IG’s


Semiannual


Report


to Congress


September 2007


y 

Washington, D.C. 20230 

I am pleased to submit this Semiannual Report to Congress, which details the work and activities of the O

of Inspector General for the 6-month period April 1, 2007, through September 30, 2007. The Inspe

General Act of 1978 requires that we prepare this report twice each year to summarize our assessment

Commerce operations and that you transmit it, with any comments you may wish to add, to Congress wi

30 days of receiving it. 

On June 29, 2007, Johnnie Frazier retired after 37 years at the Department of Commerce, including ne

three decades with the Office of Inspector General and nine years as Inspector General. OIG would lik

acknowledge Mr. Frazier’s extraordinary dedication to public service during his lengthy federal career, 

express our appreciation for the many valuable contributions he made to this organization, the Departm

and the inspector general community. The office is continuing its efforts to promote integrity, efficiency, 

effectiveness in departmental programs and operations as we await the confirmation of a new inspector gen

Consistent with prior reporting periods, our work over the last six months addressed a number of the m

operational and programmatic priorities of the Department. We maintained our focus on information secur

a top challenge for Commerce and the federal government as a whole – completing assessments under the Fed

Information Security Management Act, as well as reviews of the Census Bureau’s IT security controls and prop

management policies for the thousands of laptop computers used in its field and headquarters operations. 

During this period, we also began to escalate our oversight of Census’s preparations for the 2010 decen

completing a review of update/enumerate test operations on the Cheyenne River Reservation in South Da

and an evaluation of the bureau’s progress in readying its workers’ compensation program for the decennia

addition, we have initiated reviews of several aspects of the 2008 dress rehearsal and performance audits of 

multimillion-dollar contracts that are integral to decennial operations. 

I thank you and your staff for your continued support of the work of this office, and the generous assist

provided by senior managers throughout the Department during this period of transition. 

Sincerely, 

Elizabeth T. Barlow 

Acting Inspector General 

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

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

Ensure that USPTO Uses Its Authorities and Flexibilities as a Performance-Based Organization


to Achieve Better Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

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

Promote U.S. Exports and Fair Competition in International Trade . . . . . . . . . . . . . . . . . . . . . . . . . . 

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

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

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

Agency Overviews 

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

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

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

National Institute of Standards and Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

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

United States Patent and Trademark Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

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

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

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

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

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

Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Types of OIG Work Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Photo by 

This lighted vault is one of the Herbert C. Hoover Building’s many beautiful architectural feat
A considerable amount of the work completed 

during this period was dictated by the Federal 

Information Security Management Act, which 

requires that we annually assess Commerce’s efforts to 

safeguard data processed by its computer systems and 

networks. Meeting FISMA standards has proven a 

difficult and costly challenge for many federal 

agencies. In FY 2007, the government spent 

$5.2 billion to secure its total IT investment of 

approximately $64 billion.1 Yet progress has been 

uneven across the board, and Commerce—while 

making significant headway—has been among those 

inventory, a situation the bureau has since recti

Likewise, the Department’s recent initiative to eq

all Commerce computers with “full disk” encrypt

which secures all of a computer’s data, should en

that information on Census laptops is now protec

Oversight of Census 2010 Activities 

With roughly 2 years remaining until the 2

decennial census, we have escalated our oversigh

the bureau’s preparations, with reviews under wa

the 2008 dress rehearsal and of two multimill

We await the confirmation of a new inspector general and look forward to continuing 

productive partnership we have enjoyed with the Department and the improvements 

Commerce operations it has yielded. 

that continue to struggle to adequately protect 

systems and information from compromise. Our 

annual FISMA work has been important in gauging 

the nature and extent of problems and progress at the 

various operating units, and for offering solutions to 

achieve the Department’s full compliance with the 

law. (See pages 30, 36, and 41.) 

Complementing our FISMA evaluations during this 

semiannual period were our reviews of IT security 

and property management at the Census Bureau in 

relation to the loss of several hundred Census laptop 

computers, many of which contained sensitive data. 

(See page 21.) Initiated at the request of Secretary 

Gutierrez, our reviews sought to determine how the 

breakdown in property management occurred and 

whether the laptops had adequate security controls to 

1 http://www.whitehouse.gov/omb/egov/documents/ 

FY07ITBudgetRollout.pdf 

dollar IT contracts. During this semiannual per

we completed an evaluation of the bureau’s 2

update/enumerate test on the Cheyenne R

Reservation and Off-Reservation Trust Land in So

Dakota (see page 25). We found, among other thi

that poor maps and incorrect address lists mad

difficult for enumerators to find housing units and 

changes to the questionnaire designed to improve 

count had little impact on the final numbers. 

We also followed up on Census’s efforts to devel

workers’ compensation strategy that addresses 

unique challenges posed by temporary decen

hires who are hurt on the job—a strategy 

recommended in a 2006 Department-wide revie

workers’ compensation. We found that the burea

yet has no such strategy in place. (See page 29.) W

dress rehearsal activities already under way, Ce

runs the risk of seeing its injured, short-t

decennial employees become long-term ben

recipients unless it quickly implements a prog

1 
specificity required to foster integrated governmentwide trade promotion activities. (See page 33). 

Work under way in other areas—such as oversight of 

the GOES-R satellite program and NOAA’s 

management of the Fisheries Finance Loan 

Program—is pointing to a number of actions needed 

to improve program operations and protect the 

federal investments at stake. We are consulting with 

public service. I wish to acknowledge with gratit

the spirit of collaboration that has marked 

interactions with Commerce officials as w

conducted our work during this time of transit

We await the confirmation of a new inspector gen

and look forward to continuing the produc

partnership we have enjoyed with the Departm

and the improvements in Commerce operation

has yielded. 

2 
(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. 

TOP 10 MANAGEMENT CHALLENGES 

1. Control the cost and improve the accuracy 

of the decennial census. 

2. Strengthen Department-wide information


security.


3. Effectively manage departmental and bureau 

acquisition processes. 

4. Strengthen internal controls over financial, 

programmatic, and business processes. 

5. Ensure that USPTO uses its authorities and 

flexibilities as a performance-based 

organization to achieve better results. 

6. Effectively manage the development and


acquisition of environmental satellites.


7. Promote U.S. exports and fair competition 

in international trade. 

8. Effectively manage NOAA’s stewardship of 

ocean and living marine resources. 

9. Aggressively monitor emergency preparedness, 

safety, and security responsibilities. 

10. Enhance export controls for dual-use 

commodities. 

of the Decennial Census 

The Census Bureau’s redesigned decennial p

established after the 2000 census, is hea

dependent on automating critical field operat

to accurately count the nation’s popula

within budget. After conducting a series of t

throughout the decade, the bureau has begu

“dress rehearsal” or dry run of the upcoming 2

census, which will produce an unofficial count 

two sites: San Joaquin County, California, and e

counties surrounding Fayetteville, North Carol

The local census office for each site opened 

April 2007. 

During the past year, we monitored various asp

of the bureau’s decennial operations: we c

pleted our evaluation of the 2006 test 

update/enumerate at the Cheyenne R

Reservation and conducted a follow-up review 

the bureau’s progress in readying its work

compensation program for the 2010 decennial 

pages 25 and 29). We also have initiated 

reviews of the 2008 dress rehearsal, one asses

the effectiveness of address canvassing proced

in improving the accuracy of the address list 

maps, and the other evaluating the capabilities 

performance of the technology that supports 

operation. And we are auditing two multimill

dollar contracts: Field Data Automation Collec

(FDCA) and the Decennial Response Integra

System (DRIS), which are being used to acquire 

devices and services that are critical to the suc

of the reengineered census. 

3 
and getting an accurate count of the entire household 

is difficult. In update/enumerate census-takers go 

door to door to collect population information and 

update address lists and maps. We evaluated the test’s 

conduct and outcomes, particularly with regard to 

the impact of a new query on the census form 

designed to improve the count of all household 

members (“within-household coverage”). We looked 

at the success of the overall operation in accurately 

enumerating the reservation population. 

Overall, we found the new query had little impact on 

reservation enumerations. We also found many 

problems caused by the poor quality of Census maps 

and address list information collected during the 

address canvassing operation, which preceded 

update/enumerate, and Census’s decision not to 

equip enumerators with GPS navigation tools in this 

geographically challenging environment. Given that 

Census did little to test alternative enumeration 

methods, we question whether the bureau devoted 

adequate time and attention to the 2006 effort. 

With the countdown to the 2010 census accelerating, 

the bureau’s time for modifying plans and ensuring 

an accurate, cost-effect count of all Americans is 

growing short. We recommended that Census, at the 

very least, give enumerators usable, legible maps and 

sufficiently detailed address lists on a consistent basis 

and consider giving enumerators a GPS device for 

navigation—either the handheld computer slated for 

Census 2010 or an inexpensive off-the-shelf model. 

This latter step would go a long way toward 

improving the accuracy and efficiency of 

update/enumerate. We further recommended 

assigning a senior headquarters official specific 

responsibility for improving 2010 American Indian 

enumeration efforts. (See page 25.) 

www.census.gov/2010census/dx261-cafinalnr.pdf 

Bureau and the Departm

develop a comprehen

workers’ compensation 

gram for the 2008 d

rehearsal and the 2

decennial. The bureau p

almost $14.2 million 

workers’ compensation b

fits during the 2000 cen

and continues to 

millions of dollars 

decennial workers still on 

rolls. The unique nature of intermittent work 

Census complicates administration of the progr

so we urged the bureau and the Departmen

develop a strategy to contain these costs for 

upcoming decennial. 

During this semiannual period we assessed 

bureau’s progress in implementing our 2

recommendations for developing a progr

identifying ways to contain related costs for the 2

dress rehearsal and 2010 decennial operati

returning current claimants to work, when feas

and implementing training and other managem

controls and oversight to minimize unneces

workers’ compensation costs. 

We found the bureau had yet to implement a stra

for returning current claimants to work or 

managing a workers’ compensation program tailo

specifically to the staffing challenges posed 

decennial operations. Census officials have rece

advised us they’ve taken preliminary steps to ret

some claimants to work and have reached inte

agreement on a regionally based return-to-w

2 Management of Commerce’s Federal Workers’ Compensation 

Program Needs Significant Improvement, IPE-17536 

4 
Canvassing Dress Rehearsal 

The dress rehearsal is a final opportunity to ensure 

that decennial components work together as planned. 

We are currently evaluating the address canvassing 

portion of dress rehearsal, which took place from 

May through June 2007. 

During address canvassing, temporary staff equipped 

with handheld computers go into the field to verify, 

update, add, or remove addresses; add and delete 

streets to correct computer maps; and annotate 

address locations on the maps. The operation 

produces an updated, comprehensive file of addresses 

and physical locations where people live or stay. We 

are assessing whether fieldworkers consistently 

followed procedures and made appropriate 

corrections on the handheld computer, and whether 

the redesigned quality control component improved 

the quality of the address list. 

In a separate review, we are looking at the technology 

supporting the operation. Our observations thus far 

suggest that key automation capabilities have greatly 

improved since the 2004 and 2006 site tests. But we 

observed other problems. For example, handheld 

computer functions frequently froze, processing of 

large address lists was slow, and help desk support for 

resolving users’ computer problems was inadequate. 

The bureau and its FDCA contractor are aware of 

these problems and are working to resolve them. We 

will detail our findings and recommendations in the 

next semiannual report. 

millions of dollars to improve the security 

information on their computer systems and sh

via the Internet. Yet weaknesses persist and brea

continue. At the Department of Commerce, 

security has been reported as a material weak

under the Federal Managers Financial Integrity 

since 2001. 

The system security certification process is suppo

to provide officials with complete, accurate, 

trustworthy information on a system’s security st

so they can make timely, credible, risk-ba

decisions on whether to authorize operation. 

reviews of the Department’s certification 

accreditation (C&A) packages continue to fin

process that does not adequately identify and as

needed security controls. As a result, authori

Why Is C&A Important? 

