U.S. Department of Commerce 

Office of Inspector General 

Semiannual Report to Congress
 

September 2014 
OFFICE OF 

INSPECTOR GENERAL 

Office of Counsel 

Office of 

Administration 

Office of Audit 

and Evaluation 

Office of 

Investigations 

Deputy 

Inspector General 

Inspector General 

Oversight Areas 

Office of the Secretary 

Bureau of Economic Analysis 

Bureau of Industry and Security 

Economic Development Administration 

Economics and Statistics Administration 

International Trade Administration 

Minority Business Development Agency 

National Institute of Standards and Technology 

National Oceanic and Atmospheric Administration 

National Technical Information Service 

National Telecommunications and 

Information Administration 

U.S. Census Bureau 

U.S. Patent and Trademark Office 

OIG Main Number 

Inspector General. . . . . . . . . . . . . . . . . . . . . . . . . . .202.482.4661 

OIG Hotline 

Telephone. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .202.482.2495 

or 800.424.5197 

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or 800.854.8407 

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U.S. Department of Commerce 

Office of Inspector General 

Semiannual Report to Congress
 

September 2014 
 

 

TABLE OF 


CONTENTS
 

01 FROM THE INSPECTOR GENERAL 

02 TOP MANAGEMENT CHALLENGES FACING THE DEPARTMENT 

06 OVERSIGHT AREAS 

06 DEPARTMENT-WIDE MANAGEMENT 

12 BUREAU OF INDUSTRY AND SECURITY 

14 ECONOMICS AND STATISTICS ADMINISTRATION 

18 INTERNATIONAL TRADE ADMINISTRATION 

20 NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION 

28 UNITED STATES PATENT AND TRADEMARK OFFICE 

32 AMERICAN RECOVERY AND REINVESTMENT ACT 

36 WORK IN PROGRESS 

40 STATISTICAL DATA 

50 REPORTING REQUIREMENTS 

52 ACRONYMS AND ABBREVIATIONS 
1 

FROM THE 

INSPECTOR GENERAL 

I am pleased to present the Department of Commerce Office of Inspector General’s 

Semiannual Report to Congress for the 6 months ending September 30, 2014. 

This report summarizes work we initiated and completed during this semiannual 

period on a number of critical departmental activities. Over the past 6 months, our 

office completed 18 audits, inspections, responses to Congressional requests, and 

public investigative reports, and 2 Congressional testimonies addressing programs 

and personnel associated with the Bureau of Industry and Security, Economics 

and Statistics Administration, International Trade Administration, National Oceanic 

and Atmospheric Administration, National Telecommunications and Information 

Administration, U.S. Patent and Trademark Office, and the Department itself. 

In September 2014, we issued a draft of our annual report identifying what we 

consider from our oversight perspective to be the top management challenges 

facing the Department in fiscal year 2015, a summary of which begins on page 2. 

We will continue to work closely with the Department and with Congress to meet 

these and other challenges facing Commerce, especially as it tackles the ambitious 

strategies and initiatives outlined in America Is Open for Business, its strategic plan 

for fiscal years 2014–18. 

Also during this reporting period we entered into an agreement with the Denali 

Commission to provide a full range of inspector general services, including 

investigating hotline complaints. David Sheppard, our Regional Inspector General, 

Seattle, is serving as acting inspector general for the Denali Commission until a 

permanent inspector general is selected. 

We thank Secretary Pritzker, senior officials throughout the Department, and members 

of Congress and their staffs for their support of our work and for their receptiveness 

to our recommendations to improve Commerce programs and operations. 

TODD J. ZINSER
 
2 Office of Inspector General | Semiannual Report to Congress | September 2014

TOP MANAGEMENT 

CHALLENGES FACING 

THE DEPARTMENT 

The Reports Consolidation Act of 2000 requires federal inspectors general 

to identify the top management challenges facing their departments. In June 

2014, OIG issued to the Department of Commerce and its agencies a 

memorandum that previewed what we would discuss in further detail in our 

forthcoming report for fiscal year 2015, Top Management Challenges Facing 

the Department of Commerce. In the memorandum, we identified five areas 

of major challenges—cross-cutting issues grouped together in alignment 

with the Department’s FY 2014–18 strategic plan, which was released on 

March 10, 2014. We issued a draft report on September 19, 2014; our final 

report will be issued in October 2014. 

1. TRADE AND INVESTMENT 

Expand the U.S. economy through increased exports and inward foreign investment 

that lead to more and better American jobs 

As the lead trade and investment promotion agency in the federal government, the Department 

of Commerce faces the challenge of ensuring that it fulfills its role as a key player in making U.S. 

companies more competitive abroad and attracting foreign investment into the United States. 

Several bureaus that hold pivotal roles in supporting U.S. trade and investment face a variety of 

challenges. We have identified four key areas for management attention: 

•	 Delivering trade promotion and enforcement services to the Department’s clients and 

effectively working with federal partners by (a) realizing the benefits of the consolidation and 

reorganization of the International Trade Administration (ITA) and (b) improving ITA’s Customer 

Tracking System/customer relationship management system. 

•	 Continuing the Bureau of Industry and Security’s migration of export licensing functions to 

the Department of Defense’s USXPORTS system and working to fully implement the changes 

called for by the Export Control Reform Initiative. 

•	 Addressing conditions and issues with the Economic Development Administration’s Revolving 

Loan Fund Program. 

•	 Ensuring the accuracy of grants management financial and performance metrics. 

2. INNOVATION 

Foster a more innovative U.S. economy—one that is better at inventing, improving, 

and commercializing products and technologies that lead to higher productivity and 

competitiveness 
Top Management Challenges Facing the Department 3 

As much as half of U.S. economic growth can be attributed to advances in science, technology, 

and business processes. The Department of Commerce has a central responsibility for supporting 

and expanding innovation, and has the relationships with businesses and industry necessary 

to address the challenges the country faces in this area. We have identified three key areas for 

management attention: 

•	 Facing internal and external challenges at the U.S. Patent and Trademark Office in promoting 

innovation through the protection of intellectual property rights by (a) reducing wait times for 

issuing determinations on new patent applications, appeals, and other filings, (b) assisting 

U.S. companies to protect and enforce intellectual property (IP) rights and providing technical 

assistance to the Office of the U.S. Trade Representative to implement IP rights provisions in 

international agreements, (c) responding to stakeholder concerns about patent quality, and 

(d) managing a larger and more dispersed workforce. 

•	 At the National Telecommunications and Information Administration, (a) identifying spectrum 

for commercial broadband use, (b) addressing the First Responder Network Authority’s 

implementation of a nationwide wireless broadband network for public safety users, and 

(c) paying close attention to the sustainability of Broadband Technology Opportunities Program 

grants after the federal funds end. 

•	 Completing the re-competition of Manufacturing Extension Partnership centers by the National 

Institute of Standards and Technology. 

3. ENVIRONMENT 

Ensure communities and businesses have the necessary information, products, and 

services to prepare for and prosper in a changing environment 

The Department’s objectives under its environmental strategic goal include advancing 

understanding and prediction of changes in the environment; building a weather-ready nation; 

and fostering healthy and sustainable marine resources, habitats, and ecosystems. As the lead 

agency for addressing this goal, the National Oceanic and Atmospheric Administration (NOAA) 

faces challenges posed by costly, complex satellite acquisitions and development and potential 

data gaps; efforts to improve forecast accuracy; the competing needs of fisheries stakeholders; 

and limited marine technology. We have identified the following three key areas for management 

attention: 

•	 Keeping next-generation satellite acquisition programs on track to provide critical 

environmental observations. For the Geostationary Operational Environmental Satellite-R 

Series (GOES-R), this requires managing program costs, schedule milestones, and system 

requirements, as well as avoiding potential gaps in geostationary satellite coverage; for the 

Joint Polar Satellite System (JPSS), this requires developing and launching next-generation 

polar-orbiting satellites. 

•	 Improving forecasts to support a weather-ready nation. While there has been some evidence 

that next-generation polar satellite data from Suomi National Polar-orbiting Partnership has 

improved forecasts, a coverage gap could affect accuracy; addressing that risk requires the 

Department to develop a contingency plan. 

•	 Fostering healthy and sustainable marine resources. NOAA and its National Marine Fisheries 

Service are challenged to improve oversight of fisheries management, maintain relationships 

with and among competing stakeholders, incorporate timely fisheries science and technology, 

and address issues related to its National Observer Program. 
4 Office of Inspector General | Semiannual Report to Congress | September 2014

4. DATA 

Improve government, business, and community decisions and knowledge by 

transforming Department data capabilities and supporting a data-enabled economy 

The Department’s “Data” challenge, and its three strategic objectives, impacts the Economics and 

Statistics Administration and the U.S. Census Bureau, as well as NOAA. We have identified the 

following three key areas for management attention: 

•	 Incorporating cost-saving decennial innovations while continuing to ensure an accurate 

decennial count. Due to research and testing delays, a lack of cost and budget integration, 

and other issues, the Census Bureau is challenged with designing a more cost-effective 

2020 decennial census. 

•	 Meeting public demand for data. Providing as well as protecting data served by rapidly 

changing technology is another key challenge faced by the Census Bureau and NOAA; the 

population data and business indicators that the Census Bureau provides (and the weather, 

climate, and environmental information that users access through NOAA) illustrate the 

Department’s challenge of “transforming Department data capabilities and supporting a 

data-enabled economy.” 

•	 Implementing a mandate for government-wide data standards. The Digital Accountability and 

Transparency Act of 2014 promises to form a federal government-wide community of data 

providers adhering to uniform standards; the Department plans to hire its first-ever “Chief Data 

Officer” to develop and implement a vision for the future of the Department’s diverse 

data resources. 

5. OPERATIONAL EXCELLENCE 

Deliver better services, solutions, and outcomes that benefit the American people 

The Department characterizes the goal as being responsive, nimble, and adaptive to fast changes. 

This goal’s objective calls on all facets of the Department to maintain “customer-focused” drive. 

We have identified the following four key areas for management attention: 

•	 Improving cybersecurity and IT management. The Department relies on more than 280 IT 

systems, including 20 high-impact systems, to support its business operations; persistent 

security deficiencies and a long-standing fragmented IT governance structure challenge the 

Department’s cybersecurity. 

•	 Strengthening stakeholder confidence in the Department. Over the past 2 years, the 

Department and its bureaus have worked closely with OIG to resolve management issues 

raised through OIG hotline complaint referrals; timely and thorough actions to resolve these 

issues help create a culture of accountability in the Department. 

•	 Improving financial data quality. The lack of centralized data systems creates reporting and 

oversight challenges for the Department, including the ability to effectively report financial 

data and monitor financial activity across its bureaus; significant control weaknesses related 

to the financial accounting for NOAA satellites, financial management issues within the Office 

of the Secretary’s Working Capital Fund, and turnover within NOAA’s financial management 

leadership ranks present further challenges. 

•	 Reducing acquisition risk. Continuing to address high-risk contracts, better monitoring of 

contractor performance, and maintaining a qualified acquisition workforce will enable better 

management of the Department’s day-to-day spending. 

DEPARTMENT-WIDE MANAGEMENT
 

The U.S. Department of Commerce works to help American 

companies become more innovative and successful at home and more 

competitive abroad. It creates the conditions for economic growth and 

opportunity by promoting innovation, entrepreneurship, competitiveness, 

and stewardship. 

