes Katrina and Rita, PCIE’s Homeland Security 

Americans by creating infrastructure Working Group coordinated the inspectors general reviews of post-hurricane spendthat fosters economic growth, technologi- ing and examined relief efforts provided by the federal government because of 

cal competitiveness, and sustainable growth. expressed concerns about the potential for fraud and waste in the massive effort. 

The Department has three strategic goals: As part of the project, we surveyed Department of Commerce contracts and 

financial assistance awards made in the wake of hurricanes Katrina and Rita 

Goal 1: Provide the information and tools to to determine whether the Department had taken reasonable steps to reduce 

maximize U.S. competitiveness. the potential for fraud, waste, and abuse. Although the hurricanes represented 

significant catastrophic events, we found that, on the contracts and financial 

Goal 2: Foster science and technological leader- assistance awards we examined, the Department implemented reasonable 

ship by protecting intellectual property, enhancing precautions to protect the interests of the government and ensure funds were 

technical standards, and advancing measurement handled appropriately.

science. 

NIST awarded one $300,000 contract to a California-based nonprofit corpoGoal 3: Observe, protect, and manage the ration to conduct a field study of damage caused by the hurricanes to major 

Earth’s resources to promote environmental buildings, residential construction, and different types of infrastructure, and to 

stewardship. report on the findings and any recommendations for more detailed studies. NIST 

cited an unusual and compelling urgency for the services to award the contract 

The Department has also established a noncompetitively and stated the proposed contractor was the only responsible source 

Management Integration Goal that is that could meet the government’s needs. 

equally important to all bureaus: 

Achieve organizational and NOAA made 668 individual hurrimanagement excellence. cane-related purchases, with obligations 

totaling about $6.56 million. Cumulatively, 

some 608 of the purchases accounted for less than 

$300,000 of NOAA’s total. The remaining 60 purchases 

totaled about $6.27 million. 

procurement personnel Dispatched 

to pascagoula, mississippi 

Most of NOAA’s 60 largest procurements involved emergency response and recovery operations at a severely damaged NOAA facility in Pascagoula, Mississippi. NOAA facilities in Miami, Florida, and at Stennis Space Center in Mississippi also suffered damage from the hurricane. NOAA’s director of acquisitions 

and grants designated NOAA’s Central Region Acquisition Division in Kansas 

City, Missouri, as the lead office responsible for quickly restoring those operations. 

The director of the Central Region Acquisition Division and a NOAA project 

engineer were deployed from Kansas City to Pascagoula immediately after the 

hurricane to provide on-site procurement support and oversee contractors. 

Katrina’s storm surge flooded part of NOAA’s Pascagoula, Mississippi, facility. The high water mark is visible 

on the center wall—about 4 feet. 

Source: OIG 

September 2006/Semiannual Report to Congress 43
Department-wide Management 

Hurricane flooding wrecked the library in NOAA’s National Marine 

Fisheries Service offices in Pascagoula, Mississippi, destroying valuable 

research materials. 

Source: OIG 

On September 7, 2005, the Central Region Acquisition Division 

director made a class action determination that full and open competition was not required for supplies and services in response to 

Hurricane Katrina because NOAA’s need for those supplies and 

services was of an unusual and compelling nature and the government would be seriously injured unless NOAA was permitted to 

limit the number of sources from which it solicited quotes, bids, 

or proposals. Such class action determinations are permitted by 

Section 6.303-1(c) of the Federal Acquisition Regulation. 

The NOAA contracting officer determined that NOAA’s needs 

would best be served by awarding the cleanup and repair of the 

Pascagoula facility to a construction contractor who had been 

working on renovation and expansion prior to the hurricane, rather 

than delaying the cleanup while locating another contractor. We 

examined the contracting office’s written justification to award 

noncompetitively and the terms of the contract. We also obtained 

a written certification from the NOAA project engineer deployed 

to Pascagoula stating that the prices paid to the government were 

fair and reasonable. 

In addition to facility cleanup and repair, managers of the damaged 

Pascagoula offices and laboratories also teamed with the contracting officer and project engineer from Kansas City to buy modular 

buildings (trailers) to serve as temporary work space, replacement 

office and laboratory equipment and supplies, and replacement 

vehicles. We reviewed a sample of the contracts entered into 

and found that most were awarded competitively, under normal 

Commerce procedures. We also examined receiving records and 

toured the Pascagoula facility to observe the ongoing repair work 

and confirm receipt of items purchased. 

These outdoor freezers at NOAA’s National Seafood Inspection Laboratory in Pascagoula, Mississippi, were completely submerged by Hurricane 

Katrina’s storm surge. 

Source: OIG 

44 U.S. Department of Commerce/Office of Inspector General 
Finally, we examined specific instances in which NOAA used 

emergency expanded procurement authorities granted in the 

aftermath of Hurricane Katrina. Federal law allows agencies to 

increase certain procurement thresholds and limitations to support a national emergency and eight NOAA contracting officers 

received emergency expanded procurement authorities. NOAA 

contracting officers utilized increased authorities for only nine 

procurements. Five involved the expanded simplified acquisition 

authority at the hurricane-damaged Pascagoula, Mississippi, facility to lease temporary work space, purchase generators to provide 

electrical power, and purchase replacement laboratory supplies and 

equipment. The largest of the five simplified acquisitions totaled 

$140,000. The remaining uses of increased purchase authorities 

involved three purchases of equipment, ranging in amount from 

a little more than $10,000 to just under $14,000, and a waiver of 

a small business set-aside for a $15,000 contract with a nonprofit 

marine sanctuary foundation. 

Based on our limited review, we believe that the Department 

implemented reasonable precautions, given the circumstances 

of a significant catastrophic event, to protect the interests of the 

government and award contracts in a timely manner. 

Financial Assistance Awards Were 

reasonable and Handled properly 

Three Commerce bureaus made a total of six financial assistance 

awards, involving about $9.42 million in federal funding, in the 

aftermath of hurricanes Katrina and Rita: 

EDA awarded four grants totaling $8,840,000 to the states of 

Louisiana ($4 million), Mississippi ($4 million), and Alabama 

($450,000 and $390,000) for economic recovery planning and 

technical assistance in the aftermath of Hurricane Katrina. 

MBDA awarded a $300,000 cooperative agreement amendment to the Houston Minority Business Development Center for 

supplemental funding to provide business development services 

to minority-owned businesses affected by Hurricane Katrina in 

the state of Louisiana and to displaced minority firms from Louisiana relocated in Texas. There was no nonfederal matching share 

requirement for the amendment. 