Certification is a comprehensive assessment 

security controls implemented in a comput

system. It determines whether controls a

implemented correctly, operating as intende

and meeting the security requirements for t

system. Through the formal assessment 

controls, the system certifier identifies an

vulnerabilities that have not been eliminated 

security controls. 

Accreditation is management’s formal autho

zation to allow a system to operate. It includes 

explicit acceptance of the risks posed by an

identified remaining vulnerabilities. Throug

accreditation, senior agency officials ta

responsibility for the security of systems th

manage and for any adverse impacts should 

breach in security occur. 

5 
reviewed by OCIO as of our cutoff date in early June. 

FY 2007 FISMA Review 

We looked at a total of six C&A packages—three of 

which had been reviewed by OCIO in FY 2007; one 

reviewed in FY 2006 but sent to us late in the fiscal 

year; and two contractor systems, which had not 

undergone OCIO’s quality review. We assessed all 

components of each package and met with agency 

and contractor staff to discuss apparent omissions or 

clarify discrepancies in the documentation and gain 

further insight into the extent of the security controls 

assessment. We gave particular weight in our review 

to evidence supporting the rigor and completeness of 

the assessment. 

We concluded that only two of the six packages 

adequately complied with FISMA, OMB policy, 

NIST guidelines, and agency IT security policy. Both 

were for agency systems. But we noted continued 

improvement in security plans for all the systems, 

particularly in the identification of system 

components. We also found improvement in the 

assessment of security controls in the two compliant 

systems. However, the remaining four systems had 

serious deficiencies in their controls assessment, 

particularly in the testing of operational and technical 

controls. (See pages 30, 31, and 41.) That being the 

case, we again recommended IT security be reported 

as a material weakness within Commerce. 

Two USPTO packages were included in our review 

sample—one for an agency system and one for a 

contractor system. Both lacked sufficient evidence to 

confirm that operational and technical controls are in 

place and operating as intended, leaving the 

on improving C&A and is taking significant act

to improve the process. Likewise, USPTO’s CIO 

devoted considerable personal attention 

resources to improving C&A. These eff

demonstrate a high level of commitm

unfortunately, their benefits have yet to translate 

C&A processes that consistently produce pack

showing adequate implementation of the requ

baseline level of security for the Department’s m

than 300 IT systems. 

Lost Laptops Prompt Assessment of I

Security at Census 

The widely publicized loss of hundreds of Cen

laptops between 2001 and 2006 prompted our of

at the request of Secretary Gutierrez, to assess 

bureau’s IT security controls for protecting person

identifiable information, along with the bure

property management policies and practices (see p

21). Our assessment of the security controls focu

on the laptop computers used by about 5,500 Cen

field representatives to conduct censuses and sur

prior to implementation of full disk encryption. 

found that personally identifiable information co

be recovered from Census’s lost or stolen lap

using software tools available on the Internet. G

how the laptops are used in the field, it is likely 

some were not encrypted when lost or stolen, leav

confidential information readily accessible. 

report identifies additional IT security weakne

that further increase risk to personally identifi

information. 

Census has taken significant steps to improve 

security and better protect its sensitive informat

and has been extremely responsive in correcting 

6 
password, to control access to Commerce networks 

from remote locations. In addition, it established an 

Identity Theft Task Force of senior officials to ensure 

rapid, appropriate response to actual or potential 

data breaches involving personally identifiable 

information. 

Challenge 3 

Effectively Manage Departmental 

and Bureau Acquisition Processes 

Commerce spends nearly $2 billion a year to procure 

goods and services so management and oversight of 

the processes used must be superior. Past OIG audits 

and evaluations have identified improvements the 

Department needs to implement to fortify the 

acquisition process. These include documenting 

program needs, validating requirements, fully 

http://oam.ocs.doc.gov/ 

costly acquisitions. With that in mind, Comm

must ensure that high turnover in up

management and other key acquisition position

the Department and several of its agencies does 

affect the quality of the procurement process. 

In addition, the Department has had a difficult t

achieving discipline in the acquisition process 

the past few years. Senior management must ta

serious look at the planning and execution proce

for procurements and ensure agencies have the ab

to promptly hire and adequately train quali

acquisition staff. 

OIG’s Efforts to Improve Contracting 

Oversight 

In FY 2006, OIG established a contract au

division to oversee Commerce’s acquisition activi

The division will monitor the Department’s m

significant procurements on a continuing basis 

conduct audits of those contracts as appropriate. 

contract audits team will also scrutinize 

Department’s revision of departmental and bu

procurement policies to ensure they mirror cur

federal acquisition regulations and Office 

Management and Budget circulars. In its reports, 

team will recommend best practices and innova

approaches the Department should adopt. 

The contract audits division’s initial area of emph

has been the Census Bureau’s procurement 

products and services to support the 2010 decen

census. In April 2007, we began the first of a serie

audits of the FDCA and DRIS contracts. FDC

an effort to automate field data collection 

provide logistics, training, and help desk support 

7 
Financial, Programmatic, and time and of acceptable quality, (2) the contracting 

officers can promptly adjust the contract cost Business Processes 

estimate to account for changes in cost and schedule, 

and (3) both contracts contain effective award fee To ensure operations are effective, efficient, and 

plans. In future audits, we will review the contractors’ compliance with laws and regulations, agen

costs for equipment and materials, their management implement internal controls. These steps also m

of subcontractors, and contactor surveillance. certain that financial reporting is reliable and as

are safeguarded from waste, loss, or mi

In addition to its audit of the FDCA and DRIS propriation. 

contract, the contract audits division is currently 

monitoring several high-profile contracts within the In the years since passage of the 1990 Chief Finan

Department, including the $200 million 2010 Officers Act, Commerce has been working to 

Census Communications Campaign contract. In financial management problems, includ

anticipation of conducting an audit, we are overhauling accounting practices and consolida

evaluating the bureau’s contract administration, several financial systems into one. The result has b

focusing on whether the contractor charges a more integrated system designed to give age

appropriate labor rates and submits status reports on managers current, accurate information. costs and its progress against the program’s schedule. 

In June 2007, division staff met with the contracting 

officer for that procurement to informally review the 

processes the bureau used to solicit proposals and 

make the award. 

National Data Buoy Center In FY 2006, agencies began implementing 

internal accounting controls required by OM

OIG is also examining a large contract administered revised Circular A-123, and since FY 2004 they h

by the National Data Buoy Center, a part of the had to issue audited financial statements wi

National Weather Service that designs, develops, 45 days of the fiscal year’s close. Commerce 

operates, and maintains a network of data-collecting met this deadline each year since 2004, and 

ocean buoys and coastal stations. In 2005, the center continued to receive a clean opinion on 

awarded a 5-year contract with potential for five 1­ consolidated statements. 

year extensions worth up to $500 million for 

technical services support for its marine observation However, despite positive efforts made by 

network. Currently, an OIG inspection team is Department, the FY 2006 financial statement a

reviewing the contract’s structure and management found that continued improvements are needed i

by the National Oceanic and Atmospheric IT general control environment. Commerce 

Administration, including oversight of the associated needs to ensure that the internal controls for progr

8 

http://home.commerce.go
Commission to auction recovered analog spectrum 

and deposit the proceeds into a special fund. A portion of the proceeds will be used to fund several new 

programs within the National Telecommunications 

and Information Administration (NTIA). Under the 

act, NTIA, one of the Department’s smaller agencies, 

is slated to manage up to nine new programs, two of 

which have potential combined budgets totaling 

$2.5 billion (a grant program for public safety interoperable communications and a converter box 

coupon program). 

Successfully implementing these new programs is a 

significant management challenge for the 

Department. We are sharing our expertise with 

NTIA to help it design strong, well-structured programs that minimize the opportunities for fraud. 

During this period, we presented information on federal audit requirements, cost principles, and 

matching share requirements at a June NTIA public 

meeting and at September workshops for the 

56 states and territories receiving more than 

$968 million in grants to improve interoperable communications of public safety agencies, including fire 

and police departments and emergency medical 

teams. In addition, Congress has enacted a new 

statute requiring OIG to conduct an annual assessment of the management of the public safety 

interoperable communications program and to conduct financial audits over the next 4 years of a 

representative sample of at least 25 states or territories 

receiving the public safety grants. 

In August 2007, NTIA awarded a contract to IBM 

for digital-to-analog converter box coupon program 

services. In the next semiannual period we plan to 

review the contract and develop audit plans to help us 

evaluate the implementation of this program. 

gram revealed weak agency oversight, persis

problems, and millions in funds to be put to be

use. EDA management responded with an ac

plan that assigns responsibility of the program 

single individual who can be held accountable fo

operations, lays out a time frame with specific m

stones addressing known problems as well 

establishing performance metrics that will allow 

ior management to better monitor the progr

Since the report was issued, EDA has partnered w

OIG to provide single audit training for EDA 

involved in the management of revolving loan fu

During this semiannual period, we completed 

audit of the Census Bureau’s accountable prop

management policies and practices. We found 

bureau had made considerable progress in correc

weaknesses by implementing initiatives directed 

Commerce and on its own but still needs to m

further improvements. (See page 23.) 

We recently initiated a review of accountable per

able property at USPTO. We plan to issue a repo

our findings during the next semiannual period. 

Challenge 5 

Ensure that USPTO Uses Its 

Authorities and Flexibilities as a 

Performance-Based Organizatio

to Achieve Better Results 

Since the Patent and Trademark Office Efficiency 

transformed USPTO into a performance-ba

organization over 7 years ago, OIG has devoted 

9 
USPTO 

USPTO Director Jon Dudas and Secretary of Commerce Carlos 

Gutierrez (back row) look on as Dean Harts of 3M, April SaudersFuller of Fish & Richardson, and Felicia Metz of the University of 

Maryland (front row) file patent documents electronically at the 

March 16, 2006, launch of EFS-Web USPTO’s new electronic 

filing system. 

While USPTO plays a critical role in promoting the 

nation’s technological progress and protecting intellectual property rights, its task is often viewed as 

daunting given the increasing number and complexity of patent applications. The agency’s 21st Century 

Strategic Plan, issued in 2002 and later revised, outlined numerous initiatives to help reduce its large 

backlog of applications, ensure the quality of granted 

patents, and improve the productivity of its examiner corps. An earlier OIG report on USPTO’s patent 

examiner production goals, performance appraisal 

plans, and awards highlighted actions that the agency 

could take to stimulate and reward examiner production. A recent GAO report on USPTO’s recruitment 

and retention efforts also called on agency managers 

to reassess examiner production goals, but noted that 

examiners often cited those goals as a primary reason 

for leaving the agency. GAO also reported that attrition is continuing to offset USPTO’s hiring progress 

even with the use of many incentives and flexibilities 

to retain the workforce for longer periods. 

One of those workplace incentives has been 

USPTO’s expansion of its telework program, allowing examiners to use laptops to work at offsite 

locations. Lost laptops and data security problems at 

other Commerce bureaus underscore the need for 

strong policies, procedures, and controls at USPTO 

to avoid similar problems and the potential compro

USPTO contracts to ensure vendors are comply

with contract terms and conditions, containing co

and delivering the required services on time. 

Clearly, recruitment, attrition, and information t

nology remain serious challenges for the agency. 

will continue to monitor USPTO’s progress in th

areas as well as its training programs and hum

resources or personnel operations, where we ea

found some questionable practices and the need 

improved management controls. We also plan to c

duct follow-up work on the agency’s new over

attaché program and some of its other initiat

such as the new patent peer review process. 

Challenge 6 

Effectively Manage the 

Development and Acquisition o

Environmental Satellites 

NOAA is in the midst of a major overhaul of its e

ronmental monitoring capabilities, spending sev

billion dollars on contracts for the purchase, c

struction, and modernization of satellite systems 

collect data to produce short- and long-range we

er forecasts and a variety of other critical informat

Satellite programs are highly complex and risky, 

they historically have been plagued by substan

cost increases and schedule delays. They are 

extremely important to public safety and def

operations, and therefore have been a continu

focus of our work. 