The Department accomplishes its mission by providing national and 

local weather services; developing key economic and demographic 

data (including the Census); advancing technological and scientific 

innovation; protecting and restoring environmental resources; promoting 

international trade; and supporting local, regional, and national economic 

development. These activities affect U.S. business and industry daily and 

play a critical role in the nation’s economic well-being. 
Department-Wide Management 7 

COMPLETED WORKS (BY OVERSIGHT AREA) 

During this reporting period, OIG completed 18 audits, inspections, responses to Congressional 

requests, and public investigative reports, and two Congressional testimonies. 

5 

1 

3 

1 

6 

3 

1 

Department-widea BIS ESAb ITA NOAA USPTO Recovery Act c 

a Department-wide completed works include one Congressional testimony.
 

b ESA-completed works concern the Census Bureau and include one Congressional testimony.
 

c The Recovery Act work concerns NTIA.
 

FY 2013 COMPLIANCE WITH IMPROPER PAYMENT REQUIREMENTS (OIG-14-016-I) 

We initiated this engagement to review the Department’s compliance with the Improper Payments 

Information Act of 2002 (IPIA) and the Office of Management and Budget’s (OMB) governmentwide implementation guidance. 

The Department implemented procedures in FY 2013 to detect 

and prevent improper payments. These assessments revealed no 

programs or activities susceptible to significant risk of improper 

payments. In addition, the Department’s review did not identify 

any significant improper payments among its approximately 

$13.7 billion in outlays. The Department’s routine monitoring efforts 

in FY 2013 identified almost $9.2 million in overpayments, of 

which more than $5 million was confirmed by the Department as 

recaptured. Based on these activities, we found the Department 

met the applicable OMB criteria for compliance with IPIA. The 

Department has also implemented corrective actions to address 

the finding identified in our March 2013 report on improper 

payment practices and reporting. 

Improper Payments Legislation 

The Improper Payments Elimination and Recovery Act of 

2010 and Improper Payments Elimination and Recovery

Improvement Act of 2012 amended the Improper

Payments Information Act of 2002 by expanding on

the previous requirements and broadening recovery

requirements for overpayments. (Improper payments are

those the federal government has made in the wrong

amount, to the wrong entity, or for the wrong reason.) 

While the Department met the applicable compliance requirements 

for FY 2013, we determined that the Department could further improve its improper payment 

practices related to bureau reporting of quarterly improper payment data. 

We recommended that the Deputy Chief Financial Officer and Director for Financial Management 

enhance the Department’s processes to ensure that bureaus specifically provide, in their quarterly 
8 Office of Inspector General | Semiannual Report to Congress | September 2014

improper payment reporting, the status of unresolved audits identified in prior years and whether 

any improper payments were identified and recaptured upon final resolution. 

INADEQUATE PRACTICE AND MANAGEMENT HINDER DEPARTMENT’S INCIDENT 

DETECTION AND RESPONSE (OIG-14-017-A) 

As part of our Federal Information Security Management Act of 

2002 (FISMA) audit work, we evaluated incident detection and 

response capabilities at the Bureau of Economic Analysis, Bureau

of Industry and Security, International Trade Administration, and 

United States Patent and Trademark Office. We also evaluated 

these capabilities at the Herbert C. Hoover Building Security

Operations Center (SOC) within the Office of the Secretary. 

Our objective in conducting this audit was to determine whether

key security measures are in place to adequately monitor networks,

detect malicious activities, and handle cyber incidents.

We found that 

•	 bureaus’ actions in response to suspicious network activities may not stop cyber attacks in a 

timely manner; and 

•	 lack of collaboration prevents the bureaus from realizing the full benefits of incident detection 

and response capabilities provided by Managed Trusted Internet Protocol Services (MTIPS). 

We recommended that the Department’s Chief Information Officer work with the bureaus’ 

management to ensure that 

•	 bureaus follow the National Institute of Standards and Technology’s Computer Security 

Incident Handling Guide to take timely action in response to potential cyber attacks; 

•	 bureaus without around-the-clock SOC coverage work with the MTIPS provider to evaluate 

MTIPS services to fill gaps in SOC coverage after business hours; 

•	 bureaus interact with the MTIPS provider to (a) explore opportunities that leverage MTIPS 

services to reduce or eliminate security services currently handled by the bureau and (b) 

ensure that MTIPS security services are fully delivered and effectively utilized; and 

•	 there should be a determination of the feasibility and cost effectiveness of independently 

assessing incident management capabilities at all bureaus’ SOCs. 

Federal Information Security 

Management Act of 2002 

This legislation requires federal agencies to establish 

incident response capabilities, among other provisions. 

Performing incident response effectively is a complex 

undertaking that requires continual monitoring for attacks; 

establishing clear procedures for prioritizing the handling 

of incidents; collecting, analyzing, and reporting data; and 

communication within and outside of the organization. 

OFFICE OF THE SECRETARY’S WORKING CAPITAL FUND BILLING CONTROL ISSUES 

RESULTED IN INCORRECT CHARGES (OIG-14-020-A) 

We reviewed 34 projects managed by 9 Commerce offices that provide services to 

13 Departmental customers. For 10 of the projects reviewed, we found that the Office of the 

Secretary Financial Management (OSFM) did not use current billing rates and the service 

providers (e.g., the Office of General Counsel) did not have accurate supporting documentation 

for the amounts they charged to their customers. Consequently, the customers receiving services 

were not billed in accordance with the Department’s Working Capital Fund & Advances and 

Reimbursements Handbook. 
Department-Wide Management 9 

Specifically, we found that 

•	 OSFM relied on inconsistent project information and incorrect bases of charge. 

•	 OSFM did not use current billing information. 

We recommended that the Chief Financial Officer and Assistant 

Secretary for Administration 

•	 update processes for calculating the correct bases of charge 

and obtain the most current documentation from the service 

providers in order to ensure that customers are charged for 

their appropriate share of project costs; 

•	 require a validation and certification process for Office of 

General Counsel (OGC) and other WCF service providers to 

capture and retain supporting documentation that accurately 

reflects the level of services provided to customers; and 

•	 make a determination on whether FY 2013 charges should 

be reviewed and recalculated accordingly, and whether 

adjustments should be considered in calculating charges for 

FY 2014. 

We recommended that the General Counsel 

•	 develop an automated process to track attorney time, by customer and services provided, to 

ensure that customers are accurately charged for the OGC projects within the WCF. 

Working Capital Fund 

The Department’s Working Capital Fund operates as a 

revolving fund approved by Congress, set up to provide

centralized services to the Department as efficiently

and economically as possible. In FY 2013, the WCF 

collected nearly $150 million for 62 projects managed

by 12 service providers within the Department. Services

provided include information technology, human 

resources, security, and legal services. 

NONFEDERAL AUDIT RESULTS FOR THE 6-MONTH PERIOD ENDING 

DECEMBER 31, 2013 (OIG-14-017-M) 

OIG’s report contained an analysis of findings identified in nonfederal audit reports from July 1 

through December 31, 2013, submitted by nonprofit and government grantees pursuant to OMB 

Circular A-133 and by for-profit grantees pursuant to program guidelines. The analysis noted 

trends in the types of findings reported and summarized findings by Departmental program. 

AUDITS OF COMMERCE FUND RECIPIENTS BY NONFEDERAL 

INDEPENDENT AUDITORS (REVIEWED BY OIG DURING THE 6 MONTHS ENDING 

SEPTEMBER 30, 2014) 

In addition to undergoing OIG-performed audits, certain recipients of Department of Commerce 

financial assistance or cost-reimbursable contracts are periodically examined by state and local 

government auditors and by independent public accountants. OMB Circular A-133 establishes 

requirements for audits of states, local governments, and non-profit organizations. For-profit 

organizations that are audited in accordance with Government Auditing Standards include those 

that receive NIST awards from both the Technology Innovation Program and the Measurement 

and Engineering Research and Standards program. Some for-profit organizations are audited 

in accordance with other specific audit guides. For example, BTOP awards are audited in 

accordance with the NTIA Program-Specific Audit Guidelines for the Broadband Technology 

Opportunities Program. 

We examined 136 audit reports during this semiannual period to determine whether they 

contained audit findings related to departmental programs. For 73 of these reports, the 

Department acts as an oversight agency and monitors the audited entity’s compliance with OMB 
10 Office of Inspector General | Semiannual Report to Congress | September 2014

 

 

Circular A-133, Government Auditing Standards, or program-specific reporting requirements. 

The other 63 reports cover entities for which other federal agencies have oversight responsibility. 

We identified 6 reports with material findings related to the Department. 

NONFEDERAL AUDIT ACTIVITIES 

Report Category OMB A-133 Audits Program-Specific 

Audits 

Total 

Pending Review (April 1, 2014) 41 4 45 

Received 124 31 155 

Examined 113 23 136 

Pending Review 

(September 30, 2014) 

52 12 64 

The following table shows a breakdown by bureau of approximately $1 billion in Department funds 

audited through the A-133 or program-specific guidelines. 

NONFEDERAL AUDITS BY BUREAU 

Agency Funds Audited ($) 

U. S. Census Bureau 849,683 

Economic Development Administration 63,647,297 

International Trade Administration 337,600 

National Institute of Standards and Technologya 18,640,045 

National Oceanic and Atmospheric Administration 36,801,573 

National Telecommunications and Information Administrationb 341,518,734 

Multibureau 625,366,882 

Total 1,087,161,814 

a Includes $10,283,280 in program-specific audits; A-133 audits account for the remainder of the total amount 

of $18,640,045. 

b Includes $249,809,065 in program-specific audits; A-133 audits account for the remainder of the total amount 

of $341,518,734. 

The audits identified a total of $ 554,413 in the federal share of questioned costs, and $ 323,113 

in federal unsupported costs. 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 six reports with material findings are listed in 

table 7-a on page 47. 

CONGRESSIONAL TESTIMONY (OIG-14-015-T) 

On April 10, the Inspector General submitted written testimony at the request of the Senate 

Appropriations’ Subcommittee on Commerce, Justice, Science, and Related Agencies about 

the Department’s $12.2 billion FY 2015 budget request. He noted that the Department plays a 

pivotal role in implementing the President’s initiatives for economic recovery and job creation and, 

like other federal agencies, faces significant challenges in the upcoming year. After summarizing 

the management and performance challenges facing the Department, the Inspector General 
Department-Wide Management 11 

focused on challenges specifically related to NOAA satellites, the 2020 Census, Departmental 

cybersecurity, U.S. Patent and Trademark Office backlogs, Departmental operational controls and 

oversight, FirstNet authority, and issues raised by whistleblowers through the OIG hotline. 

FORMER SPECIAL AGENTS ARE SENTENCED IN FEDERAL COURT 

On May 12, superseding informations against two former OIG special agents were filed by the 

U.S. Attorney’s Office for the District of Maryland in two cases in the District Court for the District 

of Maryland. These filings followed a decision by the federal court to vacate the employees’ 

guilty pleas to prior similar charges. On May 13, the two former employees pled guilty to the new 

misdemeanor charges of submitting false official writings to the U.S. government related to time 

and attendance abuse. On June 30, the employees were sentenced in federal court. Each former 

criminal investigator was fined $20,000 by the court and ordered to pay over $9,000 in restitution 

and special assessments. All told, the former OIG employees were charged nearly $60,800 in 

fines, restitution, and court special assessments and were each ordered to serve 60 hours of 

community service and to complete a 12-month term of supervised release. This sentencing 

concludes a joint investigation by OIG and the FBI. The OIG agents resigned their positions from 

the government in 2013, and OIG has made several organizational changes to prevent and deter 

the type of abuse that occurred. 
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’s 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 has three primary organizational 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 anti-boycott 

provisions of the act and regulations. 

