September 2003
IG’s

Semiannual Report

to Congress

September 2003

OFFICE OF INSPECTOR GENERAL

U.S. DEPARTMENT OF COMMERC E

 Inspector General Act of 1978

Twenty-fifth An niversar y

September 2003

The Honorable Donald L. Evans

Secretary of Commerce

Washington, D.C. 20230

Dear Mr. Secretary:

I am pleased to provide you with the Inspector General’s Semiannual Report to Congress for the second half of fiscal year

2003. Section 5 of the Inspector General Act requires that you transmit this report, with any comments you may wish to add,

to the appropriate committees within 30 days of your receiving it.

Since its beginning, with the Inspector General Act of 1978, this office has worked diligently to fulfill its mission. Our mandate

was and is clear; and through our work we continue to strive to design recommendations to promote economy, efficiency, and

effectiveness and to prevent and detect fraud and abuse in Department of Commerce programs and operations. During this

silver anniversary of the Inspector General Act, I reaffirm our commitment to working with you, other Commerce officials,

and unit managers to achieve excellence throughout this Department. 

During this semiannual period, we made significant progress in meeting the goals we outlined in our work plan, monitored

improvement in challenge areas, and addressed issues brought to our attention by members of Congress. We deepened our

commitment to work with Department managers to strengthen Commerce IT and physical security, clarify and enhance

performance measures, highlight and promote best practices and improved procedures, and ensure the efficient and effective

progress of Commerce activities.

I am gratified to say that we have identified many policy and procedural improvements made within Commerce agencies to

address our findings and recommendations. Through these improvements, we remain conscious of the impact of our work and

dedicated to diligence and timeliness. Commerce’s varied national and international roles and responsibilities play an

important part in the nation’s well-being. We are proud of our association with this Department and look forward to continued

years of success through cooperation. 

Sincerely,

Johnnie Frazier

OFFICE OF INSPECTOR GENERAL

U.S. DEPARTMENT OF COMMERC E
September 2003/Semiannual Report to Congress

CONTENTS

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

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

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

Effectively Manage Departmental and Bureau Acquisition Processes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

Successfully Operate USPTO as a Performance-Based Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Control the Cost and Improve the Accuracy of Census 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Increase the Effectiveness of Marine Resource Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

Increase Fair Competition in International Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

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

Enhance Emergency Preparedness, Safety, and Security of Commerce Facilities and Personnel . . . . . . . . . . . . . . . . . . . . . . . . .13

Strengthen Financial Management Controls and Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

Continue to Improve the Department’s Strategic Planning and Performance Measurement in Accordance with GPRA . . . . . . .14

Department of Commerce Organization Chart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

Agency Overviews

Bureau of Industry and Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

Economic Development Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

Economics and Statistics Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19

International Trade Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

Minority Business Development Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24

National Oceanic and Atmospheric Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

Technology Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32

United States Patent and Trademark Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36

Department-Wide Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37

Office of Inspector General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41

Tables and Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47

Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56

Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
This year marks an important milestone for Offices of

Inspector General throughout the federal government: for

25 years we have been partners in a strong and, I believe,

highly beneficial relationship with Congress and the respective

agencies we have been charged with overseeing. 

To quote the vice chair of the President’s Council on Integrity and

Efficiency, “the role of the IG is to protect the integrity of

government programs through traditional audits and other

reviews; improve program effectiveness; and prevent and detect

fraud, waste, and abuse.” I believe, as a community, IGs have

done much to accomplish these goals. And equally important, our

efforts have been instrumental in improving program, financial,

and management operations and reducing fraud and abuse of

public resources.

I have had the privilege of being both a witness to and participant

in the strength of the Congress/Commerce/OIG partnership.

This office has been instrumental in monitoring and nurturing

the evolution of policies and processes to meet ever more

complex challenges. 

This Semiannual Report to Congress details our most recent

efforts to build on the strengths and accomplishments engendered

by this 25-year partnership. Highlights of that work are

detailed below.

Contracts/Financial Responsibilities. Our work in these areas

revealed some especially disturbing contract and financial-related

weaknesses in a number of bureau projects and activities: 

■ Our evaluation of a modification to a NOAA/NWS contract for acquiring transitional power sources for the Next

Generation Weather Radar (NEXRAD) system found,

among other things, that the change was made without

adequate negotiation, review, or oversight, and resulted in

increased contract costs of approximately $4.5 million.

Moreover our evaluation identified various technical,

management, and contractual problems that warrant management’s attention (see page 25). 

■ An audit of reimbursable activities at NOAA’s

Environmental Technology Laboratory identified significant instances of noncompliance with Department and

agency policies and procedures for administrative control

of funds such as failure to recover full costs for reimbursable projects as well as inappropriate transfers of

expenditures between reimbursable and nonreimbursable

projects (see page 28).

■ A review of airfreight charges paid by the Census Bureau

during Census 2000 revealed that the bureau—by failing

to estimate charges prior to shipping and to reconcile

billing statements with services provided—overpaid

some $2 million during an 11-month period

(see page 21).

Program/Operational Management. Our evaluation of Census

2010 plans and preparations has begun, and we are monitoring

Census Bureau activities in light of our recommended

improvements issued in Improving Our Measure of America:

What Census 2000 Can Teach Us in Planning for 2010. During

this semiannual period, we assessed bureau efforts thus far to

update its address/mapping system and found that its late start in

implementing a project management process has increased the

risk that the system will not be thoroughly tested before the 2008

dress rehearsal (see page 20).

We also evaluated two NOAA activities:

■ Critical Hydrographic Survey Backlog. NOAA has

committed to eliminating the backlog of hydrographic

surveys of the roughly 43,000 square nautical miles designated as “critical” to ocean-going commerce, travel,

and scientific research by FY 2017. Our review of its

progress toward this goal revealed that NOAA 

● has made “undocumented” changes to the baseline

survey area; 

● obligated $6.5 million of its Address Survey

Backlog funding to survey locations outside the

critical survey backlog area; 

● does not adequately track program costs or enforce

contractor delivery deadlines; and 

● lacks a detailed work plan to eliminate the critical

survey backlog (see page 26). 

■ National Marine Fisheries Service’s Groundfish

Survey. Our review of NMFS’ policies and procedures

for collecting this vital data revealed that the agency

lacks sufficient protocols for properly operating and

maintaining survey gear, and documenting these efforts;

responding to stakeholder concerns; and tracking gearrelated cost data (see page 30).

September 2003/Semiannual Report to Congress 1

IG’s Message to Congress
IT Security. In my testimony before Congress on federal IT

security weaknesses during this reporting period, I noted that

Commerce has made progress, but significant improvements are

needed to adequately secure its hundreds of critical systems. Our

annual review of Department-wide information security, this year

performed under the newly enacted Federal Information Security

Management Act (FISMA), confirmed the magnitude of the

problem: we found that while Commerce is addressing systems

and data vulnerabilities identified in prior-year reviews, IT

security remains a material weakness. (See page 37.)

Performance Reporting. Our reviews of performance

measurement and reporting during this semiannual period found

instances of inaccurate and unverified data (see page 24) and

insufficient internal controls to ensure reported data was accurate,

complete, and understandable (see page 28). These problems call

into question the reliability of performance information used in

congressional decision-making.

A FINAL NOTE

The IG Act entrusted Offices of Inspector General with the

responsibility for making government work better, and required

that we apprise Congress of our progress in doing so. For a

quarter century, these semiannual reports have served as the key

vehicle for sharing this information. 

With our submission of this report, we at the Commerce OIG

look forward to many more productive years of working with

Department officials and Congress to identify and eliminate

administrative, operational, and financial weaknesses across the

board. In so doing we can avoid potential problems before they

occur and further our ultimate goal of ensuring that this

Department is fully competent to do its part to strengthen the

economy, advance the sciences and technologies, and protect the

environmental resources of America. 

2

IG’s Message to Congress

U.S. Department of Commerce/Office of Inspector General
The Office of Inspector General, in assessing its work at the

close of each semiannual period, develops the Top 10

Management Challenges the Department faces. Each

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

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

(2) it is complex, (3) it involves sizable expenditures, or (4) it

requires significant management improvements. Because of the

diverse nature of Commerce activities, many of these criteria cut

across bureau and program lines. We believe that by addressing

these challenges the Department can enhance program efficiency

and effectiveness; eliminate serious operational problems;

decrease fraud, waste, and abuse; and achieve substantial savings.

You will note that with this Semiannual Report to Congress we

have revised our list of Top 10 Management Challenges facing

the Department to reflect shifting priorities for the various

challenges and a new area of concern. We have added controlling

the cost and improving the accuracy of Census 2010 as a new

challenge, with the hope that attention paid to this issue in the

early part of the decade will reap great benefits as the time for the

decennial draws near. Finally, instead of having a separate

challenge related to the effective management of major

Commerce renovation and construction projects, we have folded

that challenge into the existing challenge for the effective

management of departmental and bureau acquisition processes.

CHALLENGE 1

STRENGTHEN DEPARTMENT-WIDE

INFORMATION SECURITY

Many of Commerce’s information technology systems and the

data they contain have national significance: the Bureau of

Industry and Security’s (BIS’) export license data helps control

the release of dual-use commodities to countries and entities of

concern; the National Oceanic and Atmospheric Administration’s

(NOAA’s) satellite, radar, and weather forecasting data and

systems provide information used to protect lives and property;

Economics and Statistics Administration’s economic indicators

have policymaking implications that can affect the movement of

global commodity and financial markets; and U.S. Patent and

Trademark Office’s (USPTO’s) patent and trademark information

is essential to administering patent and trademark law, promoting

industrial and technical progress, and strengthening the national

economy. Loss of or serious damage to any of these critical

systems could have devastating impacts, which makes identifying

weaknesses and recommending solutions a continuing top

priority for this office. 

The Federal Information Security Management Act, signed into

law on December 17, 2002, provides a comprehensive framework

for ensuring that information resources supporting federal

operations and assets employ effective security controls. FISMA

requires Offices of Inspector General to perform independent

security evaluations of their agencies annually. 

Our security reviews found that Commerce’s senior management

continues to give that issue due attention and priority. With the

support of the Deputy Secretary, the Chief Information Officer

(CIO) has worked hard to improve information security

Department-wide. As we reported in our last semiannual, the

Department issued the Information Technology Security Program

Policy and Minimum Implementation Standards and the Policy and

September 2003/Semiannual Report to Congress 3

MAJOR CHALLENGES

FOR THE DEPARTMENT

MAJOR CHALLENGES

FOR THE DEPARTMENT

1. Strengthen Department-wide information security. 

2. Effectively manage departmental and bureau

acquisition processes.

3. Successfully operate USPTO as a performancebased organization. 

4. Control the cost and improve the accuracy of

Census 2010.

5. Increase the effectiveness of marine resource

management.

6. Increase fair competition in international trade. 

7. Enhance export controls for dual-use

commodities.

8. Enhance emergency preparedness, safety, and

security of Commerce facilities and personnel.

9. Strengthen financial management controls

and systems.

10. Continue to improve the Department's strategic

planning and performance measurement in

accordance with GPRA.
Implementation Standards for Remote Access Security, which,

together, comprehensively define Commerce’s program for

protecting agency information systems. In addition, these

documents clearly delineate the responsibilities of senior agency

officials and CIOs and plainly specify system life-cycle

information security requirements. The result is that security is

becoming better integrated into the capital planning and investment

control process. 

The Department’s noteworthy progress is moderated, however,

by the considerable challenges that persist, the greatest being

ensuring adequate security on the hundreds of Commerce

systems, including (1) assessing risk and determining appropriate

security controls, (2) testing and evaluating these controls, (3)

certifying and accrediting systems,1 and (4) ensuring that

personnel with specialized information security responsibilities

receive the necessary training. 

The Department has reported information security as a material

weakness in its Accountability Report for the past 2 fiscal years.

In our FY 2002 independent evaluation, we stated that the

Department should continue to do so until all systems that are

part of the critical infrastructure and mission critical have been

certified and accredited. The Department, in turn, set a goal for

complete certification and accreditation by the end of FY 2003.

Although 97 percent of the Department’s systems have been

reported as certified and accredited, our FY 2003 FISMA

evaluation and individual system reviews revealed numerous

systems that had been reported as certified and accredited but

contained significant deficiencies in their risk assessments,

security plans, and contingency plans—i.e., certification and

accreditation materials. Most also lacked evidence that security

controls had been tested. 

We commend the Department on its efforts to certify and accredit

its critical systems but believe that information security should

continue to be reported as a material weakness for FY 2003. We

understand that some certifications and accreditations are being

reworked, using improved processes, to meet the requirements of

the Department’s new information security policy; but until

improvements are made, the risk to Commerce IT systems

remains (see page 37).

CONTRACT SECURITY WEAKNESSES

Inadequate security provisions in Commerce IT service contracts

also place systems at risk (see September 2002 Semiannual

Report, page 51). IT expenditures accounted for nearly half ($500

million) of all Commerce’s contract/procurement obligations in

FY 2002, with IT services accounting for roughly two-thirds of

that amount (approximately $334 million). Our FY 2003 FISMA

evaluation found that while some progress has been made in

incorporating security provisions into recent IT service contracts

(see page 37),2 provisions for controlling access to Department

systems and networks are generally absent and there is little

evidence of contract oversight or of coordination among

contracting, technical, and information security personnel in the

development of appropriate contract security. We believe these two

weaknesses place Commerce systems and data at continued risk.

USPTO INFORMATION SECURITY REVIEW

At USPTO, information security has become better integrated

into that agency’s capital planning and investment control

process, and system life-cycle information security requirements

4

Major Challenges for the Department

U.S. Department of Commerce/Office of Inspector General

1 Certification is the formal testing and evaluation of the security

safeguards on a computer system to determine whether they meet

applicable requirements and specifications. Accreditation is the formal

authorization by management for system operation, including an explicit

acceptance of risk.

2 The term “contract” includes task orders and delivery orders issued

under multiple award contracts and government-wide agency contracts.
and processes are being improved. In addition, the agency

continues to work to ensure that its senior program officials

understand and accept their responsibilities for information

security, a prerequisite for any effective and long-lived program.

Significantly, USPTO is well on its way to having its systems

certified and accredited. It does not grant interim accreditations

without comprehensive risk assessments, security plans, and

testing; and uses a disciplined certification and accreditation

process that includes rigorous testing of security controls. Using

this approach the agency has gained a great deal of insight into

system-specific weaknesses that must be corrected and

organization-wide security policies, procedures, and processes

that must be improved. 

Our last evaluation found that USPTO lacked current

certifications and accreditations for its systems and suggested

that it report information security as a material weakness until its

mission-critical systems are fully certified and accredited.

(USPTO has no systems designated as national critical.) The

agency did so in its FY 2002 Performance & Accountability

Report and set a goal of certifying and accrediting all high-risk

systems by the end of FY 2003. The agency subsequently revised

its system inventory by consolidating more than 100 systems into

193

—9 mission critical and the remainder business essential. It

planned to have its 9 mission-critical systems and 1 classified

system certified and accredited by the end of FY 2003. By the

end of the fiscal year, all 10 systems had undergone certification

testing; 9 had been granted 120-day interim accreditations and 1

had received final accreditation. 

Because of the security weaknesses identified by the certification

process and the lack of final accreditations, however, we believe

USPTO should continue to report information security as a

material weakness for FY 2003 (see page 37). 

CHALLENGE 2

EFFECTIVELY MANAGE

DEPARTMENTAL AND BUREAU

ACQUISITION PROCESSES

Federal acquisition legislation in the 1990s mandated sweeping

changes in the way federal agencies buy goods and services. The

intent was to reduce the time and money spent on purchasing and

to improve the efficiency of the process. Commerce now must

focus on effectively managing the acquisition processes those

initiatives fostered—balancing the desire to streamline the 

process with the need to ensure that taxpayer dollars are wisely

spent and laws and regulations followed. 

Streamlined processes must not come at the expense of basic

acquisition principles: careful planning, promotion of

competition, prudent review of competitive bids, adept contract

negotiations, well-structured contracts, and effective contract

management and oversight. Moreover, the Department’s

increasing reliance on contractors to provide services makes

following basic acquisition principles essential. Problems we have

identified with service contracting in the past include failure to use

performance-based task orders where they would be beneficial;

inadequate training in the use of performance-based service

contracting; insufficient planning for contract administration and

monitoring; and the need to ensure that adequate security

provisions are included and enforced in IT service contracts (see

page 37 for a discussion of this last concern).

The Department agrees that acquisition planning and

management need greater emphasis. It notes that efforts by its

Office of Acquisition Management (OAM) to improve

procurement management include (1) establishing an

acquisitions review board to oversee all major acquisitions; (2)

evaluating Commerce’s delegation and warrant program, with the

goal of realigning contracting authorities to increase overall

effectiveness and accountability; (3) revising the contracting

officer’s technical representative (COTR) certification program

to improve accountability and training; and (4) assessing these

initiatives to determine their effectiveness. We have not evaluated

the effectiveness of these actions, however.

The need for increased attention to basic acquisition principles—

and for continued improvements and oversight—are highlighted

by our recent findings discussed below.

SELECTED ACQUISITION PROGRAMS

AND CONTRACTS 

In response to a congressional inquiry, we reviewed a major

modification to a NOAA/National Weather Service (NWS)

contract for a transition power source (TPS) for the NEXRAD

weather radar (see page 25). We found that the modification was

executed without adequate negotiation or appropriate review and

oversight of the contract, its management, or technical issues by

NOAA’s Acquisition and Grants Office and NWS, and that NWS

paid for defective equipment. These deficiencies resulted in an

estimated increase in contract costs of $4.5 million and purchase

of a product that may not be the best choice for NEXRAD. 

Our review of a NIST contract using simplified acquisition

procedures for evaluating and soliciting commercial items

revealed weaknesses in the procurement process. Among them,

an error in citing the relevant procurement law caused some

September 2003/Semiannual Report to Congress 5

Major Challenges for the Department

3 After our report was published, USPTO further revised its system

inventory, reducing the number of systems to 18.
confusion and, if applied, could have resulted in unfair penalties

being assessed to certain offers. Also, an incomplete explanation

in the combined solicitation document denied offerors full

information about the rules governing the procurement. In

response to our review, NIST officials agreed to improve their

internal quality assurance program, develop supplemental policy

and guidance, and provide training to their acquisition workforce

(see page 32).

PURCHASE CARD PROGRAM 

In response to increased scrutiny from this office, Congress, and

OMB, and in light of Commerce’s increasing use of purchase

cards, the Office of Acquisition Management is implementing a

purchase card improvement plan that includes mandatory

refresher training for all cardholders and approving officials.

Under the auspices of the Chief Financial Officer and Assistant

Secretary for Administration, an intradepartmental, crossfunctional team was formed to evaluate options to further

strengthen the Department’s purchase, travel, and fleet card

programs. In addition, OAM, along with other agencies and

industry, developed the Seven Steps to Performance-Based

Service Acquisition guide. Similarly, the President’s Council on

Integrity and Efficiency published A Practical Guide for

Reviewing Government Purchase Card Programs (see September

2002 Semiannual Report, page 59) to ensure the integrity and

prudent use of the purchase card by federal cardholders. 

During this semiannual period we issued our final audit report on

the purchase card program at NOAA’s Environmental

Technology Laboratory, in Boulder, Colorado (see page 29).

While we noted a number of weaknesses in internal controls and

instances of noncompliance with the Commerce Acquisition

Manual, we found no fraud or material misuse. Many of the

internal control weaknesses identified in this review were

previously reported (see March 2000 Semiannual Report, page

60), but had remained unresolved. NOAA agreed with our

recommendations and described actions planned or taken to

implement them. 

MAJOR CONSTRUCTION AND

RENOVATION PROJECTS

Effective management of contracts for construction and/or

renovation of Commerce facilities is a critical challenge for the

Department because of the numerous inherent risks involved in

planning and managing contracts for large, costly, and complex

capital improvement and construction projects. Departmental

leadership and OIG oversight are needed to maximize

Commerce’s return on its investment in these projects. Detecting

and addressing potential problems during the developmental

stages rather than after a project is begun or completed saves time

and money. For this reason, we continue to actively monitor the

progress of the Department’s current and planned contracts for

construction projects.

As part of that effort, we are currently reviewing USPTO’s

progress on the construction of its new headquarters complex

in northern Virginia (see Challenge 3, page 8). In addition to

USPTO’s buildings, the Department has plans for numerous

major4 renovation and construction projects: 

■ NOAA has 20 projects scheduled or in process including

a Marine and Environmental Health Research Laboratory

in South Carolina, a Center for Weather and Climate

Prediction in College Park, Maryland, and a satellite

operations facility in Suitland, Maryland.