NTIA awarded a grant with a federal share of $283,320 to the 

Louisiana Educational TelevisionAuthority, under the Public Telecommunications Facility Program, for emergency replacement of 

transmission equipment. The grant required a nonfederal match of 

$94,440, bringing the total estimated project cost to $377,760. 

After reviewing the EDA, MBDA, and NTIA award documents 

and regulations and discussing the awards with agency officials, 

we believe the Department actions to award the grants were reasonable. (Denver Regional Office of Audits: DEN-17829) 

Department-wide Management 

Framing and electrical wiring repairs were required after Hurricane 

Katrina damaged NOAA’s National Marine Fisheries Service offices in 

Pascagoula, Mississippi. 

Source: OIG 

preaward Financial 

Assistance screening 

As part of our ongoing emphasis on prevention of fraud, waste, 

and abuse, we continue to work with the Office of Acquisition 

Management, NOAA and NIST grant offices, and EDA program 

offices to screen the Department’s proposed grants and cooperative 

agreements before they are awarded. Our screening serves two 

functions: it provides information on whether the applicant has 

unresolved audit findings and recommendations on earlier awards, 

and it identifies any negative financial or investigative history on 

individuals or organizations connected with a proposed award. 

On January 1, 2004, we implemented new policies and procedures 

for our preaward screening process. OIG and the Department determined that there are several categories of recipients for whom 

the costs and administrative burden of the screening process may 

well outweigh the government’s risk of financial loss. Our new 

policies exempt from review, recipients who (1) receive awards in 

amounts of $100,000 or less; (2) have received financial assistance 

from the Department for 3 or more consecutive years without any 

adverse program or audit findings; or (3) are units of a state or 

local government. 

September 2006/Semiannual Report to Congress 45
Department-wide Management 

During this period we screened 192 proposed awards. For 33 

of the awards, we found major deficiencies that could affect the 

ability of the prospective recipients to maintain proper control 

over federal funds. On the basis of the information we provided, 

the Department delayed 22 awards and established special award 

conditions for 11. (Office of Audits) 

Preaward Screening Results 

Award 

Results Number Amount 

Awards delayed to 

resolve concerns 

22 $25,884,555 

Special award conditions established 11 $13,235,825 

nonfederal Audit Activities 

In addition to undergoing OIG-performed audits, certain recipients 

of Commerce financial assistance are periodically examined by 

state and local government auditors and by independent public accountants. OMB Circular A-133, Audits of States, Local 

Governments, and Non-Profit Organizations, sets forth the audit 

requirements for most of these audits. For-profit organizations 

that receive Advanced Technology Program funds from NIST are 

audited in accordance with Government Auditing Standards and 

NIST Program-Specific Audit Guidelines for ATP Cooperative 

Agreements, issued by the Department. 

We examined 231 audit reports during this semiannual period to 

determine whether they contained any audit findings related to 

Department programs. For 152 of these reports, the Department 

acts as oversight agency and monitors the audited entity’s compliance with the OMB Circular A-133 or NIST’s program-specific 

reporting requirements. The other 79 reports are from entities for 

which other federal agencies have oversight responsibility. We 

identified 28 reports with findings related to the Department of 

Commerce. 

ATP OMB Program- Report Category A-133 Specifics Total 

Audits Audits 

Pending (April 1, 

2006) 33 118 151 

Received 142 34 176 

Examined 119 112 231 

Pending (September 

30, 2006) 56 40 96 

The following table shows a breakdown by bureau of more than 

$660 million in Commerce funds audited. 

Bureau Funds 

EDA $ 41,898,642 

NIST* 176,036,009 

NOAA 39,208,751 

NTIA 362,644 

Multiagency 402,954,880 

Agency not identified 22,429 

Total $660,483,355 

* Includes $169,942,322 in ATP program-specific audits. 

We identified a total of $3,643,795 in federal questioned costs and 

$2,846,452 in funds to be put to better use. In most reports the 

subject programs were not considered major programs; thus the 

audits involved limited transaction and compliance testing against 

laws, regulations, and grant terms and conditions. The 28 reports 

with Commerce findings are listed in Appendix B-1. (Atlanta and 

Denver Regional Offices of Audits) 

46 U.S. Department of Commerce/Office of Inspector General 
oFFicE oF inspEctor 

GEnErAl 

office of investigations 

The mission of the During this semiannual period, the Office of Investigations maintained its focus on areas within 

Office of Inspector the traditional IG investigative portfolio—fraud, waste, and abuse in Commerce programs and 

General is to promote operations—while expanding its reach to combat other forms of internal and external corrupeconomy, efficiency, and effective- tion that negatively impact the Department, the federal government, and taxpayers. Notable 

ness and detect and prevent waste, work conducted over the past 6 months includes investigation of a massive international 

fraud, abuse, and mismanagement in telemarketing scam and a major immigration fraud ring. We also achieved impressive 

the programs and operations of the U.S. results in a diverse array of cases involving grant fraud, bribery, theft, and criminal 

Department of Commerce. Through its misuse of government computer resources in connection with child pornography. The 

audits, inspections, performance evalu- investigations highlighted below are representative of our recent accomplishments in 

ations, and investigations, OIG proposes these and other areas of critical concern. 

innovative ideas and constructive solutions that lead to positive changes for the investigation of international telemarketing Department. By providing timely, useful, 

and reliable information and advice to Fraud yields multiple Arrests, indictments, and 

departmental officials, the administra- convictions 

tion, and Congress, OIG’s work helps 

improve Commerce management For the past 3 years, OIG has been investigating a major telemarketing fraud scheme based 

and operations as well as its de- in Costa Rica that was perpetrated by callers identifying themselves as employees of the 

livery of services to the public. Commerce Department and other federal agencies. The callers told victims in the United States 

that they were winners in a national lottery sanctioned by the Department and that they had won 

sweepstakes prizes ranging in value from $450,000 to more than $4 million. Victims were then instructed to use commercial wire transfer services to send payments of $1,500 to $4,500 to Costa Rica, 

purportedly for insurance and customs fees that were required to retrieve their winnings. Many victims were 

persuaded to send multiple payments to the telemarketers—some individuals transferred more than $200,000. 

Total identified losses to U.S. residents exceed $30 million to date. 

The investigation is being conducted in conjunction with the U.S. Postal Inspection Service, the Bureau of Immigration and Customs 

Enforcement of the Department of Homeland Security, and several foreign law enforcement agencies, and is an integral part of the Department of Justice’s Operation Global Con, the largest international mass marketing fraud investigation of its kind. To date, Operation 

Global Con investigations have developed evidence of several massive international confidence schemes that have defrauded nearly 

3 million victims of more than $1 billion. 