Chief Financial Officer and Office of Administration—Advises 

senior leadership on business and information technology issues and 

oversees policies and procedures for administrative functions for 

programs including budget and finance, human resources and workforce 

issues, corporate analysis and risk management, IT operations and 

cyber security, acquisitions, audits and investigations, and Freedom of 

Information Act requests. 
Bureau of Industry and Security 13 

BIS’S IMPLEMENTATION OF EXPORT CONTROL REFORM REQUIRES SEVERAL 

IMPROVEMENTS TO ADDRESS CHALLENGES (OIG-14-028-A) 

We conducted this audit in response to a Congressional request and in conjunction with our 

Top Management Challenges report for FY 2013. We focused our analysis on areas of BIS most 

affected by the Export Control Reform (ECR) Initiative, namely its licensing divisions, outreach 

office, and enforcement offices (excluding anti-boycott compliance). 

Our audit found that 

•	 BIS currently has adequate licensing resources to handle the gradually increasing licensing 

workload for new munitions items, including satellite items, that is coming as a result of ECR. 

•	 Average license determination processing times could not be fully calculated due to data 

errors. 

•	 Delays in migrating to a new IT system, USXPORTS, now in its third year, may cost BIS 

$1.3 million per quarter in FY 2015 to continue operating its current antiquated system. 

•	 BIS’s plans for increasing enforcement capabilities and 

resources are reasonable, but end-use check training for 

commercial officers from the International Trade Administration’s 

U.S. and Foreign Commercial Service (USFCS) could be 


enhanced. 


We recommended that the Under Secretary for Industry 

and Security: 

•	 verify the appropriateness of staffing levels after the transfer of 

all U.S. Munitions List items to the Commerce Control List is 

complete; 

•	 improve the tracking of license determinations to ensure they 

are processed within established timeframes; 

•	 develop a contingency plan for completing the migration to 

USXPORTS that includes any additional incurred costs and 

how BIS will absorb those costs; and 

•	 enhance end-use check training for USFCS officers. 

U.S. Export Control System 

The U.S. export control system is distributed among 

several different licensing and enforcement agencies.

The two primary export licensing agencies are the 

Bureau of Industry and Security, which historically has 

licensed exports of dual-use items, and the Department

of State, which has historically licensed munitions, 

satellites, and spacecraft items. 

The Export Control Reform Initiative, launched in 2010, 

is a three-phase effort to streamline the nation’s export 

control system by ultimately consolidating the export 

efforts of multiple federal agencies. It aims to create a

single licensing agency, a single list of controlled items, 

a single information technology platform, and a single 

export enforcement coordination agency. 
ECONOMICS AND STATISTICS 

ADMINISTRATION 

The Economics and Statistics Administration analyzes economic 

activity, formulates policy options, and produces a major share of the 

U.S. government’s economic and demographic statistics. ESA has one 

constituent operating unit and two primary operating units. 

Office of the Chief Economist—Provides the Department with 

expertise on key economic forces affecting the U.S. economy, 

delivering timely, relevant, and credible economic analysis and advice to 

government leaders and the public. 

Census Bureau—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 quinquennial census of industry. 

Bureau of Economic Analysis—Prepares, develops, and interprets 

national income and product accounts (summarized by the gross 

domestic product), as well as aggregate measures of international, 

regional, and state economic activity. 
Economics and Statistics Administration 15 

CENSUS BUREAU LACKS ACCURATE AND INFORMATIVE COST DATA TO GUIDE 

2020 CENSUS RESEARCH THROUGH A CONSTRAINED BUDGET ENVIRONMENT 

(OIG-14-021-A) 

We conducted this audit to (1) evaluate the Bureau’s process for implementing recent budget 

reductions; (2) assess the impact of these reductions on the Bureau’s goal of achieving a costeffective, high-quality 2020 Census; and (3) evaluate the roles of the Department and ESA in 

monitoring the Bureau’s progress toward this goal. 

The Census Bureau’s Decennial Program generally adhered to OMB and Departmental guidance 

for implementing mandatory budget reductions. However, we found that 

•	 due to inaccurate cost information, the impact of budget 

reductions cannot be determined; 

•	 budget fund transfers prevent the Bureau from validating 

budget estimates and identifying inaccurate project costs; 

•	 the Decennial Program does not have support for budget 

requests; and 

•	 ESA should develop a stronger oversight process for 

monitoring the Decennial Program’s progress in reducing 

2020 decennial census costs. 

Projected 2020 Census Costs

The Census Bureau is committed to conducting the 

2020 Census for less, per household, than the 2010

Census, which had a life-cycle cost of an estimated 

$13 billion (about $94 per household). To achieve this 

goal, the Bureau must make fundamental changes to 

the design, implementation, and management of the 

decennial census. If the Bureau fails to innovate in

these areas, the cost of the 2020 Census could reach 

$148 per household.

Funding for the 2020 decennial census lifecycle began

in FY 2012 and will continue through FY 2023. This 

protracted life cycle with many dependent phases,

along with cost accounting and budget formulation

issues noted during the audit, may hinder the Bureau’s 

ability to control the cost of the 2020 Census.

OIG is committed to monitoring the progress of 

planning for the 2020 Census and includes ongoing

reviews in its annual audit plan.

We recommended that the Director of the Census Bureau develop 

•	 a process to ensure project costs reflect the actual level of 

effort (a) in the short term, by requiring all Census Bureau 

employees to accurately record project hours through webTA 

(an Internet-based time tracking system), and (b) in the long 

term, by implementing an activity-based costing system, with 

appropriate internal controls, that reflects actual project cost 


and reconciles with the accounting system;
 

•	 policies and procedures that require supporting documentation 

for budget estimate decisions be prepared and retained for 


audit; and 


•	 a process to validate budget estimates that (a) incorporates 

actual costs recorded in the accounting system and (b) uses budget-to-actual cost information 

to identify incorrect project charges. 

We also recommended that the Director of the Census Bureau and Under Secretary for Economic 

Affairs develop a process to ensure that ESA has sufficient oversight of the 2020 Decennial 

Program. 

INVESTIGATIVE REPORT ON CENSUS BUREAU DATA FALSIFICATION ALLEGATIONS 

(14-0073) 

In May, OIG issued an investigative report that looked into whether employees in the Census 

Bureau’s Philadelphia Regional Office manipulated the results from the Current Population Survey 

in order to systematically manipulate the national unemployment rate in advance of the 2012 

Presidential election. OIG conducted more than 100 interviews of Census employees, reviewed 

numerous documents, analyzed data, and found no evidence that management in the Philadelphia 
16 Office of Inspector General | Semiannual Report to Congress | September 2014

Regional Office instructed staff to falsify survey data at any time. As a result, our report concluded 

that the allegations were unsubstantiated. However, we identified several programmatic 

weaknesses, including that legal advice from the Department hindered Census from dealing with 

employees who falsified data, and made recommendations to strengthen the program. 

INDIVIDUAL PLEADS GUILTY TO CONSPIRACY TO COMMIT WIRE FRAUD 

In June, a Nigerian man pleaded guilty to taking part in a computer hacking and identity theft 

scheme that compromised various government employee e-mail accounts, which were then 

used to defraud vendors of almost $1 million of office products and supplies. Beginning in 

approximately 2012, the individual and his co-conspirators operated an e-mail “spear phishing” 

attack scheme that targeted several government agencies and their employees, as well as vendors 

of office products that were approved to do business with government agencies. As part of the 

scheme, they used fraudulent e-mails and websites to imitate legitimate government accounts and 

deceived the employees in order to obtain legitimate e-mail account user names and passwords. 

The individual and his co-conspirators used stolen credentials to access the employees’ accounts 

to place fraudulent orders for various office supplies, most often printer toner cartridges. The 

goods and supplies were then shipped to other locations for repackaging and shipment overseas 

to locations controlled by these individuals to be sold on the black market for profit. 

The case was investigated by the U.S. Attorney’s Office for the District of New Jersey, the FBI, 

and the Offices of Inspectors General from the Department of Commerce, Environmental 

Protection Agency, and General Services Administration. Sentencing has been scheduled for 

December 2014. 

CONGRESSIONAL TESTIMONY (14-0073-T) 

On September 18, the Inspector General testified before the House Committee on Oversight and 

Government Reform on data collection vulnerabilities. His testimony focused on our investigative 

report on Census data falsification allegations and highlighted our findings and recommendations. 

Census Director John Thompson also testified and described several changes Census is 

implementing to strengthen its programs in response to recommendations in our report. 

INTERNATIONAL TRADE 

ADMINISTRATION 

The International Trade Administration is the premier resource 

for American companies competing in the global marketplace. ITA 

strengthens the global competitiveness of U.S. industry, promotes trade 

and investment, and ensures fair trade through the rigorous enforcement 

of U.S. trade laws and agreements. ITA is organized into three business 

units that work together to achieve ITA’s mission. 

Industry and Analysis—Enhances the international competitiveness 

of U.S. industry, expands its market access, and increases its exports by 

devising and implementing innovative international trade, investment, and 

export promotion strategies utilizing in-depth quantitative and qualitative 

analysis and leveraging ITA’s industry relationships. 

Enforcement and Compliance—Safeguards and enhances the 

competitive strength of U.S. industries against unfair trade through the 

enforcement of U.S. trade remedy laws and ensures compliance with 

trade agreements negotiated on behalf of U.S. industries. 

Global Markets—Assists and advocates for U.S. businesses in 

international markets to foster U.S. economic competitiveness and 

prosperity. Global Markets effectively helps U.S. businesses, partners, 

and stakeholders enter and expand into international markets, 

addressing barriers to trade, winning foreign government procurements, 

and attracting inward investment. 
International Trade Administration 19 

LETTER TO SENATORS MIKULSKI AND SHELBY RE: STATUS OF INTERNATIONAL 

TRADE ADMINISTRATION’S CONSOLIDATION (OIG-14-026-M) 

In response to a requirement in Senate Report 113-78 for the FY 2014 Commerce, Justice, 

Science, and Related Agencies Appropriations Bill, OIG began an audit of ITA’s consolidation. 

The Senate Report directed OIG to provide an initial report on the progress, efficacy, and 

management of ITA’s consolidation, including feedback from affected staff and organizations, 

within 180 days of the act’s passage. Specifically, we sought to assess the status of the 

consolidation; evaluate changes in resources, including staffing and funding; and identify 

management challenges that might hinder this effort. 

To assess the status of the consolidation, OIG conducted a survey of all ITA employees (and 

received a 60 percent response rate), interviewed ITA senior management and staff involved 

in planning for and carrying out the consolidation, and analyzed Departmental and ITA financial 

information from the end of FY 2011 through January 2014. 

Based on our fieldwork from February 20 through May 30, 2014, we determined that ITA saved 

$8 million by eliminating, through attrition, 50 positions from the end of FY 2011 through January 

2014. Because the FY 2013 sequestration had reduced its budget authority from $461 million to 

$438 million, ITA was unable to direct these savings to high-priority programs (such as expanding 

overseas markets) and instead used the funds to maintain existing operations. 

Based on our initial analysis of the survey results, we identified five broad areas that warrant ITA 

management’s attention and further examination during our audit: (1) collaboration within and 

among ITA business units following the consolidation, (2) levels of management, (3) duplication 

of effort and program changes, (4) changes in employee responsibilities, and (5) management 

communication and employee feedback. 