■ The National Institute of Standards and Technology

(NIST) will continue its multimillion-dollar program to

upgrade existing laboratories in Gaithersburg, Maryland,

6

Major Challenges for the Department

U.S. Department of Commerce/Office of Inspector General

4 According to the U.S. Department of Commerce’s Office of Real Estate

Policy and Major Programs, “major” projects are those costing $2.3

million or more.
September 2003/Semiannual Report to Congress 7

Major Challenges for the Department

Construction of NIST’s Advance Measurement Laboratory, as of September 2003, is shown in the photo above. The artist’s rendition

shows what the mostly underground facility will look like on completion.

Source: NIST’s Advanced Measurement Laboratory web site (http://aml.nist.gov/), accessed November 2003.
and Boulder, Colorado, and to complete construction of

the Advanced Measurement Laboratory building in

Gaithersburg and a central utilities plant in Boulder.

NIST also plans to install a perimeter security fence at

the Boulder site.

■ Two buildings will be constructed for Census at its

Suitland, Maryland, headquarters.

■ Commerce is planning to modernize its headquarters, the

Herbert C. Hoover Building in Washington, D.C. A

Renovation Program Office has been established to plan

and monitor this project. 

CHALLENGE 3

SUCCESSFULLY OPERATE THE U.S.

PATENT AND TRADEMARK OFFICE

AS A PERFORMANCE-BASED

ORGANIZATION

As a performance-based organization,5 USPTO has not only

expanded control over its budget allocations and expenditures,

personnel decisions and processes, procurement, and information

technology operations, it also has broader responsibility for

managing its operations more like a business. 

In response to concerns of its stakeholders USPTO, in June

2002, issued its 5-year, 21st Century Strategic Plan. The plan

was intended to help the agency overcome the challenges

accompanying its transition to performance-based operations—

successfully develop necessary personnel policies; establish

procurement and administrative policies as well as performanceoriented processes and standards for evaluating costeffectiveness; and, simultaneously, meet its performance goals

under the Government Performance and Results Act (GPRA) in

addition to the timeliness standards of the American Inventors

Protection Act.

In February 2003 USPTO revised this plan. According to the

agency, it is now more aggressive and far-reaching and provides

a roadmap for major changes in patent and trademark processes,

including steps to (1) move to a paperless environment and

promote e-government, (2) enhance employee development, (3)

explore competitive sourcing, and (4) improve and maintain

quality assurance. The plan also calls for the agency to work with

worldwide intellectual property offices to create a global

framework for enforcing intellectual property rights.

Our office is currently auditing USPTO’s trademark application

process as well as its efforts to reduce trademark application

pendencies. We are also performing an evaluation of patent

examiner production goals, awards, and performance appraisal

plans to determine whether they maximize production and reduce

patent pendency. We recently completed a review to follow up on

complaints regarding patent processing (see page 36). 

As part of our effort to monitor USPTO operations, we are

currently reviewing progress on the construction of the agency’s

new headquarters complex in Alexandria, Virginia. Construction of

USPTO’s state-of-the-art office complex is one of the federal

government’s largest real estate ventures. When completed in

2005, the five-building complex will consolidate the majority of

the USPTO employees and contractors currently scattered among

18 buildings in Crystal City, Virginia. With construction well under

way, USPTO must monitor progress to help ensure the project

stays on schedule and to carefully implement the relocation of its

facilities to minimize costs and adverse effects on operations,

employees, patent and trademark applicants, and the public. We are

conducting a follow-up review of USPTO’s management of this

project, looking at construction costs as well as issues we identified

during the project’s planning and design phases, such as space

planning and allocation, relocation strategies, and actual versus

target costs and completion schedules.

We view the successful operation of USPTO as a performancebased organization as being critical to its success and ability to

address other challenges we have identified in recent years. 

CHALLENGE 4

CONTROL THE COST AND

IMPROVE THE ACCURACY OF

CENSUS 2010

Few Commerce activities have more ambitious goals, higher

costs, or more intensive resource requirements than the

constitutionally mandated decennial census. And few are

therefore more deserving of the scrutiny of this office. 

This decade marks the third in the tenure of the Commerce Office

of Inspector General in which we will closely monitor and

evaluate the Census Bureau’s plans and preparations for

conducting its decennial population count. Our goal, as always, is

to support and enhance its readiness by identifying problems

early on, offering solutions, and informing the decision-making

process at all levels—bureau, departmental, and congressional. 

With each decade, the decennial becomes more costly, complex,

and challenging. Over the course of the three that this office has

8

Major Challenges for the Department

U.S. Department of Commerce/Office of Inspector General

5 The American Inventors Protection Act of 1999 established the U.S.

Patent and Trademark Office as a performance-based organization, giving

it greater flexibility and independence to operate more like a business.
monitored, for example, costs of $1 billion in 1980 rose to $2.6

billion in 1990, and to $6.5 billion in 2000. For 2010, Census

estimates the cost will be between $10 and $12 billion.

Much has changed in the methods and technologies for

decennial census taking during our watch, and the population

has grown and diversified dramatically. But the primary

weaknesses we have noted have remained the same and are at

least partially responsible for the ever-increasing decennial

expenditures: insufficient planning and upfront funding for an

operation that by its very nature requires long-term vision and

development and ongoing testing at key points along the way.

We advised the Department of these weaknesses as we

monitored the decennial process, recommending in 1984 that

planning for the 1990 census be reported as a major internal

control weakness until the Census Bureau formulated a master

plan that addressed cost containment and systems life-cycle

development (see March 1985 Semiannual Report to Congress,

page 18). In 1991 we urged the Department to seek sufficient

funding for fiscal years 1992 through 1996 to support early

planning for Census 2000 (see March 1991 Semiannual Report

to Congress, page 8). However, the bulk of funding and a final

decision on the design did not come until 1999. To contain costs,

the Department originally proposed sending enumerators to

only a sample of households that did not return census forms.

This proposal was ultimately disallowed by the Supreme Court

in January 1999. Surprisingly, given the controversy

surrounding the use of sampling, the bureau had done little

contingency planning and thus needed a huge infusion of

resources to make it possible to visit 50 percent more

nonresponding households than originally anticipated and to

process this additional data. Numerous operational and accuracy

September 2003/Semiannual Report to Congress 9

Major Challenges for the Department

OIG RECOMMENDATIONS FOR IMPROVING THE DECENNIAL CENSUS

1. Reach early consensus on the 2010 design to facilitate effective planning and obtain sufficient funding. Delays

in finalizing the Census 2000 design and obtaining needed funding left insufficient planning, developing, and

testing time for many key components. 

2. Produce accurate, complete address lists and maps. The bureau's master address file (MAF) and associated

mapping system (Topologically Integrated Geographic Encoding and Referencing, or TIGER) contained a

higher-than-acceptable level of unreliability, which meant too many forms and too many enumerators could not

reach the intended households. 

3. Conduct a carefully targeted and aggressive public awareness campaign. The bureau's efforts to increase public

awareness of and participation in Census 2000 were successful, enabling the bureau to achieve a response rate

of 67 percent—6 percentage points beyond the projected rate of 61 percent. Census needs to further refine its

public outreach program to achieve even higher rates in 2010.

4. Strengthen quality control of nonresponse follow-up. Instances of falsified and questionable data in Census

2000 required costly reenumeration and undermined confidence in the overall census results.

5. Implement clear policies and guidance for managing temporary staff. The logistics of hiring, training, and

supervising nearly 1 million temporary workers requires strong management policies and procedures.

6. Determine whether sampling has a role beyond measuring coverage. Sampling has been a contentious issue in

the past two decennials, and initial plans to use it to improve coverage were ultimately overruled. 

7. Implement rigorous system and software development processes and effective information security measures.

The bureau's approach to systems and software development for Census 2000 provided inadequate controls,

insufficient testing, and poor or no documentation, all of which led to inefficiency and disruptive errors.

8. Upgrade and maintain contracting and program management expertise. The bureau lacked adequate in-house

management skills to oversee decennial contracts and contractor-operated programs. 

9. Generate timely and accurate management and operational information. The bureau lacked procedures for

evaluating operations and thus failed to identify improprieties in a timely manner. Nor did it have expeditious

methods for collecting and disseminating information to stakeholders.

10. Mitigate potential disruptions and distractions to the work environment and workforce. The bureau must have

plans to counter the potentially negative impacts of two major events: the possible retirement of roughly half of

the bureau's decennial staff during this decade, and the anticipated move to new facilities in 2008—the year of

the dress rehearsal for Census 2010.

Source: Improving Our Measure of America: What Census 2000 Can Teach Us in Planning for 2010. U.S. Department of

Commerce Office of Inspector General. Report No. OIG-14431, Spring 2002.
issues reported during Census 2000 were a direct result of these

late-stage events.

The Census Bureau has committed to making 2010 different and

has already begun working toward that end. In September 2002 it

adopted a reengineered framework for 2010, proposing to collect

and tabulate long-form data throughout the decade via the

American Community Survey; enhance and improve address lists

and geographic information databases; and institute a program of

early planning, development, and testing (see Census Milestones

schedule below) for a short-form-only census. The bureau

believes these redesigned processes will improve the relevance

and timeliness of long-form data; reduce operational risk; improve

the accuracy of census data; and contain costs. The three-pronged

strategy is aggressive and intended to capitalize on the latest

technology, such as hand-held global positioning system devices

and the Internet. 

Our work assessing the bureau’s efforts to achieve its

reengineering goals is under way, against the backdrop of our

recommendations for improving the 2010 decennial in light of

the Census 2000 experience (see OIG Recommendations, page 9)

and in consideration of the concerns of Congress, the General

Accounting Office, the National Academy of Sciences, and other

oversight organizations. 

During this semiannual period we assessed the bureau’s progress

in modernizing its MAF/TIGER processing system (see page 19).

The successful redesign of this system is crucial to improving

Census 2010 operations, and must be ready to support the

decennial dress rehearsal in 2008. We are concerned that the

bureau’s late start in establishing a strong project management

structure and its lack of a plan for accelerating its software

improvement process may delay completion of the new system,

preventing it from being thoroughly tested before the dress

rehearsal. We will continue to closely monitor this and other

aspects of systems and software acquisition and development

throughout the decade, as well as the bureau’s actions to

ameliorate any problems we identify.

We also concluded work related to the 2000 census that is

instructive for 2010, in that it again underscores the need for

vigilant management oversight of census operations in order to

contain costs. Prompted by information from the General

Services Administration (GSA), we audited the bureau’s use of

and payments for airfreight services to deliver census materials in

the field. We identified a failure to follow proper procedures for

monitoring and approving charges. As a result, the bureau

overpaid some $2 million for these services during an 11-month

period (see page 20). 

Our focus will intensify in subsequent semiannual periods as the

bureau’s plans and preparations continue to unfold; and we have

set a broad agenda for review that will cover such areas as the

following: 

■ completeness of the plan for the 2010 census as well as

the coordination and integration of its elements; 

■ systems/software acquisition, development, testing

and security;

■ correction of address and map information;

■ field tests in 2004 and 2006;

■ planning for incorporation of the American

Community Survey;

■ approach to measuring data quality;

■ conduct of the 2008 dress rehearsal;

■ impact of construction and occupancy of Census’ new

headquarters on decennial scheduling; and

■ implementation of decennial operations beginning

in 2009.

We will report on the bureau’s progress in these areas as its work

proceeds through the decade. 

CHALLENGE 5

INCREASE THE EFFECTIVENESS OF

MARINE RESOURCE

MANAGEMENT

The National Marine Fisheries Service (NMFS) must balance

two competing interests: (1) promote commercial and

recreational fishing as vital elements of our national economy

and (2) preserve populations of fish and other marine life. Eight

10

Major Challenges for the Department

U.S. Department of Commerce/Office of Inspector General

CENSUS 2010 MAJOR MILESTONES

2002 Begin planning and develop method for 2004 test

2004 Conduct census test (methodology)

2005 Analyze results and refine methodology

2006 Conduct census test (systems integration)

2007 Analyze results, refine/integrate systems/methods

2008 Conduct dress rehearsal

2009 Begin to implement operations

2010 Conduct census

Source: Census Briefing to the National Academy of

Sciences, September 2002.
regional fishery management councils, along with NMFS, are

responsible for developing plans for governing domestic fisheries

in federal waters. Their combined goal is to prevent overfishing,

rebuild overfished stocks, and protect, restore, and promote the

long-term health and stability of U.S. fisheries. 

Developing conservation and management measures requires

collecting, analyzing, and reporting demographic information

about fish populations via stock assessments. These reports are a

key element of the fishery management process; they are used to

determine whether additional regulations are necessary to rebuild

fish stocks or whether greater fishing opportunities can be

allowed. Because of their potential impact on commercial and

recreational fishing, these assessments are often controversial,

and the methods used to create the estimates typically undergo

intense scrutiny by fishers and conservation groups. 

During this semiannual period we reviewed data collection

processes and equipment an NMFS science center used to survey

New England groundfish, specifically addressing concerns about

the calibration of sample-collection equipment (see page 30). 

In addition, OIG recently evaluated the enforceability of fishing

regulations and the enforcement methods used by NMFS’ Office

for Law Enforcement (OLE) and found many of the regulations

are too complex and lack sufficient clarity for viable

enforcement. We also found that NMFS’ joint enforcement

initiative with coastal states and territories is beneficial in

supplementing federal enforcement efforts (see March 2003

Semiannual Report, page 25). 

We are currently reviewing NMFS’ observer program. Observers

deployed on U.S. commercial fishing vessels collect catch

statistics, monitor bycatch and protected species interactions, and

perform biological sampling to obtain information for use by

NMFS as well as industry and academic researchers. Their

reported data is used to supplement research and aid in the

management of living resources. We are reviewing how NMFS

ensures data quality, and whether the data is meeting research and

fishery management needs. We expect to report our findings in

the next issue. 

CHALLENGE 6

INCREASE FAIR COMPETITION IN

INTERNATIONAL TRADE 

To compete effectively in today’s global marketplace, many U.S.

companies need help identifying and taking advantage of new or

expanded export market opportunities as well as addressing

unfair trade practices, trade disputes with foreign firms,

noncompliance with or violations of trade agreements,

inadequate intellectual property protection, and other

impediments to fair trade. Commerce must ensure that its export

promotion assistance and trade compliance and market access

efforts adequately serve U.S. exporters, and that its import

assistance helps eliminate unfair competition from imports priced

at less than fair market value or subsidized by foreign

governments.

To help meet the challenges in highly competitive world markets,

Commerce and its International Trade Administration (ITA) work

with the Office of the U.S. Trade Representative, the

Departments of State and Agriculture, and numerous other

federal agencies to monitor and enforce trade agreements. The

number and complexity of those agreements have increased

substantially in recent years, and the Secretary of Commerce has

made monitoring and enforcing trade agreements a top priority

for ITA and the Department as a whole. Commerce received

additional funding for trade compliance activities in FY 2001 and

redirected other resources so that it could place additional

officers at select overseas posts and in Washington to specifically

monitor market access and compliance issues. A recent OIG audit

found that with the increased funding, ITA’s Market Access and

Compliance unit was able to effectively recruit and hire sufficient

staff for critical trade and compliance positions (see March 2003

Semiannual Report, page 20). 

Commerce has numerous mechanisms to monitor and help

enforce U.S. trade agreements and review trade complaints from

a variety of sources. When warranted, its Trade Compliance

Center forms a compliance team to follow up on complaints and

bring them to satisfactory conclusion, although we found that the

center needs to improve its coordination within ITA. (See page 50

of our March 2002 Semiannual Report to Congress for an

inspection report on the Trade Compliance Center.) In addition,

ITA’s overseas U.S. & Foreign Commercial Service (US&FCS)

offices and other operating units perform a substantial amount of

market access and trade compliance work. Overall ITA’s

approach to trade compliance and market access is to engage the

issue at the working level wherever possible—avoiding formal

dispute settlement structures such as the World Trade

Organization, which can take years to resolve trade

disagreements. The Department also pursues important policy

issues—including intellectual property rights protection,

standards development, trading rights, and distribution

services—in government-to-government negotiations. For

example, the Secretary and ITA officials recently met with senior

Chinese officials to press for full implementation of trade

agreements, market access, and a level playing field for U.S.

products and services.

Commerce’s extensive network of overseas US&FCS offices and

domestic Export Assistance Centers also identifies specific

export market opportunities or trade leads for U.S. companies,

September 2003/Semiannual Report to Congress 11

Major Challenges for the Department
especially small and medium-size firms that are new to exporting

or looking to expand their overseas markets. During this

semiannual period, we reviewed the operations of the US&FCS

office in Greece to assess its effectiveness in assisting U.S.

companies increase sales in the Greek market (see page 22). This

review was similar to one we recently completed in Turkey (see

March 2003, page 19), but the review in Greece was specifically

requested by the U.S. ambassador to that country who had

concerns about the adequacy of management controls in place.

We also are currently reviewing US&FCS’ domestic network of

U.S. Export Assistance Centers.

We will continue our oversight of the Department’s promotion of

U.S. exports and also look at Commerce’s administration of the

antidumping and countervailing duty regulations and other

efforts to track, detect, and combat unfair competition to U.S.

industry in domestic markets. 

CHALLENGE 7

ENHANCE EXPORT CONTROLS

FOR DUAL-USE COMMODITIES

The effectiveness of export controls is an ongoing issue.

Advancing U.S. national and economic security interests

through export controls is a significant challenge for the parties

involved, particularly for Commerce’s Bureau of Industry and

Security, which oversees the federal government’s export

licensing and enforcement system for dual-use commodities

(goods and technologies that have both civilian and military

uses). Strengthening dual-use export licensing and enforcement

requires new, comprehensive legislative authority to replace the

expired Export Administration Act of 1979 and appropriately

address current export control needs and realities. Passed during

the Cold War, the act sought to prevent the export of critical

goods and technologies to Communist bloc countries. In today’s

political climate, hostile countries and terrorist groups seeking

weapons of mass destruction and the systems to deliver them

pose new threats to global security and U.S. foreign policy goals.

Legislation is needed to address these threats as well as to

bolster BIS’ regulatory authority, strengthen penalties for

violations, and demonstrate America’s commitment to

maintaining strong export controls while encouraging other

countries to do the same.

Given the importance of export controls to national security, we

have devoted considerable attention to the challenges facing

BIS. The National Defense Authorization Act (NDAA) for

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

the Departments of Commerce, Defense, Energy, and State, in

consultation with the directors of the Central Intelligence

Agency and the Federal Bureau of Investigation, to report to

Congress by March 30, 2000, and annually until the year 2007,

on the adequacy of export controls and counterintelligence

measures to prevent the acquisition of sensitive U.S. technology

and technical information by countries and entities of concern.

In addition, NDAA for FY 2001 requires the IGs to discuss in

their annual interagency report the status or disposition of

recommendations made in earlier reports submitted in

accordance with the act. To date, we have completed four

reviews of export controls in compliance with the act as well as

three separate follow-up reports. Together with the other IGs, we

have also issued four interagency reports on export controls for

dual-use items and munitions.

CURRENT REVIEW OF

DEEMED-EXPORT CONTROLS

To comply with NDAA’s 2004 requirement, the IGs6 agreed to

conduct an interagency review to assess whether the current

deemed-export control laws and regulations7 adequately protect

against the illegal transfer of controlled U.S. technologies and

technical information by foreign nationals to countries and

entities of concern. Our efforts will focus on the effectiveness of

the dual-use, deemed-export regulations and policies, including

their implementation by BIS, and on compliance with the

regulations by U.S. industry (particularly federal contractors) and

academic institutions. We will also follow up on prior OIG

findings and recommendations from our March 2000 report,

Improvements Are Needed in Programs Designed to Protect

Against the Transfer of Sensitive Technologies to Countries of

Concern (IPE-12454-1), as appropriate. 

FOCUSED PRIORITIES

An important element needed to enhance export controls remains

enactment of a new Export Administration Act, while BIS, the

administration, and Congress (1) work to target federal licensing

and enforcement efforts on exports that present the greatest

proliferation and national security risks and (2) streamline or

eliminate controls that unnecessarily hamper trade and do not

augment national security or foreign policy concerns. We will

continue to monitor BIS’ efforts to improve dual-use export

12

Major Challenges for the Department

U.S. Department of Commerce/Office of Inspector General

6 This year’s review includes the participation of the Department of

Homeland Security’s OIG.

7 According to the Export Administration Regulations, any release to a

foreign national of technology or software subject to the regulations is

deemed to be an export to the home country of the foreign national

(unless the foreign national is a U.S. permanent resident). These exports

are commonly referred to as “deemed exports,” and may involve the

transfer of sensitive technology to foreign visitors or workers at U.S.

research laboratories and private companies.
controls through the annual reviews required by the National

Defense Authorization Act.

CHALLENGE 8

ENHANCE EMERGENCY

PREPAREDNESS, SAFETY, AND

SECURITY OF COMMERCE

FACILITIES AND PERSONNEL

Since our March 2002 report on the status of emergency

preparedness and security programs at a cross-section of

Commerce facilities in the Washington, D.C., area and across the

nation, the Department has made significant improvements,

although more needs to be done. Heightened security requires a

variety of measures: infrastructure risk assessments, emergency

backup sites, upgraded physical security, and employee

awareness and training, to name a few. With this complexity of

measures, Commerce will have to regularly revisit its procedures

for ensuring the safety and security of its employees and

operations, and modify them as needed. 