In May 2006, OIG spearheaded the simultaneous execution of 17 search warrants in the United States and Costa Rica, targeting telemarketing call centers and the residences of several principal participants in the scheme. The search operation required coordination 

among about 200 U.S. and Costa Rican law enforcement officers, 17 Costa Rican judges, and 24 Costa Rican prosecutors. It resulted 

in the arrest and subsequent indictment of 18 American and Canadian citizens located in Costa Rica, Panama, and the United States 

who were identified as owners or employees of the call centers in Costa Rica. We also seized $400,000 in cash, multiple weapons, and 

a variety of equipment used to facilitate the scheme, including numerous Voice over Internet Protocol telecommunications devices, 

which were employed to disguise the telemarketers’ true location by displaying area codes indicating that the calls originated in the 

United States. 

The defendants all were indicted on multiple counts of conspiracy, wire fraud, and money laundering in the Western District of North 

Carolina. Since that time, indictments or criminal informations have been filed against an additional eight participants in the scheme, 

including five Costa Rican nationals. Two of the defendants have already pleaded guilty to conspiracy to commit wire fraud. 

September 2006/Semiannual Report to Congress 47
Office of Inspector General 

In addition, on August 2, 2006, a Costa Rican attorney previously 

indicted for his part in the telemarketing scheme (see March 

2006 Semiannual Report, page 48) was convicted in U.S. District 

Court for the Southern District of Florida on two counts of money 

laundering. His sentencing was scheduled for November 2006. 

(Atlanta Field Office) 

noAA Employee sentenced to 

15 years on child pornography 

conviction 

Our March 2006 Semiannual Report (page 51) reported the indictment and arrest of a longtime NOAA employee for sexual exploitation of children and possession of child pornography following 

an OIG investigation that found he had been using government 

and personal computers to download sexually explicit images of 

children for at least a decade. An extensive forensic examination 

of the employee’s home and office computers revealed more than 

a million pornographic images of children, and a search of his 

residence uncovered evidence that he was personally involved 

in the production of child pornography. Thousands of slides and 

photographic negatives discovered during the search disclosed images of a young child involved in sexual activity with an adult male 

resembling the defendant. 

OIG investigators identified and interviewed the 

now adult victim, who 

confirmed that the defendant had engaged in and 

photographed sexual relations with her on an ongoing basis from the time 

she was about 8 years old 

until she was 14. 

Rather than face arrest, 

the defendant fled the 

country after his indictment, traveling from his 

brother’s home in California to various locations 

in Canada and Europe. By 

employing sophisticated 

investigative tracking 

techniques and an extensive network of law enforcement agencies in the 

United States and abroad, 

OIG was able to quickly 

OIG special agents store seized 

evidence. 

Source: OIG 

trace him from Vancouver 

to Prague, and finally to Italy. We had previously made contact with 

the national television program America’s Most Wanted, which 

aired a segment on the investigation on January 21, 2006. Within 

48 hours of the broadcast, the defendant contacted the American 

Embassy in Rome and made arrangements to surrender. 

In May 2006, the defendant pleaded guilty to possession and 

production of child pornography. On August 30, 2006, he was 

sentenced in U.S. District Court for the District of Maryland to 

15 years in prison followed by 3 years’ supervised probation, and 

ordered to liquidate his federal thrift savings account and pay 

all proceeds to the victim identified during our investigation as 

restitution for his crimes. 

The defendant’s brother still faces criminal charges in the Eastern 

District of California for helping the defendant evade arrest by 

failing to disclose his whereabouts to OIG investigators and warning him that we had traced his movements to Canada. (Computer 

Crimes Unit) 

Government reaps $2 million 

settlement in Qui Tam lawsuit 

A manufacturer of water storage tanks used in federally funded 

development projects agreed to a $2 million settlement in order to 

resolve claims that the tanks were not constructed in accordance 

with contract specifications. For a period of about 10 years, the 

company supplied steel water storage tanks for projects funded 

under grant programs administered by EDA and the Departments 

of Agriculture and Housing and Urban Development. A qui tam 

action filed in the Southern District of Indiana by a former employee of the company alleged that the welds used by the company 

to construct certain tanks did not meet contract specifications 

and that the use of a less expensive and potentially less effective 

welding technique rendered the tanks less structurally sound than 

required. It was also alleged that the company conspired with an 

engineering firm to generate false testing records to show that the 

tanks it manufactured met contract specifications. 

In April 2006, following a joint investigation conducted by the 

Commerce, Agriculture, and HUD OIGs, the company agreed to 

a settlement that provides a payment of $1.75 million to the government over an 18-month period, along with extended warranties 

valued at $250,000, under which the company agrees to repair at 

its sole expense any failures, leaks, or degradation resulting from 

substandard welding. Under the terms of the agreement, the former 

employee who initiated the action will receive $400,000 of the 

settlement proceeds. The company will also pay him $50,000 to 

cover his legal costs. (Silver Spring Resident Office) 

Former census Employee indicted 

for Workers’ compensation Fraud 

On July 11, 2006, a former Census field representative was indicted in U.S. District Court for the Northern District of Georgia 

on five counts of making false statements to collect federal work48 U.S. Department of Commerce/Office of Inspector General 
ers’ compensation benefits for work-related injuries sustained in 

a 1994 automobile accident. An OIG investigation disclosed that 

the former employee failed to report more than $40,000 in earnings 

from a retail job and the operation of a show dog kennel when 

filing annual certifications with the Department of Labor between 

2001 and 2005. As a result of her false reporting, she fraudulently 

received about $89,000 in workers’ compensation benefits. The 

defendant was released on bond pending further proceedings. A 

trial date has not yet been set. (Atlanta Field Office) 

sentencing in patent office Bribery 

scheme 

We previously reported the conviction of a draftsman at USPTO 

for his participation in a bribery scheme initiated by his supervisor, who solicited payment from patent applicants in exchange for 

drafting work performed by her staff. (See March 2006 Semiannual 

Report, page 49.) In May 2006, the defendant was sentenced in 

U.S. District Court for the Eastern District of Virginia to 1 year 

probation, a $1,000 fine, and $100 in restitution. In August 2006, 

a second employee implicated in the scheme agreed to enter the 

Department of Justice’s Pretrial Diversion Program in order to 

resolve the charges against him. Under the terms of the agreement, 

all pending charges will be dismissed upon his successful completion of a 6-month period of supervision under the program, which 

will include 50 hours of approved community service. (Alexandria 

Resident Office) 

noAA Employee and spouse 

convicted for Use of Government 

Gas cards 

In May 2006, a NOAA employee and her husband were convicted 

of theft from the government after a joint investigation with the 

General Services Administration OIG revealed that the couple 

had on multiple occasions used GSA automotive fleet credit 

cards assigned to NOAA to purchase gasoline for their personal 

vehicles and the vehicles of others. On August 2, 2006, both defendants were sentenced in U.S. District Court for the District of 

