U.S. Department of Commerce 

Office of Inspector General 

Semiannual Report to Congress
 


March 2015 
 

OFFICE OF 

INSPECTOR GENERAL 

Office of 

Administration 

Inspector General Office of Counsel

Office of Audit 

and Evaluation 

Office of 

Investigations 

Oversight Areas 

Office of the Secretary 

Bureau of Economic Analysis 

Bureau of Industry and Security 

Economic Development Administration 

Economics and Statistics Administration 

First Responder Network Authority 

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. . . . . . . . . . . . . . . . . . . . . . . . . . .

OIG Hotline 

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

202.482.4661

or 800.424.5197 

TDD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .202.482.5923

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U.S. Department of Commerce 

Office of Inspector General 

Semiannual Report to Congress
 


March 2015 
 

 

TABLE OF 
 

CONTENTS
 


01 FROM THE INSPECTOR GENERAL 

02 TOP MANAGEMENT CHALLENGES FACING THE DEPARTMENT 

12 OVERSIGHT AREAS 

12 DEPARTMENT-WIDE MANAGEMENT 

18 ECONOMIC DEVELOPMENT ADMINISTRATION 

20 INTERNATIONAL TRADE ADMINISTRATION 

22 NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION 

24 NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION 

28 UNITED STATES PATENT AND TRADEMARK OFFICE 

32 WORK IN PROGRESS 

36 STATISTICAL DATA 

46 REPORTING REQUIREMENTS 

48 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 March 31, 2015. 

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 14 audits, inspections, and responses to Congressional requests, 

as well as 4 Congressional testimonies addressing programs and personnel 

associated with the International Trade Administration, First Responder Network 

Authority (FirstNet), U.S. Patent and Trademark Office, and the Department itself. 

In October 2014, we issued 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 through 2018. 

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 the Department of Commerce’s 

programs and operations. 

TODD J. ZINSER
 

2 Office of Inspector General | Semiannual Report to Congress | March 2015

 

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 

October 2014, the Department of Commerce OIG identified five challenges 

that require significant Departmental attention in FY 2015 and beyond. 

Top Management Challenges Facing the Department of Commerce 

presents cross-cutting issues aligned with the Department’s strategic plan 

for FY 2014 through FY 2018. 

Below is a detailed summary of those five top challenges, reflecting the 

status of Departmental issues as of the October 2014 publication of the 

Top Management Challenges report. Updates will appear in subsequent 

semiannual reports. 

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. 

The International Trade Administration (ITA) must work to fully realize the goals of its recent 

reorganization and meet the challenge of NEI/NEXT, which aims to build on the work of the 

National Export Initiative (NEI). The Bureau of Industry and Security (BIS) must continue the 

migration of export licensing functions to the Department of Defense’s USXPORTS system and 

work to fully implement the changes called for by the Administration’s Export Control Reform 

Initiative (ECRI). The Economic Development Administration (EDA) faces a challenge with the 

management of its Revolving Loan Fund (RLF) program. Finally, throughout the Department, an 

added challenge will be to comply with new requirements from the Office of Management and 

Budget (OMB) regarding grant administration. 

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

effectively working with federal partners. In October 2013, ITA initiated a reorganization to 

consolidate its operations from four operating units to three. Among the benefits of consolidation 

listed in the Department’s request to Congress to consolidate the bureau: better service to 

customers through a strategic realignment of expertise; reduction of redundancies and operating 

costs; and creation of a more flexible organizational structure that can adapt to changing priorities 

and new global realities. At the request of the United States Senate, we initiated an audit of 

ITA’s consolidation to assess its status, examine changes in the level of resources within the 

organization, and identify any challenges that might hinder this effort. We identified five broad 

areas that warrant ITA management’s attention and further examination: (1) collaboration within 

and among ITA’s units following the consolidation, (2) levels of management, (3) duplication of 
 

Top Management Challenges Facing the Department 3 

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

communication and employee feedback. 