In its efforts to enhance security, thus far this year Commerce

reportedly

■ increased in-house security expertise to allow for close

coordination with the Department of Homeland Security,

the FBI’s Joint Terrorism Task Force, and various

intelligence agencies;

■ created an emergency operations center—a central

location for receiving critical information from other

emergency centers and coordinating necessary responses

during and after an emergency event;

■ completed some continuity of operation plan (COOP)

exercises to help improve communication and operations

capabilities; and

■ modified occupant emergency plans (OEP) to

incorporate shelter-in-place guidance, revised procedures

addressing special-needs individuals, and conducted

periodic tests and assessments of emergency

preparedness capabilities and related systems.

Given the size of its workforce and the geographical spread of its

481 facilities nationwide and more than 150 locations overseas,

complying with recent security-related guidance is a complex,

resource-intensive undertaking for Commerce. In recent

inspections of overseas posts operated by the U.S. and Foreign

Commercial Service, we identified the need for more timely

security upgrades, improved oversight of security operations, and

better management of resources. We believe Commerce is

making progress on many of these fronts, but the challenge is

massive. We will continue to monitor its efforts and report our

findings accordingly. 

CHALLENGE 9

STRENGTHEN FINANCIAL

MANAGEMENT CONTROLS

AND SYSTEMS

The Chief Financial Officers Act of 1990, the Government

Performance and Results Act of 1993, the Government

Management Reform Act of 1994, and the Federal Financial

Management Improvement Act of 1996 require that agencies

prepare information needed by Congress, agency executives, and

the public to assess the management of federal programs and

operations. An entity’s financial position and results of

operations, presented in findings of audits of the agency’s

financial statements, help determine whether an agency’s

financial management systems comply with federal

requirements.

The Department as a whole has made substantial improvements

in financial management; however, maintaining a clean audit

opinion remains a major challenge, especially under the

accelerated financial reporting dates mandated by the Office of

Management and Budget (OMB). On its FY 2002 consolidated

financial statements, the nonfederal auditors gave the

Department an unqualified (clean) opinion—the fourth

consecutive year for this accomplishment despite continuing

obstacles including the absence of a single, integrated financial

management system. Although the Department resolved most of

the financial management and reporting weaknesses noted in the

previous year’s audit, the audit of the Department’s FY 2002

statements identified two reportable conditions (one of which is

considered a material weakness8

) and several instances of

noncompliance with laws and regulations, all of which are repeat

findings (see March 2003 Semiannual Report to Congress, page

34). We retained an independent certified public accounting firm

to audit the Department’s consolidated financial statements for

FY 2003 and review the adequacy of information technology

security controls over financial systems. Their results will be

presented in our March 2004 Semiannual Report to Congress. 

The Department has made significant progress in implementing

September 2003/Semiannual Report to Congress 13

Major Challenges for the Department

8 Material weaknesses are serious flaws in the design or operation of an

internal control component that increase the risk that errors, fraud, or

noncompliance in material amounts may occur and not be readily

detected.
the Commerce Administrative Management System (CAMS).9

The Bureau of the Census and NOAA use CAMS as their

financial system of record. When fully deployed in 2003 CAMS

will be the single system of record for Census, NIST, NOAA,

and 10 of the Department’s operating units whose accounting

functions are handled by either NIST or NOAA. NOAA services

the Bureau of Industry and Security. NIST services the

Bureau of Economic Analysis (BEA), Economic Development

Administration (EDA), Economics and Statistics Administration

(ESA), Minority Business Development Agency (MBDA),

National Telecommunications and Information Administration

(NTIA), Technology Administration (TA), Office of the

Secretary, Office of Computer Services (OCS), and Office of

Inspector General. 

Three of the Department’s operating units will not use CAMS—

International Trade Administration, U.S. Patent and Trademark

Office, and National Technical Information Service. These will

submit data, along with other units, into a Commerce-wide database

that serves as the source for the Department’s consolidated financial

reports. The Department expects that CAMS, in conjunction with

the database, will bring Commerce into compliance with federal

financial systems requirements, including that for a single,

integrated financial management system. 

CHALLENGE 10

CONTINUE TO IMPROVE THE

DEPARTMENT’S STRATEGIC

PLANNING AND PERFORMANCE

MEASUREMENT IN ACCORDANCE

WITH THE GOVERNMENT

PERFORMANCE AND

RESULTS ACT

Congress and agency managers require relevant performance

measures and credible performance data to effectively fulfill their

oversight responsibilities with respect to federal programs. The

Government Performance and Results Act of 1993 was designed

to ensure the availability of such data by mandating that agencies

set goals for program performance and report outcomes

measured against those goals. As the government moves toward

integrating budget and performance information and using

performance data to make funding decisions, the validity of

reported performance results will be increasingly important. 

Although we believe the Department has made progress toward

meeting the challenge of measuring its performance, significant

opportunities for improvement remain for meeting GPRA and

other reporting requirements. One such opportunity concerns

data quality: Commerce should more clearly articulate the level

of reliability that can be placed on the performance data it

provides in its annual Performance & Accountability Report.

Another opportunity for improvement involves performance

measures: our audits of several such measures used by

departmental units over the past few years have identified the

need for stronger internal controls to ensure accurate reporting

of performance data and improved explanations and disclosures

of results. For example, procedures should be established to

ensure that (1) reported information is reconciled against

supporting data and (2) only appropriate data is included in

performance results.

These issues again emerged in our recent audit of selected

performance measures at NOAA (see page 28). We are concerned

that—for the measures we evaluated—NOAA needs to (1)

improve internal controls, (2) restate data that was incorrectly

reported in the past, (3) provide additional performance measures

to more clearly articulate results, (4) provide additional

disclosures and explanations of performance results, and (5)

assess the value of certain measures to determine whether they

should be revised or dropped. 

We will continue to evaluate performance measurement and

reporting at NOAA and other bureaus and, as warranted, make

recommendations to the Department and its operating units

regarding the accuracy, appropriateness, reliability, and

usefulness of accumulated performance data.

14

Major Challenges for the Department

U.S. Department of Commerce/Office of Inspector General

9 CAMS is a software package based on a commercial off-the-shelf

accounting system application that was extensively modified and

substantially augmented with capabilities to support both departmental

accounting and financial management needs as well as individual

Commerce unit requirements.
September 2003/Semiannual Report to Congress 15

Department of Commerce

Organization Chart
SOME ADMINISTRATIVE FINE-TUNING WOULD

ENHANCE OPERATIONS AT OFFICE OF

EXPORT ENFORCEMENT

Our review of export enforcement activities at the Bureau of Industry and Security

(BIS), detailed in our March 2003 Semiannual Report to Congress (page 12),

uncovered a number of administrative issues at the bureau’s Office of Export

Enforcement (OEE) that, while outside the scope of our evaluation, are

nonetheless important to the bureau’s sound and efficient functioning. We

therefore detailed these matters, as follows, in a separate report to BIS’

Under Secretary.

Confidential Funds. These funds, available to pay for informant

information, are rarely used for this purpose by the OEE field offices we

visited. However, they are used for a variety of undercover activities

that are not specifically delineated as either permissible or

impermissible in the authorizing guidance—OEE’s Special Agent

Manual. We believe BIS should issue clearer guidance on the

appropriate use and handling of confidential funds.

Vehicle Inventories. Field offices are supposed to have one leased

vehicle per agent. They are not permitted to lease vehicles for

prospective employees and must relinquish vehicles for a vacated

position that is not filled within 2 months. However, we found that OEE

field offices had surplus vehicles, representing excess leasing

expenditures of at least $106,908 for fiscal years 2000-2002. 

Building Security. Each field office differed in its physical security

measures, and lacked certain safeguards that we believe to be essential. 

Office Locations. BIS did not have a clear, mission-related rationale for its

choice of locations for OEE’s eight field offices, but has developed such criteria

to support proposals for new sites—degree of risk for export violations and dollar

volume of exports passing through the area. To ascertain whether existing field

locations are the most appropriate for accomplishing BIS’ enforcement mission, the

bureau should evaluate these sites against the same criteria. (Office of Inspections and

Program Evaluations: IPE-15155-2)

16 U.S. Department of Commerce/Office of Inspector General

BUREAU OF INDUSTRY

AND SECURITY

The

Bureau of

Industry and

Security is primarily responsible

for administering and enforcing the

nation’s system for controlling exports

of sensitive dual-use goods and

technologies. BIS’ major functions include

formulating and implementing export control

policy; processing export license applications;

conducting various policy, technical, and

economic analyses; promulgating regulations;

conducting industry outreach; and enforcing the

Export Administration Act and regulations. BIS’

activities also include promoting federal initiatives and

public-private partnerships across industry sectors to

protect the nation’s critical infrastructures. BIS is

divided into two units: 

Export Administration implements U.S. export control

and nonproliferation laws and policies through export

licensing, commodity classifications, and advisory

opinions; technical, economic, foreign availability, and

policy analyses; promulgation of regulations; and

industry outreach. It also conducts various defense

industry activities and enforces industry compliance

with arms control treaties.

Export Enforcement participates in reviews of

export license applications and conducts

criminal and administrative investigations

relating to the export control portions of

the Export Administration Act and

regulations. It also administers and

enforces the antiboycott

provisions of the act and

regulations.
REVOLVING LOAN FUNDS 

EDA’s Economic Adjustment Program provides, among other things, grants to capitalize revolving

loan funds (RLFs). Currently more than 600 RLFs are operating throughout the country, with a

total capital base of about $1 billion. This includes EDA’s share of the initial investment and

matching funds contributed by state and local governments, nonprofit organizations, and

other eligible recipients that operate RLFs. The program focuses on communities and

regions that have experienced or are threatened by serious structural damage to their

underlying economic base. The purpose of an RLF is to leverage other public and

private investment in key sectors of the local economy and to stimulate

employment for the local workforce. RLFs offer loans to local businesses that

otherwise cannot secure sufficient private financing, providing a continuous

infusion of economic development funds into the affected community. 

Because RLFs manage cash and other liquid assets, they are particularly

susceptible to fraud, waste, and abuse if not adequately managed and

monitored. Recognizing the sizable federal investment in these funds, we

have worked cooperatively with EDA over the past 2 years to identify highrisk investments and have conducted a series of RLF audits targeting

projects on the basis of a variety of factors that typically suggest heightened

vulnerability. Such factors include minimal use of grant funds, large

uncommitted cash balances, and lack of single audit coverage. Our audits

have identified several recurring issues, the most serious of which are

■ unneeded funds from recapitalization grants,

■ excessive cash reserves,

■ inappropriate loans,

■ inadequate accounting for RLF assets (cash and loans), and

■ inadequate audit coverage.

Based on findings in individual audits, we have made recommendations, as

appropriate, to recoup unused grant funds, remedy fiscal and administrative

deficiencies, and ensure compliance with applicable laws and program requirements. In

all cases, EDA has required grant recipients to take prompt corrective action. 

Summarized below are the results of the two RLF audits we conducted this semiannual period,

which include recommendations that more than $2.4 million of revolving loan funds be put to better

use. EDA is reviewing the audit findings and recommendations to develop corrective action plans.

VIRGINIA RLF HAS ALMOST $1.5 MILLION IN EXCESS CASH RESERVES 

In September 1980 EDA awarded a $500,000 Long-Term Economic Deterioration Implementation grant to a Virginia district

commission to capitalize a revolving loan fund. The grant required 25 percent in matching funds. Three subsequent grant amendments

brought the RLF’s total capitalization to $1,625,002 consisting of $1,250,000 in EDA funds and $375,002 of local funds. The RLF

was to be used to stimulate economic diversification and create permanent employment in three counties in south central Virginia. 

The

Economic

Development

Administration was

established by the Public Works

and Economic Development Act of

1965 to generate new jobs, help

retain existing jobs, and stimulate

commercial and industrial growth in

economically distressed areas of the United

States. EDA continues to fulfill this mission

under the authority of the Economic

Development Administration Reform Act of

1998, which introduced the concept of

Comprehensive Economic Development

Strategies, a local planning process designed to

guide the economic growth of an area. Based on

these locally and regionally developed strategies,

EDA works in partnership with state and local

governments, regional economic development

districts, public and private nonprofit

organizations, and Indian tribes to help distressed

communities address problems associated with

long-term economic deterioration and recent,

severe economic dislocations, including

recovery from the economic impact of natural

disasters, the closure of military installations

and other federal facilities, changes in trade

patterns, and the depletion of natural

resources. EDA provides eligible

recipients with technical assistance, as

well as grants for public works and

economic development, planning,

training and research, and

economic adjustment.

September 2003/Semiannual Report to Congress 17

ECONOMIC DEVELOPMENT

ADMINISTRATION
Our audit disclosed that the commission had almost $1.5 million

in excess cash as of April 2003 and had retained excess cash for

at least seven consecutive semiannual reporting periods. The

excess funds demonstrated persistent noncompliance with the

capital utilization standard at 13 CFR §308.17(c) and is contrary

to RLF program objectives. The excess resulted from a lack of

loan demand in previous years, although the commission recently

identified possible uses for its RLF funds.

To resolve the excess funds finding, we recommended that EDA’s

Philadelphia regional director require the commission to (1)

deposit the $1,477,696 in excess funds into a separate interestbearing account and remit the interest monthly to the U.S.

Treasury, (2) use the excess funds within 6 months to make direct

loans or loan guarantees in accordance with RLF program

objectives, and (3) remit EDA’s share of any unused excess funds

remaining in the account after 6 months to the U.S. Treasury.

Our audit also disclosed that the commission made $324,000 in

improper payments from the fund including a $250,000

disbursement to fund a non-RLF loan, charges for unsupported

management fees, and payments for unauthorized foreign travel,

alcoholic beverages, and entertainment. The commission

subsequently repaid the $250,000 to the RLF. We recommended

that EDA’s Philadelphia regional director require the commission

to reimburse the RLF account for the remaining $74,000 in

improper payments and ensure that RLF personnel are familiar

with applicable federal cost principles. (Atlanta Regional Office

of Audits: ATL-15985)

EXCESS CASH RESERVES AND

INEFFECTIVE MANAGEMENT AT

MONTANA RLF 

EDA awarded a Sudden and Severe Economic Dislocation

Defense Adjustment grant of $1.5 million to a Montana

development authority in September 1996 to establish a revolving

loan fund. EDA recapitalized the grant by adding $750,000 in

May 2000 and requiring an additional local match of $750,000. 

Our audit disclosed that the authority was not managing the RLF

effectively. As of September 30, 2002, the authority failed to

provide $286,500 of required matching funds, had $1,426,242 in

excess cash with no marketing plan or strategy to utilize it,

maintained inadequate documentation for its loan portfolio, and

failed to obtain audits conducted in accordance with the Single

Audit Act.

Based on these findings, we recommended that EDA’s Denver

regional director require the authority to (1) provide the

remaining matching funds of $286,500 applicable to the grant,

(2) sequester $1,426,242 in excess cash reserves in an interest

bearing account and remit to the U.S. Treasury the portion of the

interest earned on the account attributable to the grant, (3) use the

excess funds within 6 months in accordance with RLF program

objectives, (4) remit EDA’s share of any unused excess funds

remaining in the account after 6 months to the U.S. Treasury, (5)

revise its RLF plan to develop effective marketing strategies, (6)

establish and maintain adequate documentation for its loan

portfolio, and (7) obtain audits conducted in accordance with the

Single Audit Act for the two fiscal years ended June 30, 2003.

(Denver Regional Office of Audits: DEN-15180)

18

Economic Development Administration

U.S. Department of Commerce/Office of Inspector General
SLOW START FOR REDESIGN OF CENSUS 2010

ADDRESS/MAPPING SYSTEM INCREASES

PERFORMANCE AND COST RISKS

To conduct the decennial census and other statistical work, the Census Bureau developed

and maintains the master address file (MAF) and the Topologically Integrated

Geographic Encoding and Referencing (TIGER) databases. MAF is an inventory of

address information covering an estimated 115 million residences and 60 million

businesses and other structures. TIGER is a digital map containing the locations

and names of streets, rivers, railroads, boundaries, and other geographic features

and their geospatial relationship to each other and to MAF addresses. 

The complex, voluminous MAF and TIGER databases are essential to the

success of the bureau’s census and survey activities. However, the current

data contains an unacceptable level of inaccuracy, and the systems that

manage the data are cumbersome, outdated, and difficult to integrate with

newer technology. The bureau has thus launched a major effort to redesign

these systems and improve the data’s accuracy. Known as the MAF/TIGER

Enhancement Program, this 8-year, roughly $500 million undertaking is

part of Census’ overall 2010 decennial census strategy to reduce operational

complexity and risks, contain costs, and improve results. 

The computer and software upgrade portion of the enhancement program—

the MAF/TIGER Processing Environment Redesign—is crucial to the

bureau’s attainment of these goals, and is being developed in-house with the

aid of contractors. The redesign will combine a standard, commercial off-theshelf database management platform with geographic information system

computer products to support hand-held global positioning system devices for

field operations, Internet access for local governments, and faster response to

operational requests while simplifying error-prone operations, such as database

updates, and reducing training time for new MAF/TIGER programmers. 

To have this complex, technically challenging system thoroughly tested before the 2008

dress rehearsal and within its estimated $50 million budget, Census must use a disciplined

project management process that conforms with federal guidelines and accepted business

practices,10 and have methodical software processes. 

Our evaluation sought to determine whether Census has established and is following accepted processes for

managing and developing the redesigned MAF/TIGER system. Our findings and recommendations were as follows:

The

Economics

and Statistics

Administration analyzes

economic developments, formulates policy options, and produces a major share of U.S. government economic and demographic

statistics. The Chief Economist monitors and analyzes economic developments and directs studies that have a

bearing on the formulation of economic

policy. ESA has two principal agencies:

Bureau of the Census is the country’s preeminent statistical collection and dissemination agency. It publishes a wide variety of statistical data about the nation’s people and

economy, conducting approximately 200

annual surveys, in addition to the decennial

census of the U.S. population and the decennial census of industry.

Bureau of Economic Analysis prepares,

develops, and interprets the national

income and product accounts (summarized by the gross domestic product),

as well as aggregate measures of

international, regional, and

state economic activity.

September 2003/Semiannual Report to Congress 19

ECONOMICS AND STATISTICS

ADMINISTRATION

10 See the Clinger-Cohen Act of 1996; OMB Circular A-11 Part 7, Planning, Budgeting, Acquisition, and Management of Capital Assets; and, for

example, the Program Management Institute’s Program Management Body of Knowledge.
LATE START IMPLEMENTING PROJECT

MANAGEMENT PROCESS HAS

INCREASED RISKS

Although the project had been under way for 1.5 years at the start

of our evaluation, Census had not yet implemented a

comprehensive project management process (see figure)—it had

not established a management organization (the sponsor, review

board, a full-time project manager, and key project team

members); or developed a comprehensive plan identifying the

scope of work (i.e., the system’s requirements and architecture),

the strategy for building the system and all major intermediate

products, and the activities needed for project completion (the

work breakdown structure). It had not assigned baseline activitylevel cost, schedule, or performance (C/S/P) parameters. Nor had

it implemented required controls such as earned value

management.11 In the absence of an effective management

process, several initial project activities did not produce the

results needed to proceed to the next stage of development and

had to be reworked. 

Census officials attributed their slow start to understaffing and

other work priorities, but have since begun implementing more

disciplined project management. We recommended that Census

fill staffing needs for the redesign as quickly as possible and

implement a comprehensive project management process. 

TECHNICAL CHALLENGES WARRANT

ACCELERATING SOFTWARE

PROCESS IMPROVEMENT

Because the bureau had no structured process for determining

requirements, implementing software, conducting testing, and

providing quality assurance for Census 2000, last minute system

requirements and software changes were a way of life. This

experience prompted the bureau in 2002 to implement a

multiyear software process improvement program using the fivelevel Capability Maturity Model® (CMM®)12 for software,

developed by the Carnegie Mellon Software Engineering

Institute. Since the redesign and the software improvement

program both started around the same time, the project’s initial

activities did not benefit from improved software processes. The

bureau is attempting to bring the redesign project up to speed

with the more mature software processes envisioned by the

model and thereby increase the likelihood that it will meet system

requirements and cost and schedule projections. The current goal

is to accelerate development and implementation of CMM® level

20

Economics and Statistics Administration

U.S. Department of Commerce/Office of Inspector General

12 Capability Maturity Model and CMM are registered in the U.S. Patent

and Trademark Office by Carnegie Mellon University.

CMM® LEVEL 2 

Key

Maturity Process

Level 2 Description Areas

Repeatable Basic project management 

Project processes are established 

management to track cost, schedule, 

processes and functionality. The 

necessary process

discipline is in place to 

repeat earlier successes 

on projects with 

similar applications. 