Maryland. The employee was sentenced to 1 year probation, 50 

hours of community service, and $448 in restitution. Her husband 

received a sentence of 2 years’ probation, 90 days in a halfway 

house, and restitution of $448. Based on her conviction, NOAA 

has proposed the employee’s removal from federal service. (Silver 

Spring Resident Office) 

commerce Employee Arrested for 

role in immigration Fraud ring 

A senior patent examiner was one of 19 individuals arrested on 

September 7, 2006, in connection with an immigration fraud 

scheme operating in Maryland, Northern Virginia, and the District 

Office of Inspector General 

of Columbia, which entailed the orchestration of sham marriages 

between American citizens and foreign nationals seeking legal 

immigration status in the United States. The arrests were the result 

of a 3-year task force investigation involving Commerce OIG, the 

Department of Homeland Security’s Immigration and Customs 

Enforcement branch, the State Department OIG, and several other 

federal, state and local law enforcement agencies. 

Nine of those arrested—including the USPTO employee—are 

charged with facilitating the scheme by arranging fraudulent marriages for a fee. The other 10 are foreign nationals who entered 

into sham marriages in order to gain immigration benefits and 

avoid deportation from the United States. Arrest warrants have 

also been issued for 3 American citizens who were paid to marry 

aliens as part of the scheme. Charges have been filed against the 

defendants in the Eastern District of Virginia for multiple violations of federal law, including immigration fraud, conspiracy to 

defraud the United States, and filing false statements. 

The investigation was initiated after a clerk at theArlington County 

Courthouse observed that the same individual was escorting groups 

of citizen/noncitizen couples to apply for marriage licenses on a 

September 2006/Semiannual Report to Congress 49
Office of Inspector General 

weekly basis and often returned with the couples a short time later 

to assist them in filing for divorce. (Alexandria Resident Office) 

subcontractor on EDA project 

sentenced for His role in Bribery 

scheme 

In our March 2006 Semiannual Report (page 48), we reported 

the conviction of a construction company owner for his role in an 

extortion scheme run by a Philadelphia city official, who accepted 

bribes to issue minority business certificates for use in bidding on 

federally-funded construction projects, including several funded 

by EDA. OnAugust 29, 2006, the defendant was sentenced in U.S. 

District Court for the Eastern District of Pennsylvania to 5 years’ 

probation and a $6,000 fine and was ordered to pay restitution in 

the amount of $31,852. (Alexandria Resident Office) 

Former noAA Employee convicted 

of theft for time and Attendance 

Fraud 

A former NOAA employee was convicted of theft in the District 

Court of Maryland for Montgomery County after an OIG investigation found that he had manipulated the office’s time and 

attendance database and altered manual timekeeping records to 

obtain more than $11,000 in unearned salary over an 18-month 

period. In June 2006, he was sentenced to 12 months’ supervised 

probation, fined $400, and ordered to make full restitution to the 

agency. The employee retired from federal service shortly after 

his arrest. (Washington Field Office) 

Additional convictions and 

Arrest for t&A Fraud at Uspto 

Our March 2006 Semiannual Report (page 50) reported the arrests 

of two USPTO employees, which resulted from OIG investigative 

findings that the former patent examiners had embezzled a total of 

nearly $6,000 from the agency by falsely claiming pay for hours 

not worked. 

On May 5, 2006, one of the defendants was convicted of theft 

in the Circuit Court of the City of Alexandria, Virginia. She was 

sentenced to 30 days’ incarceration and ordered to pay $1,444 in 

restitution. The second defendant was indicted on felony theft 

charges in June 2006 for defrauding USPTO of approximately 

$4,470 in salary payments. After pleading guilty to the charges 

in August 2006, she was sentenced in Alexandria Circuit Court 

on September 21, 2006, to 2 years’ probation and 50 hours of 

community service, and ordered to make full restitution to the 

government. Both employees had resigned from the agency prior 

to arrest. 

Another former patent examiner was arrested by OIG on July 10, 

2006, and charged in Alexandria Circuit Court with embezzling 

more than $21,000 from USPTO between June 2005 and January 

2006 by submitting falsified time and attendance records. The 

defendant has been released on her own recognizance pending 

further proceedings. (Alexandria Resident Office) 

oiG recovers missing Weather 

service Equipment 

Early this year, OIG received information that meteorological 

equipment belonging to the National Weather Service was being 

offered for sale on eBay. We identified the equipment as part of a 

shipment of 50 radiosondes that was either lost or stolen while in 

transit from the National Logistics Supply Center in Kansas City, 

Missouri, to a local weather forecast office. Radiosondes are balloon-borne instruments used to transmit meteorological measurements—such as wind speed and barometric pressure—from the 

upper atmosphere to ground stations. OIG investigators located 

the eBay seller, who had purchased 30 of the missing instruments 

at an auction in North Carolina. We seized the 23 radiosondes still 

in his possession, as well as his customer list, and subsequently 

recovered an additional 6 units from purchasers. The investigation 

is continuing. (Atlanta Field Office) 

other oiG Activities 

commerce inspector General 

testifies Before House science 

committee on npoEss 

On May 11, Inspector General Johnnie E. Frazier testified before 

the U.S. House of Representatives Committee on Science about 

findings in an OIG report on cost overruns and schedule delays of 

the triagency National Polar-orbiting Operational Environmental 

Satellite System (NPOESS) weather satellite program. 

Frazier told the committee that OIG’s review uncovered two overarching management and contract weaknesses that resulted in unchecked 

cost and schedule overruns in the NPOESS program. First, the executive committee of the triagency program, comprised of top NOAA, 

Department of Defense, and NASA officials, never challenged optimistic assessments of the impact of technological problems. Second, 

the contractor received excessive award fees despite problems. 

“Inadequate management oversight, in effect, postponed critical 

evaluations and decisions needed to replan the program’s faltering elements and contain cost and schedule overruns,” Frazier 

said. “Time and money were thus wasted as NPOESS problems 

continued unchecked.” 

50 U.S. Department of Commerce/Office of Inspector General 
Frazier said OIG’s audit questioned why fees were paid for unsatisfactory performance and the contractor was allowed to roll over 

unearned fees. “The intimate connection between the director’s 

professional reputation and the success of both the program and 

the contractor could affect his objectivity as fee determining official in setting award amounts,” Frazier added. 