Following the consolidation, new ITA leadership was appointed to help guide the organization 

through this transition. It can also help address the issues we have identified—while addressing 

other challenges, such as NEI/NEXT. Since 2010, ITA has collaborated with other federal 

agencies in carrying out the NEI, which aimed to double U.S. exports by the end of 2014 

over 2009 levels. In 2013, U.S. exports rose to $2.28 trillion, which is below the target of 

$2.76 trillion for that year. Although it appears unlikely that ITA and its partner agencies will 

achieve the overall goal of doubling U.S. exports in 5 years, the bureau is moving forward with 

a new effort that will build upon the achievements of the NEI. In May 2014, the Secretary 

announced the launch of NEI/NEXT—which involves 20 federal departments and agencies with 

export-related programs. As it transitions from one major export promotion effort to another, ITA 

must ensure that it strategically directs its resources and coordinates with federal partners to 

build upon the achievements of the NEI and serve the nation’s exporters. 

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

functions to the Department of Defense’s USXPORTS system. BIS is transitioning to 

an interagency, mission-critical information technology (IT) system, as directed by the ECRI. 

In April 2010, the Administration announced the ECRI, which is designed to streamline the 

country’s export control laws and regulations. Part of that effort was to determine which items 

were to shift from the U.S. Munitions List to the Commerce Control List (CCL), which are 

administered by the Department of State and BIS, respectively. 

Additionally, since FY 2011, BIS has worked with its Department of Defense counterpart to 

migrate its licensing operations to the Department of Defense’s IT system, called USXPORTS. 

This system is currently used by the Departments of Defense and State to process munitions 

license applications. According to BIS, end-to-end testing of USXPORTS conducted in August 

2014 uncovered several development and programming issues, including lack of support for BIS’ 

enforcement screening of license applications. 

Although both BIS and the State Department will soon be processing license applications 

using USXPORTS, for the near term U.S. exporters will continue to access separate portals 

at the Departments of Commerce and State to submit applications, depending on the export. 

Moving forward with ECR activities, BIS will need to continue working with the Departments of 

Defense and State to create a single customer portal on USXPORTS for submission of license 

applications. 

Addressing conditions and issues with EDA’s RLF Program. Due to an IT disruption at 

EDA in 2012, its Revolving Loan Fund Management System (RLFMS) has been unavailable. 

The unavailability of RLFMS, the absence of a reliable and consistently applied interim tool, and 

turnover among EDA’s regional staff who monitor RLF program activities have allowed the internal 

control weaknesses that we first reported in 2007 to continue. We are currently reviewing whether 

EDA (a) takes appropriate corrective actions with RLFs that are experiencing performance 

problems and (b) addresses indications that communities previously identified as “distressed” 

may no longer be considered distressed. 

Ensuring the accuracy of grants management financial and performance metrics. 

In conjunction with new rules issued by OMB that went into effect in December 2014, the 

Department and each of its bureaus have assumed new responsibilities regarding single audits 

of grants. This new approach will place a greater burden on the Department and, if not properly 

deployed, may affect the performance of its trade and research grant programs. In FY 2013, the 

Department awarded more than $1.2 billion in grants across more than 50 programs, including 

$723 million through the National Oceanic and Atmospheric Administration (NOAA), $185 million 

through the National Institute of Standards and Technology (NIST), and $198 million through EDA. 
4 Office of Inspector General | Semiannual Report to Congress | March 2015

Because of their lack of experience with the single-audit process, these and other awarding 

bureaus will be challenged to develop the required processes and metrics for providing effective 

oversight of grant funds. 

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. 

The Department of Commerce has a central responsibility for supporting and expanding 

innovation—and the relationships with businesses and industry necessary to address the 

challenges the country faces in this area. The U.S Patent and Trademark Office (USPTO) faces 

challenges with reducing wait times for issuing determinations on new patent applications, 

appeals, and other filings and with responding to stakeholder concerns related to patent 

errors that might lead to abusive and unnecessary litigation. USPTO also faces challenges in 

managing its large and dispersed workforce. The National Telecommunications and Information 

Administration (NTIA) faces challenges with identifying spectrum for commercial broadband use; 

addressing the First Responder Network Authority’s (FirstNet’s) implementation of a nationwide 

wireless broadband network for public safety users; and ensuring the sustainability of its 

Broadband Technology Opportunities Program (BTOP) grants after federal funding ends. Finally, 

the NIST Manufacturing Extension Partnership (MEP) program faces challenges in exercising 

better oversight of conference activities by its grantees and in completing the re-competition of its 