10 
oped and acquired with help from NASA Goddard 

Space Flight Center. Planning for the new series has 

been under way for the past 7 years. The 

Department’s investment for GOES-R for fiscal years 

2008 to 2012 is projected to be about $2.4 billion. 

http://goes.gsfc.nasa.gov/text/goesimbroch.html 

This solar imager, which is carried on the GOES satellites currently 

in orbit, observes the sun’s X-ray emissions and allows early 

detection of flares and other solar phenomena that may affect the 

Earth and its atmosphere. GOES-R will feature an enhanced solar 

imaging suite that permits even more varied and precise readings. 

In acquiring GOES-R jointly with NASA, NOAA 

will have the lead management role for the first time, 

giving the Department direct oversight authority for 

both the ground and space segments. In June 2007, 

NOAA and NASA signed a memorandum of agreement defining their separate authorities and 

responsibilities for managing, developing, acquiring, 

and integrating GOES-R. Because these are new roles 

for both the Department and NOAA, we evaluated 

whether they have established effective mechanisms 

for handling their expanded responsibilities. 

Our draft report, issued to the Department and 

NOAA in September, identifies a life-cycle process 

Department’s response, which will be considere

developing our final conclusions and recommen

tions regarding management of the GOE

program. 

NPOESS Acquisition Restructured 

We described the troubled National Polar-orbi

Operational Environmental Satellite Sys

(NPOESS) in our September 2006 Semiann

Report (page 29). This joint project of NO

NASA, and the Department of Defense will be a 

ical element in the nation’s ability to prov

continuous weather and environmental data for c

ian and military needs through the coming 2 deca

In November 2005, Defense reported that NPO

costs had grown by 25 percent over original 

mates, largely because of problems developing a 

sensor, the Visible/Infrared Imager Radiometer S

(VIIRS). The 25 percent overrun triggered cong

sional recertification under the Nunn-McCu

provision of the FY 1982 National Defe

Authorization Act. In June 2006, the House Scie

Committee accepted 

triagency proposal to c

tinue the program, 

with four satellites ins

of six, and with fewer 

sors. Total acquisi

costs were revised 

http://eic.ipo.noaa.gov/ 

IPOarchive/ED/graphics_kit/ 

NPOESS_teamLogo.jpg 

$5 billion. 

This past July, 

NPOESS Program O

executed a $4.2 billion modification to the deve

ment and production contract after a year-long ef

11 
Program executives have identified VIIRS and the 

Cross-track Infrared Sounder (CrIS) as the highest 

risk components. 

We will continue to monitor cost, schedule, and 

technical progress on both GOES-R and NPOESS 

and report our findings in future semiannual reports. 

Challenge 7 

Promote U.S. Exports and 

Fair Competition in 

International Trade 

The Department of Commerce accomplishes its 

goals of promoting trade, opening overseas markets 

to American firms, and protecting U.S. industry 

from unfair trade practices primarily through the 

work of the International Trade Administration 

(ITA). ITA also works with USPTO and NIST to 

advise U.S. companies on intellectual property rights 

and standards issues. 

During this semiannual period, OIG decided to 

revise the title of the challenge facing the 

Department. Although Commerce has a primary role 

in enforcing U.S. antidumping and countervailing 

duty laws and countering foreign unfair trade practices, greater emphasis and resources are focused on 

promoting U.S. exports and ensuring access to world 

markets for U.S. companies. Hence, we have modified this challenge to better reflect the Department’s 

and ITA’s responsibilities for promoting exports and 

reducing trade barriers. 

Interagency Trade Coordination 

In March 2007, OIG released a report reviewing 

ious aspects of Commerce’s trade promotion eff

and the coordination of those efforts among var

offices within the Department and with other fed

and state trade agencies and other trade partners. 

found effective collaboration on trade promotio

many instances, but we also identified areas w

Commerce and other members of the federal in

Commerce Photographic S

Commerce Secretary Carlos M. Gutierrez announced the releas

the 2007 National Export Strategy and highlighted the need fo

congressional action on the Peru, Colombia, Panama, and Kor

Free Trade agreements at the 25th annual Washington Trade G

in July. 

12 
tion report, OIGs at several agencies raised issues 

about the process Commerce uses to prepare the 

National Export Strategy and the involvement of other 

federal agencies in that effort. We reviewed the 2002 

to 2006 National Export Strategy reports and found 

that the annual report often outlines useful strategies 

and initiatives—such as the promotion of public-private partnerships. The strategy does not, however, 

establish consistent goals for promoting exports, align 

agency-specific strategic objectives with governmentwide export promotion strategic goals, or measure 

progress toward meeting those goals. Nor is it a coordinated government-wide strategy, as envisioned by 

the Export Enhancement Act of 1992. The 2007 

National Export Strategy report, released in June, contained several improvements that are responsive to 

our recommendations, but further action is warranted. (See page 33.) 

U.S. Trade Promotion in Latin America 

and China 

During this semiannual period, we followed up on 

recommendations made in our reports on 

Commercial Service (CS) operations in Brazil, 

Argentina, Uruguay, and China. ITA and CS have 

made progress on many of the recommendations in 

our CS Brazil review, and we have closed 18 of our 

43 recommendations. Those that remain open 

include recommendations for improving coordination with other embassy sections, clarifying export 

success reporting, and developing a strong marketing 

plan and financial management practices. In addition, we have closed the 2 recommendations made to 

USPTO but have kept open a recommendation to 

NIST regarding coordination with CS on regional 

Finally, only 3 recommendations remain open of 

35 originally made in our review of CS Ch

although we recently received information indica

additional action may be required on one of 

closed recommendations. The open recommen

tions deal with the American Trading Ce

initiative and an evaluation of language proficie

requirements for CS officers assigned to China. 

March 2006 Semiannual Report, pages 23-26.) 

During the next semiannual period, we will conti

to monitor Commerce’s response to recommen

tions made in our recent reports on CS operation

Asian and South American posts and on trade c

dination. Future OIG reviews may focus on 

Department’s efforts to oversee U.S. foreign t

zones or to increase exports to countries that h

recently signed free trade agreements with the Un

States. We will also continue our periodic inspect

of CS’ overseas posts, as mandated by the 1

Omnibus Trade and Competitiveness Act. 

Challenge 8 

Effectively Manage NOAA’s 

Stewardship of Ocean and Livin

Marine Resources 

NOAA spends billions of dollars each year supp

ing a vast array of programs designed to protect 

enhance the resources in 3.5 million square mile

coastal and deep ocean waters and the Great La

These programs require long-term commitments 

years of funding to show their full effect. And 

must operate in balance with the economic inte

13 
vides direct loans to refinance or refurbish fishing 

vessels, shoreside processing facilities, and aquaculture facilities. Program regulations and congressional 

appropriation language restrict the program from 

making loans for vessel construction or refurbishing 

loans that increase a vessel’s fishing capacity. Since 

1998, NMFS has made approximately 200 loans, for 

a total of nearly $300 million. We are currently evaluating the agency’s management of the loan program 

to determine if it affects NOAA’s ability to help end 

overfishing and rebuild fisheries. Also under way are 

reviews of NOAA’s National Marine Sanctuary 

Program and the National Data Buoy Center’s ocean 

observation system. 

Greg McFall/Grey’s Reef National Marine Sanctuary 

Coral reefs are some of the most biologically rich and economically 

valuable ecosystems on Earth. They are found in five National 

Marine Sanctuaries, such as Grey’s Reef (pictured above), off the 

coast of Georgia. 

The sanctuary program manages and protects 

13 sanctuaries and a marine national monument in 

northwestern Hawaii, which is the largest protected 

marine area in the world. The entire sanctuary system 

encompasses 158,000 square miles of U.S. ocean and 

Great Lakes marine habitat that have conservation, 

historical, or scientific importance—their protected 

mary focus on marine conservation and research

The National Data Buoy Center manages four ma

observation systems: weather buoys, coastal ma

observing stations, tsunami detection buoys, and 

mate monitoring buoys. Weather forecasting depe

on the reliability and accuracy of these systems

addition, the Tropical Atmosphere and Ocean bu

and weather buoys with oceanographic sensors 

vide climate data and information for researchers. 

are assessing the quality and availability of data g

erated by the observational buoys and coastal stat

and the center’s management of them. We antici

that the sanctuary and data buoy reviews will be c

pleted in December or early 2008. 

In planning for future OIG work on this challe

we are considering reviews of NOAA’s offshore aq

culture program, its coral reef program and coa

zone management, among other issues vital to 

stewardship of ocean and living marine resources

Challenge 9 

Aggressively Monitor Emergenc

Preparedness, Safety, and 

Security Responsibilities 

The Department of Commerce has more t

35,000 employees and hundreds of facilitie

must keep safe. As a cabinet-level Department, it 

has a number of programs critical to national 

paredness and recovery efforts, and it must sup

U.S. efforts to prepare for, respond to, and rec

from major disasters. 

14 
Homeland Security Council 

The National Continuity Implementation Plan provides 

comprehensive guidance for maintaining essential operations 

during emergencies. 

We continue to monitor Commerce’s progress in 

resolving weaknesses in emergency preparedness and 

security. As of August 2007, the Department had 

addressed virtually all outstanding recommendations 

from our 2002 and 2005 reviews of its preparedness 

programs. But a dynamic security environment continues to challenge the nation: Commerce, like all 

federal agencies, must be vigilant in maintaining effective oversight of emergency plans and programs, 

identifying and mitigating new security vulnerabilities, and protecting critical assets. It must be able to 

continue essential operations under all circumstances. 

In May 2007, President George W. Bush issued 

National Security Presidential Directive 51 (also 

known as Homeland Security Presidential Directive 

20) that updates long-standing continuity directives 

to ensure that governing entities are able to recover 

from operational disruptions, thus maintaining continuity of operations. We will keep a close watch on 

the Department’s efforts to comply with this directive, as well as on its ongoing oversight of 

preparedness procedures, its response to emerging 

15 

year, we are also considering reviews of 

Department’s new identity/badging system, pers

nel security, and information document security. 

Challenge 10 

Enhance Export Controls for 

Dual-Use Commodities 

Commerce’s Bureau of Industry and Security (BIS

responsible for the federal government’s exp

licensing and enforcement system for goods and te

nologies with both civilian and military uses. Beca

of the importance of export controls to national se

rity, OIG has consistently devoted a great deal of t

and resources to challenges facing BIS. 

For the past 8 years, OIG has been working to fu

the requirements of the National Defe

Authorization Act (NDAA) for FY 2000, as ame

ed, which directed the inspectors general 

Commerce, Defense, Energy, and State, in consu

tion with the directors of Central Intelligence and 

Federal Bureau of Investigation, to report 

Congress each year through 2007 on the adequac

current export controls and whether they are ef

tively preventing entities of concern from acqui

sensitive U.S. technologies. The Department 

Homeland Security’s OIG has also participated 

these reviews since that agency was formed. The gr

of OIGs is currently completing the eighth and f

NDAA interagency review of export controls. 

During this semiannual period, we continued 

monitor BIS’ progress in implementing NDAA 

ommendations detailed in our March 2
BIS 

Deemed export controls 

are designed to prevent 

the transfer within the United States of controlled 

U.S. technologies and technical information to foreign nationals from countries or entities of concern. 

We look forward to the committee’s report by the end 

of this calendar year and hope its findings and recommendations will enable BIS to increase deemed 

export compliance rates, assist enforcement efforts, 

and ensure that the regulations have the intended 

effect of protecting national security interests without 

unnecessarily burdening exporters and the scientific 

community (see March 2004 Semiannual Report, 

pages 14-17). 