Vice Admiral Conrad C. Lautenbacher (ret.), administrator of 

NOAA, also testified before the committee, saying NPOESS had 

a history of budget and technical problems but that actions were 

being taken to address them. He said the NOAA employee who 

previously directed the project had resigned, and the prime contractor had changed the personnel on the project. Lautenbacher added 

that an Air Force Brigadier General had stepped in as director, 

raising “concerns about whether NOAA and NASA priorities will 

still receive adequate attention.” 

Rep. Sherwood L. Boehlert, chairman of the Committee on Science, said NPOESS’ success is vital to the nation but the program 

was not succeeding and needed to get on track. 

“What I want to hear clearly is an admission that NOAA — and 

that means NOAA’s leadership right up to the top — made 

mistakes, can identify those mistakes, and has plans to fix those 

mistakes,” Boehlert said. “I am not suggesting that anyone was 

not trying to do their best in running the NPOESS program. But 

I am suggesting that previous management procedures clearly 

were not successful.” 

Vernon J. Ehlers, chairman of the Subcommittee on Environment, 

Technology and Standards, said he had been assured in 2004 that 

problems were being solved. “And here we are again, now billions 

over budget, with delays long enough that we are facing large 

potential gaps in life-saving satellite data. This cannot continue,” 

Ehlers said. “We must make sure that we have the satellites we need 

when we need them, and effective management of the procurement 

and acquisition process is essential to meeting this goal.” 

Commerce OIG has named managing the environmental satellite 

program as one of the Department’s top management challenges. 

“I am pleased to note that in his response to our report, Deputy 

Secretary (David) Sampson stated that both he and Secretary (Carlos) Gutierrez are fully committed to providing strong oversight 

and management of NPOESS,” Frazier added. 

On May 22, the House Science Committee introduced HR 5450, 

the National Oceanic andAtmosphericAdministrationAct, which 

among other things, creates the position of deputy assistant secretary for science and education. The bill also requires NOAA 

to notify Congress and the public if it plans to close or transfer 

a NOAA facility, and if it starts a new satellite program, or encounters problems or makes major changes to an existing satellite program. The bill passed in the House of Representatives on 

Office of Inspector General 

Commerce Inspector General Johnnie E. Frazier (left) testified before the 

House Science Committee about the environmental satellite program’s 

schedule delays and cost overruns on May 11. Vice Admiral Conrad C. 

Lautenbacher (ret.), administrator of NOAA, (right) also testified before 

the committee. 

Source: House Science Committee 

September 21, 2006, and was referred to the Senate Committee 

on Commerce, Science, and Transportation. 

On June 8, 2006, the House Committee on Science held a hearing 

on the results of the statutorily required Nunn-McCurdy review. 

The Nunn-McCurdy provision of the National Defense Authorization Act requires that any DoD-funded program that is more 

than 25 percent over budget be reviewed to see if it should be 

continued and how. 

The review, which was carried out under the auspices of DoD by 

all three NPOESS agencies, determined that the program should 

be continued with fewer satellites of lesser capability. The agencies maintain that no additional funds beyond what is projected 

will be needed until FY 2010. 

(Asummary of the OIG report appears on page 29. The full report, 

OIG-17794: Poor Management Oversight and Ineffective Incentives Leave NPOESS Program Well Over Budget and Behind 

Schedule, can be viewed at www.oig.doc.gov/oig/reports/audit_inspection_and_evaluation_reports/index.html.) 

oiG investigators Honored 

Several staff members in the Office of Investigations were recognized during this semiannual period by groups outside the 

Department. 

A criminal investigator in our Atlanta Field Office was named 

Special Agent of the Year by the Southeast Region of Inspectors 

General Council as a result of his exceptional work in the telemarketing fraud investigation detailed on page 47. 

September 2006/Semiannual Report to Congress 51
Office of Inspector General 

The special agent-in-charge of our Computer Crimes Unit received 

a Certificate of Honorable Mention from the National Center for 

Missing and Exploited Children (NCMEC) for identifying a new 

victim for inclusion in NCMEC’s national database of missing 

and exploited children while investigating the case reported on 

page 48. 

Finally, during this period, a criminal investigator in our Denver 

Resident Office received the Guardian of Justice award from the 

U.S. Attorney’s Office for the District of Kansas, as well as a 

Distinguished Achievement Award from the Colorado chapter of 

the Association of Certified Fraud Examiners. Both awards honored his work in connection with a successful fraud and money 

laundering investigation, which he conducted while serving in 

his previous position with the Office of Inspector General at the 

Department of Health and Human Services. 

52 U.S. Department of Commerce/Office of Inspector General 
Office of Inspector General 

TABLES AND STATISTICS 

Statistical Overview 

TABLES	 PAGE

1. Investigative Statistical Highlights for this Period...................................................................................................................53

2. Audit Resolution Follow-Up ....................................................................................................................................................54

3. Audit and Inspection Statistical Highlights for this Period ......................................................................................................54

4. Audits with Questioned Costs ..................................................................................................................................................54

5. Audits with Recommendations that Funds Be Put to Better Use.............................................................................................55

APPENDIXES	

A. Report Types this Period .........................................................................................................................................................56

A-1. Performance Audits........................................................................................................................................................56

A-2. Financial Assistance Audits ...........................................................................................................................................57

A-3. Inspections and Systems Evaluations.............................................................................................................................58

B. Processed Audit Reports..........................................................................................................................................................59

B-1. Processed Reports with Audit Findings .........................................................................................................................60

Table 1. Investigative Statistical 

Highlights for this Period 

Investigative Activities

Arrests 

Indictments and informations 

Convictions 

Personnel actions

Fines, restitutions, judgments, and other 

civil and administrative recoveries 

26 

32 

10 

6 

$2,112,812 

Allegations Processed

Accepted for investigation 47 

Referred to operating units 14 

Evaluated but not accepted for investigation or referral 26 

Total	 87 

Audit Resolution and Follow-Up 

The Inspector General Act Amendments of 1988 require us to 

present in this report those audits issued before the beginning of 

the reporting period (April 1, 2006) for which no management 

decision had been made by the end of the period (September 30, 

2006). Eight audit reports remain unresolved for this reporting 

period (see pages 23, 24, and 42). 

Department Administrative Order 213-5, Audit Resolution and 

Follow-up, provides procedures for management to request a 

modification to an approved audit action plan or for a financial 

assistance recipient to appeal an audit resolution determination. 