58 MEP centers that began in FY 2014. 

Facing internal and external challenges at USPTO in promoting innovation through 

the protection of intellectual property (IP) rights. USPTO, as the U.S. authority for issuing 

all patents and trademarks, has a critical role in awarding IP rights and working on the global 

stage to further IP policy, protection, and enforcement. As a fee-funded agency with over 12,000 

employees, USPTO has undergone significant changes over the past 5 years. In September 

2011, the President signed the Leahy-Smith America Invents Act (AIA), representing the most 

fundamental change to the U.S. patent system in more than 50 years. Amid these changes, 

USPTO must address both internal and external challenges as it strives to promote U.S. innovation 

and industrial competitiveness. 

Although USPTO has made progress in reducing the time an applicant waits to have a new 

application reviewed (known within USPTO as “pendency”), waiting times for other types of filings 

have increased. The patent application backlog decreased from 718,835 applications in FY 2009 

to 616,019 applications as of the third quarter of FY 2014. During that same time, however, 

waiting times for another type of filing, the request for continued examination (RCE), increased 

from 2 months in FY 2009 to 8.7 months as of the third quarter of FY 2014. Pendency also grew 

for appeals filed with the Patent Trial and Appeal Board (PTAB). Although USPTO has begun to 

reduce the backlog of RCEs, the rapid rise in the RCE backlog over the last 5 years highlights the 

challenges USPTO encounters when it prioritizes the review of new applications to the detriment 

of other types of filings. The steady growth in the appeal backlog and in waiting times also raises 

concerns about the timely adjudication of IP rights at USPTO. 

USPTO also faces workforce management challenges, including operating without a permanent 

director between January 2013 and March 2015. In the summer of 2014, our office issued two 

high-profile investigations related to concerns with hiring practices at the Trademark Office and 

poor supervisory oversight at PTAB. In the Trademark Office investigation, we found that a senior 

official improperly intervened in the hiring process to ensure that a candidate who was not the 

most qualified, but who had ties to the official, received a position. In the PTAB investigation, we 

found that the lack of work for paralegals resulted in waste totaling more than $5 million—and that 

senior USPTO officials were aware of the situation for years but failed to take action to prevent 

further waste. In fact, our investigation found that USPTO management provided over $680,000 in 
Top Management Challenges Facing the Department 5 

bonuses between FY 2009 and FY 2013, even when the paralegals who received these bonuses 

did not have enough work to keep them fully engaged. 

Challenges also exist with the management of USPTO’s telework program. In a memorandum 

dated July 8, 2013, USPTO responded to OIG’s request that it conduct a review of allegations 

of systemic time-and-attendance abuse by teleworkers, as well as how supervisors were not 

empowered by USPTO senior management to adequately address abuse when it occurred. The 

findings of the internal USPTO investigation and the two OIG investigations raise concerns over 

USPTO’s ability to hire and manage an expanded workforce, many of whom work from home. 

Identifying spectrum for commercial broadband use, and administering FirstNet and 

BTOP. In June 2010, the President requested that 500 megahertz (MHz) of federal or nonfederal 

spectrum be freed up for commercial wireless broadband. In response, NTIA announced in 

March 2012 that the federal government intended to repurpose 95 MHz of prime spectrum 

for commercial use. A June 14, 2013, presidential memorandum directs federal agencies to 

accelerate shared access to spectrum. While progress has been made to enhance spectrum 

sharing, challenges—such as lack of incentives for federal agencies to share spectrum—must be 

addressed for this effort to succeed. 

The 2012 legislation that established FirstNet reallocated some existing public safety spectrum, 

along with the so-called “D-block” spectrum (the 10 MHz bandwidth), and authorized up to 

$7 billion in funding for the establishment of a nationwide public safety broadband network. 

Questions about the sufficiency of funding provided to implement a nationwide network that 

meets public safety-grade standards and provides coverage in every state and territory presents 

FirstNet with a challenge. As detailed in a February 2014 OIG memorandum, FirstNet will 

need to establish an effective organization and leverage existing infrastructure by entering into 

agreements with commercial carriers and local and state governments. Effective outreach will 

be necessary to achieve buy-in from the public safety community that FirstNet is designed to 

serve. Also, experiences gained from the four BTOP public safety grants that FirstNet entered 

into spectrum lease agreements with will need to be factored into the network’s design. Further, 

FirstNet is operating under commercial accounting standards, per its authorizing legislation, but 

is also required to comply with federal accounting standards due to its status as an independent 

authority within NTIA. This has caused several operational challenges and contributed to a material 

weakness being reported in the audit of FirstNet’s federal financial statements. 