Finally, although questions remain about the ov

effectiveness of the Committee on Fore

Investment in the United States (CFIUS) proces

this year’s NDAA follow-up report we noted 

both BIS and ITA are working toward implemen

our recommendations related to CFIUS activ

within Commerce. (See March 2007 Semiann

Report, pages 23-25.) We believe these improvem

will allow greater coordination and transparenc

Commerce’s decision-making process. However, 

continue to question whether CFIUS’ voluntary 

eign investment reporting process allows 

Committee to receive timely information abou

acquisitions and mergers that pose potential secu

concerns, especially those involving small 

medium-sized U.S. companies that manufactur

conduct research on sensitive U.S. technologies. 

16 
The Economic Development Administration was established by the Public Works and EconoDevelopment Act (PWEDA) of 1965 to generate new jobs, help retain existing jobs, and stimulate 

vate investment in economically distressed regions of the United States. EDA continues to fulfill this mis

under the authority of PWEDA, as amended by the Economic Development Reauthorization Act of 20

Based on local and regional comprehensive economic development strategies, EDA works in partnership w

state and local governments, regional economic development districts, public and private nonprofit organ

tions, and Indian tribes to help distressed communities address problems associated with long-term econo

deterioration and sudden and severe economic dislocations, including recovery from the economic impac

natural disasters, the closure of military installations and other federal facilities, changes in trade patterns, 

the depletion of natural resources. EDA provides eligible recipients with technical assistance, as well as gr

for public works, planning, training and research, and economic adjustment assistance. 

Nevada County Fails to 

Complete $6.7 Million Public 

Works Project 

We conducted an audit of a public works grant 

awarded to a county to offset the economic impacts 

of defense downsizing at the Nevada Test Site. Total 

estimated costs for the project—which targeted hightech development in the state's south central 

region—were $6.7 million, consisting of a $3 million 

federal share, with the county's match making up 

the balance. 

The grant was to fund three activities: planning and 

project management, creation of a technology center 

to provide distance education to rural communities 

along the targeted development corridor, and construction of a science and technology park for private 

high-tech firms. 

Our audit, which covered the full g

term—September 30, 1999, through August 

2004—sought to determine whether the county 

achieved award objectives, claimed allowable c

maintained adequate administrative and prog

controls, and complied with grant terms and co

tions. The county claimed total project costs 

$6,746,652, which exceeded the appro

award budget. 

Our review disclosed that the county failed to exe

numerous responsibilities it had committed to w

it applied for the award. It could not finance the l

share, implement the project components as inte

ed, or properly oversee the project to ensure it 

administered according to federal cost princip

uniform administrative requirements, and aw

terms and conditions. In addition, the county did 

provide and maintain the necessary enginee

supervision to ensure that the work on the scie

17 
OIG 

The grantee completed the proposed technology center knowing that 

the county did not have the infrastructure needed to link the center 

with outlying communities and establish a long-distance learning 

network. The building remains unusable for its intended purpose. 

We questioned the entire $6,746,652 in claimed 

costs and recommended that the EDA regional director (1) conduct a technical assessment of the county's 

performance and determine the value of work not 

completed or not operational; (2) disallow all claimed 

costs pending the results of the assessment and recover the federal share of $3 million; (3) require the 

county to report on its efforts to provide water to the 

park and establish a time line and budget for completing the park as originally conceived or otherwise 

integrating it into alternative economic development 

plans; and (4) accurately identify the amount of 

equipment acquired under the award and the government's interest in that equipment. We also 

recommended that EDA declare the county a highrisk recipient should it ever be considered for future 

federal awards. 

County officials concurred with some of our findings 

and disagreed with others, but offered no compelling 

evidence to cause us to modify our conclusions and 

recommendations. (Seattle Regional Office of Audits: 

STL-17802) 

adjoining service area. In August 2005, EDA 

pended the award because the recipients had 

executed a joint agreement to administer the gr

The water district subsequently asked to withd

from the grant but agreed to continue to pro

$2 million toward the local share. EDA has ye

decide on the water district's request to withd

The award remains suspended, and no federal fu

have been disbursed by EDA. 

We conducted an audit to assess the city’s abilit

effectively manage the grant project. As the g

recipient, the city is responsible for responding to 

requests for records and making staff available 

interviews and inquiries. Despite this fact, 

encountered numerous difficulties obtaining ac

to the documentation and key personnel we nee

Among other things, the city refused to 

■	 schedule an entrance conference until show

the audit access clause contained in the 

city’s award; 

■	 provide requested documentation relating 

its procurement of consulting and 

architectural engineering services, claiming 

that California record retention laws do no

require such documentation to be maintai

in perpetuity, despite the fact that grant te

clearly required them to have retained the 

relevant documents at the time of our 

request; and 

■ schedule interviews with two key personne

We were ultimately able to arrange a meeting w

one after obtaining contact information f

outside sources. We were never able to schedule 

second interview. 

18 
More than $2 Million in RLF 

Grant Funds Questioned 

In September 1985, EDA awarded an $800,000 sudden and severe economic dislocation adjustment 

implementation grant to a Wisconsin county. The 

grant required a $623,870 match, bringing the initial 

project value to $1,423,870. EDA later deobligated 

$2,812 of grant funds, 

leaving total capitalization of $1,421,058. 

The grant was originally to be combined 

with private financing 

to make a loan to a 

local hardwood die 

company. Repayments of 

the loan were to be used to create a revolving loan 

fund (RLF). The initial loan defaulted in 1990, but 

the local economic development corporation that 

2006, we notified the grant administrator that 

RLF fund and corresponding matching share nee

to be separated from its other grant funds. 

After our fieldwork was complete, the grant admi

trator separated the RLF fund and its correspond

match from other grant funds and claimed the f

totaled $2,051,404 as of September 30, 20

However, the administrator did not provide do

mentation supporting its claim. We questioned 

entire amount claimed because the allowability 

accuracy of each line item was not documented. 

We recommended the EDA Chicago regional di

tor require the grant administrator to prov

supporting documentation for its claimed RLF 

ance. If the administrator cannot adequately sup

the claimed RLF balance, EDA may terminate 

grant and recover $797,188 of federal funds awar

(the $800,000 EDA award less the $2,812 deobl

tion). The grant administrator has filed an app

which is currently under consideration. (Den

Regional Office of Audits: DEN-18388) 

19 
Photo Courtesy U.S. Census Bu

A Census Bureau enumerator shows an official badge before beginning a su
’

’

The Economics and Statistics Administration analyzes economic developments, formulates pooptions, and produces a major share of U.S. government economic and demographic statistics. The c

economist monitors and analyzes economic developments and directs studies that have a bearing on 

formulation of economic policy. ESA has two principal agencies: 

U.S. Census Bureau is the country s preeminent statistical collection and dissemination agency

publishes a wide variety of statistical data about the nations people and economy, conduc

approximately 200 annual surveys, in addition to the decennial census of the U.S. population and 

quinquennial census of industry. 

Bureau of Economic Analysis prepares, develops, and interprets the national income and product acco

(summarized by the gross domestic product), as well as aggregate measures of international, regional, 

state economic activity. 

Census Bureau Needs to 

Strengthen Personal Property 

Controls and Laptop Security 

In May 2006, the Department of Veterans Affairs 

announced that computer equipment containing the 

personal information of approximately 26.5 million 

veterans and active duty members of the military had 

been stolen from the home of an employee. The ramifications of this theft, including the high cost of 

protecting the identities of the individuals whose data 

had been stolen, emphasized the importance of 

ensuring that controls are in place to prevent future 

data breaches at federal agencies. 

In September 2006, following both a congressional 

and a Freedom of Information Act request regarding 

the compromise of sensitive personal information 

and lost laptops, the Department issued a p

release stating that 1,138 laptops had been 

Department-wide. Of that number, 672 belonge

Census. Commerce subsequently received a sec

congressional request relating to information 

missing laptop computers, thumb drives, handh

devices, and computer data disks dating back 

January 2001. In response to the large number of 

tops lost by Census, the Secretary of Comm

asked the Office of Inspector General to determ

the extent of problems in protecting sensitive per

al information at the Census Bureau and to assess 

bureau’s property management policies and pract

Our Office of Audits reviewed the Census Bure

policies and procedures and assessed internal cont

over accountable personal property. Its emphasis 

on the missing/lost/stolen laptops reported 

Congress for the period 2001 to 2006. In a sepa

21 
duties, and execution, recording, and documentation 

of transactions and events. 

We also examined six laptops used by Census field 

representatives to collect and store survey information. Census’s technology management office 

obtained the laptops for us from regional Census 

offices. The encryption software on these laptops was 

the product used prior to the recent installation of a 

full disk encryption product. 

Lax IT Security Leaves Sensitive 

Census Information at Risk of 

Compromise 

To foster public participation in the bureau’s data collection activities, Title 133 requires Census to 

maintain the confidentiality of information it 

receives. Yet each of the six laptops we examined 

using tools readily available on the Internet had serious IT security weaknesses that left Title 13 

information at risk of compromise. This data included personally identifiable information such as Social 

Security numbers, addresses and phone numbers, 

financial data, and medical information. We also 

found a lack of enforcement of Department and 

bureau IT security policy. 

Information on Census field representatives’ laptops 

was only encrypted when the computer user execut3 13 U.S.C. § 1 et seq. 

13 information readily accessible. However, Cen

reported that as of June 2007 it had completed 

implementation of full disk encryption on all f

representative laptops currently in use, wh

resolved the encryption problems we had identifi

Unnecessary User Privileges Introduced 

Significant Risks 

Our laptop evaluation found that field represe

tives had more privileges than necessary to perf

their duties, including privileges to create and m

age local user accounts and groups, in

applications, and stop and start system services. S

privileges introduce significant risk of informa

compromise because they can be used to reduce 

security controls on the laptops and increase expo

to threats. 

Other Weaknesses Increased Risk 

At the time of our fieldwork, violations inclu

sharing of a single Windows operating sys

account username and password—both publishe

Census’s laptop user guide—on approxima

11,000 field laptops, laptops not configured to cr

security event audit logs, and laptops lacking cur

antivirus software. These violations greatly incr

the possibility that an attacker—either externa

internal—could gain unauthorized access; mak

impossible to reconstruct security incidents in 

event of a breach (including determining if Title 

4	 Hibernation mode allows computer users to save the conte

of their computer’s memory to disk before shutting down. 

Standby mode conserves laptop battery power by turning 

unnecessary devices until the laptop is needed again. Users 

must reauthenticate to restore the laptop from these mode

22 
even when the bureaus system was certified and 

accredited in 2004. As we reported in 2004, the 

bureau’s C&A process failed to provide accurate and 

complete information on remaining vulnerabilities to 

authorizing officials, but system operations were 

approved nonetheless. Despite the inadequacies in the 

assessment of controls on the laptops, significant security vulnerabilities were known by the bureau’s senior 

IT security officer but remained uncorrected. In addition, although an information system security officer 

is assigned to each Census system and is charged with 

implementing appropriate security controls, the security officer for the laptops—like nearly all other 

system security officers at Census—is not an IT security specialist, and system security officer is a part-time 

duty. Since the time the laptop losses were publicized, 

senior Census management has taken significant steps 

to improve protection of Title 13 information 

throughout the bureau, and the laptop system owner 

has taken quick action to correct many of the weaknesses we identified in our review. Also, our FY 2006 

and FY 2007 independent FISMA evaluations found 

Census has made significant improvements to its 

C&A process. The improved process is being used for 

C&A of the field representative laptops. 

IT Security Function Should Be Strengthened 

We recommended the Census Bureau examine recovered laptops to identify unencrypted personally 

identifiable information and notify Commerce’s 

Identity Theft Task Force of each instance where it is 

found. We also recommended the bureau evaluate 

whether its CIO office has adequate resources and 

technical expertise to ensure compliance with IT 

security requirements and to assist system owners and 

authorizing officials in carrying out their IT security 

responsibilities. We recommended that system own

the specific IT security violations we identified 

our evaluation. 