The following table summarizes modification and appeal activity 

during the reporting period. 

September 2006/Semiannual Report to Congress 53
Office of Inspector General 

Table 2. Audit Resolution Follow-Up	 Table 3. Audit and Inspection Statistical 

Highlights for this Period 

Report Category Modifications Appeals 

Actions pending (April 1, 2006) 1 10 Questioned costs $ 4,145,894* 

Value of audit recommendations Submissions 2 2 that funds be put to better use 3,495,106 Decisions 3 5 Value of audit recommendations 

Actions pending (September 30, 2006) 0 7 agreed to by management 1,704,308 

Value of inspection recommendations 

that funds be put to better use N/A 

*This number includes costs questioned bt state and local government auditors or 

independent public accountants. 

Table 4. Audits with Questioned Costs 

Report Category	 Number Questioned Costs	 Unsupported Costs

A. Reports for which no management decision had been made 

by the beginning of the reporting period 19 $26,943,444 $ 5,425,575 

B. Reports issued during the reporting period 30 4,145,894 214,733 

Total reports (A+B) requiring a management decision 

during the period1 49 31,089,338 5,640,308 

C. Reports for which a management decision was made 

during the reporting period2 16 4,471,814 1,541,220 

i. Value of disallowed costs 809,741 538,100 

ii. Value of costs not disallowed 3,802,657 1,003,120 

D. Reports for which no management decision had been 

made by the end of the reporting period 33 26,617,524 4,099,088 

NOTES:

1

 Nine audit reports included in this table are also included among reports with recommendations that funds be but to better use (see table 5). However, the dollar 

amounts do not overlap. 

2

 In Category C, lines i and ii do not always equal the total line C because resolution may result in values greater than the original recommendations. 

54 U.S. Department of Commerce/Office of Inspector General 
Office of Inspector General 

Table 5. Audits with Recommendations that Funds Be Put to Better Use 

Report Category Number Value

A. Reports for which no management decision had been made by the beginning 

of the reporting period 7 $ 2,975,478 

B. Reports issued during the reporting period 10 3,495,106 

Total reports (A+B) requiring a management decision during the reporting period1 17 6,470,584 

C. Reports for which a management decision was made during the reporting period2 9 3,040,360 

i. Value of recommendations agreed to by management 894,567 

ii. Value of recommendations not agreed to by management 2,202,301 

D. Reports for which no management decision had been made by the end 

of the reporting period 8 3,430,224 

1

Nine audit reports included in this table are also included in the reports with questioned cost (see table 4). However, the dollar amounts do not overlap. 

2

In Category C, lines i and ii do not always equal the total on line C because resolution may result in values greater than the original recommendations. 

Definitions of Terms 

Used in the Tables 

Questioned cost: a cost questioned by OIG because of (1) an alleged violation of a provision of a law, regulation, contract, grant, 

cooperative agreement, or other agreement or document governing 

the expenditure of funds; (2) a finding that, at the time of the audit, 

such cost is not supported by adequate documentation; or (3) a 

finding that an expenditure of funds for the intended purpose is 

unnecessary or unreasonable. 

Unsupported cost: a cost that, at the time of the audit, is not 

supported by adequate documentation. Questioned costs include 

unsupported costs. 

Recommendation that funds be put to better use: an OIG 

recommendation that funds could be used more efficiently if 

Commerce management took action to implement and complete 

the recommendation, including (1) reductions in outlays; (2) deobligation of funds from programs or operations; (3) withdrawal 

of interest subsidy costs on loans or loan guarantees, insurance, 

or bonds; (4) costs not incurred by implementing recommended 

improvements related to Commerce, a contractor, or a grantee; 

(5) avoidance of unnecessary expenditures identified in preaward 

reviews of contracts or grant agreements; or (6) any other savings 

specifically identified. 

Management decision: management’s evaluation of the findings 

and recommendations included in the audit report and the issuance 

of a final decision by management concerning its response. 

September 2006/Semiannual Report to Congress 55
Office of Inspector General 

Appendix A. Report Types this Period 

Type	 Number of Reports	 Appendix Number

Performance audits 2 A-1 

Financial assistance audits 8 A-2 

Inspections and systems evaluations 6 A-3 

Total	 16

Appendix A-1. Performance Audits 

Funds to

Be Put to

Report Title Report Number Date Issued Better Use

National Oceanic and Atmospheric Administration

Poor Management Oversight and Ineffective Incentives Leave 

NPOESS Program Well Over Budget and Behind Schedule OIG-17794-6-0001 05/08/06 

Office of the Secretary 

A Survey of Hurricane Katrina and Hurricane 

Rita Contracts and Grants DEN-17829-6-0001 07/20/06 

56 U.S. Department of Commerce/Office of Inspector General 
Office of Inspector General 

Appendix A-2. Financial Assistance Audits 

Value of

Funds to	 Federal	 Federal

Date	 Be Put to	 Amount	 Amount

Report Title	 Report Number Issued	 Better Use	 Questioned	 Unsupported

Economic Development Administration

City of Clovis, CA STL-17578-6-0001 07/31/06 

Shorebank Neighborhood Institute, IL DEN-17932-6-0001 09/27/06 $ 648,654 $ 81,568 

City of Dinuba, CA STL-17579-6-0001 09/29/06 

City of Greenfield and County 

of Monterey, CA STL-17580-6-0001 09/30/06 130,692 $ 24,958 

National Institute of Standards and Technology

Precision Photonics Corporation, CO DEN-17832-6-0001 04/14/06 11,693 

ReJen Company, NV DEN-17933-6-0001 09/14/06 47,555 47,555 

Alvin Lowi & Associates, Inc., CA DEN-17933-6-0002 09/15/06 35,475 35,475 

Sangamo BioSciences, Inc., CA DEN-17931-6-0001 09/15/06 195,116 

September 2006/Semiannual Report to Congress 57
Office of Inspector General 

Appendix A-3. Inspections and System Evaluations 

Funds to Be Put

Agency	 Report Title	 Report Number Date Issued	 to Better Use

Census

Enumerating Group Quarters 

Continues to Pose Challenges IPE-18046 09/29/06 — 

International Trade Administration

Commercial Service Operations in 

Argentina and Uruguay Are Mostly 

Sound but Financial Processes Need 

Attention IPE-18111 09/25/06 — 

Commerce Should Ensure that Travelers 

to China Receive Counterintelligence 

Briefings IPE-17954 07/25/06 — 

National Oceanic and Atmospheric Administration

SARSAT’s E-Authentication Controls Do 

Not Provide Adequate Assurance of Users’ 

Identities OSE-18020 09/15/06 — 

Additional Steps Are Necessary to Provide 

Better Oversight of Contractor Information OSE-18028 09/29/06 — 

Progress Being Made in Certification and 

Accreditation Process, but Authorizing 

Officials Still Lack Adequate Decisionmaking Information OSE-18019 09/19/06 — 

58 U.S. Department of Commerce/Office of Inspector General 
Office of Inspector General 

Appendix B. Processed Audit Reports 

The Office of Inspector General reviewed and accepted 231 audit reports prepared by independent public accountants and local, state, 

and other federal auditors. The reports processed with questioned costs, recommendations that funds be put to better use, and/or nonfinancial recommendations are listed in Appendix B-1. 