Under the American Recovery and Reinvestment Act of 2009, NTIA awarded approximately 

230 BTOP grants valued at approximately $3.9 billion. The awards were made in three major 

areas: program infrastructure, public computer centers, and sustainable broadband adoption. 

With multiple projects either initiated with BTOP grant funds or first-time federal fund recipients, 

NTIA will need to pay close attention to the sustainability of the projects beyond the federal 

funding period and make sure that appropriate steps are taken to secure the federal interest in 

equipment purchased. 

Completing the re-competition of MEP centers. NIST-MEP works with small and mediumsized U.S. manufacturers to help them create and retain jobs, increase profits, and save time and 

money. MEP is built around a network of 58 manufacturing extension centers located throughout 

the 50 states and Puerto Rico. The program brings together more than 1,200 technical experts 

who serve as business advisors to help U.S. manufacturers. The MEP budget for FY 2014 is 

$128 million, and NIST requested a budget of $141 million for MEP in FY 2015. 

MEP has recently experienced some significant challenges. OIG audits in 2009 found that several 

state centers had serious compliance violations regarding their expenditures. In addition, the 

poor financial condition of some center operators led to the closure of one center and use of new 

operators at three centers since 2010. Finally, as reported in another OIG audit, MEP incurred the 

costs of unnecessary contract concessions and subsidized lodging for its 2012 annual conference. 
6 Office of Inspector General | Semiannual Report to Congress | March 2015

An additional challenge began in summer 2014, when MEP launched a 3-year process of formally 

re-competing all 58 MEP centers with a demonstration program in 6–10 states. Periodic full 

and open competition is the mechanism chosen by MEP managers to ensure the effective and 

efficient management of the entire national network of MEP centers. The demonstration program 

will enable procedures, milestones, and resource requirements to be tested and refined. The 

challenge to MEP management is ensuring that this re-competition process can be implemented 

without disrupting the MEP system and degrading the program’s overall performance. 

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, 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. Overcoming these challenges 

will enable our country to prepare for and prosper in a changing environment through the use of 

“actionable environmental intelligence.” 

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

environmental observations. The Geostationary Operational Environmental Satellite-R Series 

(GOES-R) and the Joint Polar Satellite System (JPSS) are the Department’s largest investments, 

accounting for more than 20 percent of its $8.8 billion FY 2015 budget request. These satellites 

are essential components in understanding and predicting the environment: they provide data and 

imagery used to track severe storms, forecast weather, and study climate and other environmental 

conditions. However, acquisition and development delays could lead to gaps in NOAA’s satellite 

coverage, potentially degrading its ability to perform these functions. 

The GOES-R program, consisting of four satellite missions (GOES-R, -S, -T, and -U), has 

an estimated cost of $10.8 billion spread over 37 years. For FY 2015, NOAA has requested 

$981 million for GOES-R. The program faces acquisition and development challenges that could 

delay the launch of its first satellite in FY 2016 or its operational capabilities after launch, resulting 

in potential data gaps. 

The JPSS program is responsible for the acquisition and development of two afternoon orbit polar 

satellites (JPSS-1 and JPSS-2) and a ground system, which currently supports the operation of 

Suomi National Polar-orbiting Partnership (Suomi NPP) and provides data services for partner 

satellites. It is estimated to cost $11.3 billion through FY 2025; NOAA requested $916 million for 

JPSS in FY 2015. In our June 2014 audit report, we continued to raise concerns regarding the 

time between when Suomi NPP’s design life ends and JPSS-1 satellite data becomes available 

for operational use. During this potential gap of 10–16 months, there will be significant risk of 

actual gaps in key data. These data are used primarily in NOAA’s 2- to 10-day weather forecasts. 

We recommended that NOAA explain the effects of a gap in terms of diminished forecast 

hours and added economic costs—or, conversely, the contribution to forecast accuracy and the 

economic benefits of afternoon orbit data. 