In its response to our report, Census identified 

internal initiatives being implemented to improve 

bureau’s IT security program. The bureau agreed w

our recommendation to examine recovered lap

for unencrypted personally identifiable informa

and notify the Identity Theft Task Force if fou

The bureau did not say whether it concurred w

our other recommendations, although it did pro

some general discussion of actions that were part

responsive to them. The difficulty of meeting e

increasing IT security requirements with

additional funding was a major theme of 

response. (Office of Systems Evaluation: IG-18387

Census Has Improved Accountability 

for Laptops and Other Personal 

Property, but Additional Improvemen

Are Needed 

From January 2001 until September 2006, pers

property management at Census suffered from 

number of weaknesses, including insufficient at

tion to property management, inactive prop

boards of review, and inadequate procedures 

recovery of laptops. During our review, we were 

by various Census officials that prior to 2006 

recovery of lost/stolen laptops and other account

property had not been a priority. 

By the time we began our review, Census had ta

or planned a number of actions to address the e

ing weaknesses in personal property management

an October 3, 2006, memorandum, the Dep

23 
But despite the actions already taken, we found 

Census needs to further strengthen internal controls 

over its accountable property, and we recommended 

a number of additional actions to improve its management of personal property. 

Transactions Should Be Recorded Promptly 

Our review found the property management system 

was not always current because transactions involving 

property were often not recorded in the Automated 

Property Management System (APMS) promptly. We 

recommended that all such transactions be promptly 

recorded; all accountable property on hand at the 

time of an inventory be recorded in APMS; the backlog of Personal Property Control forms (CD-50s) be 

eliminated; and equipment no longer in use be properly and promptly excessed. 

Execution of Inventory Procedures 

Needs Improvement 

We found that regional offices did not always have a 

member of the inventory team responsible for 

ensuring that all items are scanned and marked during their inventories. Headquarters also encountered 

difficulties performing inventories. We recommended Census issue appropriate guidance on conducting 

inventories, emphasizing the need for segregation 

of duties. 

Property Management Policies and Inventory 

Procedures Need to Be Consolidated 

We found that Census’s guidance on conducting 

inventories, recovering laptops, and disposing of 

U.S. Census B

Above, a storage room full of equipment no longer in use that h

been identified as excess and is waiting to be removed from the 

premises at a regional office. 

Property Boards of Review Need to 

Be Convened to Prevent Buildup of 

Case Backlog 

During our audit, Census reinstated property bo

of review to eliminate its backlog of approxima

400 missing, lost, or stolen laptops and 400 o

missing items. Census told us new cases resul

from its April/May 2007 inventory were b

reviewed. We recommended property boards 

review be convened as necessary to ensure that 

future backlog of cases accumulates. 

Property Management Officer’s 

Responsibilities Should Be Evaluated 

Although the large volume and value of its geogra

ically dispersed property poses a signific

control challenge for Census, the bureau does 

have a full-time property management officer. 

recommended the bureau assess whether to crea

full-time position solely dedicated to prop

management. 

24 
Reveals Flaws in Maps, Address 

Information, and Approach 

In spring 2006, the Census Bureau tested the 

update/enumerate process it plans to use in the 2010 

decennial census to count American Indians living on 

reservations, Alaska Natives, and other hard-to-count 

rural populations. During update/enumerate, Census 

staff go door to door to collect population data. They 

are also instructed to make any needed corrections to 

the bureau-generated maps and address lists they use 

to locate housing units. Census chose South Dakota’s 

Cheyenne River Reservation as the site for the test— 

a choice we believe was a good one because it posed 

many of the challenges that have long hindered 

efforts to accurately count reservation populations: a 

severe housing shortage and expansive, rural geography punctuated by small communities that have 

mostly unnamed streets and unnumbered houses. 

Update/enumerate is an extremely labor-intensive 

operation that, in the 2000 decennial, counted 

1.1 million households (of 116 million nationwide) 

at a cost of $32 million. 

American Indians have historically been undercounted in decennial censuses. Enumerating those who live 

on large, rural reservations is especially difficult 

stream operation, called coverage follow-up, 

collecting information from households identi

through the coverage question as potentially hav

additional members. These modifications were pu

the test on the Cheyenne River Reservation. 

We evaluated the conduct and early outcomes of 

update/enumerate test, taking a specific look at 

impact of the new query on improving “wit

household coverage”—that is, counting all mem

of reservation households—and the success of 

overall operation in accurately counting the rese

tion population. We also assessed whe

enumerators updated maps and address lists corre

and quality control staff provided an effective qu

check of these revisions. Our findings are as follo

Flawed Update/Enumerate Process a

Failure to Complete the Operation 

Undercut the Bureau’s Ability to 

Improve the Reservation Count in 201

Cheyenne River Reservation, with about 3,000 h

ing units, was divided into 215 assignment ar

each of which needed to be enumerated and t

25 
We identified three primary problems that caused fre

quent errors and kept the operation from finishing: 

(1) The unclear, inaccurate maps and incomplete 

address lists generated during address canvassing and 

supplied to update/enumerate staff prevented enumerators from finding a significant number of 

housing units and quality control staff from completing their follow-up checks. (2) Update/enumerate 

staff did not have GPS technology to compensate for 

the poor maps and address lists. (3) The multitude of 

errors made during enumeration overwhelmed the 

quality control check, causing a higher than expected 

number of areas to fail quality control and require 

recanvassing—both of which further crippled the 

progress of the operation. 

ed to enumerate individuals identified by this 

query in the later coverage follow-up operation ra

than on the spot, as had been the practice. 

Census identified only 16 households with additi

residents because of the new query, and only one 

son in those households was added to the 2006 co

One factor in the poor outcome may have been a 

ure to properly test the revised questionnaire: 

majority of enumerators we observed never e

asked respondents the new query. Because Cen

decennial managers did not adequately monitor e

merators conducting interviews in the field or t

incoming questionnaires, the bureau did not re

Coverage Question Asked by Enumerators 

26 

Census B
Leadership Devoted to Transforming 

Census’s Approach Is Needed to 

Improve the Count on American Indian 

Reservations 

Despite the difficult challenges to improving the 

count of reservation populations, the Census Bureau 

did not have any headquarters official whose principal responsibility was to plan and implement the 

2006 update/enumerate test for American Indian 

reservations. Although many employees work on 

American Indian issues, no headquarters official was 

assigned leadership responsibility for the operation or 

charged with the singular task of improving enumeration on reservations for 2010. 

Our Recommendations 

To improve the count of reservation populations in 

2010, we recommended that Census give a senior 

headquarters official specific responsibility for leading the effort to identify, implement, and monitor 

changes to the update/enumerate process on 

American Indian reservations. This effort should, at a 

minimum, generate actions designed to improve the 

address canvassing operation so that it produces better maps and address lists for update/enumerate staff. 

We offered several options for Census to consider in 

accomplishing this objective, such as 

■	 adding current landmark information and 

community names to maps, and 

■	enhance enumerator training, supervision, 

and quality control to ensure that the 

coverage question is asked as intended, and 

■	 reconsider the decision to delay additional 

enumerations identified via the coverage 

question to coverage follow-up. 

(Office of Systems Evaluation: OSE-18027) 

Funding Problems Lead 

to Backlog at Federal 

Audit Clearinghouse 

The Single Audit Act of 1984 established unif

entitywide audit requirements for state and local 

ernment and nonprofit organizations receiv

federal financial assistance. In 1996, Cong

amended the act to streamline and improve its ef

tiveness. Currently, all entities expending $500,

or more in federal funds are required to have 

annual single audit. 

Reports required under the act provide valu

information on how federal dollars are spent 

whether the funds are spent in accordance with ap

cable laws and regulations. The informa

contained in these reports is used by grant-mak

agencies to manage more than $450 billion in gr

to states, local governments, universities and o

nonprofits. In FY 2006, approximately $1 trillio

federal expenditures were included in single a

reports sent to the Federal Audit Clearinghouse, 

repository for all single audit reports. 

27 
allows the public access to audit findings for most 

federal grant programs and also provides government 

managers with information that can be used to identify major flaws in a program’s administration. 

The Census Bureau is required by federal law, regulation, and departmental policy to recover full costs for 

work performed under certain agreements. As a 

result, the clearinghouse is expected to recover the 

costs of its operations from the federal agencies it 

services. To do this, it has entered into reimbursable 

agreements with those agencies. Over the 4 years covered by our audit, the reimbursable agreements 

totaled more than $11 million. 

We conducted an audit of the clearinghouse’s reimbursable agreements to match the revenue received by 

the clearinghouse with the costs of operations and 

determine whether the costs charged to the reimbursable agreements are reasonable, allowable, and 

allocable. Originally, the audit scope was to cover the 

period from October 1, 2003, through March 31, 

2006. But once we began our work, Census officials 

requested we expand the audit to include fiscal year 

2003 so we would be reviewing a year not plagued by 

funding issues. Additionally, we expanded the period 

to cover the review of reimbursable agreement 

authorities and signatures for the second half of 

2006. We did not review expenditures for the second 

half of FY 2006. 

We found that while management oversight on the 

allocation of project costs to the appropriate reimbursable agreement is generally good, there were a 

few instances in which clearinghouse staff had 

charged time to different project codes once available funds were exhausted. Furthermore, although 

Census has entered into reimbursable agreements 

with 16 different federal agencies to ensure 

recovery, since FY 2004 funds received thro

those agreements have not been sufficient to en

clearinghouse staff to process all submitted si

audit reports. This lack of funding caused the cl

inghouse to accumulate a significant backlog 

approximately 36,000 unprocessed reports 

February 2007, thereby jeopardizing its ability 

provide the critical data contained in the si

audit reports to the grant-making entities that 

on it. 

http://harvester.census.gov/fac/collect/ddeinde

We recommended that officials ensure that o

charges allocable to the clearinghouse project 

charged to the project and that personnel who w

on the clearinghouse project are not inappropria

charged to other Census projects. At the bureau’s 

gestion, we also recommended that Census w

with the Office of Management and Budget 

other entities to develop a budget that fully funds 

clearinghouse so it can eliminate the current bac

as soon as possible. 

28 
Census 2010: Little Progress Has 

Been Made on a Workers’ 

Compensation Strategy for 

Temporary Hires 

During this semiannual period, we followed up on 

our March 2006 review of the Federal Employees’ 

Compensation Act (FECA) program at Commerce, 

looking at the Census Bureau’s progress in developing 

a plan to handle workers’ compensation claims that 

arise during 2010 decennial and preceding activities 

and to reemploy claimants who have been on the 

FECA rolls since the 1990 and 2000 censuses. 

Our 2006 report found that Census’s FECA costs 

accounted for nearly 40 percent of the Department’s 

total FECA spending ($5.59 million of $14.5 million) during the 12-month period we examined (July 

2004 through June 2005). These costs were substantially higher at census time: for example, from July 

2000 through June 2001, as the 2000 decennial was 

under way, Census paid almost $14.2 million in 

FECA benefits. Many of these claims came from 

temporary workers hired to collect census data in the 

field. Opportunities for reemployment dwindle as 

decennial operations wind down, and those who are 

not offered a job can remain on the rolls for years. We 

identified 44 active claims from the 1990 decennial 

and 183 from Census 2000. We recommended that 

Census, together with the Department, identify all 

other claimants who are able to return to work and 

take necessary actions to bring them back on the job 

as soon as possible. 

been collaborating with the Department to iden

claimants from past decennials who could be off

jobs, but no offers have been extended. 

Census officials advised us that they have been un

to implement their plans for addressing the rec

mendations in our 2006 report for a variety 

reasons, one being the disruption of relocating 

to the bureau’s new headquarters building this 

spring. They also questioned the wisdom of train

field supervisors to be more involved in the work

compensation program, believing this additio

responsibility might negatively impact their abilit

accurately count the population within allotted t

frames. Finally, they said they may have b

overzealous in estimating how quickly they co

coordinate with Commerce’s Office of Hum

Resources Management (OHRM) and 

Department of Labor to develop a viable work

compensation strategy. 