Agency	 Audits

Economic Development Administration ......................................................................................................................................40

National Institute of Standards and Technology* ...................................................................................................................... 118

National Oceanic and Atmospheric Administration.....................................................................................................................20

National Telecommunications and Information Administration ....................................................................................................3

Multiagency..................................................................................................................................................................................48

Agency not identified .....................................................................................................................................................................2

Total............................................................................................................................................................................................231

*Includes 112 ATP program-specific audits. 

September 2006/Semiannual Report to Congress 59
Office of Inspector General 

Appendix B 1. Processed Reports with Audit Findings 

Value of

Funds to	 Federal	 Federal

Date	 Be Put to	 Amount	 Amount

Report Title	 Report Number Issued	 Better Use	 Questioned	 Unsupported

Economic Development Administration

Cumbres & Toltec Scenic 

Railroad Commission, CO 

New Bedford Economic 

Development Council, Inc., MA 

Operation Hope, Inc., CA 

Puerto Rico Industrial 

Development Company 

Tri-County Economic 

Development District, WA 

The East Los Angeles Community 

Union and Subsidiary, CA 

ATL-09999-6-2392 

ATL-09999-6-2589 

ATL-09999-6-2653 

ATL-09999-6-2663 

ATL-09999-6-2601 

ATL-09999-6-2571 

09/22/06 

09/22/06 

09/22/06 

09/22/06 

09/22/06 

09/29/06 

$ 100,000 

89,416 

2,265,718 

$ 35,973 

483,494 

74,964 

$ 35,973 

National Institute of Standards and Technology

PowerSicel, Inc., CO 

Callida Genomics, Inc., CA 

Organ Recovery Systems, Inc., IL 

Siemens Westinghouse Power 

Corporation, FL 

Gene Network Sciences, Inc., NY 

Display Technologies, Inc., CO 

InRAD, LLC, TN 

Integrated Fuel Cell Technologies, MA 

Engineous Software, Inc., NC 

Polymer Technologies, Inc., NJ 

Alfred University, NY 

COVA Technologies, Inc., CO 

Geometric Informatics, Inc., MA 

ATL-09999-6-2115 

DEN-09999-6-1678 

ATL-09999-6-2111 

ATL-09999-6-1964 

ATL-09999-6-2461 

ATL-09999-6-2496 

ATL-09999-6-2526 

ATL-09999-6-2406 

ATL-09999-6-2032 

ATL-09999-6-2474 

ATL-09999-6-2627 

ATL-09999-6-2164 

ATL-09999-6-2357 

04/05/06 

04/14/06 

06/26/06 

06/26/06 

07/24/06 

08/04/06 

08/11/06 

08/21/06 

08/31/06 

08/31/06 

09/22/06 

09/22/06 

09/22/06 

42,386 

22,496 

59,688 

251,421 

2,167 

30,382 

25,602 

9,619 

13,104 

20,502 

66,801 

82,362 

142,301 

403,276 

178,862 

111,447 

74,919 

13,944 

20,453 

13,104 

60 U.S. Department of Commerce/Office of Inspector General 
Office of Inspector General 

Appendix B 1. Processed Reports with Audit Findings (continued) 

Value of

Funds to	

Date	 Be Put to	

Report Title	 Report Number Issued	 Better Use	

Federal	 Federal

Amount	 Amount

Questioned	 Unsupported

Intermet Corporation, MI ATL-09999-6-2453 09/22/06 

Intermet Corporation, MI ATL-09999-6-2454 09/22/06 

MesoFuel, Inc., NM ATL-09999-6-2372 09/22/06 

Molecular Nanosystems, Inc., CA ATL-09999-6-2495 09/22/06 $ 13,160 

Motorola, Inc., AZ ATL-09999-6-2227 09/22/06 

The Timken Company, OH ATL-09999-6-2307 09/22/06 

E.I. du Pont de Nemours 

and Company, DE ATL-09999-6-2523 09/29/06 

National Oceanic and Atmospheric Administration

State of South Carolina ATL-09999-6-2552 08/31/06 0 

Federated States of Micronesia 

National Government, FM ATL-09999-6-2672 09/22/06 0 

$ 211,016 

357,693 

119,479 

13,573 

12,765 

977,033 

147,469 0 

37,215 37,215 

September 2006/Semiannual Report to Congress 61
Office of Inspector General 

REPORTINg REQUIREmENTS 

The Inspector General Act of 1978, as amended, specifies reporting requirements for semiannual reports. The requirements are listed 

below and indexed to the applicable pages of this report. 

Section	 Topic	 Page

4(a)(2) Review of Legislation and Regulations .................................................................................62 

5(a)(1) Significant Problems, Abuses, and Deficiencies ..............................................................15–46 

5(a)(2) Significant Recommendations for Corrective Action.......................................................15–46 

5(a)(3) Prior Significant Recommendations Unimplemented ............................................................62 

5(a)4 Matters Referred to Prosecutive Authorities ..........................................................................53 

5(a)(5) and 6(b)(2) Information or Assistance Refused ........................................................................................63 

5(a)(6) Listing of Audit Reports ..................................................................................................56–61 

5(a)(7) Summary of Significant Reports .....................................................................................15–46 

5(a)(8) Audit Reports—Questioned Costs ........................................................................................54 

5(a)(9) Audit Reports—Funds to Be Put to Better Use......................................................................55 

5(a)(10) Prior Audit Reports Unresolved ............................................................................................63 

5(a)(11) Significant Revised Management Decisions ..........................................................................63 

5(a)(12) Significant Management Decisions with Which OIG Disagreed ..........................................63 

Section 4(a)(2): Review of Legislation 

and Regulations 

This section requires the inspector general of each agency to 

review existing and proposed legislation and regulations relating 

to that agency’s programs and operations. Based on this review, 

the inspector general is required to make recommendations in the 

semiannual report concerning the impact of such legislation or 

regulations on the economy and efficiency of the management of 

programs and operations administered or financed by the agency 

or on the prevention and detection of fraud and abuse in those 

programs and operations. Comments concerning legislative and 

regulatory initiatives affecting Commerce programs are discussed, 

as appropriate, in relevant sections of the report. 