Source: Software Engineering Institute. The Capability Maturity

Model: Guidelines for Improving the Software Process. ®

Requirements

management

Software project

planning

Project tracking

and oversight

Subcontract

management

Software quality

assurance

Configuration

management 

11 Earned value management is an objective, quantitative technique for

measuring progress by obtaining reliable, timely project data and

evaluating it against the baseline to support decision-making throughout

the project’s life cycle.
2 capabilities (see table, page 20) for the redesign, which would

provide the elements most critical to controlling a complex

software project—requirements management; project planning,

tracking, and oversight; configuration management; and quality

assurance.

However, the median time for advancing from level 1, the

bureau’s current status, to level 2 is 2 years, so the bureau

needs a plan and strategy to significantly shorten its

progression time. We recommended that Census provide the

management commitment, resources, and oversight needed to

attain CMM® level 2 capabilities as soon as possible. Census

agreed with our recommendations. (Office of Systems

Evaluation: OSE-15725)

CENSUS BUREAU OVERPAID

$2 MILLION FOR AIRFREIGHT

SHIPMENTS DURING

2000 DECENNIAL

The General Services Administration is required by law to audit

government transportation bills. After reviewing airfreight bills for

Census 2000 delivery services, GSA reported to our office that it

found evidence of substantial overcharges on government bills of

lading (GBLs) submitted to Census by the two carriers that made

the air shipments out of the Census National Processing Center

(NPC). Census, through its NPC, paid more than $11 million for

airfreight services over an 11-month period to ship decennial

materials to regional and local offices around the country.

Based on GSA’s information, we undertook an audit to review the

practices used by the bureau to procure air transportation and

determine whether the two carriers had in fact overcharged the

government. GSA suspended its review pending the completion

of our audit.

We found that both carriers had overcharged Census and that

the bureau did not (1) follow federal transportation management regulations for acquiring the airfreight services or

(2) independently estimate the cost of shipments beforehand or

thoroughly audit the final charges on the GBLs, and was

therefore unaware that it was being overcharged. We also found

that a freight weight specialist, with no contracting authority,

negotiated rates and signed agreements with the carriers. 

In light of our findings, GSA resumed and completed its review

of GBLs and has since billed the carriers for refunds of more than

$2 million in shipping overcharges. 

We recommended a series of actions to the Census Bureau to

prevent this situation from recurring. We emphasized that the

bureau must improve management and oversight of this and all

operations for Census 2010, if it is to contain costs and ensure an

efficient and successful decennial. 

The bureau agreed with our recommendations and described

actions it has taken or plans to take to address them. (Economics

and Statistics Audits Division: ESD-14911)

September 2003/Semiannual Report to Congress 21

Economics and Statistics Administration
A FEW KEY WEAKNESSES UNDERCUT

GENERALLY SOUND OPERATIONS AT

US&FCS GREECE 

Greece—an import-dependent country of 10.6 million residents—is a difficult

market for U.S. firms. American exports totaled $1.15 billion in FY 2002—a 4.5

percent share of Greece’s import market. One reported reason for this small

market share is that Greece is a member of the European Union, and European

companies offer stiff competition to exporters from the United States. 

The U.S. and Foreign Commercial Service13 post in Greece has a very

active advocacy program and a full menu of trade events to assist firms

seeking to tap the Greek market. Located in the capital city of Athens,

the post had an FY 2002 budget of $1.14 million. Until February

2002, it also maintained a presence in Northern Greece (in the city

of Thessaloniki).

We inspected US&FCS Greece at the request of the U.S.

ambassador, who was concerned about the integrity of post

operations following problems associated with services provided to

a U.S. firm seeking to enter the Greek market. 

SUMMARY OF FINDINGS

MANAGEMENT ENHANCEMENTS

Though the post’s senior

commercial officer (SCO)

and staff were praised by

colleagues and clients for their

cooperation and responsiveness,

we found gaps in management

oversight of US&FCS Greece

operations that undercut the efficacy of

established controls and procedures and

ultimately led to problems associated with the

services provided to the U.S. firm. We also noted

that when assisting U.S. companies that are seeking

contracts in Greece, the post needs to improve its

coordination with ITA’s Advocacy Center (see box) to ensure that

US&FCS, the ambassador, and the rest of the U.S. mission do not appear to be

giving favored or preferential treatment to any one U.S. company. 

22 U.S. Department of Commerce/Office of Inspector General

The

International

Trade Administration

is responsible for trade promotion

and policy issues associated with most

nonagricultural goods and services. ITA

works with the Office of the U.S. Trade

Representative to coordinate U.S. trade policy.

ITA has four principal units:

Market Access and Compliance develops and

implements international economic policies of a

bilateral, multilateral, or regional nature. Its main

objectives are to obtain market access for American

firms and workers and to ensure full compliance by

foreign nations with trade agreements signed with the

United States. 

Trade Development advises on international trade and

investment policies pertaining to U.S. industrial sectors,

carries out programs to strengthen domestic export

competitiveness, and promotes U.S. industry’s increased

participation in international markets.

Import Administration defends American industry

against injurious and unfair trade practices by

administering the antidumping and countervailing

duty laws of the United States and enforcing other

trade laws and agreements negotiated to address

such trade practices. 

U.S. and Foreign Commercial Service

promotes the export of U.S. products and

helps small and medium-sized

businesses market their goods

and services abroad. It has more

than 250 domestic and

foreign offices.

INTERNATIONAL TRADE

ADMINISTRATION

13 US&FCS is also known as the U.S. Commercial Service.

ITA established the Advocacy

Center in 1993 to help ensure

U.S. products and services have

the best possible chance of selling

abroad. The center promulgates

guidelines to help government

personnel determine whether and

to what extent they should assist

U.S. firms interested in a specific

commercial transaction or opportunity overseas—for example, a

tender sponsored by a foreign

government.
TIMELINESS OF SERVICES, MARKET

RESEARCH PRODUCTION, AND EXPORT

SUCCESS REPORTING

Though most US&FCS Greece’s clients are pleased with the

post’s services and products, we found that certain core products

and services were not delivered in a timely manner and the post’s

reporting on market developments was less frequent than that of

similarly sized US&FCS posts. In addition, our review of 57

selected export successes reported by the post in 2002 and 2003

revealed 17 instances in which the post either overstated the value

of the success, reported “anticipated” rather than actual sales, or

took credit for a success it was not involved in or that did not

occur. As a result, at a minimum, US&FCS Greece inflated the

value of export successes reported for this period by more than

$118 million, or nearly half of the total dollar value of the export

successes in our sample. 

EXPORT SUCCESSES REPORTED BY

US&FCS GREECE AND POSTS OF

SIMILAR SIZE (FY 1999-2003)

US&FCS Post 1999 2000 2001 2002 2003

Greece 4 8 31 50 57

Portugal 35 43 85 106 89

Poland 39 53 112 50 86

Hungary 10 2 47 66 61

Czech Republic 0 42 65 111 91

Information for FY 2003 is incomplete, but despite increases in

export successes reported by CS Greece, the number remains low

compared to totals for other posts of similar size. At the time of

our review of its export successes, Greece reported only 28. By

the time our report was issued in draft, an additional 29 had been

reported, equalling the total—57—shown here for FY 2003.

Source: US&FCS E-Menu.

FINANCIAL AND

ADMINISTRATIVE OPERATIONS

Our review of US&FCS Greece’s financial and administrative

operations—collections, inventory, time and attendance, petty

cash, procurements, representation funds, and the budget—found

all to be properly managed. We also noted that the post had

corrected weaknesses identified in an April 2002 review

conducted by the Commercial Service’s Office of Planning. Only

one minor issue requires attention: the post does not appear to

need all of its four vehicles and should either reassign or surplus

two of them.

US&FCS RESPONSE 

The Commercial Service agreed with our 14 recommendations

for improving operations and submitted an action plan that

outlines many specific steps it has taken to strengthen its

oversight of its post in Greece. (Office of Inspections and

Program Evaluations: IPE-15804)

September 2003/Semiannual Report to Congress 23

International Trade Administration
WEAKNESSES IDENTIFIED IN MBDA’S

PERFORMANCE REPORTING

In January 2003 we initiated a preliminary review of MBDA’s performance reporting in the

Department’s FY 2002 Performance & Accountability Report to determine the validity of the

performance data reported under the measure for contracts awarded to assisted minorityowned businesses (MBEs). This measure is intended to indicate MBDA’s progress in

achieving its first performance goal: “Develop an entrepreneurially innovative marketfocused economy.” 

The FY 2002 reported dollar value for just the Minority Business Opportunity

Committee (MBOC) program was $905 million, or nearly 70 percent of the total

($1.3 billion) reported for the performance goal. We determined early in our audit

process that this value appeared overstated, and we apprised MBDA of our

observations. The $905 million appeared to include the value of procurement

opportunities that MBOC had merely disseminated information about to MBEs,

rather than the value of contracts actually secured. We believe the composition of

the reported results was not made clear in the Department’s Accountability Report. 

A factor contributing to the problem is the lack of clear, written guidance for

program operators, managers, and evaluators regarding what constitutes performance

accomplishments and how they should be documented and reported by MBDA to the

Department and to OMB. 

We are currently working with MBDA to come up with an appropriate way to address

the noted deficiencies, correct past inaccuracies, and better define its performance

measurement criteria. 

24 U.S. Department of Commerce/Office of Inspector General

The

Minority

Business

Development Agency

was created to help

minority-owned and operated

businesses achieve effective and

equal participation in the American

free enterprise system, and overcome

the social and economic

disadvantages that have limited their

participation in the past. MBDA

provides management and technical

assistance to minority firms upon

request, primarily through a network of

business development centers. It also

promotes and coordinates the efforts of

other federal agencies in assisting or

providing market opportunities for

minority businesses.

MINORITY BUSINESS

DEVELOPMENT AGENCY
INEFFECTIVE CONTRACT NEGOTIATIONS,

REVIEW, AND OVERSIGHT COST NOAA

$4.5 MILLION ON NEXRAD TRANSITION

POWER SOURCE ACQUISITION

In 1992 NOAA’s National Weather Service began exploring technical solutions to

power supply problems affecting the 158 Next Generation Weather Radar

(NEXRAD) systems—high resolution Doppler weather radar systems jointly

designed, acquired, and operated by the Departments of Commerce (NWS),

Defense (Air Force and Navy), and Transportation (Federal Aviation

Administration). A tri-agency Radar Operations Center (ROC) located in

Norman, Oklahoma, is responsible for meteorological, software,

maintenance, and engineering support for all NEXRAD systems. The

ROC is a component of NWS’ Office of Operational Systems (OOS). 

The search for supplementary power sources was prompted by two

problems that degraded NEXRAD operability: power loss—and

resultant loss of critical data—during transitions between commercial

power and the standby engine generator; and poor power quality at

remote NEXRAD sites, which shortens the life of the systems’

electronics and increases maintenance costs. To solve these problems,

the ROC sought to acquire transition power sources (TPS)—

uninterruptible power systems that prevent power loss to the radar

during power transfer and protect the electronics from commercial

power anomalies. 

The ROC assessed two TPS technologies: static and rotary. A static TPS

consists of a rectifier/battery charger, battery, and inverter; rotary units

consist of an electric motor mechanically connected to a generator. The

ROC’s testing showed commercial off-the-shelf rotary technology to be

feasible, and NWS decided to acquire rotary TPS units for NEXRAD. NOAA

executed a contract in 1997 with a prime contractor who would supply the rotary

units via a subcontractor. (The prime contractor manufactured static TPS units only.) 

Installation began the following year, and some units quickly began to present problems, the

most serious being bearing noise and failures. Although the subcontractor attempted to solve each

problem, some were resistant to solution. By May 2000, with 94 rotary TPS units installed, 33 were

out of service, and the ROC directed that the TPS units be shut down immediately. In November 2000

NOAA modified the original TPS contract to authorize acquisition of the prime contractor’s static TPS in place

of the rotary units.

We conducted an evaluation of the TPS acquisition to determine whether (1) NWS paid for defective equipment (i.e., the original TPS

units), (2) the actions of the NOAA contracting office to modify the contract received proper review and oversight, (3) program and

The

National

Oceanic and

Atmospheric Administration

studies climate and global change;

ensures the protection of coastal

oceans and the management of marine

resources; provides weather services; and

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

and warnings to the general public.

National Ocean Service issues nautical charts;

performs geodetic surveys; conducts research; and

develops policies on ocean mining and energy.

National Marine Fisheries Service conducts a

program of management, research, and services related

to the protection and rational use of living marine

resources.

National Environmental Satellite, Data, and

Information Service observes the environment by

operating a national satellite system.

Office of Oceanic and Atmospheric Research

conducts research related to the oceans and

inland waters, the lower and upper atmosphere,

space environment, and the Earth.

Office of Marine and Aviation

Operations operates NOAA’s ships and

aircraft and provides NOAA

programs with trained technical

and management personnel

from the nation’s seventh

uniformed service.

NATIONAL OCEANIC

AND ATMOSPHERIC

ADMINISTRATION

September 2003/Semiannual Report to Congress 25
contracting decisions regarding the TPS were reasonable

and supportable, (4) the acquisition was planned and managed

effectively, and (5) goods and services were delivered

as intended. 

We found that NWS did indeed pay for defective equipment,

and contracting personnel modified the contract without

adequate negotiation and in the absence of proper review and

oversight from NOAA. The result was an estimated increase in

contract costs of $4.5 million (see box). We also found that once

the rotary units began to fail, NOAA seriously mishandled the

acquisition/management process, with the result that the rotary

TPS was abandoned without sufficient evaluation and the prime

contractor’s static TPS was selected without serious

consideration of any other alternatives. Specifically, the

decision to switch to the prime contractor’s static TPS was

made without closely monitoring the subcontractor’s progress

in implementing corrections and without assessing static units

from other manufacturers. NOAA also did not consult with the

FAA regarding that agency’s positive experience with (1) rotary

units supplied by the same subcontractor for its NEXRAD

systems and (2) static units deployed on a similar FAA radar

system that incorporated newer technology, which might be

more suitable for NEXRAD than the static units provided by the

prime.

We made a number of recommendations to rectify the problems

we noted. NOAA agreed with them, stating they represent good

business practice, but disagreed with most of our specific findings.

NOAA described the decision of whether to continue with the

rotary unit as a tough judgment call for its managers. We agree,

and that is why we believe NOAA managers shortchanged

themselves by failing to ensure their staffs provided accurate

information and sound analysis for making their difficult

judgments. We urged NOAA and NWS to give particular attention

to our recommendation that they evaluate their acquisition

policies, procedures, and oversight and identify actions needed to

prevent similar problems from occurring on other acquisitions. 

According to the Office of the Chief Financial Officer, the

Department’s procurement executive is reviewing this acquisition

to determine what corrective action may be appropriate and

whether operating unit or departmental oversight processes should

be modified to prevent similar incidents in the future. (Office of

Systems Evaluation: OSE-15676)

PROCESS FOR REDUCING

THE CRITICAL

HYDROGRAPHIC SURVEY

BACKLOG LACKS KEY

MANAGEMENT CONTROLS 

NOAA has a statutory mandate to enable safe ocean transport of

marine commerce by providing nautical charts and related

information, and to collect basic hydrographic data that supports

engineering, scientific, commercial, and industrial needs. To

fulfill this mandate, NOAA—using state-of-the-art technology—

conducts hydrographic surveys of the U.S. Exclusive Economic

Zone, an area of more than 3 million square nautical miles that

extends 200 nautical miles offshore from the nation’s coastline.

The resulting data is used to create the charts and to support a

variety of maritime functions, including port and harbor

maintenance (dredging), coastal engineering (beach erosion and

replenishment studies), coastal zone management, and offshore

resource development. 

26

National Oceanic and Atmospheric Administration

U.S. Department of Commerce/Office of Inspector General

COST IMPACT OF MODIFICATION TO

ORIGINAL CONTRACT

At the time the modification was executed, NOAA had

paid $3.9 million for equipment and associated costs,

and was withholding payments of $996,499. In negotiating the switch to its static units, the prime initially

proposed the retrofit of the 94 rotary units at a cost of

$4.2 million and installation of 56 new static units at a

cost of $5.3 million. The proposal noted that this

amount reflected $2.6 million in credits and discounts,

conditional upon NOAA's paying the withheld payments and fees. 

The prime subsequently revised its proposal, agreeing

to waive the outstanding payments but reducing the

discount. The net effect of this offer was that it

increased the total proposed price by $996,449—the

exact amount of the payments NOAA had withheld.

NOAA accepted this proposal without adequate analysis and negotiation, and in so doing, paid for all defective or removed rotary units. 

Prime's final proposed cost for retrofit

of sites having rotary units . . . . . . . . . . . .$5,204,025

Less estimated savingsa attributed to

new TPS installations . . . . . . . . . . . . . . . . .(726,723)

Total estimated additional cost

to NOAA . . . . . . . . . . . . . . . . . . . . . . . . .$4,477,302

a Based on the difference between the estimated cost delineated in the basic contract for the remaining new installations using a rotary TPS and the estimated cost for new

installations with the static TPS. This estimate does not

include maintenance, spares, or extended warranties.
In 1994 NOAA identified approximately 43,000 square nautical

miles, primarily coastal shipping lanes and approaches to major

U.S. ports, as critical areas14 in need of hydrographic survey,

known as “the critical survey backlog.” 

In FY 1998 Congress specified that NOAA use private sector

contractors to augment the data acquisition activities of its

hydrographic vessels, and appropriated a total of $89.7 million

for FYs 1998 through 2002 to be used for such contracting.

We conducted an audit to determine and validate NOAA’s

progress toward reducing the critical survey backlog, identify and

assess agency goals and plans for ultimately eliminating it, and

evaluate the effectiveness of NOAA’s management controls over

the backlog reduction program. 

SUMMARY OF FINDINGS AND

RECOMMENDATIONS

CONTROLS FOR MANAGING,

STABILIZING, AND DOCUMENTING THE

CRITICAL BACKLOG ARE INADEQUATE

NOAA indicated that it does not have the original nautical charts

that specify the critical backlog baseline established in 1994 and

has since modified the baseline. We found that it continues to

make undocumented changes. NOAA officials acknowledged

they lack written policies and procedures for documenting the

history of the backlog’s composition. Without such controls,

NOAA cannot provide assurance that it is making progress

toward reducing the backlog, nor were we able to determine the

status of its efforts to do so. We recommended that such policies

and procedures be implemented, the backlog’s composition be

stabilized and only modified to reflect reductions of identified

backlog areas, and that all related nautical charts and

documentation be preserved.

APPROPRIATED FUNDS ARE SOMETIMES

USED TO SURVEY AREAS OUTSIDE THE

CRITICAL BACKLOG

During FYs 2001 and 2002, NOAA obligated $6.5 million of its

backlog funding for surveys of nonbacklog locations, despite

Congress’s clear direction that the appropriation be used to hire

private surveyors to help reduce the backlog. Not only is NOAA’s

action inconsistent with the intent of the funding, it also increases

the likelihood that the agency will need additional appropriations

to achieve backlog reduction goals. NOAA must take steps to

ensure that funds appropriated for reducing the backlog are used

to survey those areas only. At present, the agency has no written

policies and procedures for restricting use of these funds to

critical survey backlog areas. We recommended that NOAA

develop such guidance. 

OTHER FINDINGS

We also determined that NOAA does not track full program

costs, enforce delivery deadlines for completion of contractor

surveys, and lacks a detailed, documented work plan for

eliminating the backlog. 

NOAA’S RESPONSE

NOAA generally concurred with all but one of our

recommendations—disagreeing on the need for a detailed work

plan. The agency stated that it will continue to develop general

work plans and projections for eliminating the backlog based on

September 2003/Semiannual Report to Congress 27

National Oceanic and Atmospheric Administration

14 Areas deemed critical are waterways that have (1) high volumes of

commercial traffic (e.g., cargo, fishing, and cruise vessels and ferries),

(2) extensive petroleum or hazardous material transport, (3) transiting

vessels with low under-keel clearance over the seafloor; or that (4)

prompt compelling requests for surveys from users.

Hull-mounted multibeam sonar (left) and towed side-scan

sonar (right) represent some of the state-of-the-art

technology NOAA uses to detect, locate, and identify

wrecks and obstructions on the ocean floor.

Source: NOAA’s National Ocean Service.

http://oceanservice.noaa.gov/mapfinder/products/hydro/welcome.html

Accessed November 2003.
current appropriations and technology. We reaffirm our

recommendation, noting that without documented plans that

include specific cost and schedule goals, NOAA cannot fully

account for the time and resources it expends. (Science and

Technology Audits Division: STD-15120)

AUDITS OF NOAA

PERFORMANCE MEASURES

CONTINUE TO POINT UP

NEEDED IMPROVEMENTS

Our series of performance measurement audits continued this

past semiannual period with a review of another two of NOAA’s

seven goals15 that support the Department’s environmental

stewardship responsibilities: (1) advance short-term warnings

and forecasts, and (2) implement seasonal to interannual climate

forecasts. NOAA’s net cost of operations for activities related to

these two goals in FY 2001 was more than $1.5 billion—or more

than half of the total amount spent for all seven NOAA goals.