In our follow-up report, we reiterated our recomm

dations that Census 

■	 develop a comprehensive workers’ 

compensation management initiative for th

2010 decennial, incorporate related guidan

into training and administrative manuals fo

both the 2008 dress rehearsal and 2010 

operations, and train all relevant headquart

regional, and field staff on the initiative; 

■	 bring together human resources, decennial 

management, field operations, and 

administrative staff to develop and implem

a comprehensive return-to-work strategy fo

employees injured during 2010 operations 

well as for claimants already on the rolls; a

29 
US Census Bureau 

During every decennial census, the Census Bureau hires thousands 

of temporary workers for jobs that last from several weeks to several 

months. If these employees are hurt on the job, they qualify for 

workers’ compensation benefits. Moving them off the rolls is 

especially difficult because opportunities for reemployment dwindle 

as census operations wind down. 

We also recommended that Census evaluate and 

adopt alternative hiring options for reemploying 

decennial claimants or helping them find jobs at 

other agencies or private firms, and that the 

Department’s Chief Financial Officer work with the 

bureau’s director to strengthen Census’s management 

of its workers’ compensation program and thereby 

reduce the costs of the 2008 dress rehearsal and 

2010 census. 

The Census Bureau did not agree with several findings in our draft report, but concurred with our four 

recommendations. It indicated that it had already 

and field operations staff. The bureau also repo

that it is working with OHRM to determine 

finalize the proper resource allocations and cont

options for operating the program and managing 

caseload of injuries that result from the dress rehe

al and 2010 decennial census. In addition, 

bureau reported sending letters to 73 recipi

from the 1990 and 2000 censuses, seek

information it needs to extend job offers for 2

decennial operations. 

Commerce’s Chief Financial Officer and Assis

Secretary for Administration concurred with our 

ommendation addressed to the Department. 

indicated that OHRM’s Office of Occupati

Safety and Health continues to take additio

actions to address this recommendation and th

from our March 2006 report. It is facilita

arrangements to send departmental workers’ c

pensation case files from the regional offices of DO

Office of Workers’ Compensation Programs 

Commerce headquarters. He stated that this 

eliminate the need to travel to DOL’s regional of

and enable the Department and Census to more 

ily obtain the medical information needed to iden

and process potential return-to-work cases. (Offic

Inspections and Program Evaluations: IPE-18592) 

C&A of Census Systems Shows 

Mixed Results in FISMA Review

To meet our FY 2007 FISMA reporting requ

ments, we evaluated the Census Bureau’s Cl

Services General Support System and the AESDi

Major Application, which is a contractor system. 

30 
pp, 

but used outdated scanning signatures. 

■	 Secure configuration settings were not


evaluated for some IT products. 


■	 Security controls for mobile code were not 

adequately documented or assessed. 

We concluded that the certification and accreditation 

of this system was compliant with FISMA requirements. Evidence that mitigates most of our concerns 

about the use of outdated scanning signatures—a 

patch management tool that maintains up-to-date 

patches and patch history—was available, but was 

not part of the C&A package. However, better methods of certification testing are needed to give 

authorizing officials more complete information. 

Census concurred with all but one of our recommendations and identified actions it will take to address 

them. With that one exception, the bureau’s actions 

were responsive to our recommendations. 

AESDirect Major Application 

Our review of AESDirect showed a number of problems, including the following: 

■	 Secure configuration settings were not defined 

for most IT products and none were assessed. 

■ Assessment of security controls was incomplete. 

trols were not adequately assessed for certifica

and accreditation and that the authorizing official 

not have enough information to make a cred

risk-based accreditation decision. 

Census agreed that some security controls were 

adequately assessed for certification and accredita

and indicated that all vulnerabilities identified b

in our report and Census’s own testing have bee

will be tracked on a plan of action and milesto

The bureau noted that mitigation of the vulnera

ties had already begun. 

The bureau did not agree with our conclusion 

the authorizing official did not have enough infor

tion to make a credible, risk-based accredita

decision. The bureau maintained that the infor

tion not available to the authorizing official wo

have made no difference in the accreditation deci

and that the system had not had a single docum

ed security incident in its 10 years of operat

However, our report cited numerous example

inadequate controls assessment, which suggests 

potential for significant unknown vulnerabilitie

exist. Better controls assessment may have identi

additional vulnerabilities. Moreover, the lack of d

umented security incidents was not persua

evidence that the security controls are adequate, 

ticularly since Census itself identified the absenc

controls necessary for the detection of secu

breaches, and thus could be unaware of whether s

rity incidents have occurred. (Office of Syst

Evaluation: OSE-18690-1 and -2) 

31 
Photo Courtesy 1WTC, 

An artist’s rendering of the future Freedom Tower and New York Harb

the site of the former twin towers of the World Trade Ce
The International Trade Administration is responsible for trade promotion and policy issues associ

with most nonagricultural goods and services. ITA works with the Office of the U.S. Trade Representa

to coordinate U.S. trade policy and with other agencies to coordinate U.S. trade promotion efforts. ITA 

four principal units: 

Market Access and Compliance develops and implements international economic policies of a bilat

multilateral, or regional nature, and participates in trade negotiations. Its main objectives are to ob

market access for American firms and workers and to ensure full compliance by foreign nations with t

agreements signed with the United States. 

Manufacturing and Services undertakes industry trade analysis, shapes U.S. trade policy, participate

trade negotiations, organizes trade capacity-building programs, and evaluates the impact of domestic 

international economic and regulatory policies on U.S. manufacturers and service industries. 

Import Administration defends American industry against injurious and unfair trade practices 

administering the antidumping and countervailing duty laws of the United States and enforcing other t

laws and agreements negotiated to address such trade practices. 

U.S. Commercial Service seeks to promote economic prosperity, enhance U.S. job creation, 

strengthen national security through a global network of international trade professionals. CS prom

and protects U.S. commercial interests abroad and delivers customized solutions to help U.S. busine

especially small and medium-sized enterprises, compete effectively in the global marketplace. 

National Export Strategy 

Document Would Benefit from 

Greater Interagency Involvement 

and Clear Goals 

In response to the requirements of the Export 

Enhancement Act of 1992 and Executive Order 

12870, which implemented the act, the interagency 

Trade Promotion Coordinating Committee (TPC

develops an annual National Export Strategy re

that is supposed to (1) establish government-w

priorities for federal export promotion and finan

activities and (2) provide a plan to bring those ac

ities of the TPCC agencies into line with 

priorities. The annual National Export Strategy re

is sent by the TPCC chairman (the Secretary 

Commerce) to Congress with the approval of 

President. The act also intended for the strateg

33 
the process used to develop the annual National 

Export Strategy. Our original review, which was 

requested by three members of Congress, including 

the then-Chairman of the House Small Business 

Committee, was coordinated with OIGs from the 

departments of State, Agriculture, and the Treasury, 

the U.S. Agency for International Development, the 

Small Business Administration, and the Millennium 

Challenge Corporation. 

We did not originally set out to comment on the 

National Export Strategy, but agreed to address this 

issue in a separate memorandum report at the request 

of some of the other OIGs involved in the interagency review, who had raised several concerns about 

Commerce’s development of the annual strategy. 

What We Found 

We found the annual National Export Strategy reports 

often outline useful strategies and initiatives—such as 

the promotion of public-private partnerships—within the context of discussing ongoing federal trade 

promotion efforts. These reports do not, however, 

articulate a strategy, establish consistent export promotion goals, align agency-specific strategic 

objectives with government-wide export promotion 

strategic goals, or track agencies’ actual progress 

toward those goals. 

Commerce Should Establish a More Inclusive 

Process for Developing the National Export 

Strategy Reports 

Under the current process used to develop the annual National Export Strategy, the TPCC Secretariat and 

comments on 

draft annual rep

the process used 

develop the ann

reports does not 

mote the ac

involvement of 

other TPCC mem

agencies, nor leve

their expertise 

developing the b

ITA strategic objective

The National Export Strategy Does Not 

Establish Specific Export Promotion Goals 

or Use Performance Measures to Track 

Program Success 

In a 2002 report, the Government Account-ab

Office reported that the National Export Strategy 

too broad and did not discuss government-wide 

cific goals or assess progress toward meeting th

goals.5 Our review of subsequent National Exp

Strategy reports for 2002-2006 showed that little 

changed. Absent the specific export promotion g

that GAO recommended, the annual export stra

did not provide an effective framework for focu

the activities of TPCC agencies to meet core ex

promotion priorities. Moreover, lacking usable 

formance measures—which are required of 

member agencies—TPCC cannot evaluate or re

on the agencies’ progress toward federal export 

motion priorities. 

5 Export Promotion: Mixed Progress in Achieving a Governmen

wide Strategy, GAO-02-850, September 4, 2002. 

34 
py gg

cies’ 2006 activities that are responsive to those 

strategies. However, further enhancements are necessary to fully implement our recommendations. 

The TPCC May Not Include All 

Relevant Agencies 

The roster of TPCC members was established by 

Executive Order in 1993 and was last updated in 

2003 to include the Department of Homeland 

Security (DHS), although DHS was not an active 

TPCC member at the time of our review. The 

Millennium Challenge Corporation (MCC), established in 2004, is a U.S. government-owned 

corporation with the stated mission to help reduce 

worldwide poverty through economic growth, while 

targeting aid to reward countries with good public 

policies. Since its inception, MCC has received 

approximately $4 billion in federal appropriations. 

As part of its efforts to promote economic development, MCC sponsors projects to increase the trade 

capacity of developing countries. These projects can 

complement federal export promotion efforts by 

helping improve access to foreign markets for U.S. 

products and creating other opportunities for U.S. 

exporters. We recognize that MCC may be reluctant 

to be included as a TPCC member because it wants 

to avoid the perception that its development efforts 

are linked to U.S. export promotion priorities, but 

we recommended in our March 2007 report on trade 

coordination that MCC be included in relevant 

TPCC working groups. 

U.S. Department of Treasury 

Office of the U.S. Trade Representative 

U.S. Agency for International Development 

U.S. Environmental Protection Agency 

U.S. Department of Defense 

U.S. Department of Energy 

U.S. Department of Interior 

U.S. Department of Labor 

U.S. Department of Transportation 

Office of Management and Budget 

National Security Council/National 

Economic Council 

Council of Economic Advisers 

Our Recommendations 

We recommended that ITA institute a meanin

interagency strategic planning process that ident

the core strategic goals and objectives of fed

export promotion efforts through an interage

consultative process; aligns agency-specific strat

objectives with government-wide export promo

strategic goals; identifies any agency-specific 

formance measures relevant to government-w

export promotion goals; and uses these measure

evaluate the progress of agencies toward meeting 

ernment-wide export promotion goals. We 

recommended ITA continue to engage MCC 

trade promotion activities and use appropriate ch

nels to request Presidential approval to update 

TPCC membership to include all relevant fed

trade promotion agencies. 

35 
pgg

TPCC Secretariat planned to take to address our recommendations and enhance its strategic planning 

process. ITA also indicated its continued commitment to work with MCC, whenever practical, and to 

determine ways to increase the visibility of MCC 

opportunities with the U.S. exporting community. 

We made changes in our final report to clarify some 

of the language, better articulate the ongoing efforts 

of the TPCC Secretariat, and recognize progress 

made in the 2007 National Export Strategy. (Office of 

Inspections and Program Evaluations: IPE-18589) 

ITA’s C&A Process Gave Officials 

Sufficient Information to Approve 

System Operation 

As part of our FY 2007 FISMA work, we examined 

the adequacy of ITA’s certification and accreditation 

of its Core Network General Support System. 

Though not without deficiencies, the C&A process 

was generally sound. Certification testing adequately 

assessed the required security controls. Certification 

activities provided sufficient basis for the authorizing 

official to make a credible, risk-based decision to 

approve system operation. 

ITA’s assessment process was solid: procedures and 

expected results were well-defined, and actual results 

were clearly documented for each tested procedure. 

By carefully defining procedures and expected results, 

and thoroughly documenting actual outcomes, the 

certification agent could accurately determine which 

security controls are implemented properly, recommend specific corrective actions, and clearly present 

to the authorizing official the risks associated with 

the remaining vulnerabilities. 