Improving forecasts to support a weather-ready nation. As described in the Department’s 

Strategic Plan, building a weather-ready nation protects against “increasing vulnerability to 

extreme weather and water events.” The Department’s objective is to improve severe weather 

preparedness, response, and recovery capabilities through strategies to (1) evolve the National 

Weather Service, (2) improve the accuracy and usefulness of forecasts, and (3) enhance decision 

support services for emergency managers. A significant challenge to the second strategy is to 

objectively improve NOAA’s forecast accuracy and warning lead time. There has been some 
Top Management Challenges Facing the Department 7 

evidence that next-generation polar satellite data from Suomi NPP have improved forecasts. A 

polar-satellite coverage gap, however, could lessen the accuracy of numerical weather prediction 

models. To address that risk, the Department must fully develop a contingency plan to mitigate 

forecast degradation in the event of a polar satellite coverage gap. 

Fostering healthy and sustainable marine resources. Fisheries play a significant role in the 

U.S. economy. In 2012, U.S. commercial fishermen landed 9.6 billion pounds of seafood valued 

at $5.1 billion. Recreational fishers in 2012 caught an estimated total weight of more than 200 

million pounds of landed catch. The Dutch Harbor, Alaska, commercial fishing port was the 2012 

national leader in volume, with 752 million pounds landed; the New Bedford, Massachusetts, 

port had the highest value of catch in 2012, with $411 million landed. However, a broad range 

of National Marine Fisheries Services (NMFS) concerns—including the difficult balance of 

stakeholder roles and interests, the need for scientific and technological advancement, and the 

continuing call for National Observer Program (NOP) improvements—poses challenges for NOAA. 

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. 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. Keeping up with rapidly changing technology, in 

terms of providing as well as protecting data, is another key challenge faced by Departmental 

bureaus such as 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—are only two examples of the Department’s challenge of “transforming 

Department data capabilities and supporting a data-enabled economy.” These changes, along 

with the Digital Accountability and Transparency Act of 2014 (the DATA Act), promise to bring the 

Department into a new era: a federal government-wide community of data providers adhering to 

uniform standards. 

Incorporating cost-saving decennial innovations while continuing to ensure an 

accurate decennial count. The Census Bureau faces multiple challenges as it prepares for the 

2020 decennial census and conducts ongoing surveys. Various program delays have forced the 

Bureau to reevaluate the timing of 2020 research and testing, as well as reduce the cost of field 

operations—all while maintaining survey quality at a time when response rates are declining. 

In addition, the Census Bureau must improve cost-accounting practices in order to demonstrate 

that its decennial programs have achieved actual cost savings. The Census Bureau also confronts 

the legal and public-relations challenge of introducing innovations in the use of administrative 

records, and other forms of data sharing, in order to introduce a more cost-efficient decennial 

census for 2020. 

The Census Bureau continues to face project management challenges that pose risks to its 

ability to conduct a cost-effective 2020 decennial census. The 2010 decennial census cost U.S. 

taxpayers approximately $13 billion. In order to control costs of the 2020 decennial census, the 

Census Bureau committed to researching and testing design innovations that will reduce costs of 

the most expensive aspects: paper data collection and labor costs associated with nonresponse 

follow-up operations. However, recent OIG audit reports continue to identify issues similar to 

those encountered during 2010 decennial planning. In order to make well-informed design 

decisions by the end of FY 2015, the Census Bureau must define and adhere to a final testing 

schedule. If innovations are abandoned prior to the 2020 decennial census, the cost of a 2020 

count using the 2010 decennial design is estimated to be as a high as $18 billion. 

Audits of the Census Bureau’s 2010 decennial planning noted that the Census Bureau had not 

integrated the research and testing schedule with budget and cost data. To effectively manage a 
8 Office of Inspector General | Semiannual Report to Congress | March 2015

program of the size, complexity, and cost of the 2020 decennial census—and assess the return 

on investment of research efforts—managers need accurate accounting records. Integration of the 

research schedule with budget and cost information allows managers to better track the status of 

available funds, conduct cost-benefit analyses, and forecast impending underruns and overruns 

so that funds can be reallocated. Without accurate cost information, the Census Bureau will be 

challenged to demonstrate in a transparent manner that it achieved cost reduction goals. 