Within NOAA, the National Weather Service conducts most of

the work related to our analysis. 

We noted a commitment on the part of NOAA to report outcomeoriented measures and reliable information, and extensive efforts

by NWS to ensure the accuracy of performance information.

However, as in our prior review, we found that improvements

were needed for all of the measures associated with the goals, to

correct internal control weaknesses that were permitting

inaccurate, incomplete, or unclear performance data to be

reported. In some cases, we found that the measures themselves

should be revised, augmented, or eliminated. 

For example, measures for advancing short-term warnings and

forecasts of tornadoes and flash floods, as currently calculated,

reflect the average lead times NWS provides the public prior to

the weather events for which it issued warnings ahead of time.

They do not adequately reflect the fairly significant number of

tornadoes and flash floods for which the agency’s warning

provided the public with no lead time or for which it issued no

warning at all. We also noted the omission of key details in

reported results—for example, that some measures were based

on estimates and others excluded data from certain parts

of the country. Such omissions further limited the

measures’ usefulness. 

Similarly, measures for implementing seasonal to interannual

climate forecasts—as titled and as described in annual

performance reports—do not clearly articulate what is being

assessed or what results have been achieved. For example,

discussions concerning the measure, “new climate observations

introduced” (which refers to climate-monitoring systems),

suggest that NOAA is counting multiple types of systems brought

on-line during the fiscal year, when in reality it is measuring the

introduction of only one type. And the number it reported

introducing in FY 2001 was actually the number budgeted for

procurement rather than the number actually deployed.

NOAA concurred with our findings, with some qualifications,

and is taking action to strengthen internal controls and thereby

eliminate the weaknesses we identified. (Financial Statements

Audits Division: FSD-15643)

ENVIRONMENTAL

TECHNOLOGY LABORATORY

REVIEWS NOTE ACCOUNTING

DEFICIENCIES

NOAA’s Environmental Technology Laboratory (ETL) in

Boulder, Colorado, develops remote sensing instrumentation that

allows meteorologists and oceanographers to peer inside the

Earth’s atmosphere and oceans. ETL works with local, federal,

and international agencies, as well as universities and private

corporations, to improve understanding of the atmospheric and

oceanic processes that govern our weather and climate, and to

develop new remote sensing systems

In November 2001 the Department of Defense Office of

Inspector General reported that the lab had inappropriately

charged $1.6 million in expenses to a joint Defense/ETL

28

National Oceanic and Atmospheric Administration

U.S. Department of Commerce/Office of Inspector General

15 The March 2003 Semiannual Report to Congress detailed our review

of two NOAA goals—promote safe navigation and sustain healthy

coasts (FDS-14998).

Source: OIG.
project.16 This report prompted us to conduct a broader

examination of the lab’s administration, management, and

oversight of financial operations and programs. During this past

semiannual period, we concluded two audits of ETL activities:

one of its handling of work for which it receives reimbursement;

the second, of its management of the purchase card program.

WEAKNESSES EXIST IN

MANAGEMENT OF

REIMBURSABLE FUNDS 

Reimbursable work—activities for which ETL receives

payment from other federal agencies—is a major source of

funding for the lab, accounting for roughly 45 percent of its

total obligations during fiscal years 2000-2002. Our audit

sought to determine whether ETL properly identifies, records,

and recovers the costs of this work; complies with federal and

departmental requirements in doing so; and has a sound

operating plan that appropriately balances reimbursable income

and activities with NOAA funding and pursuits, and ultimately

supports NOAA’s mission.

We conducted a comprehensive examination of ETL’s

reimbursable operations and activities for fiscal years 2000,

2001, and through May 2002. We identified significant instances

of noncompliance with Department and NOAA policies and

procedures for administrative control of funds. Specifically,

ETL’s management of reimbursable activities did not comply

with Economy Act mandates and departmental policies and

procedures requiring the lab to recover the full cost of goods and

services it provides. To compensate for funding shortfalls that

occurred as a result, ETL inappropriately transferred

expenditures between unrelated reimbursable tasks as well as

between reimbursable and nonreimbursable projects. 

In addition, we found two instances in which ETL appears to

have reprogrammed appropriated funding from its intended

purpose, in one case to cover unreimbursed expenditures and in

another, to “repay” funds borrowed from a NOAA program in a

prior year. Congress requires notification of such shifts 15 days

in advance of their occurrence when they exceed a certain

amount. Both of the shifts we identified required such

notification, yet in the first instance, NOAA failed to provide it,

and in the second, provided it 9 months after the fact. 

We made a series of recommendations to the appropriate

NOAA officials to improve internal controls on funds

management and bring ETL into compliance with all applicable

federal, departmental, and agency requirements. We also

recommended that NOAA follow through on efforts already

under way to reduce ETL’s reliance on reimbursable funding

and thus mitigate the financial uncertainty it brings. NOAA

agreed with our recommendations. (Business and Trade Audits

Division: BTD-14852)

VULNERABILITIES IN PURCHASE

CARD PROGRAM PERSIST

Our audit of ETL’s purchase card program identified a number of

internal control weaknesses—some new and some noted in a 1999

audit of the program, but still unresolved—that leave the laboratory

vulnerable to improper and wasteful spending. We found that

ETL’s policies and procedures for the program are unclear and are

not routinely updated to reflect federal and departmental changes.

In addition, the lab does not (1) require cardholders to obtain

written preapprovals for applicable purchases, (2) promptly close

accounts of all departing employees, (3) ensure that cardholders

take the required card use refresher training, and (4) provide

adequate management oversight of individual card expenditures.

Cardholders, for their part, do not always protect their cards from

theft or unauthorized use.

NOAA concurred with most of our findings and

recommendations. (Business and Trade Audits Division:

BTD-15139)

FISMA REVIEW AT

NESDIS IDENTIFY IT

SECURITY CONCERNS

As part of our Department-wide FISMA review (see page 37), we

evaluated security controls for two systems at the National

Environmental Satellite, Data, and Information Service

(NESDIS)—(1) the local area network (LAN) that operates at

NESDIS headquarters and (2) the agency’s Research Data

System (RDS)—and found similar weaknesses affecting both. 

For example, system security measures and server room safety

features such as fire suppression mechanisms do not adequately

protect against the full range of vulnerabilities and thus need to

be enhanced. Risk assessments and security and contingency

plans are incomplete. The LAN and RDS were certified and

accredited, though security controls were neither tested nor their

effectiveness documented. 

We made a number of recommendations specific to these

findings, and also noted that NESDIS needs to ensure that agency

officials give greater attention to information security. NESDIS

September 2003/Semiannual Report to Congress 29

National Oceanic and Atmospheric Administration

16 Department of Defense, Office of Inspector General. November 23,

2001. Advanced Sensor Applications Program Joint Project, Report No.

D-2002-017, p. i.
agreed with our recommendations and has taken action to address

them. (Office of Systems Evaluation: OSE-15996-1 and 2)

IT SECURITY WEAKNESSES

NOTED AT NMFS MIRROR

THOSE OF OTHER

COMMERCE AGENCIES 

NMFS’ wide area network (WAN) and headquarters local area

network were also among the Commerce systems we evaluated

during our FY 2003 Department-wide FISMA review (see pages

29 and 37), and our findings for these two systems were similar

to what we found elsewhere. Most notably, risk assessments and

security plans for the NMFS systems were incomplete and

inconsistent, and thus inadequate sources for identifying needed

security controls. Though the agency has established controls,

these have not been tested and their effectiveness therefore not

verified; both actions are prerequisites for certification and

accreditation, yet the systems were certified and accredited

regardless. Additionally, NMFS has not completed its

contingency planning for either system.

NMFS agreed with all of our recommendation for correcting the

identified deficiencies and is taking steps to resolve them. (Office

of Systems Evaluation: OSE-15693)

CONCERNS OVER IMPROPER

CALIBRATIONS PROMPT

REVIEW OF NMFS

GROUNDFISH SURVEY

The Magnuson-Stevens Act gives the National Marine Fisheries

Service primary federal responsibility for managing marine fisheries.

Along with eight regional fishery councils, NMFS is charged with

preventing and ending overfishing of currently depressed stocks,

rebuilding depleted stocks, and reducing bycatch. 

The status of both commercial and recreational fisheries—

determined largely through stock assessments—is the basis of

regulations governing catch limits, fishing days at sea, and so

forth. For more than 400 years, the fishing industry off the

northeastern U.S. coast has been identified both culturally and

economically with harvesting groundfish (fish that swim in close

proximity to the bottom of the ocean). Thus any regulations that

affect fishing are of vital interest to the people of the region. 

Data used in stock assessments is carefully scrutinized and the

methods used to create the estimates often undergo intense

scrutiny. This controversy is evident at NMFS’ Northeast

Fisheries Science Center (NEFSC), where the calibration of the

gear used to tow the bottom trawl net that collects groundfish

samples was a longstanding concern. 

Based on that concern, NEFSC inspected the trawl cables on the

NOAA Research Vessel (RV) Albatross IV and found that marks

designating the length of each segment of the cables attaching

the bottom-trawl net to the vessel differed. When in use during

an average bottom-trawl survey, the mismarking caused one

cable to be longer than the other by about 6.5 feet. The different

lengths of cable deployed on either side of the net increased the

risk that the net operated improperly and thus could potentially

skew fish population counts. The mismarked cable was used in

eight bottom-trawl surveys, from the winter of 2000 until

spring 2002. 

We focused our review on assessing whether (1) sufficient

30

National Oceanic and Atmospheric Administration

U.S. Department of Commerce/Office of Inspector General

Cape Hatteras, NC, to western Nova Scotia Shelf—Area

covered by NEFSC’s groundfish survey.
policies and procedures are in place to effectively capture,

identify, and, as appropriate, address concerns raised by

stakeholders; (2) sufficient protocols are available to calibrate,

operate, inspect, and maintain bottom-trawl survey gear; and (3)

procedures are in place to ensure management information is

available to assess the cost of gear calibration, operation,

inspection, and maintenance activities. 

Prior to and during our review, NOAA took several steps to

address stakeholder concerns including issuing new protocols and

conducting two peer reviews that concluded that the trawl cable

problem did not have a significant impact on the actual survey

catch data for 2000 and 2001. Despite these actions, we found

several areas where additional improvements could be made. 

NMFS NEEDS TO DEVELOP AN

AGENCY POLICY FOR HANDLING

COMPLAINTS OR CONCERNS RAISED

BY OUTSIDE STAKEHOLDERS

We found that concerns about the calibration of trawl cables had

been expressed but were not addressed for some time. While we are

aware that not every concern raised by outside stakeholders will

warrant action, having a process for collecting and assessing these

concerns is important for ensuring that managers are aware of

potential problems and can take sufficient action. 

NMFS NEEDS TO INCLUDE, IN ITS NEW

SET OF PROTOCOLS, ADDITIONAL

POLICIES AND PROCEDURES FOR

CALIBRATING, OPERATING, INSPECTING,

AND MAINTAINING SURVEY GEAR

For example, NMFS needs to 

■ address calibration issues that remain, despite improved

protocols for calibrating trawl cables; 

■ more completely address in the protocols concerns about

the condition and operation of the gear;

■ ensure, through instituting a better warehouse

management system, that inspection, maintenance, and

inventory records are complete and accurate; and

■ take specific measures to better ensure protocol

recommendations are followed.

NMFS ALSO NEEDS TO TAKE MORE

STEPS TO ENSURE THAT THE COST OF

GEAR-RELATED ACTIVITIES ARE

UNDERSTOOD BY DECISION-MAKERS

AND AGENCY MANAGERS

If such costs are not accurately reflected in budgets, NMFS risks

not having enough funding to support critical survey procedures,

such as calibration and maintenance, needed to maintain

consistent survey quality and, thus, accurate measures of relative

fish abundance. 

NOAA agreed with 15 of our 18 recommendations and in most

cases provided specific steps for implementing them. And

although NOAA only partially concurred with a recommendation

regarding evaluating an existing warehouse system for use by its

other science centers, its response appeared to address the intent

of our recommendation. (Science and Technology Audits:

STD-15750)

September 2003/Semiannual Report to Congress 31

National Oceanic and Atmospheric Administration
CHARGE OF PREFERENTIAL TREATMENT IN

CONTRACT AWARD PROMPTS AUDIT 

A U.S. company charged that it did not receive fair, equal, or appropriate treatment during

NIST’s procurement process and that the agency showed preferential treatment to a

foreign firm; the charge resulted in a letter from the Connecticut congressional

delegation to the Secretary of Commerce. The complaint involved a contract

awarded by NIST for a five-axis machining center to be used for several

purposes including performing metrology and machining experiments. In

December 2002 NIST forwarded to this office the delegation’s letter

requesting that we undertake a review of NIST’s procurement decision. 

In response, we audited the machining center contract and evaluated

whether NIST followed the correct contracting procedures for the

procurement, specifically addressing each of the concerns raised. We

found that one issue, which helped create confusion and

contradictions, was NIST’s citation of the wrong procurement law in

the solicitation document. 

The Buy American Act was cited as the legislation governing how

offers would be evaluated. In this instance, however, that law did not

apply because of the value of the procurement. The Buy American Act

generally is restricted to purchases valued at less than $169,000, that

are not domestic end products,17 and are to be used within the United

States. However, this procurement exceeded the dollar limitation of the

Buy American Act and was therefore subject to the Trade Agreements

Act, which waives the applicability of the Buy American Act for some

foreign supplies and construction materials. As a result, offers of foreign

end products from countries defined in the Federal Acquisition Regulation

(FAR) as a “designated country,” countries of the Caribbean Basin, and

member countries of the North American Free Trade Agreement (NAFTA)

receive the same consideration as offers from U.S. companies. 

Overall we concluded that NIST’s procedural errors had no effect on the ultimate

awarding of the contract. We recommended, however, that the NIST acting deputy

director instruct the chief of the Acquisition and Assistance Division to develop and

document procedures to ensure that all procurement actions comply with the provisions of the

FAR. We also recommended that the chief be instructed to ensure that clear, accurate, and concise

guidance is developed regarding how best value should be defined for procurement actions, as well as

how technical, past performance, and pricing reviews should be conducted when using the test program under

the simplified acquisition procedures,18 and ensure that the guidance is followed. 

32 U.S. Department of Commerce/Office of Inspector General

The

Technology

Administration

serves the needs of technologybased industry, advocates federal

actions and policies to speed the

transfer of technology from the

laboratory to the marketplace, and removes

barriers for commercializing new

technologies. It includes three major

organizations: 

Office of Technology Policy works to raise

national awareness of the competitive challenge,

promotes industry/government/ university

partnerships, fosters quick commercialization of

research results, promotes dedication to quality,

increases industry’s access to and participation in

foreign research and development, and encourages

adoption of global standards. 

National Institute of Standards and Technology

promotes U.S. economic growth by working to

develop and apply technology, measurements, and

standards. NIST manages four programs: the

Advanced Technology Program, the Manufacturing

Extension Partnership Program, the Baldridge

National Quality Program, and NIST Laboratories. 

National Technical Information Service is a

self-supporting agency that promotes the

nation’s economic growth and job creation by

providing access to information that

stimulates innovation and discovery.

NTIS accomplishes this mission

through information collection and

dissemination to the public and

through information and

production services to

federal agencies.

TECHNOLOGY

ADMINISTRATION

17 A domestic end product means an end product manufactured in the United States, if the cost of its components mined, produced, or manufactured

in the United States exceeds 50 percent of the cost of all its components. (Source: FAR Subpart 25.1)

18 FAR subpart 13.6 authorizes, as a test program, use of simplified procedures for the acquisition of supplies and services in amounts greater than the

simplified acquisition threshold but not exceeding $5 million.
NIST officials agreed with our recommendations and are in the

process of revising internal quality control policies and

procedures to address the issues. (Science and Technology

Audits: STD-15839)

NIST’S ADVANCED

TECHNOLOGY PROGRAM

AND MANUFACTURING

EXTENSION PARTNERSHIP

PROGRAM 

As part of its efforts to spur technological development, NIST

administers the Advanced Technology Program (ATP) to provide

financial assistance through cooperative agreements, with the

goal of transferring cutting-edge technology to industrial uses. In

addition, its Manufacturing Extension Partnership Program

(MEP) helps small and midsize companies integrate new

technologies and related management practices in order to

enhance their performance and productivity. MEP also provides

financial assistance through cooperative agreements. 

During this semiannual period we audited costs claimed under

four ATP awards and two MEP awards, for which we questioned

costs totaling more than $6.1 million and identified federal funds

be put to better use totaling more than $3.5 million. Summarized

below are the results of the audits.

EXCESSIVE DRAWDOWNS

PROMPT SUSPENSION OF

AWARD PAYMENTS

In September 2001 NIST awarded a $2 million ATP cooperative

agreement to a New York City firm that engineers technologies

for computer-aided surgery. The purpose of the project was to

develop and demonstrate innovative computerized anatomic

models for use in cancer therapy. The 3-year agreement required

a $110,500 cost-share, bringing total estimated project costs

to $2,110,500.

NIST officials requested an audit of the award due to concerns

about the company’s ability to account for federal funds spent.

Our audit revealed that the company (1) had not contributed any

of its required matching funds, (2) had drawn down $205,126 in

excess of the federal share of project costs, and (3) had filed

inaccurate financial reports to NIST by overstating expenses

to justify excess drawdowns. On the basis of our report,

NIST immediately suspended further award payments to

the company.

We recommended that NIST continue its suspension of award

payments until the company reimburses the $205,126 of

excessive drawdowns and submits accurate financial reports to

NIST. We further recommended that NIST designate the

company as “high risk” and place it on a reimbursement-only

payment basis if the suspension of award payments is removed.

(Atlanta Regional Office of Audits: ATL-16095)

ATP AWARD TERMINATED FOR

PREMATURE DRAWDOWNS 

In October 2001 NIST awarded a $1,907,201 Advanced

Technology Program cooperative agreement to a Torrance,

California, company involved in innovative composite design and

engineering. The purpose of the agreement was to develop a

unique high-speed manufacturing process to enable the efficient,

affordable manufacture of a new generation of advanced

electrical conductors as an upgrade for new or replacement power

transmission lines. The agreement was for a 2-year period with

$1,097,678 in funding for the first year and $809,523 for the

second year. The agreement required the company to provide a

matching share of $85,650 for each of the 2 years.

In February 2003 NIST suspended the cooperative agreement and

requested that OIG perform an audit. The company had drawn

down $781,200, or 97 percent of the year 2 funds, while only

reporting costs of $474,753. Moreover, the company was not

responding to NIST’s request for documentation related to the

difference of $306,447.

In March 2003 we issued an audit report that revealed that the

company had prematurely drawn down $306,447 of federal funds

for year 2. Our report recommended that NIST require the

company to reimburse the premature drawdown. NIST agreed

and gave the company until May 2003 to comply. When the

company failed to comply, NIST terminated the cooperative

agreement effective May 20, 2003, and established an account

receivable for $306,447.

Subsequent to our March 2003 report concerning the premature

drawdowns, we conducted a second audit of the award to assess

the allowability of project costs claimed. This second audit report

questioned costs totaling $668,153 due to lack of supporting

documentation for personnel, fringe benefits, equipment, and

accounting costs. We also found that the company had not

submitted financial reports required by the award.

We recommended that NIST disallow $668,153 in questioned

costs and require the company to reimburse excess federal

disbursements of $934,207, which includes the $306,447 in

premature drawdowns identified in our prior audit report.

(Atlanta Regional Office of Audits: ATL-15922-2)

September 2003/Semiannual Report to Congress 33

Technology Administration
CALIFORNIA-BASED COMPANY

CLAIMS $7 MILLION IN

UNALLOWABLE INDIRECT COSTS 

We performed audits of two NIST ATP joint venture cooperative

agreements awarded to a California-based company that

manufactures equipment for the semiconductor industry. The first

audit involved a September 2000 cooperative agreement in which

the company was the administrator of a three-member joint

venture. The 3-year award period of November 1, 2000, through

October 31, 2003, had total estimated costs of $13,719,717, with

the federal government’s share not to exceed $6,716,870, or

48.96 percent of allowable costs.

For the award period of November 1, 2000, through June 30,

2002, the company had submitted financial reports to NIST, on

behalf of the joint venture, claiming total project costs of

$5,531,718, which included $3,873,208 claimed by the

administrator company. The company provided cost schedules to

us indicating that it incurred an additional $1,516,106 that was

not reported to NIST, bringing the company’s total project costs

to $5,389,314.