For the remainder of this audit, we will analyze ITA’s plans to define and measure operational 

improvements associated with the consolidation by reviewing relevant documentation and 

conducting focus-group interviews with select ITA staff and external stakeholders. We will also 

evaluate the impact of employee concerns about ITA operations as a result of the consolidation. 

To determine whether ITA has aligned resources with strategic priorities, we will explore 

conducting a resource value analysis of U.S. and Foreign Commercial Service offices by 

comparing staffing costs against office performance. Finally, we will review the extent that Global 

Markets is directing its resources toward high-growth and emerging markets based on data from 

before and after the consolidation. We plan to issue a final audit report to ITA in early calendar 

year 2015. 
NATIONAL OCEANIC AND 

ATMOSPHERIC ADMINISTRATION 

The National Oceanic and Atmospheric Administration mission is to 

understand and predict changes in Earth’s environment, as well as conserve 

and manage coastal and marine resources to meet our nation’s economic, 

social, and environmental needs. NOAA does this through six line offices. 

National Environmental Satellite, Data, and Information Service— 

Observes the environment by operating a national satellite system. 

National Marine Fisheries Service—Conducts a program of 

management, research, and services related to the protection and rational use 

of living marine resources. 

National Ocean Service—Provides products, services, and information 

to promote safe navigation, support coastal communities, sustain marine 

ecosystems, and mitigate coastal hazards. 

National Weather Service—Reports the weather of the United States and 

provides weather forecasts and warnings to the general public. 

Office of Oceanic and Atmospheric Research—Conducts research 

related to the oceans and Great Lakes, the lower and upper atmosphere, 

and the earth. 

Office of Program Planning and Integration—Develops and 

coordinates NOAA’s strategic plan, supports organization-wide planning 

activities, guides managers and employees on program and performance 

management, and integrates policy analysis with decision making. 
National Oceanic and Atmospheric Administration 21 

REVIEW OF NOAA CATCH SHARE PROGRAMS (OIG-14-019-I) 

This report is part of a multiple-phase review OIG is conducting of the National Marine Fisheries 

Service (NMFS) and the Fishery Management Councils (FMCs). It is focused on the development 

of rules for the commercial fishing industry and the fisheries regulation process at NOAA, the 

NMFS, and the FMCs. 

Two previous reports—NOAA Needs to Continue Streamlining the 

Rulemaking Process and Improve Transparency and Consistency 

in Fisheries Management (OIG-13-011-I) and Results of 

Commerce OIG’s Online Survey of Fishery Management Council 

Members and Staff (OIG-13-022-I)—looked at (a) the role of 

NOAA and the FMCs in the fishery rulemaking and (b) FMC 

perspectives on fishery regulatory requirements, rulemaking, and 

improvements in fisheries management. 

The objective of this report was to evaluate the sufficiency of 

NOAA’s implementation and monitoring of a selection of catch 

share programs developed by FMCs and to consider the adequacy 

of automated and manual systems and processes for collecting 

information and administering catch share programs. 

We reviewed 6 of the 15 current catch share programs to evaluate 

the sufficiency of NOAA’s implementation and monitoring of the 

programs. We found that 

•	 NOAA does not have adequate data and does not track or enforce landings overage violations 

in the Pacific Sablefish Permit Stacking Individual Fishing Quota (IFQ). 

•	 The Golden Tilefish program did not have formal controls to ensure that shareholders with 

sanctions were prevented from buying, selling, or transferring shares or allocation. 

•	 NOAA relies on shareholder self-certifications for eligibility criteria. 

We recommended that the NOAA Assistant Administrator for Fisheries, in coordination with the 

Pacific Fishery Management Council and relevant state agencies, improve the internal controls 

for the Pacific Sablefish Permit Stacking IFQ program. NOAA should also verify whether 

improvements should be made in the programs not included in our review. Specifically, for all 

catch share programs, we recommended that the NOAA Assistant Administrator for Fisheries 

•	 develop a process to ensure that accurate landings information is obtained by individual permit 

holders in a timely manner; 

•	 develop controls to monitor landings on an individual permit basis to ensure overage violations 

are adequately addressed; 

•	 develop a process to ensure that shareholders with sanctions are prevented from buying, 

selling, or transferring shares or allocation; and 

•	 document procedures for determining when reviewing self-certifications is warranted, 

to ensure that shareholders meet eligibility requirements prior to joining fisheries. 

NOAA Catch Share Programs 

“Catch share” is a general term for several fishery 

management strategies that allocate a specific portion 

of the total allowable fishery catch to individuals, 

cooperatives, communities, or other entities. 

Catch share programs have been used in U.S. federal 

fisheries since 1990, and now include 15 programs 

managed by 6 different Fishery Management Councils 

(FMCs). Each program is designed by the relevant FMC 

with features tailored to the specific program goals 

and objectives or other unique characteristics of the 

fisheries in their region.
22 Office of Inspector General | Semiannual Report to Congress | September 2014

AUDIT OF JOINT POLAR SATELLITE SYSTEM: TO FURTHER MITIGATE RISK OF DATA 

GAPS, NOAA MUST CONSIDER ADDITIONAL MISSIONS, DETERMINE A STRATEGY, 

AND GAIN STAKEHOLDER SUPPORT (OIG-14-022-A) 

Developing next-generation environmental satellite systems is 

a top management challenge for the Department and NOAA. 

Given its national significance and large budget, we have 

conducted oversight of NOAA’s Joint Polar Satellite System 

(JPSS) since 2010, after management and technical problems 

led to cost increases, schedule delays, and capability reductions 

for its predecessor program, National Polar-orbiting Operational 

Environmental Satellite System (NPOESS). This is our third audit 

report and fourth oversight product focused on JPSS. 

Our objectives were to (1) monitor NOAA’s progress toward 

establishing JPSS cost, schedule, and performance baselines; 

(2) assess ongoing development activities; and (3) review efforts 

to mitigate a potential data gap between Suomi National Polarorbiting Partnership (Suomi NPP) and JPSS-1 satellites. 

Joint Polar Satellite System 

The Joint Polar Satellite System program was 

established in 2010 when the Administration chose 

to restructure the troubled National Polar-orbiting 

Operational Environmental Satellite System—a triagency partnership among the Department of Defense, 

NOAA, and NASA—into separate civil and defense 

programs. JPSS currently supports the operation of 

one satellite and is developing and launching two, 

next-generation polar-orbiting satellites (JPSS-1 and 

JPSS-2) with new, more capable instruments to replace 

NOAA’s legacy polar satellites. 

We found that 

•	 JPSS program baselines were established after the Department and NOAA reduced system 

capabilities to lower the life-cycle cost and focus its missions, but baselines may be revised to 

mitigate risk of data gaps. 

•	 NOAA leadership deemed JPSS-1 ready for the next phase of development—but technical, 

schedule, and programmatic challenges await. 

•	 NOAA has begun gap mitigation activities but should do more to help stakeholders understand 

the consequences of a gap. 

We recommended that the NOAA Administrator 

•	 establish reporting metrics to ensure adequate coordination among JPSS, Solar Irradiance, 

Data and Rescue (SIDAR), and NASA climate instrument programs for review at monthly 

Program Management Council meetings; 

•	 ensure that JPSS-2 operations and sustainment costs beyond FY 2025 are delineated in 

stakeholder briefing materials about plans for additional missions; 

•	 leverage Office of Acquisition Management (OAM)-led cost analysis expertise to explore cost 

savings opportunities in acquisitions beyond JPSS-2; and 

•	 ensure that stakeholders are provided formal documentation of NOAA’s response to 

independent review team recommendations and its corresponding acquisition strategy. 

We recommended that the NOAA Assistant Administrator for Satellite and Information Services 

•	 ensure that stakeholders (including Congress) are provided updated information on the results 

and confidence level of the JPSS-1 mission’s integrated master schedule. 
National Oceanic and Atmospheric Administration 23 

We recommended that the NOAA Deputy Under Secretary for Operations 

•	 direct appropriate NOAA entities to explain the effects of a potential afternoon orbit data gap 

in terms of degraded forecast hours and extrapolated economic costs, or, conversely, the 

contribution to forecast accuracy and the economic benefits of afternoon orbit data. 

SIGNIFICANT SECURITY DEFICIENCIES IN NOAA’S INFORMATION SYSTEMS 

CREATE RISKS IN ITS NATIONAL CRITICAL MISSION (OIG-14-025-A) 

NOAA’s information systems are crucial to its ability to reliably 

perform its national critical mission. They provide hazardous 

weather forecasts and warnings, which are essential in protecting 

life, property, and the nation’s economy. This information 

technology security audit focused on select systems in two 

line offices that support NOAA’s critical mission: the National 

Environmental Satellite, Data, and Information Service (NESDIS) 

and the National Weather Service (NWS). Specifically, we 

evaluated information security controls and security-related 

documentation for four NESDIS systems to determine whether 

key security measures adequately protect them. Additionally, we 

reviewed the independent security control assessments of five 

NWS systems to determine whether the controls were 

adequately assessed. 

Federal Information Security 

Management Act of 2002

This legislation requires agencies to secure their 

information technology systems through the use of 

cost-effective management, operational, and technical 

controls, among other provisions. In addition, FISMA 

requires inspectors general to evaluate agencies’

information security programs and practices, by

assessing a representative subset of agency systems, 

and the results are reported to the OMB, the Department 

of Homeland Security, and Congress annually. 

We found that 

•	 Information systems connected to NESDIS’s critical satellite ground support systems 

increases the risk of cyber attacks. 

•	 NESDIS’s inconsistent implementation of mobile device protections increases the likelihood 

of a malware infection. 

•	 Critical security controls remain unimplemented in NESDIS’s information systems. 

•	 Improvements are needed to provide assurance that independent security control assessments 

are sufficiently rigorous. 

We recommended that NESDIS’s Assistant Administrator and NOAA’s Chief Information Officer 

•	 conduct a review to determine risks posed by NESDIS’s restricted systems’ current 

interconnections and ensure that the U.S. Air Force (USAF) identifies all of the Defense 

Meteorological Satellite Program’s (DMSP’s) interconnections; 

•	 document and convey to NOAA senior management the risks identified with these 

interconnections; 

•	 require that interconnected systems have completed control assessments and are authorized 

to operate before establishing an interconnection; 

•	 pursue USAF commitment to conduct security assessments on DMSP; 

•	 prevent components’ moving between the Geostationary Operational Environmental Satellites 

(GOES) and Space Weather Prediction Center (SWPC) networks for maintenance activities; 
24 Office of Inspector General | Semiannual Report to Congress | September 2014

•	 implement security mechanisms to protect against the use of unauthorized mobile devices; 

•	 determine a feasible remediation timeframe for applying patches to Polar-orbiting 

Operational Environmental Satellites (POES), GOES, and Environmental Satellite 

Processing Center (ESPC); 

•	 ensure appropriate priority to remediation of high-risk vulnerabilities in the required timeframe. 

If remediation is not feasible, ensure documentation of vulnerabilities and implementation of 

compensating controls; 

•	 ensure (a) information system compliance with all applicable remote access and telework 

policies and (b) implementation of two-factor authentication; 

•	 ensure NESDIS telework policy compliance with Department policy on personal devices; 

•	 implement necessary security mechanisms to secure against remote access via personal 

computers; and 

•	 ensure that appropriate attention is given to implementing required secure configuration 

settings in a timely manner and continue the implementation. 