A key tenet of the Census Bureau’s 2020 decennial redesign effort is that reducing nonresponse 

followup operation costs, as well as making other design changes, could reduce the overall cost 

of the 2020 decennial census by billions of dollars. The use of administrative records to remove 

nonresponding households from follow-up operations is critical to reducing these costs. However, 

the use of administrative records presents challenges: potential legal impediments to data sharing 

among the Census Bureau, other agencies, and the private sector exist, as does public sensitivity 

regarding the use of previously collected data. In addition, the validity of administrative record 

information must be verified and field-tested. As with other elements of the Census Bureau’s 

decennial research program, administrative record testing has encountered delays, potentially 

hindering the Census Bureau’s ability to develop new, cost-efficient methods for the 2020 

decennial census. 

Meeting public demand for data. The Department’s role in the data community is expanding, 

to a provider of information that reaches an increasing number of users. Two Departmental 

bureaus, the Census Bureau and NOAA, provide examples of looming challenges. The population 

data and business indicators that the Census Bureau provides—and the weather, climate, and 

environmental information that users access through NOAA—are only two examples of the 

Department’s diverse data resources. 

In order to meet changing expectations for data services, the Census Bureau has taken steps 

to provide vital economic information: for example, by modernizing its approach to issuing easyto-use data. With a mobile app, it has consolidated its indicators with those from the Bureau 

of Economic Analysis and the Bureau of Labor Statistics, which produce monthly and quarterly 

snapshots of key sectors within the U.S. economy. However, as more people than ever before 

have access to data—thus fueling a higher demand for data—the Department will need to keep 

pace with rapidly changing technology. The Census Bureau must keep pace with changing 

technology in such a way that facilitates dissemination of data to all interested users, from 

individuals to businesses to governments. 

Likewise, the demand for weather, climate, and environmental data is increasing. In February 

2014, NOAA requested information from the private sector to determine whether the capability 

and interest exists to position NOAA’s considerable data holdings on the cloud, to be co-located 

with easy and affordable access to computing, storage, and advanced analytical capabilities. The 

private sector and NOAA must determine the feasibility of partnering, taking into consideration 

that NOAA must (1) ensure its existing services are not impacted, (2) remain compliant with 

statutes and regulations, and (3) retain and maintain the scientific stewardship of any data 

provided to industry partners. As with the increased demand for Census Bureau data, NOAA data 

providers must face an additional challenge along with service continuity, statutory compliance, 

and scientific stewardship: IT security. 

Implementing a mandate for government-wide data standards. The Department’s goal of 

“transforming Department data capabilities and supporting a data-enabled economy,” along with 

the DATA Act of 2014, challenge the Department (and the new Chief Data Officer it will hire) to 

develop and implement a vision for the future of the Department’s diverse data resources. 

The DATA Act is intended to establish government-wide standards for financial data and requires 

that consistent, reliable, and searchable government spending data be displayed accurately for 

taxpayers and policy makers. Among other things, the DATA Act requires that, for any funds made 
Top Management Challenges Facing the Department 9 

available to, or expended by, a federal agency or component of a federal agency, the following 

information shall be posted on USASpending.gov, for each appropriations account: the amount of 

budget authority appropriated, the amount that is obligated, the amount of unobligated balances, 

and the amount of any other budgetary resources. Guidance on implementing data standards 

will be issued to agencies within 12 months of May 9, 2014 (the date of the enactment of the 

DATA Act), and inspectors general will follow with reviews of spending data submitted under the 

act within 18 months after guidance is issued. As a result, the Department will need to dedicate 

resources in FY 2015 to implement the established data standards and prepare for reviews of the 

reported data. 

In July 2014, Secretary Pritzker announced that the Department will hire its first-ever Chief Data 

Officer. This new leader will be responsible for developing and implementing 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 of “operational excellence” 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. To meet this challenge, the Department must focus on all customers, 

including (a) internal (its own operating units, striving to improve their cybersecurity posture and 

financial data quality), (b) the public at large (who expect a culture of accountability from the 

Department), and (c) U.S. businesses (who, according to the Department’s mission, seek help 

from Commerce to become more innovative at home and more competitive abroad). 