Our audit revealed $1,500,048 of questioned indirect costs as a

result of unallowable items included in the company’s proposed

overhead and general and administrative cost pools. We

recommended that NIST disallow the questioned costs and

recover $17,894 of excess federal disbursements.

The second audit involved a September 1998 cooperative

agreement in which the company was originally a partner but

became the joint venture administrator when the original

administrator company withdrew from the joint venture. The

five-member joint venture, which includes two other for-profit

companies and two universities, was established to work on a

project involving intelligent control of the semiconductor

patterning process. The 44-month award period of January 1,

1999, through August 30, 2002, had total estimated costs of

$18,292,775, with the federal government’s share not to exceed

$9,110,456, or 49.8 percent of allowable costs.

For the award period of January 1, 1999, through June 30, 2002,

the company had submitted financial reports to NIST on behalf

of the joint venture, claiming total project costs of $18,466,959,

which included $12,803,256 claimed by the administrator

company. The company provided cost schedules to us indicating

that it had incurred an additional $848,438 that was not reported

to NIST, bringing the company’s total project costs to

$13,651,694.

Our audit revealed $5,657,069 of questioned costs, including (1)

$5,532,430 of indirect costs as a result of unallowable items

included in the company’s proposed overhead and general and

administrative cost pools, (2) $56,978 of salary and fringe

benefits costs, and (3) $67,661 in costs that were not included in

the company’s approved budget. We recommended that NIST

disallow the questioned costs and recover $1,983,936 of excess

federal disbursements. (Denver Regional Office of Audits: DEN14219-3-2 and -3)

EXCESS FEDERAL

DISBURSEMENTS TO

UNIVERSITY-BASED ENGINEERING

SERVICE TOTAL $771,555

In September 1999 NIST transferred an MEP cooperative

agreement from a state of Texas economic development agency

to an engineering service that is a component of a state university.

We performed an interim audit of the period September 1, 1999,

through January 31, 2001. After the September 1999 transfer,

the award provided funding for the engineering service’s

headquarters, a statewide office, and several subrecipient centers.

Our audit revealed questioned costs of $1,954,279, including

$1,610,252 in training costs primarily related to large

manufacturing firms, which are outside the scope of work of the

NIST award and are therefore not allocable to the award, and

$344,027 in facilities and administrative expenses charged in

excess of allowable expenses, based on negotiated indirect

cost-rate agreements. We also found that the recipient failed to

reconcile cost claims with approved budget categories. 

We recommended that NIST (1) disallow the questioned costs

and seek recovery of the resulting $771,555 in excess federal

disbursements, (2) direct the engineering service to prepare

financial analyses by award budget categories and obtain any

required approvals for award budget deviations, and (3) require

the engineering service to adjust subsequent financial reports to

eliminate these questionable items. Implementation of our

recommendations will result in $3,360,000 in funds being put to

better use during the remainder of the cooperative agreement

period. (Denver Regional Office of Audits: DEN-14401)

RECOVERY OF $1.6 MILLION

RECOMMENDED FROM

MASSACHUSETTS NONPROFIT

In March 2000 NIST transferred an MEP cooperative agreement

from a department of the Commonwealth of Massachusetts to a

local nonprofit organization. The original award to the state

had been made in 1998 for purposes of improving the

competitiveness and technical flexibility of small and mediumsize manufacturers in Massachusetts through improvements to

34

Technology Administration

U.S. Department of Commerce/Office of Inspector General
their manufacturing and training processes. The project had an

initial 1-year award period of February 9, 1998, through February

8, 1999, and estimated total costs of $7,045,045. The award was

amended twice in 1999 to extend the award period through

February 8, 2000, at an additional cost of $7,038,000, and to

provide Y2K funding in the amount of $1,305,226.

At the time of the transfer, the award had remaining federal funds

of $994,971, which were to be matched with $1,989,942 in cost

share, resulting in a federal cost-share of 33.33 percent of total

allowable costs. The transferred award has been amended several

times and now covers the period through April 30, 2004, with

estimated total costs of $43,652,897, including a federal share

of $14,541,155.

We audited the nonprofit’s cost claims for the period from the

transfer of the award, March 17, 2000, through June 30, 2001.

During this period, the recipient had claimed total costs of

$13,352,102, including a claim for preaward costs beginning

March 1, 2000, and received federal disbursements totaling

$3,689,510.

Our audit revealed questioned costs totaling $8,177,606,

including improper matching cost claims of $7,616,094,

unsupported contract costs of $513,333, and unallowable

preaward travel costs of $48,179. We also found weaknesses in

the recipient’s financial reporting system, resulting in a

$1,096,614 discrepancy between costs reported to NIST and

costs recorded in the organization’s accounting records. We

recommended that NIST disallow questioned costs of

$8,177,606, recover the federal share of $1,599,349, and

require the recipient to implement improvements to its

financial reporting system. (Denver Regional Office of Audits:

DEN-14422)

September 2003/Semiannual Report to Congress 35

Technology Administration
ALLEGATIONS OF PATENT CORPS WRONGDOING

REFLECT PROCEDURAL LAPSES RATHER THAN

INTENTIONAL MISDEEDS

In response to requests from a patent applicant, the Office of Inspector General looked into charges

that USPTO personnel had purposely mishandled two patent applications and had manipulated

the agency’s Patent Application Location and Monitoring (PALM) system for personal gain. 

We found no evidence of manipulation or falsification but concluded that the agency did fail

to meet appropriate time frames for processing three of the complainant’s petitions and two

amendments.19 In addition, data from USPTO’s PALM system indicated that the agency did

lose the two applications for 1 and 2 months, respectively. Further, it appears USPTO’s

failure to delineate all pertinent information in its communications with the applicant and its

use of vague terms, such as “promptly,” to describe time frames for certain steps in the

application process caused confusion and ultimately led to the complainant’s perception

of impropriety.

To resolve these weaknesses, we recommended that USPTO (1) quantify the term “promptly” as

it relates to agency responses to inquiries regarding an application’s status, (2) ensure that agency

correspondence clearly identifies every status inquiry being addressed, (3) give applicants clear

guidelines for submitting status inquiries, and (4) establish specific timeliness goals for handling and

responding to applicant petitions. 

USPTO concurred with all four of our recommendations. (Office of Inspections and Program Evaluations:

IPE-16083)

36 U.S. Department of Commerce/Office of Inspector General

The

United

States

Patent and

Trademark Office

administers the nation’s

patent and trademark laws.

Patents are granted and

trademarks registered under a

system intended to provide

incentives to invent, invest in

research, commercialize new

technology, and draw attention

to inventions that would

otherwise go unnoticed.

USPTO also collects,

assembles, publishes, and

disseminates

technological

information

disclosed in

patents. 

UNITED STATES PATENT AND

TRADEMARK OFFICE

19 An applicant may submit an amendment to change, add, or delete information in the patent application.
COMMERCE IT SECURITY CONTINUES

TO IMPROVE, BUT SHOULD REMAIN

A MATERIAL WEAKNESS 

OIG’s independent evaluation of the Department of Commerce’s information security

program and practices was conducted this year pursuant to the Federal Information

Security Management Act, which replaced the expiring Government Information

Security Reform Act in December 2002. Unlike in years past, we did not separately

evaluate and report on USPTO’s IT security, but rather incorporated that agency into

a single, Commerce-wide review. This consolidation is in keeping with OMB’s FY

2002 Report to Congress on federal government information security reform, in

which it combined USPTO with the rest of the Department. 

In general, we found that senior management continues to give attention to

information security. With support from the Deputy Secretary, the Department’s

chief information officer has worked hard to improve information security

throughout Commerce and has made noteworthy progress. The Department

issued a new security policy in January 2003 that comprehensively defines a

program for assuring the protection of agency information systems, and its

detailed requirements are helping improve the security programs of the operating

units. At USPTO, information security also continues to improve, and the agency

is well on its way to having systems certified and accredited.20

Considerable challenges remain, however, for both the Department and USPTO, and

as in the past 2 fiscal years, we again believe that both should report information

security as a material weakness until all systems considered national critical and mission

critical have been certified and accredited. 

Our specific findings are noted below, with those for USPTO separately summarized when warranted. 

Information Security in IT Service Contracts Is Improving, but Additional Efforts Are Needed. In last

year’s evaluation, we concluded that federal and departmental policy and guidance for incorporating security

provisions into IT service contracts were lacking. In the intervening year, the Department drafted a standard contract

provision for safeguarding the security of unclassified systems and information and developed acquisition-specific information

security training. While we noted some progress in incorporating security provisions into recent IT service contracts, there remains (1) a

general absence of provisions for controlling access to Department systems and networks; and (2) little evidence of contract oversight, or of

coordination among contracting, technical, and information security personnel in developing appropriate contract security requirements. 

The Department Has Established a Sound Plan of Action and Milestone (POA&M) Process. Commerce develops, implements, and

manages POA&Ms for all systems that have identified security weaknesses. System owners21 prepare the POA&Ms for their systems,

DEPARTMENT-WIDE

MANAGEMENT

The

United

States

Department of Commerce

promotes job creation and

improved living standards for all

Americans by creating

infrastructure that fosters economic

growth, technological competitiveness,

and sustainable growth. The Department

has three strategic goals:

Goal 1: Provide the information and the

framework to enable the economy to

operate efficiently and equitably. 

Goal 2: Provide the infrastructure

innovation to enhance American

competitiveness. 

Goal 3: Observe and manage the Earth’s

environment to promote sustainable

growth. 

The Department has also established

a Management Integration Goal

that is equally important to all

bureaus: Strengthen

management at all

levels.

September 2003/Semiannual Report to Congress 37

20 Certification is the formal testing and evaluation of the security safeguards on a computer system to determine whether they meet applicable

requirements and specifications. Accreditation is the formal authorization by management for system operation, including an explicit acceptance of risk.

21 The Department’s information security policy defines a system owner as a project manager with day-to-day management and operational control

over the system and direct oversight of the system/network administrators and operations staff. 
and the operating unit IT security officer prepares the POA&M

for the unit’s program. Units submit their POA&Ms to the

Department CIO monthly. Commerce monitors these plans

closely and uses them to manage corrective actions for identified

weaknesses. The CIO’s office intends to tie POA&Ms to the

Department’s system budget request in FY 2004. 

USPTO. The agency develops, implements, and manages

POA&Ms for all systems that have identified security

weaknesses. Beginning in FY 2004, it will join the rest of the

Commerce units in submitting its POA&Ms to the Department’s

CIO Office, for incorporation into Commerce’s consolidated

POA&M report to OMB.

Responsibilities and Authorities Are Clearly Specified. The

responsibilities and authorities for the Department’s CIO and

program officials have been clearly delineated in the new

information security policy. Accordingly, the CIO has primary

oversight of all aspects of Commerce’s information security

program and reports to the Deputy Secretary on the status of

information security within the Department. Operating unit heads

have explicit responsibility for the unit’s information security.

Program officials must ensure implementation of an effective

security program for the systems under their responsibility. 

USPTO. Responsibilities and authorities for the agency’s CIO

and program officials are delineated in its draft Agency

Administrative Order 212-4, Information Technology Security,

which is expected to be finalized by the end of the fiscal year. The

CIO and the Director of USPTO have initiated a concerted effort

to improve information security, and the results of their

commitment are evident in a considerably improved program. 

Significant IT Investments Require CIO Concurrence. No

operating unit can make a major IT investment without the

Department CIO’s review and concurrence. The unit’s CIO must

approve other significant IT investment proposals. 

USPTO. A management council consisting of the CIO and other

senior executives reviews and approves the agency’s budget,

including new IT investments having a life-cycle cost of more

than $100,000. 

Steps for Managing Life-Cycle Information Security Are

Prescribed. The Department’s new policy specifies the

requirements for managing information security for each system

life-cycle phase and makes the system owner primarily responsible

for fulfilling these requirements. Commerce has management and

oversight processes for ensuring life-cycle information security for

all but one phase—disposal—for which it lacks an oversight

mechanism. 

USPTO. USPTO’s draft policy states that information security is

managed throughout a system’s life cycle, but it does not clearly

delineate requirements by life-cycle phase—and such

information is also missing from the agency’s system life-cycle

management manual. These documents would be improved by

the addition of such information so that program officials and

system owners fully understand their roles. The draft policy

does describe information security oversight reviews to be

conducted at key system milestones. The certification testing

conducted this past year identified areas throughout the system

life cycle in which policies, procedures, and processes need to

be improved. 

Information Security and Critical Infrastructure Protection

Responsibilities Are Well Integrated, and Coordination with

Other Security Functions Is Increasing. Commerce’s critical

infrastructure and information security programs are under the

authority of the Department CIO and are highly integrated. The

Department’s policy delineates partnerships that must be

maintained with offices under the CFO that have other

security responsibilities, including the Office of Security, the

Office of Human Resources Management, and the Office of

Acquisition Management. 

USPTO. The agency’s draft policy addresses coordination and

cooperation between information security and other security

programs, including interface with USPTO’s physical security

and human resource offices. 

National- and Mission-Critical Asset Identification Efforts

Continue to Be Refined. Commerce has identified its nationalcritical assets but has not determined the interdependencies

among them. Both the Department and USPTO have identified

and continue to refine their mission-critical assets,22 and to the

extent that security plans for these systems follow the required

NIST guidance, they identify direct information-sharing

interconnections with other systems. As the Department

and USPTO define and document their enterprise architectures—

which show the relationship between business functions and the

technologies and information that support them—they should

identify any interrelationships with mission-critical systems. 

The Information Security Policy Has Requirements for

Documenting Incident Reporting Procedures. The policy

defines the types of incidents that need to be reported and

requires each operating unit to submit its response procedures to

Commerce’s CIO Office for review and approval. The policy

requires operating unit computer incident response teams

(CIRTs) and the Department’s CIRT to report incidents to the

Federal Computer Incident Response Center (FedCIRC), but

does not set a time frame for doing so. 

USPTO. USPTO has draft incident response procedures that,

while detailed and specific, do not provide a time frame for

38

Department-Wide Management

U.S. Department of Commerce/Office of Inspector General

22 USPTO has no national-critical assets.
reporting incidents to FedCIRC or require notifying OIG when

an incident occurs. 

Risk Assessments, Security Plans, and Testing of Security

Controls Continue to Need Serious Attention. Many risk

assessments and security plans throughout Commerce do not

provide essential information for determining appropriate system

security controls, and others contain inaccurate or inconsistent

information. Certifications were frequently granted without

careful review of the documentation and with little or no testing. 

USPTO. The agency’s one certified and accredited system had a

thorough risk assessment and comprehensive security and

contingency plans. Certification included extensive testing of

security controls that identified weaknesses in the system itself,

as well as organization-wide security issues. USPTO appears to

be using the same rigorous process for certifying and accrediting

its remaining systems. 

Information Security Awareness Training Is Being Addressed,

but Specialized Training Requirements Are Needed. The

Department requires security awareness training for new

employees and contractors, and annual refresher training for all

existing employees and contractors who have access to systems

containing sensitive information. The Department’s CIO appears

to be providing awareness refresher training to Commerce

employees and contractors. However, we found slow progress has

been made in providing specialized training for personnel with

significant information security responsibilities, and a pervasive

lack of understanding of the objectives and requirements of

system risk assessment, security planning, contingency planning,

and certification and accreditation. USPTO is also providing the

mandated annual awareness refresher training. 

The Department CIO Continues to Make Progress in

Improving Information Security. The Department CIO has

focused intensely on improving information security and has

made significant strides. In finalizing the new information

security policy, he gave Commerce a comprehensive blueprint for

securing agency information systems, and is making a

determined effort to effectively implement the security program.

Much remains to be done, however, particularly with regard to

ensuring that program and IT officials as well as personnel with

specialized information security roles understand their respective

responsibilities and have the knowledge and skills to carry them

out. The Department CIO Office is evaluating the performance of

all Commerce operating units to validate the security information

they report and assess the effectiveness of their information

security programs. 

USPTO. As mentioned earlier, USPTO is well on its way to

certifying and accrediting all of its mission-critical systems and

is using sound processes to do so. But it, too, has much to do to

facilitate program officials’ understanding and acceptance of

their more active role and increased accountability. The CIO is

working aggressively to bring these officials up to speed, and we

believe the CIO’s effort is essential to initiating and maintaining

an effective information security program. (Office of Systems

Evaluation: OSE-16146)

PREAWARD FINANCIAL

ASSISTANCE SCREENING

As part of our ongoing emphasis on prevention of fraud, waste,

and abuse, we continue to work with the Department, NOAA and

NIST grant offices, and EDA program offices to screen the

Department’s proposed grants and cooperative agreements before

they are awarded. Our screening serves two functions: it provides

information on whether the applicant has unresolved audit

findings and recommendations on earlier awards, and it identifies

any negative financial or investigative history on individuals or

organizations connected with a proposed award. 

During this period we screened 1,597 proposed awards. For 36 of

the awards, we found major deficiencies that could affect the

ability of the prospective recipients to maintain proper control

over federal funds. On the basis of the information we provided,

the Department delayed 35 awards and had special award

conditions established for 1 award. (Office of Audits)

Preaward Screening Results 

Award

Results Number Amount 

Awards delayed to resolve concerns 35 $69,376,233 

Special award conditions established 1 599,430 

NONFEDERAL AUDIT ACTIVITIES 

In addition to undergoing OIG-performed audits, certain

recipients of Commerce financial assistance are periodically

examined by state and local government auditors and by

independent public accountants. OMB Circular A-133, Audits of

States, Local Governments, and Non-Profit Organizations, sets

forth the audit requirements for most of these audits. For-profit

organizations that receive Advanced Technology Program funds

from NIST are audited in accordance with Government Auditing

September 2003/Semiannual Report to Congress 39

Department-Wide Management
Standards and NIST Program-Specific Audit Guidelines for ATP

Cooperative Agreements, issued by the Department. 

We examined 197 audit reports during this semiannual period to

determine whether they contained findings related to Department

programs. For entities represented in 125 of these reports the

Department acts as oversight agency and monitors compliance

with OMB Circular A-133 or NIST’s program-specific reporting

requirements. The other 72 reports are from entities for which

other federal agencies have oversight responsibility. We identified

33 reports with findings related to the Department of Commerce.

ATP 

OMB ProgramA-133 Specific 

Report Category Audits Audits Total 

Pending (April 1, 2003) 17 83 100 

Received 120 60 180 

Examined 113 84 197 

Pending (September 30, 2003) 24 59 83 

The following table shows a breakdown, by bureau, of the nearly

$441 million in Commerce funds audited.

Bureau Funds 

EDA $ 38,622,620 

NIST* 109,741,439 

NTIA 803,946 

NOAA 7,256,753 

Office of the Secretary 422,211 

Multiagency 281,984,459 

Agency not identified 1,733,963 

Total $ 440,565,391 

* Includes $104,270,562 in ATP program-specific audits.

We identified a total of $2,137,268 in questioned costs and

$456,398 in funds to be put to better use. In most reports the

subject programs were not considered major programs; thus the

audits involved limited transaction and compliance testing

against laws, regulations, and grant terms and conditions. The 33

reports with Commerce findings are listed in Appendix B-1.

(Atlanta and Denver Regional Offices of Audits)

40

Department-Wide Management

U.S. Department of Commerce/Office of Inspector General
IG’S TESTIMONY ON COMMERCE IT SECURITY

NOTES PROGRESS, COMMITMENT, BUT STILL

MUCH TO BE DONE

Commerce IG Johnnie Frazier and National Aeronautics and Space Administration IG Robert

Cobb described the status of IT security at their respective agencies during a June 24, 2003,

hearing before the U.S. House of Representatives’ Subcommittee on Technology, Information

Policy, Intergovernmental Relations and the Census, Committee on Government Reform.

The number of reported security incidents involving federal IT systems has skyrocketed

in recent years, prompting Congress, the administration, and inspectors general to give

close scrutiny to agency efforts to improve their IT security status. The Government

Information Security Reform Act has for the past 2 years required IGs to conduct

independent evaluations of their agencies’ IT security programs. This requirement

continued in fiscal year 2003 with enactment of the Federal Information Security

Management Act, which replaced GISRA. 

TESTIMONY CHARTS IMPROVEMENTS

UNDER GISRA

IG Frazier testified that 2 years ago, when he addressed the subcommittee about Commerce

IT security, the Department exhibited the six common IT security weaknesses identified by

OMB: (1) lack of senior management attention to IT security; (2) poor security education and

awareness among employees; (3) failure to fully fund and integrate security into the capital

planning and investment control process; (4) failure to ensure that contractor services are adequately

secure; (5) failure to detect, report, and share information on vulnerabilities; and (6) lack of IT security

performance measures. As a result of these and other weaknesses, OIG identified information security as a

top management challenge for Commerce and recommended that it be reported as a material weakness in fiscal

year 2001 and again in FY 2002,23 a recommendation the Department followed. Mr. Frazier reported that the Department

has improved in these six areas identified by OMB, but significant challenges remain. 