Section 5(a)(3): Prior Significant 

Recommendations Unimplemented 

This section requires identification of each significant recommendation described in previous semiannual reports for which 

corrective action has not been completed. Section 5(b) requires 

that the Secretary transmit to Congress statistical tables showing 

the number and value of audit reports for which no final action has 

been taken, plus an explanation of the reasons why recommended 

action has not occurred, except when the management decision 

was made within the preceding year. 

To include a list of all significant unimplemented recommendations in this report would be duplicative. Information on the status 

of any audit recommendations can be obtained through OIG’s 

Office of Audits. 

62 U.S. Department of Commerce/Office of Inspector General 
Office of Inspector General 

Sections 5(a)(5) and 6(b)(2): 

Information or Assistance Refused 

These sections require a summary of each report to the Secretary 

when access, information, or assistance has been unreasonably 

refused or not provided. There were no instances during this 

semiannual period and no reports to the Secretary. 

Section 5(a)(10): Prior Audit 

Reports Unresolved 

This section requires a summary of each audit report issued before 

the beginning of the reporting period for which no management 

decision has been made by the end of the reporting period (including the date and title of each such report), an explanation of why a 

decision has not been made, and a statement concerning the desired 

timetable for delivering a decision on each such report. There were 

five Census and three NIST reports more than 6 months old. 

Section 5(a)(11): Significant Revised 

management Decisions 

This section requires an explanation of the reasons for any significant revision to a management decision made during the reporting 

period. DepartmentAdministrative Order 213-5,Audit Resolution 

and Follow-up, provides procedures for revising a management 

decision. For performance audits, OIG must be consulted and must 

approve in advance any modification to an audit action plan. For 

financial assistance audits, OIG must concur with any decision 

that would change the audit resolution proposal in response to an 

appeal by the recipient. The decisions issued on the four appeals 

of audit-related debts were finalized with the full participation and 

concurrence of OIG. 

Section 5(a)(12): Significant management 

Decisions with Which OIg Disagreed 

This section requires information concerning any significant 

management decision with which the inspector general disagrees. 

Department Administrative Order 213-5 provides procedures for 

elevating unresolved audit recommendations to higher levels of 

Department and OIG management, including their consideration 

by an Audit Resolution Council. During this period no audit issues 

were referred to the council. 

September 2006/Semiannual Report to Congress 63
TyPES OF OIg WORK PRODUCTS


The various kinds of audits, evaluations, inspections, and investigations at our disposal enable the IG’s office to assess Commerce 

programs and operations from a range of perspectives. Thus we 

are able to provide program managers with reviews and recommendations that are either narrowly focused or comprehensive, as 

needed, to aid them in ensuring the most efficient and effective 

use of taxpayer dollars. 

AUDITS 

Performance Audits address the efficiency, effectiveness, and 

economy of the Department’s programs, activities, and information technology systems. They may check a unit’s compliance 

with laws and regulations, and evaluate its success in achieving program objectives. They may also involve reviewing the 

Department’s financial assistance awards by assessing an award 

recipient’s compliance with laws, regulations, and award terms; 

allowance of costs; and the degree to which projects achieved 

intended results. 

Financial Audits determine whether (1) a reporting entity’s 

financial statements are presented fairly and in accordance with 

generally accepted accounting principles; (2) the entity has an 

internal control structure that provides reasonable assurance of 

achieving the control objectives set forth by OMB; and (3) the entity complied with laws and regulations that could have a direct and 

material effect on the financial statements, the Federal Financial 

Management Improvement Act, and other laws and regulations. 

Attestation Engagements involve examining, reviewing, or 

performing agreed-upon procedures on a subject matter or an assertion about a subject matter and reporting the results. Attestation 

engagements can have a broad range of financial or nonfinancial 

focuses, such as an entity’s compliance with laws and regulations; 

management’s discussion and analysis presentations; and allowability and reasonableness of final grant and contract costs. 

INSPECTIONS 

Inspections are reviews of an activity, unit, or office, or a contractor or other nonfederal entity that receives funds from the 

Department. They focus on an organization, not a whole program, 

and are often designed to give agency managers timely and useful 

information about operations, including current and foreseeable 

problems. 

EVALUATIONS 

Program Evaluations are in-depth reviews of specific management issues, policies, or programs. 

Systems Evaluations review system development, acquisitions, 

operations, and policy, focusing on computer systems and other 

technologies. 

INVESTIgATIONS 

Investigations are conducted based on alleged or suspected 

wrongdoing by Department employees, contractors, recipients of 

financial assistance, and others responsible for handling federal 

resources. Investigations that expose violations of Department 

rules and regulations or acts of fraud committed against the U.S. 

government can result in administrative sanctions and/or criminal 

or civil prosecution. 

64 U.S. Department of Commerce/Office of Inspector General 
OFFICE OF THE

SECRETARY

Bureau of the

Census

National

Institute of

Standards and

Technology

Bureau of

Economic

Analysis

National

Technical

Information

Service

National

Environmental

Satellite, Data,

and

Information

Service

National

Marine

Fisheries

Service

National

Weather

Service

National

Ocean Service

Oceanic and

Atmospheric

Research

Marine and

Aviation

Operations

Bureau of

Industry and

Security

U.S. Patent and

Trademark

Office

International

Trade

Administration

Economic

Development

Administration

Economics and

Statistics

Administration

Technology

Administration

Minority Business

Development

Agency

National Oceanic

and Atmospheric

Administration

National

Telecommunications

and Information

Administration

U.S. Department of Commerce

The U.S. Department of Commerce creates the conditions for economic growth and opportunity by

promoting innovation, entrepreneurship, competitiveness, and stewardship. The Department

accomplishes its mission by providing national and local weather services, developing key economic and demographic data (including the decennial census), and working to advance technological

and scientific innovation, protect and restore environmental resources, promote international trade,

and support local, regional, and national economic development. These activities impact U.S. business and industry daily and play a critical role in the nation's economic well-being.
U.S. Department of Commerce

Office of Inspector General

Room 7099 C, HCHB

1401 Constitution Avenue, N.W.

Washington, D.C. 20230

www.oig.doc.gov

Atlanta, GA

Denver, CO

Seattle, WA

Commerce Headquarters

Washington, D.C.

OIG Regional Offices