We recommended that NOAA’s Chief Information Officer 

•	 develop a quality control process for assurance that security controls are appropriately 

assessed before the authorization package is assembled and submitted to the 

authorizing official. 

EXPEDITED EFFORTS NEEDED TO REMEDIATE HIGH-RISK VULNERABILITIES IN 

THE JOINT POLAR SATELLITE SYSTEM’S GROUND SYSTEM—FINAL MEMORANDUM 

(OIG-14-027-M) 

Joint Polar Satellite System 

Ground System 

The JPSS ground system is a high-impact IT system 

that supports NOAA’s mission by gathering and routing 

data from several polar-orbiting weather satellites and 

disseminating it to users worldwide. This system also 

provides command, control, and data processing for the 

Suomi National Polar-orbiting Partnership (Suomi NPP) 

weather satellite and in the future will provide similar 

functions for other planned satellites. In a partnership 

with NOAA, NASA manages the contract for the JPSS 

ground system. 

The objective of our audit was to assess the effectiveness of 

NOAA’s IT security program by determining whether key security 

measures adequately protect NOAA’s systems. We found that the 

JPSS program needs to expedite its efforts to reduce the current 

IT security-related risks to its ability to support critical weather 

forecasting operations and improve the overall security posture 

of JPSS’s ground system. 

Although full implementation of many of the missing and partially 

implemented security controls requires the significant changes 

that are planned for the next iteration of this system, there are 

steps the program can take now to improve its security posture. 

It is essential that the JPSS program’s existing urgent update 

processes be used to correct high-risk vulnerabilities in the ground 

system’s critical components. 

We believe that the types of high-risk vulnerabilities we have identified can be fixed in an 

expedited manner and should be addressed as soon as possible. Although these measures will 

not address all vulnerabilities, we believe that they will improve protection of the current JPSS 

ground system until NOAA deploys the next iteration of its ground system. Considering that the 

current system’s security posture was at a disadvantage from the outset—having not incorporated 

security into its development when it was transitioned into the JPSS—the program needs to 

ensure that the security measures planned for the next iteration of the ground system are included 

from the beginning and not added later or deferred. 
National Oceanic and Atmospheric Administration 25 

To reduce the risks of compromise to the JPSS ground system, we recommended that the NOAA 

Assistant Administrator for Satellite and Information Services and NOAA’s Chief Information 

Officer ensure that 

•	 the JPSS program review the types of vulnerabilities identified in this memorandum and, where 

possible, correct them as soon as feasible; 

•	 urgent system update processes are used to deploy high-risk security-related software 

patches and updates, based on the criticality of the patches and the system components 

affected; and 

•	 newly discovered, high-risk, JPSS vulnerabilities be remediated within 3 months, according 

to the requirements of Plan of Action and Milestones guidelines. 

INVESTIGATIVE REPORT ON HURRICANE SANDY RELIEF FUNDING FOR THE 

NATIONAL ESTUARINE RESEARCH RESERVE SYSTEM (13-0963) 

In May, OIG issued a public investigative report looking into whether a NOAA grantee improperly 

applied for and received Hurricane Sandy funds under the Disaster Relief Appropriations Act 

and Sandy Recovery Improvement Act. While OIG did not find evidence of fraud, we concluded 

that under the plain language of the Act, some applications for this funding did not meet the Act’s 

threshold requirement for equipment that was “damaged by Hurricane Sandy.” In fact, we found 

that NOAA instructed applicants that equipment that was “lost, damaged, or compromised” by 

Hurricane Sandy met the Act’s requirement for funding and thus expanded the Act’s eligibility 

requirements. This guidance to the funding applicants and subsequent approval of funding 

applications resulted in questioned costs of approximately $550,200—more than half of the 

approximately $1 million of funds disbursed—for items that may not have been eligible for funding 

based on the eligibility standard established by the plain language of the Act. As a result of the 

investigation, OIG provided several recommendations to NOAA, including the development of an 

internal approval process for substantive changes to eligibility standards in NOAA grant programs. 

REVIEW OF IMPROPER EXPENDITURE FOR GOES-R GROUND SEGMENT TEAM 

ACTIVITY (14-0475) 

In September, OIG issued a public investigative report concerning an off-site team-building 

event involving 21 members of the Geostationary Operational Environmental Satellite-R Series 

(GOES-R) Ground Segment staff. Our investigation established that 2 NOAA employees, 

3 NASA employees, 1 Department of Commerce employee, and 15 contract employees 

participated in the event to varying degrees. While 17 individuals who participated in the event 

properly accounted for the event or made up the time by working extra hours during the same 

pay period, we found that 4 GOES-R Ground Segment contract employees improperly billed 

their participation in the event to the GOES-R project and did not otherwise make up the time, 

resulting in $1,460 in taxpayer-funded wages initially charged to the government. 

Although we found that the amount improperly billed to the federal government was subsequently 

refunded by the respective contracting companies, in our report we noted that the credits were 

made only after we initiated our review into the team activity. It appeared unlikely that GOES-R 

management or the contract companies would have recognized the improper billing absent the 

OIG review. 
26 Office of Inspector General | Semiannual Report to Congress | September 2014

GUILTY PLEAS IN CONSPIRACY AND FRAUD CASES RELATED TO NOAA 

FISHERIES FUNDS 

In the March 2014 Semiannual Report to Congress, we reported that in November 2013 the U.S. 


Attorney’s Office for the Southern District of Mississippi announced indictments from federal and 


state grand juries against five individuals for conspiracy, bribery, federal program fraud, mail fraud, 


and money laundering. Two of these individuals, one of whom is the former executive director of 


the Mississippi Department of Marine Resources (MDMR), pleaded guilty to conspiracy to defraud 


the government, and were sentenced in June and July of this year. In June, the former director was 


sentenced to 60 months in federal prison, followed by 3 years of supervised release, and in July, 


the second individual was sentenced to 18 months and 3 years of supervised release. 


In addition, both individuals were ordered to pay $235,200 related to the Department of 


Commerce programs, in addition to other ordered payments. 


Our investigation, which was conducted in coordination with the FBI and Mississippi’s Office of 


the State Auditor, found that the then–executive director embezzled $210,000, most of which 


came from Emergency Disaster Relief Program funds through NOAA’s National Marine Fisheries 


Service, to purchase land on behalf of a family member. The FBI’s investigation involved a larger-


scale public corruption scandal that encompassed elected officials and several people who held 


senior positions within MDMR. MDMR received eight different awards in part for oyster reef 


restoration, oyster and shrimp ground restoration, research, testing, and assistance to businesses 


and fishers.
 

NOAA SUSPENDS EMPLOYEE FOR DOWNLOADING PORNOGRAPHY 

In January 2013, OIG concluded an investigation into a NOAA employee’s improper use of 

government computer equipment. Our investigation found that the employee downloaded 14 adult 

pornographic video files, 92 adult pornographic images, and 3 unauthorized computer programs. 

Due to the seriousness of the individual’s misconduct, we recommended that appropriate action 

be taken against the individual. In April, NOAA suspended the employee for 30 days. 

UNITED STATES PATENT 

AND TRADEMARK OFFICE 

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, and commercialize new technology. USPTO also 

collects, assembles, publishes, and disseminates technological 

information disclosed in patents. 
United States Patent and Trademark Office 29 

RAPID RISE IN THE REQUEST FOR CONTINUED EXAMINATION BACKLOG REVEALS 

CHALLENGES IN TIMELY ISSUANCE OF PATENTS (OIG-14-024-A) 

Since FY 2010, USPTO has made progress in reducing the amount of time that an applicant 

waits to have a new patent application reviewed. During that time, however, there was a 

concurrent decline in USPTO’s performance in issuing timely determinations on another type of 

filing application, the Request for Continued Examination (RCE). RCEs are patent applications 

resubmitted for consideration after an examiner has previously closed the review, such as by 

making a second and final rejection of the inventor’s claims. 

Our audit identified several factors that have contributed to the recent increase in the RCE 

backlog at USPTO. Specific findings include: 

•	 Structural and examiner-specific issues have increased the number of RCEs that USPTO 

needs to act upon. 

•	 The inclusion of new information from examiners is an ongoing concern for applicants. 

•	 USPTO was slow to act on rapid RCE growth and will face challenges making future 

adjustments. 

•	 Some USPTO incentives that could reduce RCEs have low applicant participation rates and a 

negligible effect of the RCE backlog. 

We recommended that the Under Secretary of Commerce for Intellectual Property and Director of 

the United States Patent and Trademark Office 

•	 mitigate the impact of RCE structural issues and examiner-specific issues and take corrective 

action where necessary by (a) researching the reasons for the variance in after-final 

amendment approval rates and the decline in after-final amendment filings; (b) assessing why 

applications handled by lower- and higher-grade examiners have different RCE filing rates; and 

(c) assessing the reasons for variance among art units, identifying best practices that promote 

efficiency, and then developing strategies to minimize patent term adjustment; 

•	 determine whether a stratified sample of patent applications targeting risk areas would 

enhance quality assurance tests and the overall determination of patent examiner quality; 

•	 establish a risk-management plan that ensures that timely, situation-specific analysis and 

solutions are documented and implemented to minimize patent-term adjustments when 

rebalancing is needed to meet statutory requirements and public expectations for prompt 

processing; and 

•	 develop ways to increase participation in the compact prosecution initiatives. 

REVIEW OF CONDUCT BY A HIGH-RANKING USPTO OFFICIAL IN THE HIRING OF A 

TRADEMARK ORGANIZATION EMPLOYEE (13-0726) 

In July, OIG issued an investigative report looking into whether a high-ranking official at USPTO 

improperly used her official position to ensure the hiring of a relative’s boyfriend. Our investigation 

found that the official instructed subordinates to interview the boyfriend after he had not been 

selected for an interview and that the official effectively created a new position specifically for the 

boyfriend after he was interviewed and not selected to receive an offer of employment. As a result, 

we concluded that the high-ranking official violated several federal regulations, which prohibit 

using a public office for private gain, prohibit giving preferential treatment to an applicant for 
30 Office of Inspector General | Semiannual Report to Congress | September 2014

employment, and prohibit taking actions that create the appearance that the employee is 


violating the law or ethical standards. OIG recommended that the agency take appropriate action. 


The high-ranking official will be resigning from USPTO at the end of 2014.
 

REVIEW OF WASTE AND MISMANAGEMENT AT THE PATENT TRIAL AND 

APPEAL BOARD (13-1077) 

In July, OIG issued an investigative report on whistleblower allegations of waste and 

mismanagement at the Patent Trial and Appeal Board (PTAB), part of the Patent and Trademark 

Office. Our investigation uncovered waste that persisted for more than 4 years, beginning in 

2009, and resulted in the misuse of federal resources totaling more than $5 million. The bulk of 

the waste identified in our report related to PTAB’s paralegals, who had insufficient workloads and 

considerable idle time during those years. Paralegals told our investigators that they engaged in a 

variety of personal activities including watching television; surfing the internet; using Facebook and 

other social media; washing laundry and cleaning dishes; and shopping online while in an official 

pay status. 

We also found that this problem was widely known throughout the agency, but that no employees, 

except for the whistleblowers, reported the waste. OIG issued nine recommendations to USPTO 

to remedy this situation and to prevent similar waste in the future. For example, we recommended 

that the PTAB conduct an examination of workloads on a regular basis and implement a process 

to readjust employee assignments, among other things, if employees have insufficient workloads. 