Senior management attention to IT security. Prior to GISRA, senior Department officials gave little regard to IT security. As a result,

Commerce’s IT policy was incomplete, out of date, and not enforced; systems had not been assessed for vulnerabilities nor certified as

secure. However, the Secretary of Commerce has since directed top officials to give high priority and sufficient resources to IT security

and to stress their leadership role in correcting deficiencies identified in OIG and General Accounting Office evaluations. Senior

Commerce managers were given specific responsibility for protecting the security of operations and assets they control. Our subsequent

reviews have noted this commitment at Commerce operating units, although some have been slower than others in giving the needed

level of attention.

Security education and awareness. In FY 2001, security training at Commerce was not conducted on a rigorous or ongoing basis. The

operating units have since made significant progress in providing awareness training to both employees and contractors. However, training

OFFICE OF

INSPECTOR GENERAL

OFFICE OF INSPECTOR GENERAL

U.S. DEPARTMENT OF COMMERC E

The

mission of

the Office of

Inspector General is to to

promote economy, efficiency,

and effectiveness and detect

and prevent waste, fraud, abuse,

and mismanagement in the

programs and operations of the

Department of Commerce. Through

its audit, inspection, performance

evaluation, and investigative efforts,

OIG proposes innovative ideas and

constructive solutions that lead to

positive internal and external changes

for the U.S. Department of Commerce.

By providing timely, useful, and

reliable information and advice to

departmental officials, the

administration, Congress, and the

public, OIG's work helps improve

the Department's management

and operations as well as its

delivery of services to the

public.

September 2003/Semiannual Report to Congress 41

23 OIG again recommended that IT security be reported as a material weakness in FY 2003, and as we went to press, the Department indicated that it

plans to do so.
for personnel with significant IT security responsibilities (e.g.,

system administrators, IT security officers) remains inadequate.

Funding and integrating security into the capital planning and

investment control process. Commerce ensures security is

planned at the earliest stages of a system’s life cycle by requiring

Department CIO concurrence for IT investment decisions

affecting all major systems. OIG reviews have determined that

capital asset plans developed by most operating units need to

better identify security risks throughout a system’s life cycle so

that security expenditures can be better developed and justified. 

Ensuring that contractor services are adequately secure. OIG

evaluations of IT service contracts revealed insufficient

federal and departmental guidance for ensuring that contract

documents contain adequate IT security provisions. At our

recommendation, the Department has drafted a standard IT

security contract provision. 

Detecting, reporting, and sharing information on

vulnerabilities. In FY 2001, OIG found that only 4 of 14

operating units had incident response capability, and that the

Department’s policy for reporting IT security incidents did not

specify notification of OIG. The Department has since

established a computer incident response team to support

operating units that had no response capability.

IT security performance measures. Two years ago, OIG reviews

found that nearly two-thirds of the Department’s systems lacked

risk assessments, almost half did not have a security plan, and

more than 90 percent were not certified or accredited. But by the

end of fiscal year 2002, 94 percent of systems had risk

assessments, 96 percent had security plans, and 77 percent were

certified and accredited. 

Mr. Frazier noted that, while this track record is impressive,

subsequent OIG evaluations suggest that the accreditation and

certification process is sometimes being shortcut: risk

assessments and security plans are sometimes inadequate, and

controls go untested, all of which undermines the reliability of

accreditation and certification in assuring that effective security

controls are in place. 

THE DEPARTMENT’S STATUS

AT FY 2003 YEAR-END

Since Mr. Frazier’s testimony, OIG has completed its FY 2003

independent evaluations of IT security under FISMA, which

update the Department’s security status described by Mr. Frazier

at the subcommittee hearing. Summaries of our findings appear

on pages 29 and 37 of this semiannual report. 

HIGHLIGHTS OF THE OFFICE

OF INVESTIGATIONS

The Office of Investigations (OI) systematically examines

suspected or alleged fraud, waste, abuse, and mismanagement by

Department of Commerce employees, contractors, recipients of

financial assistance, and others connected to the Department’s

programs and operations. These investigations typically

culminate in criminal and/or civil prosecution, as well as

administrative sanctions for violation of federal regulations and

the Standards of Ethical Conduct for Employees of the Executive

Branch. With a staff of criminal investigators deployed

throughout the United States, OI works in conjunction with the

Department of Justice and the Federal Bureau of Investigation to

investigate and prosecute those engaged in activities designed to

defraud Commerce and its component agencies. 

Section 812 of the Homeland Security Act of 2002 (P.L. 107-

296), recently passed by Congress and signed by the President,

will, when implemented, provide criminal investigators in this

and other OIGs headed by presidentially appointed inspectors

general, with statutory law enforcement authority to carry

firearms, make arrests, and execute search warrants. Until

then, investigators will retain law enforcement powers as special

deputy U.S. marshals under a memorandum of understanding

with the Department of Justice and the Federal Bureau

of Investigation.

OI continually seeks to reinvent itself and its methods for

preventing and detecting fraud, waste, and abuse by periodically

evaluating its operations to ensure that they are optimally

structured to protect the Department’s resources and the integrity

of its programs. These reviews help OI improve the timeliness of

its work, enhance its collaboration with Department employees

and program officials, and maximize the use of its limited

resources through greater interaction with other OIG

components. Within Commerce, OI has assumed a leadership

role among its law enforcement peers from other bureaus, and is

thus addressing issues that could potentially impact investigative

operations Department-wide. 

SIGNIFICANT INVESTIGATIVE

ACTIVITIES DURING THIS

SEMIANNUAL PERIOD 

NTIA SENIOR OFFICIAL COUNSELED ON

ETHICS REQUIREMENTS

OIG investigated allegations that a senior NTIA official

improperly accepted a gift from telecommunications industry

lobbyists in the form of a party at her home, and that the gift had

42

Office of Inspector General

U.S. Department of Commerce/Office of Inspector General
influenced the agency’s official position on a policy matter of

interest to the companies that hosted the party. Our investigation

did not substantiate the charge that the performance of official

duties was improperly influenced by the gift. It did, however,

disclose several violations of the Standards of Ethical Conduct on

her part, including prohibitions against accepting gifts from

persons or entities whose interests may be substantially affected

by the performance or nonperformance of the employee’s duties,

and engaging in or being party to actions that create the

appearance of improper conduct. The official, who has since left

federal service, was counseled about her responsibility for

maintaining the highest levels of integrity, including taking all

precautions necessary to avoid any appearance of impropriety.

(Washington Field Office)

SENIOR MBDA OFFICIAL REMINDED OF

ETHICS OBLIGATIONS

OIG initiated an investigation of a senior MBDA official after

receiving allegations that the official had improperly accepted

gifts and violated government travel and procurement

regulations. Our investigation substantiated only one instance of

impropriety—the official’s receipt of an unsolicited gift of Cuban

cigars, valued at approximately $100, from a person who had

business dealings with the Department. On advice from the

Office of General Counsel, the official subsequently paid the

donor the fair market value of the cigars. Based on our findings,

the MBDA official was reminded of the need for strict adherence

to the Standards of Ethical Conduct for Employees of the

Executive Branch regarding the receipt of gifts, particularly from

prohibited sources. (Silver Spring Resident Office)

FORMER NATIONAL WEATHER SERVICE

EMPLOYEE SENTENCED

In our March 2003 Semiannual Report (page 40) we reported the

theft conviction of a former National Weather Service employee,

who had misused a government purchase card to acquire more

than $70,000 worth of items for personal use. On June 20, 2003,

the defendant was sentenced in U.S. District Court for the Eastern

District of Virginia to 5 months’ imprisonment and 5 months’

home detention/electronic monitoring, and was ordered to pay

restitution to the government in the amount of $71,052.

(Washington Field Office)

FORMER CENSUS EMPLOYEE SENTENCED

FOR RECEIVING A GRATUITY

In our March 2003 issue (page 39) we reported the conviction of

a former community partnership specialist in the Census

Bureau’s Dayton, Ohio, regional office under 18 USC §201,

based on his acceptance of an illegal gratuity. The conviction

arose from a joint OIG/FBI investigation that disclosed he had

misused his position to solicit and receive at least $1,750 from

four vendors in exchange for favorable treatment in purchasing

promotional items for the 2000 Decennial Census campaign. On

May 30, 2003, the defendant was sentenced in U.S. District Court

for the Southern District of Ohio to 4 months’ home confinement

with strictly monitored work and medical release, 3 years’

probation, and a $1,000 fine. (Washington Field Office)

FORMER NOAA EMPLOYEE SENTENCED

FOR THEFT OF GOVERNMENT PROPERTY

An OIG investigation disclosed that a former NOAA program

support assistant, who also served as the official timekeeper for

her office, altered her time and attendance submissions after they

were certified by her supervisor, which resulted in an

overpayment of more than $18,000. We also found that she had

misused a government cellular telephone to make personal calls

costing more than $3,000. In July 2003 the former employee

pleaded guilty to a one-count information charging theft of

government property, and on September 4, 2003, was sentenced

in U.S. District Court for the District of Columbia to 3 years’

probation and full restitution in the amount of $21,716. (Silver

Spring Resident Office)

FORMER NOAA CONTRACTOR

EMPLOYEE SENTENCED FOR THEFT OF

GOVERNMENT PROPERTY

In our March 2003 issue (page 40) we reported that special agents

from the Commerce and General Services Administration OIGs

arrested a NOAA contractor employee after discovering a scheme

through which he allegedly charged more than $6,000 in

fraudulent purchases to a GSA fleet vehicle fuel card. In July

2003 the employee pleaded guilty to one count of theft of

government property in U.S. District Court for the District of

Maryland. On August 13, 2003, he was sentenced to 4 months of

incarceration in a halfway house, 3 years’ probation, restitution in

the amount of $6,342, and 120 hours of community service. In

addition, the individual’s employment with the contractor was

terminated. (Silver Spring Resident Office)

FORMER USPTO EMPLOYEE SENTENCED

FOR THEFT OF GOVERNMENT PROPERTY

In our March 2003 Semiannual Report (page 40) we reported the

theft conviction of a former USPTO employee who had used her

supervisor’s government purchase card number to make

unauthorized purchases totaling more than $2,000. On April 8,

2003, the defendant was sentenced in U.S. District Court for the

September 2003/Semiannual Report to Congress 43

Office of Inspector General
Eastern District of Virginia to 3 years’ probation and ordered to

make restitution to the government in the amount of $2,133.

(Silver Spring Resident Office)

FORMER EMPLOYEE SENTENCED FOR

MISREPRESENTATION OF STATUS

As reported in our March 2003 issue (page 41), a former OIG

employee now working in private industry pleaded guilty to a

one-count misdemeanor charge of violating 18 USC §712 after

our investigation confirmed that he had falsely represented

himself as an OIG employee in an attempt to obtain proprietary

information from a business competitor. On April 2, 2003, he was

sentenced in U.S. District Court for the District of Columbia to a

$1,000 fine, 2 years’ probation, and 50 hours of community

service. (Silver Spring Resident Office)

FORMER USPTO EMPLOYEE SENTENCED

FOR FRAUDULENT USE OF A SOCIAL

SECURITY NUMBER

OIG investigated allegations that a USPTO employee unlawfully

obtained the social security number and date of birth of a fellow

employee and used that information to open several credit card

accounts. Our investigation revealed that the employee had

obtained his colleague’s vital data from the colleague’s desk

drawer at a USPTO office in Crystal City, Virginia. Once the

credit cards were issued, he used them to make purchases and

cash withdrawals. On May 22, 2003, the employee pleaded guilty

in the U.S. District Court for the Eastern District of Virginia to a

one-count criminal information charging fraudulent use of a

social security number. On September 12, 2003, he was

sentenced to 2 years’ probation, and ordered to pay a $5,000 fine.

The employee was also removed from his position at USPTO.

(Silver Spring Resident Office)

FORMER GSA EMPLOYEE SENTENCED

FOR CREDIT CARD THEFT

A joint Commerce/GSA OIG investigation established that a

former GSA contractor employee, whose duties involved input of

purchase order data submitted by federal agencies, illegally

obtained and used Commerce government purchase card

numbers to acquire goods for her personal use. The individual

was arrested in Atlanta on August 25, 2003, by an OIG special

agent and the Atlanta Police Department and indicted on six

counts of credit card theft. She pleaded guilty to one count of

credit card theft and on September 30 was sentenced in Georgia

state criminal court to 3 years’ probation and 40 hours of

community service and ordered to pay restitution to the

government in the amount of $732.36. (Atlanta Field Office) 

FORMER NWS EMPLOYEE ACCEPTED

INTO PRETRIAL DIVERSION PROGRAM

An OIG investigation disclosed that a former purchasing agent

with the National Severe Storms Laboratory had used a

government purchase card to charge $8,000 worth of personal

items. She returned items totaling approximately $4,700 to the

government and was terminated from federal employment.

Appearing in the U.S. District Court for the Western District of

Oklahoma in September 2003, the employee agreed to pretrial

diversion, received 6 months’ probation and was required to pay

restitution to the government in the amount of $2,104. (Denver

Resident Office)

FORMER CENSUS EMPLOYEE

PLEADS GUILTY TO THEFT OF

GOVERNMENT PROPERTY

A joint OIG/FBI investigation disclosed that a former Census

payroll supervisor had embezzled approximately $2,500 from the

Bureau of the Census by issuing paychecks in the names of

several former Census employees, which she then deposited into

accounts belonging to her and her husband. The former employee

was indicted in U.S. District Court for the Middle District of

North Carolina on two counts of theft of government property.

On July 14, 2003, OIG and FBI special agents arrested her in

Stafford County, Virginia. Under the terms of a plea agreement,

the former employee entered a guilty plea of one count of theft of

government property on September 8, 2003. Sentencing is

scheduled for December 2003. (Silver Spring Resident Office)

TIMEKEEPER ARRESTED FOR

OVERTIME FRAUD

An administrative employee in the Office of the Secretary was

arrested and charged with first degree theft under the D.C.

Criminal Code after an OIG investigation revealed that she had

used her position as timekeeper to obtain nearly $3,300 in

overtime pay for hours she had not worked. As a result of the

investigation, in May 2003 the Office of the Secretary distributed

a memorandum to its staff requiring all employees to (1) obtain a

supervisor’s signature on their time and attendance sheet, and (2)

to properly receive overtime compensation, obtain signed

Authorization for Paid Overtime and Compensatory Time forms

for each occasion of overtime and submit the forms with the

appropriate time sheets. The memorandum also prohibited

timekeepers from processing their own time sheets. (Washington

Field Office)

44

Office of Inspector General

U.S. Department of Commerce/Office of Inspector General
RLF GRANT FUND ADMINISTRATORS

SUSPENDED FROM FEDERAL

PROCUREMENT AND

NONPROCUREMENT TRANSACTIONS

In our last issue (March 2003, page 39) we reported the

indictment and arrest of four individuals in Massachusetts for

misuse of EDA and other federal grant funds administered by a

municipal economic development organization. Among other

things, the organization operates an EDA-funded revolving loan

fund and a Small Business Administration loan program. On

April 25, 2003, all four individuals were prohibited from

participating in any procurement or nonprocurement transactions

with the executive branch of the federal government, based on the

88-count indictment charging conspiracy, federal program fraud,

false statements, and money laundering. (Washington Field

Office)

INVESTIGATION PROMPTS PROGRAM

CHANGES IN OFFICE OF THE SECRETARY

PROCUREMENT MANAGEMENT 

An OIG investigation into alleged irregularities in a Department

contract for elevator maintenance prompted the Office of the

Secretary to require, as of April 2003, that its contracting officer’s

technical representatives receive training regarding their roles

and responsibilities, job-related ethics, and conflicts of interest,

and that all members of procurement evaluation teams sign

conflict-of-interest and nondisclosure statements. (Washington

Field Office) 

NOAA CONTRACTOR FORCED TO PAY

EMPLOYEES’ BENEFITS

An OIG investigation disclosed that a NOAA janitorial contractor

failed to pay health and welfare benefits owed to seven of its

employees. As a result of the investigation, the contractor remitted

a total of $8,139 as full payment of their past-due benefits. The

contractor also agreed to pay correct wages and benefits as

stipulated in the NOAA contract. (Denver Resident Office)

INVESTIGATIVE STATISTICAL HIGHLIGHTS

FOR THIS PERIOD 

Criminal Investigative Activities 

Arrests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 

Indictments and informations . . . . . . . . . . . . . . . . . . . . . . .4 

Convictions and pretrial diversions . . . . . . . . . . . . . . . . . . .5 

Personnel actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 

Fines, restitutions, judgments and other

civil and administrative recoveries . . . . . . . . . . . . .$111,605 

Allegations Processed 

Accepted for investigation . . . . . . . . . . . . . . . . . . . . . . . . .46 

Referred to operating units . . . . . . . . . . . . . . . . . . . . . . . .56 

Evaluated but not accepted for investigation

or referral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 

TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .116 

THE PRESIDENT’S COUNCIL

ON INTEGRITY AND

EFFICIENCY

The presidentially appointed IGs work together, through the

President’s Council on Integrity and Efficiency (PCIE), to

address integrity, economy, and effectiveness issues. Likewise,

the IGs of designated federal entities work together to coordinate

their activities through the Executive Council on Integrity and

Efficiency (ECIE). Separately and together these councils

promote collaboration on issues that transcend individual federal

agencies and work to enhance the professionalism and

effectiveness of OIG personnel throughout the government. 

This year in its combined annual report to the President, the

councils offered impressive yearly statistics as well as a

combined assessment of their accomplishments for FY 2002,

reflecting the work of more than 11,000 OIG employees whose

combined efforts, taken together, produced 

■ potential savings of nearly $72 billion,

■ nearly 10,700 successful criminal prosecutions,

September 2003/Semiannual Report to Congress 45

Office of Inspector General
■ suspensions or debarments of more than 7,600

individuals or businesses,

■ almost 2,200 civil or personnel actions,

■ more than 5,700 indictments and criminal informations,

■ more than 234,000 complaints processed, and 

■ more than 90 testimonies before Congress.

Reaching across agency boundaries, PCIE and ECIE provide

leadership to the IG community, offering a forum for addressing

shared concerns. Six standing committees are maintained by the

two councils to examine crosscutting issues and assist ongoing

efforts such as developing core competencies to standardize

professional levels throughout the IG community. Commerce

Inspector General Johnnie Frazier is a member of PCIE and chair

of the PCIE Inspection and Evaluation Committee.

INSPECTION AND

EVALUATION COMMITTEE

A primary function of the Inspection and Evaluation (I&E)

Committee is to share ideas and develop better ways to

communicate inspection and evaluation policies and procedures

as well as findings and address cross-agency issues. By sharing

best practices, training, and professional insights, and undertaking

interagency projects, members of the committee more efficiently

and effectively conduct the business of their own units.

Last year’s publication of A Practical Guide for Reviewing

Government Purchase Card Programs was hailed by the IG

community as a valuable reference, offering those new to the

profession handy access to years of accumulated experience.

This year the committee is working to produce a guide to

reviewing travel card programs, a companion compilation of

solid advice from published OIG reports from multiple agencies.

This volume will serve as a convenient and experience-based

reference guide for conducting inspections and evaluations of

agency travel card programs. The guide outlines common

problems, preventive measures, and proven solutions as well as

best practices identified in the work of 25 OIGs that have

reviewed travel card programs. 

A more broadly based tool is the online Directory of OIG Reports

on both purchase and travel card use. The directory—a

searchable database of 125 reports—serves as a quick and useful

resource to anyone seeking to review or improve management of

purchase and travel card programs and is available at the

PCIE/ECIE web site, IGnet. 

Another project, a survey of OIG inspection and evaluation units,

is attempting to profile the 24 federal OIGs that have such units.

The purpose of this 2003 survey is to update what we know about

the inspections and evaluations community and share information

about operations, priorities, work products, and processes. The

survey will highlight the capabilities of the I&E community,

promote the sharing of ideas and techniques, and serve as a tool

to promote the value of the I&E concept, particularly to new

inspectors general. The survey will also help identify a broader

range of possibilities for joint OIG reviews and crosscutting

issues of concern to multiple OIGs. 

Updating the Quality Standards for Inspections is another

significant committee project. With OIGs’ use of inspections to

effectively review and improve their agency’s operations, it is

increasingly important to ensure that standards of quality are

consistent in the inspection process. PCIE developed, in 1993, a

set of standards to guide the conduct of inspection work. In

developing Quality Standards for Inspections, it was necessary to

reconcile several divergent points of view concerning the content,

application, and need for inspections standards. The updated

Quality Standards for Inspections will continue that tradition—

reflecting the consensus expressed by members of the IG

community, highlighting best practices as well as the most

effective and efficient processes and procedures. Consistent

application of the standards will protect the OIG community’s

reputation for impartiality, reliability, and credibility.