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

systems—20 of them categorized as high-impact systems—to support its business operations. 

Although the Department has taken actions to strengthen cybersecurity, our Federal Information 

Security Management Act of 2002 (FISMA) assessments over the years repeatedly identified 

significant flaws in basic security measures protecting the Department’s IT systems and 

information. Our recent FISMA audits revealed significant security deficiencies in NOAA’s highimpact systems and identified security weaknesses in the Department’s incident detection and 

response capabilities. These persistent security deficiencies make the Department vulnerable to 

cyber attacks. In addition, a long-standing fragmented IT governance structure provides additional 

challenges to effectively strengthening Department-wide cybersecurity. 

To deal successfully with cyber threats, the Department needs to establish a robust incident 

response capability, specifically within the Department of Commerce Computer Incident 

Response Team. In addition, the Department must deploy a sustainable implementation of its three 

enterprise-wide cybersecurity initiatives that are under way to continuously monitor its IT systems, 

provide cyber security situational awareness, and meet requirements to optimize and standardize 

its individual external network connections. 

The first initiative is the Enterprise Cybersecurity Monitoring and Operations (ECMO), an essential 

piece of the Department-wide continuous monitoring capability. The Department must make a 

concerted effort to expedite ECMO deployment and thereby provide near real-time security status, 

support for patch management, and remediation of software configuration issues for Departmentwide system components. The second is the Enterprise Security Oversight Center (ESOC). While 

the Department has made progress from its ESOC initial planning stage—including completion 

of ESOC site selection and acquisition of hardware and software for ESOC’s operation—it 

needs several years of the Department’s commitment and strong cooperation among operating 

units to fully implement ESOC. Thirdly, in order to improve its overall cybersecurity posture, the 

Department must maintain a fully operational and stable IT infrastructure at its headquarters in the 

Herbert C. Hoover building in Washington, DC, which supports core IT services such as incident 

detection and response to multiple bureaus. 
10 Office of Inspector General | Semiannual Report to Congress | March 2015

We reported our concerns about the Department’s fragmented IT governance in previous years. 

In response to OMB direction, the then-Acting Secretary issued a memorandum in June 2012 

that described a strategy to strengthen the Department’s Chief Information Officer’s (CIO’s) ability 

to oversee the bureaus’ IT investments, committing $1.9 billion in FY 2014 alone (as of August 

2014) for that purpose. The CIO has leveraged this increased authority to lead the effort to 

consolidate commodity IT Department-wide—and continues to strengthen IT oversight through the 

Commerce IT Review Board. Despite this increased authority, the CIO’s responsibility to oversee 

satellite IT investments has been diminished, and IT investments still need to close the gap 

between planned and actual schedule and cost performance. 

Strengthening stakeholder confidence in the Department. OIG operates a complaint 

hotline for employees and the public to submit information about alleged wrongdoing, misconduct, 

or mismanagement. OIG’s determination to review, investigate, or refer the complaint information 

to Departmental management for appropriate action helps to instill a culture of ethical conduct 

and ensures that spending is appropriate and complies with laws and regulations. Over the past 

2 years, the Department and its bureaus have worked closely with OIG to resolve management 

issues raised through OIG’s hotline. Timely and thorough actions to resolve these issues help to 

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. The Department and most of its bureaus use 

an outdated financial management system, developed with aging technology and augmented 

with in-house software that is increasingly difficult to maintain. Limited system functionality, high 

support costs, lack of system integration, and lack of centralized reporting capability impede 

the Department’s ability to oversee and manage Department-wide financial activities. Plans are 

in progress to replace the legacy financial management system; however, there are significant 

challenges with this project, including an aggressive timeline, the need for successful conversion 

at the Census Bureau in time for 2020 decennial readiness, the use of a shared-service 

provider, the need to interface separate component systems, and funding adequate timely 

project completion. 

In FYs 2011–2013, the accounting firm KPMG LLP identified several significant control 

weaknesses at NOAA related to the financial accounting for satellites. Although NOAA develops 

a corrective plan each year, repeated satellite accounting deficiencies highlight other challenges. 

For example, the operation and management of NOAA’s satellite program needs strengthening to 

ensure integrity, accountability, and transparency. Further, it is essential that program and finance 

personnel work together to ensure that satellite investments are accurately identified, recorded, 

and reported. The Department also must address financial management challenges within the 

Office of the Secretary’s Working Capital Fund (WCF). 