AMERICAN RECOVERY 

AND REINVESTMENT ACT 

The Recovery Act—signed into law by President Barack Obama on 

February 17, 2009—had three immediate goals: (1) create new jobs 

and save existing ones, (2) spur economic activity and invest in longterm growth, and (3) foster unprecedented levels of transparency and 

accountability. 

Five Department of Commerce bureaus—the Census Bureau, EDA, 

NIST, NOAA, and NTIA—and OIG received $7.9 billion under the 

Act, with $1.2 billion ultimately rescinded or transferred to other 

agencies. Financial and activity reporting for the Recovery Act ended 

as of December 31, 2013. As of December 31, 2013, the Department 

had obligated and disbursed almost all of the approximately $6 billion 

remaining. (The disbursal amount includes funding for the nowcompleted NTIA Digital Television Converter Box Coupon Program.) 
American Recovery and Reinvestment Act 33 

OIG RECOVERY ACT OVERSIGHT, FEBRUARY 2009–SEPTEMBER 2014 

Funded by $16 million for proactive oversight of the Department’s Recovery Act programs and 

activities, OIG has been evaluating whether agencies are using Recovery Act funds efficiently and 

effectively and following up on complaints, including whistleblower reprisal allegations. 

Key Activities Cumulative Results 

Published audit and evaluation reports 24 

Other work products (correspondence to Congress and the 

Recovery Accountability and Transparency Board) 8 

Audits/evaluations in progress 2 

OIG recommendations for action, correction, or improvement 97 

Recommendations implemented to take corrective action by 

making improvements, reducing risk, or preventing waste 88 

Investigations completed 30 

Investigations in progress 7 

Whistleblower reprisal allegations received 16 

Whistleblower reprisal allegations accepted 15 

Debarments and corporate compliance agreements implemented 1 

Testimonies 6 

Proactive training and outreach sessions held 129 

Individuals trained 6,624 

Hours of training provided 8,259 

EXCESS EQUIPMENT, WEAKNESSES IN INVENTORY MANAGEMENT, AND OTHER 

ISSUES IN BTOP INFRASTRUCTURE PROJECTS (OIG-14-023-A) 

Through our oversight of the Broadband Technology Opportunities 

Program (BTOP), we identified equipment as an area of concern 

that needed further review. Our audit of equipment acquisitions 

found that for the sample of infrastructure recipients reviewed, 

the recipients appropriately acquired, tested, and implemented 

equipment. However, we identified certain weaknesses and 

recommended steps to improve NTIA’s oversight controls: 

•	 Site visits identified problems with excess equipment and 

inventory management. 

•	 Technical oversight of BTOP grant recipients needs to be 

strengthened. 

•	 The design of the middle-mile network for one recipient does 

not follow industry best practice for providing reliable service. 

•	 Three of the six recipients we reviewed may not be able to 

sustain network service beyond the grant period. 

•	 Many of the projects were not completed on time, requiring that 

they receive extensions. 

Broadband Technology 

Opportunities Program 

The Recovery Act provided NTIA approximately $4.7 

billion to establish this competitive grant program that 

provides funds for deploying broadband infrastructure, 

enhancing broadband capacity at public computing 

centers, improving access to broadband services for 

public safety agencies, and promoting sustainable 

broadband adoption. 

Of the $4.7 billion, NTIA issued 232 BTOP grant awards 

representing approximately $3.9 billion. The bulk of 

BTOP dollars, totaling $3.5 billion, went toward 123 

infrastructure grants. A significant portion of federal 

funds used to implement these projects has been spent 

on purchasing network equipment: fiber, base tower 

stations, switches, microwave radio equipment, etc. 
34 Office of Inspector General | Semiannual Report to Congress | September 2014

We recommended that the Assistant Secretary for Communications and Information direct NTIA 

personnel to perform the following oversight activities on all BTOP grants: 

•	 NTIA should ensure that grant recipients have devised effective inventory internal controls. 

•	 NTIA program officers should review their awards and, where appropriate, ensure that BTOP 

grant recipients obtain agreements with all community anchor institutions to secure federal 

interests in all BTOP equipment. 

•	 NTIA program officers should work with grant recipients to assess equipment acquisitions to 

ensure that (1) the justification on the use and benefit of the equipment is adequate and 

(2) the purchases are allowable. 

•	 NTIA should work with recipients to identify and employ best practices in network design and 

risk mitigation strategies for networks in which reliability is a concern. 

•	 NTIA should reassess its staff’s ability to provide technical expertise in order to ensure that 

awards with complex issues are receiving appropriate oversight. 

NATIVE AMERICAN TRIBE ENTERS INTO SETTLEMENT AGREEMENT WITH 

WHISTLEBLOWER 

A Native American tribe received more than $7 million in BTOP funding from NTIA to install 

a middle-mile fiber optic broadband system in an underserved rural area. In July 2013, OIG 

closed an investigation into allegations that a former employee of the tribe was terminated from 

his position as a result of making whistleblower complaints concerning the tribe’s handling of 

environmental compliance issues. Our investigation produced ample evidence to substantiate 

this allegation, and the tribe entered into a settlement agreement whereby it remediated the 

issue. In addition to the settlement agreement with the whistleblower, the tribe agreed to revise 

certain policies and to deal with the environmental compliance issues originally raised by the 

whistleblower. 

NTIA SUB-RECIPIENT SETTLES CIVIL CASE FOR $780,000 

In June 2014, Advanced Power and Lighting, an NTIA sub-recipient of a BTOP award, and two 

of the company’s former officials entered into a settlement by agreeing to pay $780,000 to the 

government. The parties agreed to settle allegations that the company deliberately underpaid 

company workers on federally funded projects covered by the Davis-Bacon Act and also violated 

the False Claims Act by submitting fictitious payroll records to conceal the illegal activity. 

Our investigation, which was conducted in coordination with the U.S. Attorney’s Office for the 

Northern District of Georgia and the U.S. Department of Labor OIG, found that the subjects in 

this case deliberately underpaid certain workers by approximately $10 per hour, based upon the 

prevailing wage requirements for the occupation positions, in order to increase profit margins and 

bonuses. The investigation also established the company submitted fictitious payroll records that 

indicated the workers were paid approximately $10 per hour for fringe benefits, i.e., training and 

uniforms, which they also did not receive. 

36 Office of Inspector General | Semiannual Report to Congress | September 2014

WORK IN 

PROGRESS 

WORK IN PROGRESS (BY OVERSIGHT AREA)

During this reporting period, 22 OIG audit and evaluation projects were initiated or under way. 

a All three ESA works in progress concern the Census Bureau.

b Both Recovery Act works in progress concern programs within the National Telecommunications and 

Information Administration.

5

1

3

2

1 1 1

Department-wide BIS EDA ESAa ITA NIST NOAA NTIA Recovery Act b USPTO

4

1

3

DEPARTMENT-WIDE

Top Management Challenges Facing the Department in FY 2015

An annual report, required by the Reports Consolidation Act of 2000, highlighting the most 

significant management challenges facing the Department of Commerce. 

FY 2014 Audit of the Department’s Financial Statements

Determine whether the Department’s financial statements are presented fairly, in all material 

respects, in accordance with generally accepted accounting principles. (The audit will also 

consider the Department’s internal control over financial reporting and compliance with certain 

provisions of applicable laws, regulations, contracts, and grant agreements that could have a 

direct and material effect on the financial statements.)

Audit of Commerce’s Cloud-computing Environments

As part of a government-wide review initiated by the Council of Inspectors General on Integrity 

and Efficiency (CIGIE), evaluate the Department’s efforts to adopt cloud-computing technologies 

and review executed contracts between the Department’s bureaus and cloud service providers for 

compliance with applicable standards. 
37

Audit of Departmental Premium-class Travel Spending

Evaluate controls over premium-class travel spending and how they have been implemented. 

Assess whether the Department has established effective controls over related approvals, 

justifications, and documentation in order to comply with applicable laws, regulations, and policies.

Review of the Department’s Deployment of Business Application Solutions (BAS)

Evaluate the discovery and planning phases of BAS, determine whether milestones were attained, 

and identify any challenges as the Department enters the implementation phase.

BUREAU OF INDUSTRY AND SECURITY

Audit of BIS’s IT Security

Assess, as part of our FY 2014 FISMA audit, whether BIS’s continuous monitoring strategy and 

practices—including ongoing security control assessments of its critical information systems—

provide adequate information for authorizing officials to make proper risk-based decisions.

ECONOMIC DEVELOPMENT ADMINISTRATION

Audit of Revolving Loan Fund (RLF) Program

Audit EDA’s controls and processes associated with management of its RLF program to determine 

how EDA responds to performance problems, such as low utilization rates, high default rates, 

or noncompliance with reporting requirements. Also, determine how EDA responds to 

communities that may no longer be considered distressed or underserved.

ECONOMICS AND STATISTICS ADMINISTRATION

Audit of the Census Bureau’s IT Security

Determine, as part of our FY 2014 FISMA audit, whether the Census Bureau’s continuous 

monitoring strategy and practices—including ongoing security control assessments of its critical 

information systems—provide adequate information for authorizing officials to make proper riskbased decisions.

Audit of the Census Bureau’s Regional Office Realignment and Field 

Management Reforms 

Determine if the bureau is meeting, or on pace to meet, its goals of reduced cost and improved 

efficiency and responsiveness, while maintaining data quality across the many surveys it 

conducts annually. 

Review of the 2014 Site Test

Assess whether design alternatives tested in Montgomery County, MD, and Washington, DC, 

align with originally developed project goals and if Census is continuing its plan to utilize an 

iterative testing approach.

INTERNATIONAL TRADE ADMINISTRATION

Audit of ITA Consolidation

Evaluate and report on the progress, efficacy, and management of the October 2013 

consolidation of ITA’s four units into three, and specifically (1) assess the status of ITA 

consolidation, (2) evaluate whether resource changes as a result of the consolidation are aligned 

with ITA’s strategic priorities and are sufficient for providing services to ITA’s customers and 

stakeholders, and (3) identify management and leadership challenges that might hinder the 

consolidation effort.

Work in Progress
38 Office of Inspector General | Semiannual Report to Congress | September 2014

NATIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY

Audit of NIST’s Oversight of Contracts

Determine (1) if NIST has managed and administered contracts in accordance with federal 

and Departmental guidelines, policies, and procedures, and (2) if officials with performance 

monitoring responsibilities possess the requisite training, technical expertise, and certification 

of qualifications.

NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION

Audit of the National Marine Fisheries Service’s Observer Program

Understand how effectively NMFS has evaluated and implemented alternative fishery monitoring 

options, innovations, and methods in the Observer Program.

Audit of NOAA’s Polar Satellite Follow-on Planning and JPSS Implementation

Determine the progress of polar satellite follow-on program planning, monitor ongoing JPSS 

acquisition and development, and assess the extent of potential data gaps.

Audit of Geostationary Operational Environmental Satellite-R Series 

(GOES-R) Program

Assess the adequacy of GOES-R development activities in accordance with NOAA and 

NASA standards. Monitor NOAA’s progress in developing and vetting with stakeholders a 

comprehensive set of trade-off approaches to mitigate launch delays and its oversight of 

GOES-R systems engineering.

NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION

Audit Related to FirstNet Procurement Issues

Review certain ethics and procurement issues concerning the operations of FirstNet, assessing 

whether (a) contracts were appropriately awarded and administered in accordance with relevant 

acquisition regulations, (b) the acquired services were delivered to meet contract requirements, 

and (c) the processes undertaken by FirstNet pertaining to ethics-related matters of the board 

were adequate.