Also, ITA did not test the contingency plan

required annual event—and the plan did not add

the procedures and activities for restoring operat

after a disruption or failure. ITA subsequently gav

a document titled Network Shutdown Procedures 

Network Restore Procedures. But this document 

limited—it addressed protocols for shutting d

and restarting the network but omitted other im

tant procedures necessary to restore operations. 

contingency plan also did not specify emergency 

narios that require annual testing. 

We recommended that ITA (1) assess all compon

that implement security controls for a system prio

or during certification and accreditation; (2) inco

rate into the contingency plan, procedures 

activities for restoring operations after a failure or 

ruption, in accordance with Department policy; 

(3) test the plan annually and document its sc

procedures, scenarios, and results. 

“Each federal agency shall develop, documen

and implement an agency-wide informatio

security program to provide information securi

for the information and information systems tha

support the operations and assets of the agenc

including those provided or managed by anoth

agency, contractor, or other source...” 

—Federal Information Security 

Management Act of 2002 

ITA officials concurred with our recommendat

and noted that in the future, the agency will as

components that are not a part of an informa

system’s accreditation boundary prior to comple

36 
37 
Photo Courtesy NIST/Copyright Robert R

Physicist Richard Steiner adjusts the electronic kilogram, an experime

apparatus for defining mass in terms of the basic properties of na
The National Institute of Standards and Technology promotes U.S. innovation and industrial competitiveby advancing measurement science, standards, and technology in ways that enhance economic security 

improve quality of life. NIST manages four programs: the Advanced Technology Program, the Manufactu

Extension Partnership program, the Baldrige National Quality Program, and NIST Research Laboratories. 

Audit Questions $1.4 Million in 

Costs Claimed on ATP Projects 

A California company specializing in medical diagnostic technologies for musculoskeletal diseases received 

two Advanced Technology Program (ATP) awards to 

develop new tools for detecting and managing arthritis and osteoporosis. The first, awarded in September 

2000, was for a 3-year project with total costs of 

$1,960,181. The second, awarded in May 2002, had a 

2-year term and total costs of $1,977,613. 

In 2004 the firm’s new CEO—on advice from outside 

counsel—asked a forensic accounting specialist to 

review the awards. The specialist confirmed that the 

company had billed NIST approximately $1 million 

for hours not worked on the projects. In February 

2005, company officials reported the overcharge to 

NIST and offered to repay the funds. But the NIST 

grants officer wanted both awards audited in accordance with ATP guidelines to verify the amount due. 

Our audit examined the financial status of the awards 

as well as whether the company had complied with 

applicable laws and regulations and had claimed 

reasonable and allowable costs. The audit covered 

the period from November 1, 2000, through 

August 31, 2004. 

We found that the firm’s financial management system was inadequate and questioned a total of 

$1,430,562 in costs claimed on the two awards, 

bulk of them unallowable payroll charges. We rec

mended that for the first award, NIST disa

$752,951 in questioned costs and recover $726,

in federal funds, and for the second award, disa

$677,611 in questioned costs and recover 

amount in full. 

The company concurred with our recommendati

(Atlanta Office of Audits: ATL-18418) 

National Institutes of H

A California firm received ATP funds to develop new diagnost

and treatment tools for arthritis and osteoporosis. Roughly a thi

of the money was used for unallowable payroll expenses. 

39 
Photo Courtesy NOAA/R. 

Underwater research at St. Croix, U.S. Virgin Isla
’

The National Oceanic and Atmospheric Administration studies climate and global change; ensures 

protection of coastal oceans and the management of marine resources; provides weather services; 

manages worldwide environmental data. NOAA does this through the following organizations: 

National Weather Service reports the weather of the United States and provides weather forecasts 

warnings to the general public. 

National Ocean Service provides products, services, and information that promote safe navigat

support coastal communities, sustain marine ecosystems, and mitigate coastal hazards. 

National Marine Fisheries Service conducts a program of management, research, and services relate

the protection and rational use of living marine resources. 

National Environmental Satellite, Data, and Information Service observes the environment 

operating a national satellite system. 

Office of Oceanic and Atmospheric Research conducts research related to the oceans and Great Lakes, 

lower and upper atmosphere, space environment, and the Earth. 

Office of Program Planning and Integration develops and coordinates NOAAs strategic plan, supp

organization-wide planning activities, guides managers and employees on program and performa

management, and integrates policy analyses with decision-making. 

Flaws Remain in C&A Process for 

Network Operations Center 

As part of our FY 2007 FISMA work, we assessed 

NOAA’s certification and accreditation process and 

security configuration settings for its Network 

Operations Center (NOC). The center provides 

regional network backbone and Internet connectivity 

for NOAA headquarters in Silver Spring, Maryland, 

and other locations in the Washington, D.C., area. 

Our evaluation of the C&A package found impr

ments over an earlier version we reviewed, particu

in its description of system components and scann

for network vulnerabilities. But we noted nume

deficiencies in NOAA’s C&A process that req

management attention, including the following: 

■	 The system security plan was inadequate. F

example, it did not describe the functional 

properties of controls and often did not 

address applicable control requirements. 

41 
■	 Secure configurations were inadequately 

defined and assessed. 

We concluded that the authorizing official lacked 

information needed on remaining vulnerabilities to 

make a credible, risk-based accreditation decision. 

NOAA concurred with our recommendations and 

stated that it has implemented a continuous monitoring program to correct deficiencies in the security 

plan as well as to reassess security controls and 

settings. (Office of Systems Evaluation: OSE-18688) 

Work in Progress 

We have a number of reviews in progress that are 

assessing key NOAA programs and activities, including the following: 

Fisheries Finance Loan Program 

We are evaluating the National Marine Fisheries 

Service’s management of this program, which offers 

long-term loans to the commercial fishing industry to 

refinance or refurbish fishing vessels that do not add 

capacity to the fisheries, shoreside processing facilities, 

and aquaculture facilities while reducing overfishing 

and revitalizing fisheries. Since 1998, NMFS has 

made approximately 200 loans, for a total of nearly 

$300 million. We will consider the impact that any 

management deficiencies we may identify could have 

on NOAA’s ability to rebuild and sustain fisheries. 

p

(northwestern Hawaiian Islands) in 2006—

138,000 square miles the largest marine prote

area in the world—the sanctuaries now encom

more than 158,000 square miles of ocean and G

Lakes marine habitats. The special habitats of 

sanctuaries include coral reefs, whale migra

corridors, deep sea canyons, kelp forests, and sea g

beds. Historic shipwrecks are also protected. 

program’s primary mission is resource protection, 

it must also facilitate compatible public 

commercial uses along with conservation 

research activities. We are evaluating whether 

program is successfully (1) providing for the lo

term protection of marine and cultural resou

and (2) collaborating with other NOAA offices, 

with federal, state, and local entities involved 

developing and managing marine protected ar

enforcing sanctuary regulations, and conduc

scientific research. 

National Data Buoy Center 

The National Data Buoy Center is part of 

National Weather Service. The center operates 

marine observation systems—weather buoys, coa

marine observing stations, tsunami detection bu

and climate monitoring buoys. These systems pro

critical data on oceanic and atmospheric condit

that is used by weather and hurricane forecas

researchers, climatologists, oceanographers, comm

cial fishermen, and recreational boaters. We 

assessing whether the center effectively maintains 

repairs its marine buoys and coastal marine stat

and whether it distributes adequate and reliable 

from these observing platforms to meet the need

42 
Alaska Ocean Observing System 

This NOAA data buoy, one of five located in Prince William 

Sound, Alaska, senses and transmits meteorological information for 

weather forecasting. 

gy 

of a hurricane fact sheet that included a discussio

climate change and hurricane intensity. We antici

issuing our report in the coming months. 

43 
Photo Courtesy USP

The glass-enclosed atrium of USPTO’s new headquar
’

The United States Patent and Trademark Office administers the nations patent and trademark l

Patents are granted and trademarks registered under a system intended to provide incentives to inv

invest in research, commercialize new technology, and draw attention to inventions that would otherwis

unnoticed. USPTO also collects, assembles, publishes, and disseminates technological information disclo

in patents. 

C&A Inadequacies Revealed in 

FISMA Reviews 

To meet our FY 2007 FISMA reporting requirements, we evaluated USPTO’s certification and 

accreditation for the Patent Search System—Primary 

Search and Retrieval, and the Project Performance 

Corporation (PPC) General Support System, which 

is a contractor system. 

Patent Search System—Primary 

Search and Retrieval 

Our review of the Patent Search System—Primary 

Search and Retrieval revealed 

■	 security controls were not adequately defined 

prior to the certification phase; 

■	 certification assessment was incomplete and 

lacked adequate supporting evidence; 

■	 the authorizing official did not receive 

accurate information on the status of secure 

configuration settings; and 

■	 incomplete and questionable rationales we

used to reduce risk levels of several remain

vulnerabilities. 

We concluded that the authorizing official lac

sufficient information about the remaining vuln

bilities and their associated risk to make a cred

risk-based decision on whether to accredit the syst

USPTO concurred with all of our recommendati

but did not agree with our conclusion. The age

contended that all controls were properly asse

and that the evidence for the authorizing official 

sufficient, but noted that more detailed evide

would be provided to this official in the future. 

response described improvements that have b

made in IT security in FY 2007. 

PPC General Support System 

Our review of the PPC General Support Sys

revealed 

■	 the system security plan was generally


adequate but inaccuracies need to


be addressed;


45 
We concluded the security controls were not adequately assessed for certification and accreditation 

and the authorizing official did not have enough 

information to make a credible, risk-based accreditation decision. 

security in FY 2007. (Office of Systems Evaluat

OSE-18841-1 and -2) 

46 
’

The United States Department of Commerce creates the conditions for economic growth and opportu

by promoting innovation, entrepreneurship, competitiveness, and stewardship. The Department has t

stated strategic goals: 

Goal 1: Provide the information and tools to maximize U.S. competitiveness. 


Goal 2: Foster science and technological leadership by protecting intellectual property, enhancing techn

standards, and advancing measurement science. 


Goal 3: Observe, protect, and manage the Earths resources to promote environmental stewardship. 

The Department has also established a Management Integration Goal that is equally important to all bure

Achieve organizational and management excellence. 

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 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 

several categories of recipients for whom the c

and administrative burden of the screening pro

may well outweigh the government’s risk of finan

loss. The current policies exempt from review, rec

ents who (1) receive awards in amounts of $100,

or less; (2) have received financial assistance from 

Department for 3 or more consecutive years with

any adverse program or audit findings; or (3) 

units of a state or local government. 

During this semiannual period we screened 182 

posed awards. For 72 of the awards, we found m

deficiencies that could affect the ability of the pros

tive recipients to maintain proper control over fed

funds. On the basis of the information we provi

the Department delayed 35 awards and establis

special award conditions for 37. (Office of Audits) 

47 
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 149 audit reports during this semiannual period to determine whether they contained any 

audit findings related to Department programs. For 

67 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 programspecific reporting requirements. The other 82 reports 

are from entities for which other federal agencies have 

oversight responsibility. We identified 18 with findings related to the Department of Commerce. 

* Includes $45,402,676 in ATP program-specific audits. 

We identified a total of $7,028,184 in federal q

tioned costs and $456,405 in funds to be pu

better use. In most reports the subject programs w

not considered major programs; thus the au

involved limited transaction and compliance tes

against laws, regulations, and grant terms and co

tions. The 18 reports with Commerce findings 

listed in Appendix B-1. (Regional Offices of Audit

48 
The mission of the Office of Inspector General is to promote economy, efficiency, and effectiveness detect and prevent waste, fraud, abuse, and mismanagement in the programs and operations of the U

Department of Commerce. Through its audits, inspections, performance evaluations, and investigations, O

proposes innovative ideas and constructive solutions that lead to positive changes for the Department

providing timely, useful, and reliable information and advice to departmental officials, the administration, 

Congress, OIG’s work helps improve Commerce management and operations as well as its delivery of serv

to the public. 