46

Office of Inspector General

U.S. Department of Commerce/Office of Inspector General
AUDIT RESOLUTION AND

FOLLOW-UP

The Inspector General Act Amendments of 1988 require us to

present in this report those audits issued before the beginning of

the reporting period (April 1, 2003) for which no management

decision had been made by the end of the period (September 30,

2003). There are no audit reports remaining unresolved in excess

of 6 months for this reporting period (see page 57).

Department Administrative Order 213-5, Audit Resolution and

Follow-up, provides procedures for management to request a

modification to an approved audit action plan or for a financial

assistance recipient to appeal an audit resolution determination.

The following table summarizes modification and appeal activity

during the reporting period.

TABLE 1. AUDIT RESOLUTION FOLLOW-UP 

Report Category Modifications Appeals 

Actions pending

(April 1, 2003) 0 13 

Submissions 0 17 

Decisions 0 9 

Actions pending

(September 30, 2003) 0 21 

September 2003/Semiannual Report to Congress 47

TABLES AND STATISTICS

STATISTICAL OVERVIEW

TABLES PAGE 

1. Audit Resolution Follow-Up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47 

2. Audit Statistical Highlights for this Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48 

3. Audits with Questioned Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49 

4. Audits with Recommendations that Funds Be Put to Better Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49 

APPENDIXES 

A. Report Types this Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50 

A-1. Performance Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50 

A-2. Financial-Related Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51 

A-3. Internal Quality Reviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51 

A-4. Inspections and Systems Evaluations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52 

B. Processed Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53

B-1. Processed Financial-Related Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
TABLE 2. AUDIT AND INSPECTION

STATISTICAL HIGHLIGHTS FOR THIS

PERIOD 

Questioned costs . . . . . . . . . . . . . . . . . . . . . . . . .$9,602,197 

Value of audit recommendations that

funds be put to better use . . . . . . . . . . . . . . . . . .15,129,418 

Value of audit recommendations

agreed to by management . . . . . . . . . . . . . . . . . .23,654,020 

DEFINITIONS OF TERMS USED

IN THE TABLES

Questioned cost: a cost questioned by OIG because of (1) an

alleged violation of a provision of a law, regulation, contract,

grant, cooperative agreement, or other agreement or document

governing the expenditure of funds; (2) a finding that, at the time

of the audit, such cost is not supported by adequate

documentation; or (3) a finding that an expenditure of funds for

the intended purpose is unnecessary or unreasonable.

Unsupported cost: a cost that, at the time of the audit, is not

supported by adequate documentation. Questioned costs include

unsupported costs.

Recommendation that funds be put to better use: an OIG

recommendation that funds could be used more efficiently if

Commerce management took action to implement and complete

the recommendation, including (1) reductions in outlays; (2)

deobligation of funds from programs or operations; (3)

withdrawal of interest subsidy costs on loans or loan guarantees,

insurance, or bonds; (4) costs not incurred by implementing

recommended improvements related to Commerce, a contractor,

or a grantee; (5) avoidance of unnecessary expenditures

identified in preaward reviews of contracts or grant agreements;

or (6) any other savings specifically identified.

Management decision: management’s evaluation of the findings

and recommendations included in the audit report and the

issuance of a final decision by management concerning

its response.

48

Office of Inspector General

U.S. Department of Commerce/Office of Inspector General

TABLE 3. AUDITS WITH QUESTIONED COSTS 

Report Category Number Questioned Costs Unsupported Costs 

A. Reports for which no management decision had been

made by the beginning of the reporting period 16 $ 8,464,702 $1,673,845 

B. Reports issued during the reporting period 32 9,602,197 1,907,114 

Total reports (A+B) requiring a management decision

during the reporting period1 48 18,066,899 3,580,959 

C. Reports for which a management decision was made

during the reporting period2 29 8,975,049 1,970,446 

i. Value of disallowed costs 7,996,801 6,041,856 

ii. Value of costs not disallowed 1,185,176 73,672 

D. Reports for which no management decision had been

made by the end of the reporting period 19 9,091,850 1,610,513 

1

Six 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 on line C because resolution may result in values greater than the original

recommendations.
September 2003/Semiannual Report to Congress 49

Office of Inspector General

TABLE 4. AUDITS WITH RECOMMENDATIONS THAT FUNDS BE PUT TO BETTER USE 

Report Category Number Value 

A. Reports for which no management decision had been made by the

beginning of the reporting period 9 $ 14,454,402 

B. Reports issued during the reporting period 10 15,129,418 

Total reports (A+B) requiring a management decision during the reporting period1 19 29,583,820 

C. Reports for which a management decision was made during the reporting period2 11 15,908,235 

i. Value of recommendations agreed to by management 15,657,219 

ii. Value of recommendations not agreed to by management 306,447 

D. Reports for which no management decision had been made by the end of the reporting period 8 13,675,585 

1

Six audit reports included in this table are also included in the reports with questioned costs (see table 3). However, the dollar amounts do not overlap.

2

In Category C, lines i and ii do not always equal the total on line C because resolution may result in values greater than the original recommendations.

APPENDIX A. REPORT TYPES

THIS PERIOD 

Number of Appendix

Type Reports Number 

Performance audits 7 A-1 

Financial-related audits 8 A-2 

Internal quality reviews 5 A-3 

Inspections and systems evaluations 9 A-4 

Total 32 
50

Office of Inspector General

U.S. Department of Commerce/Office of Inspector General

APPENDIX A-1. PERFORMANCE AUDITS 

Funds to 

Date Be Put to 

Report Title Report Number Issued Better Use 

Economics and Statistics Administration 

Census Bureau’s National Processing Center Needs to Improve

Controls Over Government Bills of Lading ESD-14911-3-0001 09/30/03 $2,045,304* 

National Institute of Standards and Technology 

Award for Five-Axis Machining Center Under RFQ SB1341-02-Q-0550

Justified but Procurement Process Needs Improvement STD-15839-3-0001 09/30/03 — 

National Oceanic and Atmospheric Administration 

Process for Reducing the Critical Hydrographic Survey Backlog

Lacks Key Management Controls STD-15120-3-0001 07/28/03 6,500,000 

Environmental Technology Laboratory Needs to Improve Internal

Controls for Accounting and Funds Management BTD-14852-3-0001 09/30/03 — 

Purchase Card Program at the Environmental Technology

Laboratory Needs Heightened Monitoring and Strengthened Internal Controls BTD-15139-3-0001 09/30/03 — 

Improvements Needed in the Reporting of Performance Measures

Related to Goals for Advancing Short-Term Warnings and Implementing

Seasonal to Interannual Climate Forecasts FSD-15643-3-0001 09/30/03 — 

Recent Gear Protocols Should Improve NMFS Groundfish

Bottom-Trawl Survey but More Should Be Done STD-15750-3-0001 09/30/03 — 

* Listed as questioned costs in audit report.
September 2003/Semiannual Report to Congress 51

Office of Inspector General

APPENDIX A-2. FINANCIAL-RELATED AUDITS 

Value of

Funds to Federal Federal

Date Be Put to Amount Amount

Report Title Report Number Issued Better Use Questioned Unsupported 

Economic Development Administration 

High Plains Development

Authority, Inc., MT DEN-15180-3-0001 07/22/03 $1,426,242 

Southside Planning District

Commission, VA ATL-15985-3-0001 09/11/03 1,136,348 $57,196 $48,447 

National Institute of Standards and Technology 

Computer Aided Surgery, Inc., NY ATL-16095-3-0001 07/25/03 205,126 

Massachusetts MEP DEN-14422-3-0001 08/27/03 2,725,596 

W. Brandt Goldsworthy &

Associates, Inc., CA ATL-15922-3-0002 09/04/03 613,097 613,097 

Texas Engineering

Extension Service DEN-14401-3-0001 09/24/03 3,360,000 771,555 

KLA-Tencor Corporation, CA DEN-14219-3-0002 09/30/03 702,022 

KLA-Tencor Corporation, CA DEN-14219-3-0003 09/30/03 2,595,463 

APPENDIX A-3. INTERNAL QUALITY REVIEWS 

OIG Division Report Number Date Issued 

Business and Trade Audits Division, Science and Technology Audits Division,

and Economics and Statistics Audits Division DEN-15928-1 8/11/03 

Financial Statements Audits Division DEN-15928-2 8/05/03 

Atlanta Regional Office of Audits DEN-15928-3 8/06/03 

Seattle Regional Office of Audits DEN-15928-4 8/11/03 

Denver Regional Office of Audits HQA-15928-5 8/04/03 
52

Office of Inspector General

U.S. Department of Commerce/Office of Inspector General

APPENDIX A-4. INSPECTIONS AND SYSTEMS EVALUATIONS 

Report Title Report Number Date Issued 

Bureau of Industry and Security 

Administrative Matters Concerning BIS’ Export Enforcement IPE-15155-2 6/4/03 

Economics and Statistics Administration 

MAF/TIGER Redesign Project Needs Management Improvements

to Meet Its Decennial Goals and Cost Objective OSE-15725 9/30/03 

International Trade Administration 

Generally Sound Operations at Commercial Service Greece Are

Compromised by Key Weaknesses IPE-15804 9/30/03 

National Oceanic and Atmospheric Administration 

Acquisition of NEXRAD Transition Power Source Marred by

Management, Technical, and Contractual Problems OSE-15676 9/30/03 

Stronger Security Controls Needed to Protect NESDIS’

Headquarters Local Area Network OSE-15996-1 9/22/03 

Additional Management Attention Needed to Ensure Implementation of

Effective Security Controls to Protect NESDIS’ Research Data System OSE-15996-2 9/22/03 

Stronger Security Controls Needed to Protect NMFS Information

Technology Systems OSE-15693 9/17/03 

U.S. Patent and Trademark Office 

OIG Review of Complaints and Concerns Related to USPTO’s

Handling of Patent Applications IPE-16083 9/30/03 

Office of the Secretary 

Independent Evaluation of the Department of Commerce’s

Information Security Program Under the Federal Information

Security Management Act OSE-16146 9/22/03 
September 2003/Semiannual Report to Congress 53

Office of Inspector General

APPENDIX B. PROCESSED REPORTS 

The Office of Inspector General reviewed and accepted 197 financial-related audit reports prepared by independent public

accountants and local, state, and other federal auditors. The reports processed with questioned costs, recommendations that funds

be put to better use, and/or nonfinancial recommendations are listed in Appendix B-1. 

Agency Audits 

Economic Development Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56 

National Institute of Standards and Technology* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .92 

National Telecommunications and Information Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 

National Oceanic and Atmospheric Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 

Office of the Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 

Multiagency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33 

Agency not identified . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .197 

*Includes 84 ATP program-specific audits.
54

Office of Inspector General

U.S. Department of Commerce/Office of Inspector General

APPENDIX B 1. PROCESSED FINANCIAL-RELATED AUDITS 

Value of

Funds to Federal Federal

Date Be Put to Amount Amount

Report Title Report Number Issued Better Use Questioned Unsupported

Economic Development Administration 

City of Picayune, MS ATL-09999-3-1356 06/11/03 $75,897 

Economic Development Fund of

Northern Vermont, Inc ATL-09999-3-1372 06/11/03 $234,340 

Operation Hope, Inc., CA ATL-09999-3-1424 06/11/03 9,105 

The Oceanic Institute and Subsidiary, HI ATL-99999-3-1385 06/11/03 562 

Native American Development

Corporation, MT ATL-09999-3-1468 09/16/03 112,500 

City of Blackfoot, ID ATL-09999-3-1550 09/16/03 92,805 

Idaho Innovation Center ATL-09999-3-1460 09/30/03 157,539 

Ark-Tex Council of Governments, TX ATL-09999-3-1525 09/30/03 

National Institute of Standards and Technology 

Adept Technology, Inc., CA ATL-09999-3-1203 05/05/03 122,678 $94,822 

Sarnoff Corporation, NJ ATL-09999-3-1318 05/05/03 27,045 

Industrial Virtual Reality, Inc., IL ATL-09999-3-1435 06/11/03 11,901 11,901 

Zyvex Corp., TX ATL-09999-3-1422 06/16/03 5,114 5,114 

Perceptron, Inc., MI ATL-09999-3-1288 06/25/03 27,591 17,425 17,425 

Applied Biosystems, CA ATL-09999-3-1428 06/26/03 43,570 43,570 

Ford Motor Company, MI ATL-09999-3-0676 06/27/03 

General Motors Corporation, MI ATL-09999-3-0906 06/27/03 

General Motors Corporation, MI ATL-09999-3-0907 06/27/03 

Electroplating Chemicals and Services, NY DEN-09999-3-1166 07/02/03 211,363 211,363 

Electroplating Chemicals and Services, NY DEN-09999-3-1167 07/02/03 5,699 5,699 
September 2003/Semiannual Report to Congress 55

Office of Inspector General

APPENDIX B 1. PROCESSED FINANCIAL-RELATED AUDITS (CONT’D.)

Value of

Funds to Federal Federal

Date Be Put to Amount Amount

Report Title Report Number Issued Better Use Questioned Unsupported

National Institute of Standards and Technology (cont’d.)

Embrex Inc., NC ATL-09999-3-1290 07/09/03 $ 48,743 $ 48,743 

Honeywell International, Inc., MN ATL-09999-3-1296 07/09/03 5,512 5,512 

GE Global Research, NY ATL-09999-3-1486 07/09/03 51,074 51,074 

Coventor, Inc., NC ATL-09999-3-1304 08/08/03 53,133 53,133 

General Motors Corporation, MI ATL-09999-3-0726 08/12/03 

Apelon, Inc., CT ATL-09999-3-1487 08/12/03 $36,928 12,452 12,452 

Cell Based Delivery, Inc., RI ATL-09999-3-1421 08/14/03 122,516 69,514 

Ximerex, Incorporated, NE DEN-09999-3-1331 08/18/03 57,361 57,361 

M & M Precision Systems Corporation, OH DEN-09999-3-1417 08/25/03 140,738 

i2 Federal, Inc., TX ATL-09999-3-1533 09/30/03 152,887 152,887 

National Oceanic and Atmospheric Administration 

The Oceanic Institute and Subsidiary, HI ATL-09999-3-1385 06/11/03 20,279 

National Telecommunications and Information Administration 

Blue Ridge Public Television, Inc., VA ATL-09999-3-1386 06/11/03 405,000 405,000 

Monroe Chamber of Commerce, LA ATL-09999-3-1508 09/30/03 323,820 

Office of the Secretary 

Minority Access, Inc., MD ATL-09999-3-1524 09/30/03 8,089 
4(A)(2): REVIEW OF LEGISLATION

AND REGULATIONS

This section requires the inspector general of each agency to

review existing and proposed legislation and regulations relating

to that agency’s programs and operations. Based on this review,

the inspector general is required to make recommendations in the

semiannual report concerning the impact of such legislation or

regulations on the economy and efficiency of the management of

programs and operations administered or financed by the agency

or on the prevention and detection of fraud and abuse in those

programs and operations. Comments concerning legislative and

regulatory initiatives affecting Commerce programs are

discussed, as appropriate, in relevant sections of the report.

SECTION 5(A)(3): PRIOR SIGNIFICANT

RECOMMENDATIONS UNIMPLEMENTED

This section requires identification of each significant

recommendation described in previous semiannual reports for

which corrective action has not been completed. Section 5(b)

requires that the Secretary transmit to Congress statistical tables

showing the number and value of audit reports for which no final

56 U.S. Department of Commerce/Office of Inspector General

REPORTING REQUIREMENTS

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

below and indexed to the applicable pages of this report.

Section Topic Page 

4(a)(2) . . . . . . . . . . . . . . . . . . . . .Review of Legislation and Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56 

5(a)(1) . . . . . . . . . . . . . . . . . . . . .Significant Problems, Abuses, and Deficiencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16-40 

5(a)(2) . . . . . . . . . . . . . . . . . . . . .Significant Recommendations for Corrective Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16-40 

5(a)(3) . . . . . . . . . . . . . . . . . . . . .Prior Significant Recommendations Unimplemented . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56 

5(a)(4) . . . . . . . . . . . . . . . . . . . . .Matters Referred to Prosecutive Authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16-40 

5(a)(5) and 6(b)(2) . . . . . . . . . . . Information or Assistance Refused . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42-45 

5(a)(6) . . . . . . . . . . . . . . . . . . . . .Listing of Audit Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47-55 

5(a)(7) . . . . . . . . . . . . . . . . . . . . .Summary of Significant Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16-40 

5(a)(8) . . . . . . . . . . . . . . . . . . . . .Audit Reports—Questioned Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49 

5(a)(9) . . . . . . . . . . . . . . . . . . . . .Audit Reports—Funds to Be Put to Better Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49 

5(a)(10) . . . . . . . . . . . . . . . . . . . .Prior Audit Reports Unresolved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57 

5(a)(11) . . . . . . . . . . . . . . . . . . . .Significant Revised Management Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57 

5(a)(12) . . . . . . . . . . . . . . . . . . . .Significant Management Decisions with which OIG Disagreed . . . . . . . . . . . . . . . . . . . . . . .57 
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, costly,

unwieldy, and of limited value to Congress. Any list would have

meaning only if it explained whether adequate progress is being

made to implement each agreed-upon corrective action.

Management updates the Department’s Audit Tracking System

annually, most recently as of July 2003. 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 such instances during this

semiannual period and no reports to the Secretary.

SECTION 5(A)(10): PRIOR AUDIT

REPORTS UNRESOLVED

This section requires a summary of each audit report issued

before the beginning of the reporting period for which no

management decision has been made by the end of the reporting

period (including the date and title of each such report), an

explanation of why a decision has not been made, and a statement

concerning the desired timetable for delivering a decision on each

such report. There were no unresolved audits more than 6 months

old.

SECTION 5(A)(11): SIGNIFICANT REVISED

MANAGEMENT DECISIONS

This section requires an explanation of the reasons for any

significant revision to a management decision made during the

reporting period. Department Administrative Order 213-5, Audit

Resolution and Follow-up, provides procedures for revising a

management decision. For performance audits, OIG must be

consulted and must approve in advance any modification to an

audit action plan. For financial assistance audits, OIG must

concur with any decision that would change the audit resolution

proposal in response to an appeal by the recipient. The decisions

issued on the nine appeals of audit-related debts were finalized

with the full participation and concurrence of OIG.

SECTION 5(A)(12): SIGNIFICANT

MANAGEMENT DECISIONS WITH WHICH

OIG DISAGREED

This section requires information concerning any significant

management decision with which the inspector general disagrees.

Department Administrative Order 213-5 provides procedures for

elevating unresolved audit recommendations to higher levels of

Department and OIG management, including their consideration

by an Audit Resolution Council. During this period no audit

issues were referred to the council.

September 2003/Semiannual Report to Congress 57

Reporting Requirements
58 U.S. Department of Commerce/Office of Inspector General

ACRONYMS

ATP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Advanced Technology Program

BEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Bureau of Economic Analysis

BIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Bureau of Industry and Security (formerly Bureau of Export Administration)

CAMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Commerce Administrative Management System

CIRT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .computer incident response team

CIO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .chief information officer

CMM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Capability Maturity Model®

COOP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .continuity of operations plans

COTR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .contracting officer's technical representative

COTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .commercial off-the-shelf

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

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

ETL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Environmental Technology Laboratory

FAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Federal Aviation Administration

FAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Federal Acquisition Regulation

FedCIRC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Federal Computer Incident Response Center

FISMA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Federal Information Security Management Act

GBL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .government bill of lading

GISRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Government Information Security Reform Act

GPRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Government Performance and Results Act

GSA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .General Services Administration

GWAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .government-wide agency contract

IAIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Information Analysis and Infrastructure Protection

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

LAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .local area network

MAF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .master address file

MBDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Minority Business Development Agency

MBE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .minority-owned business

MBOC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Minority Business Opportunity Committee

MEP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Manufacturing Extension Partnership
September 2003/Semiannual Report to Congress 59

Semiannual Report to Congress, September 2003

NAFTA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .North American Free Trade Agreement

NDAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .National Defense Authorization Act

NEFSC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Northeast Fisheries Science Center

NESDIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .National Environmental Satellite, Data, and Information Service

NEXRAD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Next Generation Weather Radar

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

NMFS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .National Marine Fisheries Service

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

NPC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .National Processing Center

NTIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .National Telecommunications and Information Administration

NWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .National Weather Service

OAM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Office of Acquisition Management

OCS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Office of Computer Services

OEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Office of Export Enforcement

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

OLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Office of Law Enforcement

OMB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Office of Management and Budget

PALM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Patent Application Location and Monitoring

PCIE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .President's Council on Integrity and Efficiency

POA&M . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Plan of Action and Milestone

OAM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Office of Acquisition Management

OMB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Office of Management and Budget

OEP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .occupant emergency plan

OOS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Office of Operational Systems

RDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Research Data System

RLF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .revolving loan fund

ROC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Radar Operations Center

SCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .senior commercial officer

TA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Technology Administration

TIGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Topologically Integrated Geographic Encoding and Referencing

TPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .transition power source

US&FCS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.S. and Foreign Commercial Service

USPTO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.S. Patent and Trademark Office

WAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .wide area network
September 2003