UNITED STATES PATENT AND TRADEMARK OFFICE

FY 2014 Audit of USPTO Financial Statements

Audit USPTO’s FY 2014 financial statements to determine whether the financial statements are 

presented fairly, in all material respects, and in accordance with generally accepted accounting 

principles. (The audit will also consider USPTO’s internal control over financial reporting and test 

compliance with certain provisions of applicable laws, regulations, and contracts that could have a 

direct and material effect on the financial statements.)

Audit of USPTO’s Use of Time-and-Materials and Labor-Hour Contracts

Evaluate USPTO’s awarding and administering of time-and-materials and labor-hour contracts, 

which constitute high risk to the government. This is part of a risk-based oversight strategy 

developed to help the Department address management challenges in its acquisition function 

and comply with OMB’s directive that federal agencies reduce their use of high-risk contracting 

authorities.
39

Audit of USPTO’s IT Modernization Projects

Assess the impact of IT contract termination decisions made as a result of the $110 million 

reduction in USPTO’s IT budget, review the progress USPTO has made in implementing 

the recommendations from the FY 2011 Patent End-to-End audit, and assess the project 

management and technical progress USPTO has made in development and implementation 

of the Trademark Next Generation project.

Audit of USPTO’s Quality Assurance Practices

Determine the sufficiency of USPTO’s quality assurance program’s processes to prevent the 

issuance of low-quality patents. Assess the additional quality reviews performed by USPTO 

to measure examiner performance and ensure that examiners are fully qualified to issue patent 

determinations without supervisory review.

AMERICAN RECOVERY AND REINVESTMENT ACT

Audit of Broadband Technology Opportunities Program Public Computer 

Centers (PCCs)

Review NTIA’s procedures to ensure that (1) PCC recipients used appropriate procurement 

practices; (2) recipient equipment purchases are installed, functioning effectively, and utilized to 

achieve intended program outputs; (3) controls are in place to ensure effective accountability for 

the purchased equipment; and (4) claimed results are verifiable.

Audit of Broadband Technology Opportunities Program Inventory Excess

Review BTOP grantees’ inventory of excess equipment to (1) determine whether grantees 

purchased equipment outside of the needs of the program, (2) assess procedures taken by 

NTIA to identify recipients maintaining excess inventory, and (3) evaluate NTIA’s procedures for 

disposition of excess BTOP award inventory.

Work in Progress
40 Office of Inspector General | Semiannual Report to Congress | September 2014

STATISTICAL DATA 

The Inspector General Act Amendments of 1988 require us to present the statistical data 

contained in tables 1–8. 

TABLES 	 Page 

1. Office of Investigations Statistical Highlights for This Period 	 40
 

2. Audit Resolution and Follow-up 	 41
 

3. Audit, Evaluation, and Inspection Statistical Highlights for This Period 	 42
 

4. Audits with Questioned Costs 	 43
 

5. Audits with Recommendations That Funds Be Put to Better Use 	 44
 

6. Report Types for This Period 	 44
 

6-a. Performance Audits 45
 

6-b. Evaluations and Inspections 46
 

6-c. Investigative Public Reports 46
 

7. Single Audit and Program-Specific Audits 	 47
 

7-a. Processed Reports with Material Audit Findings 47
 

8. Audits Unresolved for More Than 6 Months 	 48
 

TABLE 1. OFFICE OF INVESTIGATIONS STATISTICAL HIGHLIGHTS FOR THIS PERIOD 

Investigative activities cover investigations opened and closed by OIG; arrests by OIG 

agents; indictments and other criminal charges filed against individuals or entities as a result of 

OIG investigations; convictions secured at trial or by guilty plea as a result of OIG investigations; 

and fines, restitution, and all other forms of financial recoveries achieved by OIG as a result of 

investigative action. 

Allegations processed presents the number of complaints from employees, stakeholders, and 

the general public that were handled by our Complaint Intake Unit. Of these, some resulted in 

the opening of investigations; others were referred to bureaus for internal administrative followup. Others were unrelated to departmental activities or did not provide sufficient information for 

any investigative follow-up and so were not accepted for investigation or referral. Fines and other 

financial recoveries refer only to agreements that a judge accepted. 
Statistical Data 41 

Allegations Received 

Total hotline contacts 547 

Of which, are complaints related to Commerce programs Not availablea 

Number of hotline referrals to Commerce management 223 

Investigative Caseload 

Investigations opened this period 44 

Investigations closed this period 40 

Investigations in progress as of September 30, 2014 116 

Prosecutive Actions and Monetary Results 

Indictments/Informations 2b 

Arrests 0 

Convictions 4c 

Monetary Issues Identified (waste, questioned costs, recoveries, and fines.) $6,845,545 

Administrative Actions 

Suspension/Debarment 1 

Disciplinary action 6 

a OIG is in the process of implementing a new case management system for investigations, which does not yet have any 

analytics or reporting functionality. As a result, all data included in this table should be considered to be estimated. 

b These are superseding informations that were noted when originally filed in a prior reporting period. 

c Two of the four are convictions that were previously noted, but appear again due to a sentencing appeal. 

TABLE 2. AUDIT RESOLUTION AND FOLLOW-UP 

The Inspector General Act Amendments of 1988 require us to present in this report audits 

issued before the beginning of the reporting period (April 1, 2014) for which no management 

decision had been made by the end of the period (September 30, 2014). Ten audit reports remain 

unresolved for more than 6 months for this reporting period (see table 8 page 48). 

Audit resolution is the process by which the Department of Commerce reaches an effective 

management decision in response to audit reports. Management decision refers to 

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. 

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. 
42 Office of Inspector General | Semiannual Report to Congress | September 2014

 

 

Report Category Modifications Appeals 

Actions pending (April 1, 2014) 0 5 

Submissions 0 3 

Decisions 0 3 

Actions pending (September 30, 2014) 0 5 

TABLE 3. AUDIT, EVALUATION, AND INSPECTION STATISTICAL HIGHLIGHTS 

FOR THIS PERIOD 

Audits comply with standards established by the Comptroller General of the United States for 

audits of federal establishments, organizations, programs, activities, and functions. 

Evaluations and inspections include evaluations, inquiries, and similar types of reviews that do 

not constitute an audit or a criminal investigation. 

Questioned costsa $554,413 

Value of audit recommendations that funds be put to better useb $157,000 

Value of audit recommendations agreed to by managementc $2,808,757 

These amounts include costs questioned by state and local government auditors or independent 

public accountants. 

a Questioned cost: This is 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. 

b Value of audit recommendations that funds be put to better use: This results from an OIG recommendation 

that funds could be used more efficiently if Department management took action to implement and complete the 

recommendation. Such actions may include (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 the Department, 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. 

c Value of audit recommendations agreed to by management: This is the sum of (1) disallowed costs and (2) funds 

put to better use that are agreed to by management during resolution. Disallowed costs are the amount of costs that 

were questioned by the auditors or the agency action official and subsequently determined—during audit resolution or 

negotiations by a contracting officer—not to be charged to the government. 
 

 

 

Statistical Data 43 

TABLE 4. AUDITS WITH QUESTIONED COSTS 

See table 3 for a definition of “questioned cost.” An unsupported cost is a cost that is not 

supported by adequate documentation at the time of the audit. Questioned costs include 

unsupported costs. 

Report Category Number Questioned Unsupported 

Costs ($) Costs ($) 

A.	 Reports for which no management decision 

had been made by the beginning of the 9 2,710,308 625,465 

reporting perioda 

B. 	 Reports issued during the reporting period 6 554,413 323,113 

Total reports (A+B) requiring a management 

decision during the periodb 15 3,264,721 948,578 

C. 	 Reports for which a management decision 

was made during the reporting periodc 11 2,561,341 373,818 

i. Value of disallowed costs	 2,499,757 275,000 

ii. Value of costs not disallowed	 236,641 98,818 

D. 	 Reports for which no management decision 

had been made by the end of the 

reporting period 4 703,380 574,760 

a One audit report included in this table is also included among reports with recommendations that funds be put to better 

use (see table 5). However, the dollar amounts do not overlap. 

b In category C, lines i and ii do not always equal the total in line C because resolution may result in values greater than the 

original recommendations. 
44 Office of Inspector General | Semiannual Report to Congress | September 2014

TABLE 5. AUDITS WITH RECOMMENDATIONS THAT FUNDS BE PUT TO BETTER USE 

See table 3 for a definition of “recommendation 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 1 152,000

B. Reports issued during the reporting period 1 157,000

Total reports (A+B) requiring a management decision during the perioda 2 309,000

C. Reports for which a management decision was made 2 309,000

 during the reporting periodb 

 i. Value of recommendations agreed to by management 2 309,000

 ii. Value of recommendations not agreed to by management 0 0

D. Reports for which no management decision had been made by 

 the end of the reporting period 0 0

a One audit report included in this table is also included among reports with questioned costs (see table 4). However, the 

dollar amounts do not overlap.

b In category C, lines i and ii do not always equal the total in line C because resolution may result in values greater than the 

original recommendations.

TABLE 6. REPORT TYPES FOR THIS PERIOD

Performance audits are engagements that provide assurance or conclusions based on an 

evaluation of sufficient, appropriate evidence against stated criteria, such as specific requirements, 

measures, or defined business practices. Performance audits provide objective analysis so that 

management, and those charged with governance and oversight can use the information to 

improve program performance and operations, reduce costs, facilitate decision making by parties 

with responsibility to oversee or initiate corrective action, and contribute to public accountability.

Evaluations and inspections include evaluations, inquiries, and similar types of reviews that 

do not constitute an audit or investigation. An inspection is defined as a process that evaluates, 

reviews, studies, or analyzes the programs and activities of a department or agency to provide 

information to managers for decision making; make recommendations for improvements to 

programs, policies, or procedures; and identify where administrative action may be necessary.

Investigative public reports memorialize the evidentiary findings, analysis, and conclusions of 

specific OIG investigations. Investigations are different from evaluations and other types of OIG 

reviews as they are initiated to resolve specific allegations, generally dealing with violations of law, 

regulations, or policies. In such investigations, OIG collects evidence through a variety of methods, 

including witness interviews, subpoenas, and document requests, and examines that evidence to 

determine whether allegations are substantiated. OIG will release certain investigative reports to 

Congress and the public in the interest of increased transparency and accountability.