Office of Investigations 

During this semiannual period, the Office of 

Investigations continued to pursue allegations of 

fraud, waste, and abuse affecting Commerce programs and operations, and other cases of corruption 

and fraud that negatively impacted the Department, 

the federal government, or U.S. taxpayers. The investigations highlighted below are representative of our 

accomplishments during the past 6 months. 

Jury Finds Former Census Employee 

Guilty of Workers’ Compensation Fraud 

In April 2007, a former Census field representative was 

convicted of four counts of making false statements to 

collect benefits for work-related injuries sustained in a 

1994 automobile accident, after an OIG investigation 

revealed she had failed to report more than $40,000 in 

earnings from a dog kennel business on annual certifications submitted to the Department of Labor’s Office 

of Workers’ Compensation Programs. On July 12, 

2007, the defendant was sentenced in U.S. District 

Court for the Northern District of Georgia to 

months’ imprisonment followed by 3 years of su

vised release, and ordered to pay a $5,000 fine 

restitution in the amount of $37,388.20. (Atla

Field Office) 

NOAA Employee Pleads Guilty to Cre

Card Theft 

On August 15, 2007, a former NOAA emplo

pleaded guilty to theft of government property 

charging close to $4,000 in personal purchases 

government credit card. An OIG investigation fo

that over a 3-week period in December 20

15 transactions totaling $3,938.30 were made on 

employee’s government purchase card for items s

as cigarettes, beer, gift cards, CDs, video games, 

a television. All the purchases occurred at ven

located near his residence or near his work sit

Pascagoula, Mississippi, and several of the tran

tions were captured on store surveillance tapes. 

defendant is scheduled for sentencing in U.S. Dis

Court for the Southern District of Mississipp

November 2007. (Denver Resident Office) 

49 
Communication System (TECS) 163 times over a 

2-month period in order to track the whereabouts of 

a former girlfriend. TECS is a secure, password-protected system designed to identify individuals 

suspected of or involved in violations of federal law, 

and permit direct communications between Treasury 

law enforcement offices and other federal, state, and 

local law enforcement agencies. The former special 

agent also used the database to track the movements 

of members of the woman’s family, and made harassing and life-threatening remarks to her, threatening 

to have her deported. When questioned by OIG 

investigators and his supervisors, he lied about the 

number of times he had accessed the investigative 

database for personal reasons. The defendant was 

scheduled for arraignment in October 2007. (Atlanta 

Field Office) 

ATP Award Recipient Indicted and 

Assets Seized 

On June 13, 2007, the recipient of a $2 million 

Advanced Technology Program award was indicted 

for program fraud in the Southern District of New 

York, based on the results of an OIG investigation 

that found nearly $400,000 in project funds had 

been diverted to the defendant’s personal use. On 

June 25, 2007, a superseding indictment was filed, 

adding an asset forfeiture clause seeking $390,000 

and the apartment the defendant used as both a residence and a place of business. OIG agents served a 

seizure warrant the following day and recovered an 

estimated $300,000 worth of computers and associated electronic equipment allegedly purchased with 

federal funds. A trial date has not yet been set. 

(Atlanta Field Office) 

Arrests and Convictions Continue in 

International Telemarketing Fraud Ca

For the past 4 years, we have been investigatin

major telemarketing fraud scheme based in C

Rica that was perpetrated by callers identify

themselves as employees of the Comm

Department and other federal agencies, who 

victims they had won huge cash prizes in a nati

lottery. In order to secure their winnings, vict

were instructed to use commercial wire transfer s

ices to send payments of $1,500 to $4,500 to C

Rica. The investigation is an integral part of 

Department of Justice’s Operation Global Co

massive international fraud investigation involv

nearly 3 million victims and more than $1 bil

dollars in fraud worldwide. 

Since its inception, our investigation has resulted 

total of 32 arrests and 20 convictions of particip

in the scheme, as well as a payment of ne

$1.4 million in restitution from one defendant. 

March 2007 Semiannual Report, page 61.) Du

this semiannual period, eight defendants were c

50 
Program by Commerce Employees 

The federal transit benefits program provides transit 

benefits (e.g., Metrocheks) to government employees 

to encourage the use of public transportation for 

commuting. Under the program currently in place at 

Commerce, employees may receive subsidies of up to 

$110 a month to cover their actual transportation 

costs. Based on reports of program abuses at various 

federal agencies, the Government Accountability 

Office was asked to investigate allegations that federal employees in the National Capital region were 

engaging in fraud related to the transit program. 

GAO teamed with a number of OIG organizations, 

including our office, to pursue these charges. Our 

investigative work is ongoing, but we have already 

identified several Commerce employees involved in 

abuse of the program. 

Senior Official with Parking Space Collected 

More Than $1,200 in Metrocheks 

OIG investigators determined that a senior official 

received $1,260 in transit benefits over a 10-month 

period, although he had been assigned and regularly 

used a parking space at the Commerce headquarters 

building during that time. In order to receive the periodic subsidy, an employee must complete a preprinted 

certification form containing an explicit representation 

that he or she has not been assigned a parking permit 

by a federal agency. Despite that condition, the official 

signed the certification on at least five occasions to collect transit benefits. Prior to the conclusion of our 

investigation, he reimbursed the Department for the 

full cost of the Metrocheks he received. At the close of 

this semiannual period, additional administrative 

action was pending. (Washington Field Office) 

pyg 

multiple occasions – was compelled to reimburse 

government $1,577 from her lump sum annual l

payment. (Washington Field Office) 

USPTO Employee Sold Metrocheks on eBa

Our joint investigation also revealed that a USP

employee had sold more than $400 worth of fede

ly subsidized Metrocheks on eBay during a 2-w

period in August 2006. The employee admitted m

ing the sales, but claimed he was unaware that 

actions were prohibited. He agreed to make full r

tution to the agency and subsequently resigned 

position at USPTO. (Washington Field Office) 

OIG Computer Crimes Unit Aids State 

Law Enforcement Efforts 

In addition to pursuing investigations into IT sec

ty breaches and criminal misuse of governm

computers at the Department, the Office 

Investigation’s Computer Crimes Unit regularly le

its technical expertise to fellow state and federal 

enforcement agencies, providing forensic m

analysis and support in connection with ongo

investigations and other matters relating 

Commerce employees and operations. During 

semiannual period, the unit was again called upo

provide such services in a variety of contexts. 

In June 2007, the Fairfax County, Virginia, po

requested OIG assistance to seize and examine 

ernment computer equipment assigned to a Cen

Bureau employee who had been arrested on a s

homicide charge. OIG forensic analysis of the c

51 
dence was forwarded to the local authorities for use 

in their case. (Computer Crimes Unit) 

Other OIG Activities 

Testimony Before House Committee on 

Natural Resources 

During this semiannual period, OIG’s assistant 

inspector general for auditing appeared before the 

House Committee on Natural Resources to recap our 

2005 review of NOAA’s consultation process. Section 

7 of the Endangered Species Act requires federal 

agencies to consult with NOAA about any activity 

they plan to undertake that may affect listed species. 

Our review looked at NOAA’s process for rendering a 

biological opinion on the impacts of a California 

water project on endangered fish. We found that the 

agency deviated from its normal quality control practices in developing the opinion and was criticized as 

having acted arbitrarily or inappropriately (see 

September 2005 Semiannual Report, page 21). The 

committee requested testimony on our work as part 

of its consideration of claims that modifications to a 

different water management project, operating in the 

Klamath River Basin, caused as many as 80,000 

salmon to die. 

52 
Table 1. Investigative Statistical Highlights for this Period 

Audit Resolution and Follow-Up 

The Inspector General Act Amendments of 1988 Department Administrative Order 213-5, A

require us to present in this report those audits issued Resolution and Follow-up, provides procedures 

before the beginning of the reporting period (April 1, management to request a modification to an appro

2007) for which no management decision had been audit action plan or for a financial assistance recip

made by the end of the period (September 30, 2007). to appeal an audit resolution determination. The 

Six audit reports remain unresolved for this reporting lowing table summarizes modification and ap

period (see page 60). activity during the reporting period. 

53 
Table 3. Audit and Inspection Statistical Highlights for this Period 

* This number includes costs by state and local government auditors or independent public accountants. 

Table 4. Audits with Questioned Costs 

NOTES: 

1	 Four audit reports included in this table are also included among reports with recommendations that funds be put 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 
NOTES: 

1	 Four audit reports included in this table are also included among reports with recommendations that funds be put to better use 

(see Table 4). 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. 

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 

an OIG recommendation that funds could be u

more efficiently if Commerce management t

action to implement and complete the recommen

tion, including (1) reductions in outl

(2) deobligation of funds from programs or op

tions; (3) withdrawal of interest subsidy costs 

loans or loan guarantees, insurance, or bo

(4) costs not incurred by implementing recomme

ed improvements related to Commerce, a contrac

or a grantee; (5) avoidance of unnecessary expe

tures identified in preaward reviews of contr

or grant agreements; or (6) any other sav

specifically identified. 

Management decision: management’s evaluatio

the findings and recommendations included in 

audit report and the issuance of a final decision 

management concerning its response. 

55 
Appendix A-1. Performance Audits 

Appendix A-2. Financial Assistance Audits 

56 
57

* Includes 29 ATP program-specific audits. 

58 
* Counted as one audit report 

59 
federal regulations. We found that the firm had failed 

to comply with numerous contract and federal 

requirements, and questioned more than $8.5 million in direct labor and reimbursable costs. 

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 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 

REPORTING REQUIREMENTS 

Computer Aided Surgery Inc., New York. An O

audit of this NIST cooperative agreement 

September 2004 issue, page 35, and March 2

issue, page 33—ATL-16095) questioned costs to

ing $547,426 in inappropriately charged r

utilities, and certain salary, fringe benefit, and o

expenses because these costs were unallowable

excess of budgetary limits, or incorrectly categori

This audit remains unresolved because we reque

that NIST postpone its submission of an audit r

lution proposal. 

The Inspector General Act of 1978, as amended, specifies reporting requirements for semiannual reports. 

requirements are listed below and indexed to the applicable pages of this report. 

60 
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. 

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. 

on each such report. There were one NIST and 

Census reports more than 6 months old. 

Section 5(a)(11): Significant Revised 

Management Decisions 

This section requires an explanation of the rea

for any significant revision to a management deci

made during the reporting period. Departm

Administrative Order 213-5, Audit Resolution 

Follow-up, provides procedures for revising a m

agement decision. For performance audits, O

must be consulted and must approve in advance 

modification to an audit action plan. For finan

assistance audits, OIG must concur with any deci

that would change the audit resolution proposa

response to an appeal by the recipient. The decis

issued on the four appeals of audit-related debts w

finalized with the full participation and concurre

of OIG. 

Section 5(a)(12): Significant 

Management Decisions with Which 

OIG Disagreed 

This section requires information concerning 

significant management decision with wh

the inspector general disagrees. Departm

Administrative Order 213-5 provides procedures 

elevating unresolved audit recommendations to h

er levels of Department and OIG managem

including their consideration by an Audit Resolu

Council. During this period no audit issues w

referred to the council. 

61 
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 are reviews of an activity, unit, or of

or a contractor or other nonfederal entity 

receives funds from the Department. They focu

an organization, not a whole program, and are o

designed to give agency managers timely and us

information about operations, including current 

foreseeable problems. 

EVALUATIONS 

Program Evaluations review specific managem

issues, policies, or programs. 

Systems Evaluations review system developm

acquisitions, operations, and policy, focusing 

computer systems and other technologies. 

INVESTIGATIONS 

Investigations are conducted based on alleged or 

pected wrongdoing by Department employ

contractors, recipients of financial assistance, 

others responsible for handling federal resour

Investigations that expose violations of Departm

rules and regulations or acts of fraud commi

against the U.S. government can result in adminis

tive sanctions and/or criminal or civil prosecutio

62