Type Number of Reports Table Number

Performance audits 9 Table 6-a

Evaluations and inspections 4 Table 6-b

Investigative public reports 5 Table 6-c

Total 18
 

 

 

 

 

 

 

 

Statistical Data 45 

TABLE 6-A. PERFORMANCE AUDITS 

Report Title Report 

Number 

Date 

Issued 

Funds to Be 

Put to 

Better Use ($) 

Amount 

Questioned 

($) 

Amount 

Unsupported 

($) 

Bureau of Industry and Security 

BIS’s Implementation of Export Control 

Reform Requires Several Improvements 

to Address Challenges 

OIG-14-028-A 09.04.2014 0 0 0 

Economics and Statistics Administration 

The Census Bureau Lacks Accurate 

and Informative Cost Data to Guide 

2020 Census Research Through a 

Constrained Budget Environment 

OIG-14-021-A 05.21.2014 0 0 0 

National Oceanic and Atmospheric Administration 

Audit of the Joint Polar Satellite System: 

To Further Mitigate Risk of Data Gaps, 

NOAA Must Consider Additional 

Missions, Determine a Strategy, and 

Gain Stakeholder Support 

OIG-14-022-A 06.17.2014 0 0 0 

Significant Security Deficiencies in 

NOAA’s Information Systems Create 

Risk in Its National Critical Mission 

OIG-14-025-A 07.15.2014 0 0 0 

Expedited Efforts Needed to 

Remediate High-Risk Vulnerabilities 

in the Joint Polar Satellite System’s 

Ground System 

OIG-14-027-M 08.21.2014 0 0 0 

National Telecommunications and Information Administration 

Excess Equipment, Weaknesses in 

Inventory Management, and Other 

Issues in BTOP Infrastructure Projects 

OIG-14-023-A 07.25.2014 157,000 0 0 

Office of the Secretary 

Inadequate Practice and Management 

Hinder Incident Detection and 

Response 

OIG-14-017-A 04.24.2014 0 0 0 

Office of the Secretary’s Working 

Capital Fund Billing Control Issues 

Resulted in Incorrect Charges 

OIG-14-020-A 05.15.2014 0 0 0 

U.S. Patent and Trademark Office 

Rapid Rise in the Request for 

Continued Examination Backlog 

Reveals Challenges in Timely Issuance 

of Patents 

OIG-14-024-A 06.30.2014 0 0 0 
46 Office of Inspector General | Semiannual Report to Congress | September 2014

 

 

 

 

TABLE 6-B. EVALUATIONS AND INSPECTIONS 

Report Title Report 

Number 

Date 

Issued 

Funds to Be 

Put to 

Better Use ($) 

Amount 

Questioned 

($) 

Amount 

Unsupported 

($) 

International Trade Administration 

Letter to Senate Committee on OIG-14-026-M 07.25.2014 0 0 0 

Appropriations on the Status of 

ITA’s Consolidation 

National Oceanic and Atmospheric Administration 

Review of NOAA Catch OIG-14-019-I 05.01.2014 0 0 0 

Share Programs 

Office of the Secretary 

FY 2013 Compliance with Improper OIG-14-016-I 04.15.2014 0 0 0 

Payment Requirements 

Nonfederal Audit Results for the OIG-14-017-M 04.15.2014 0 0 0 

6-Month Period Ending 

December 31, 2013 

TABLE 6-C. INVESTIGATIVE PUBLIC REPORTS 

Report Title Report Number Date Issued 

Economics and Statistics Administration 

Investigative Report on Census Bureau Data Falsification Allegations 14-0073 05.01.2014 

National Oceanic and Atmospheric Administration 

Investigative Report on Hurricane Sandy Relief Funding for the 

National Estuarine Research Reserve System 

13-0963 05.19.2014 

Review of Improper Expenditure for NOAA GOES-R Ground 

Segment Team Activity 

14-0475 09.22.2014 

U.S. Patent and Trademark Office 

Review of Conduct by a High-Ranking USPTO Official in the Hiring 

of a Trademark Organization Employee 

13-0726 07.08.2014 

Review of Waste and Mismanagement at the 

Patent Trial and Appeal Board 

13-1077 07.28.2014 
 

 

 

 

 

 

 

Statistical Data 47 

TABLE 7. SINGLE AUDIT AND PROGRAM-SPECIFIC AUDITS 

OIG reviewed and accepted 134 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 table 7-a. 

Agency Audits 

U. S. Census Bureau 1 

Economic Development Administration 44 

International Trade Administration 1 

Minority Business Development Administration 0 

National Institute of Standards and Technologya 15 

National Oceanic and Atmospheric Administration 12 

National Telecommunications and Information Administrationb 27 

Multibureau 32 

No Departmental expenditures 4 

Total 136 

a Includes 6 program-specific audits. 

b Includes 17 program-specific audits. 

TABLE 7-A. PROCESSED REPORTS WITH MATERIAL AUDIT FINDINGS 

Report Title Report Date Funds to Amount Amount 

Number Issued Be Put to Questioned Unsupported 

Better Use ($) ($) ($) 

Economic Development Administration 

Earth Science Systems LLC OIG-14-05106 09.30.2014 0 9,693 0 

(70NANB9H9012) 

Kent Displays Inc. OIG-14-05115 09.30.2014 0 83,784 0 

(70NANB11H005) 

National Oceanic and Atmospheric Administration 

Commonwealth of the OIG-14-04989 04.23.2014 0 86,757 0 

Northern Mariana Islands 

National Telecommunications and Information Administration 

EAGLE-Net Alliance OIG-14-05037 05.20.2014 0 275,000 275,000 

(NT11BIX5570001) 

JKM Consulting Inc. OIG-14-04951 04.15.2014 0 51,066 0 

(NT10BIX5570095) 

Thomas Edison State College OIG-14-05005 05.09.2014 0 48,113 48,113 
48 Office of Inspector General | Semiannual Report to Congress | September 2014

 

 

TABLE 8. AUDITS UNRESOLVED FOR MORE THAN 6 MONTHS 

National Institute of Five nonfederal audits of financial assistance grants 

Standards and Technology awarded to Massachusetts Manufacturing Extension 

Partnership for FU 2008–2012. 

NIST and OIG continue to work to resolve these audits. 

National Institute of 

Standards and Technology 

Five nonfederal audits of financial assistance grants 

awarded to Florida Manufacturing Extension Partnership 

for FY 2008–2012. 

NIST and OIG continue to work to resolve these audits. 

50 Office of Inspector General | Semiannual Report to Congress | September 2014

 

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 50 

5(a)(1) Significant Problems, Abuses, and Deficiencies 6-34 

5(a)(2) Significant Recommendations for Corrective Action 6-34 

5(a)(3) Prior Significant Recommendations Unimplemented 50 

5(a)(4) Matters Referred to Prosecutorial Authorities 41 

5(a)(5) and 6(b)(2) Information or Assistance Refused 51 

5(a)(6) Listing of Audit Reports 47 

5(a)(7) Summary of Significant Reports 6-34 

5(a)(8) Audit Reports—Questioned Costs 43 

5(a)(9) Audit Reports—Funds to Be Put to Better Use 44 

5(a)(10) Prior Audit Reports Unresolved 48 

5(a)(11) Significant Revised Management Decisions 51 

5(a)(12) Significant Management Decisions with Which OIG Disagreed 51 

5(a)(14) Results of Peer Review 51 

SECTION 4(A)(2): REVIEW OF LEGISLATION AND REGULATIONS 

This section requires the inspector general of each agency to review existing and proposed 

legislation and regulations relating to that agency’s programs and operations. Based on this 

review, the inspector general is required to make recommendations in the semiannual report 

concerning the impact of such legislation or regulations on (1) the economy and efficiency 

of the management of programs and operations administered or financed by the agency or 

(2) the prevention and detection of fraud and abuse in those programs and operations. 

Comments concerning legislative and regulatory initiatives affecting departmental programs 

are discussed, as appropriate, in relevant sections of the report. 

SECTION 5(A)(3): PRIOR SIGNIFICANT RECOMMENDATIONS UNIMPLEMENTED 

This section requires identification of each significant recommendation described in previous 

semiannual reports for which corrective action has not been completed. Section 5(b) requires 

that the Secretary transmit to Congress statistical tables showing the number and value of audit 

reports for which no final action has been taken, plus an explanation of why recommended action 

has not occurred, except when the management decision was made within the preceding year. 

However, information on the status of any audit recommendations can be obtained through OIG 

upon request. 
Reporting Requirements 51 

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 reports to the 

Secretary during this semiannual period. 

SECTION 5(A)(10): PRIOR AUDIT REPORTS UNRESOLVED 

This section requires (1) 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); (2) an explanation of why a decision 

has not been made; and (3) a statement concerning the desired timetable for delivering a 

decision on each such report. There are 10 nonfederal audit reports concerning two NIST grant 

recipients, which are more than 6 months old for which no management decision has been made. 

(See table 8.) 

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 financial 

assistance audits, OIG generally must concur with any decision that would change the audit 

resolution proposal in response to an appeal by the recipient. There are five appeals pending at 

the end of this period. 

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. 

SECTION 5(A)(14): RESULTS OF PEER REVIEW 

The most recent peer review of the Office of Audit and Evaluation was conducted in 2012 by the 

Office of Personnel Management (OPM) Office of Inspector General. OPM OIG’s System Review 

Report of our audit operations is available on our website. We received a pass rating, the highest 

available rating. We have implemented all of OPM OIG’s recommendations for process and policy 

improvements. 

The most recent peer review of the Office of Investigations was conducted in 2011 by 

OPM’s OIG. We received a compliant rating. The final report of this peer review was issued on 

April 30, 2012. 
52 Office of Inspector General | Semiannual Report to Congress | September 2014

ACRONYMS AND ABBREVIATIONS
 

BAS Business Application 

Solutions 

BIS Bureau of Industry 

and Security 

BTOP Broadband Technology 

Opportunities Program 

CIGIE Council of Inspectors General 

on Integrity and Efficiency 

CIRT Computer Incident 

Response Team 

DMSP Defense Meteorological 

Satellite Program 

DOC CIRT	 Department of Commerce 

Computer Incident 

Response Team 

ECR Export Control Reform 

EDA Economic Development 

Administration 

ESA Economics and Statistics 

Administration 

ESPC Environmental Satellite 

Processing Center 

FAR Federal Acquisition Regulation 

FirstNet First Responder 

Network Authority 

FISMA Federal Information Security 

Management Act of 2002 

FMC Fishery Management Council 

FY fiscal year 

GOES Geostationary Operational 

Environmental Satellite 

GOES-R Geostationary Operational 

Environmental SatelliteR Series 

IFQ Individual Fishing Quota 

IPERA Improper Payments Elimination 

and Recovery Act of 2010 

IT information technology 

ITA International Trade 

Administration 

JPSS Joint Polar Satellite System 

MDMR State of Mississippi’s 

Department of Marine 

Resources 

MTIPS Managed Trusted Internet 

Protocol Services 

NASA National Aeronautics and 

Space Administration 

NESDIS National Environmental 

Satellite, Data, and 

Information Service 

NIST National Institute of Standards 

and Technology 

NMFS National Marine 

Fisheries Service 

NOAA National Oceanic and 

Atmospheric Administration 

NPOESS National Polar-orbiting 

Operational Environmental 

Satellite System 

NTIA National Telecommunications 

and Information Administration 

NWS National Weather Service 
 

 

 

 

 

 

 

Acronyms and Abbreviations 53 

OAM Office of Acquisition 

Management 

OGC Office of General Counsel 

OIG Office of Inspector General 

OMB Office of Management 

and Budget 

OPM Office of Personnel 

Management 

OSFM Office of the Secretary 

Financial Management 

PATB Patent Trial and Appeal Board 

PCC Public Computer Center 

POES Polar-orbiting Operational 

Environmental Satellites 

RCE Request for Continued 

Examination 

RLF Revolving Loan Fund 

SIDAR Solar Irradiance, Data 

and Rescue 

SOC Security Operations Center 

Suomi NPP Suomi National Polar-orbiting 

Partnership 

SWPC Space Weather 

Prediction Center 

UCA Undefinitized Contractual 

Action 

USAF U.S. Air Force 

USFCS U.S. and Foreign and 

Commercial Service 

USPTO U.S. Patent and 

Trademark Office 

>> Call: 800.1'21'.5197 

>> Email: holline@oig.doc.gov 

>> Or visit our website al www.oig.doc.gov 
U.S. Department of Commerce 

Office of Inspector General 

1401 Constitution Avenue, NW 

Washington, DC 20230 

www.oig.doc.gov 

OUR MISSION 

To improve the programs and operations of the 

Department of Commerce through independent 

and objective oversight.