Reducing acquisition risk. Procurement continues to be a significant support mechanism 

for the Department’s overall mission, accounting for approximately $2.4 billion annually for 

goods and services related to satellite acquisitions, support for intellectual property operations, 

management of coastal and ocean resources, IT, and construction and facilities management. 

Minimizing waste and abuse through acquisition management and oversight is an ongoing 

challenge for the Department—and particularly critical given current budget limitations and recent 

OMB and Congressional initiatives emphasizing more accountability in federal contracting. 

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. 
9

5

2

1 1

Department-widea NTIAb USPTOc ITA NOAA

Department-Wide Management 13 

COMPLETED WORKS (BY OVERSIGHT AREA) 

During this reporting period, OIG completed 14 audits, inspections, and responses to 

Congressional requests, as well as 4 Congressional testimonies. 

a Department-wide completed works include two Congressional testimonies.



b Completed works concerning NTIA include one audit report and one Congressional testimony regarding FirstNet.



c Completed works concerning USPTO include one Congressional testimony.
 


AUDIT OF THE DEPARTMENT’S CLOUD COMPUTING EFFORTS IDENTIFIED 

CONTRACTUAL DEFICIENCIES (OIG-15-001-M) 

The Council of Inspectors General on Integrity and Efficiency (CIGIE) initiated a government-wide 

review to evaluate federal agencies’ efforts to adopt cloud computing technologies. The review 

focused on determining whether contracts that agencies have issued for cloud services comply 

with applicable standards. 

In the course of our audit, we found that cloud-computing contracts are missing required 

clauses. While the contracts and associated documents such as service level agreements, 

nondisclosure agreements, and terms of service generally include the required language, we 

noted several deficiencies. 

We also found that the Department’s cloud services are not compliant with the Federal Risk and 

Authorization Management Program (FedRAMP). OMB required that all cloud services currently 

implemented comply with FedRAMP security authorization requirements by June 5, 2014. 

However, we found that only two of the cloud services associated with the contracts we reviewed 

met the FedRAMP deadline. Nevertheless, all cloud services associated with the contracts we 

reviewed have been granted authorization to operate by the respective bureaus. As a result, 

bureau authorizing officials should be aware of risks associated with employing the cloud services 

that do not meet FedRAMP requirements. 

We recommended that the Department’s 

•		 chief financial officer and assistant secretary for administration ensure that all existing and 

future Commerce bureau cloud service contracts appropriately include clauses from CAR 

1352.239-72 and FAR subsections 52.239-1. 
14 Office of Inspector General | Semiannual Report to Congress | March 2015

•		 chief information officer ensure that Commerce bureaus employing cloud services that do not 

meet FedRAMP requirements conduct effective continuous monitoring of the services’ security 

controls in order to minimize potential risks. 

DEPARTMENT OF COMMERCE FY 2014 CONSOLIDATED FINANCIAL STATEMENTS 

AUDITS (OIG-15-008-A, OIG-15-006-A, OIG15-010-A) 

KPMG LLP, an independent public accounting firm, performed the audit in accordance with 

U.S. generally accepted government auditing standards and OMB Bulletin 14-02, “Audit 

Requirements for Federal Financial Statements.” In its audit of the Department, KPMG determined 

that the financial statements were fairly presented in all material respects and in conformity with 

U.S. generally accepted accounting principles. 

KPMG identified two significant deficiencies in (a) controls over information technology (IT) 

access, configuration management, and segregation of duties; and (b) internal control over 

accounting for EDA accrued grants. (A significant deficiency in internal control exists when the 

design or operation of a control does not allow management or employees—in the normal course 

of performing their assigned functions—to prevent or detect and correct misstatements on a timely 

basis and merits attention by those charged with governance.) 

While KPMG noted continued progress toward remediating the prior-year IT significant deficiency, 

during FY 2014 the underlying control deficiencies relating to systems access, configuration 

management, and segregation of duties continued to require improvement. Specifically, the 

Department needs to continue making improvements in its general IT controls to fully ensure that 

financial data processed on the Department’s systems has integrity, is securely maintained, and is 

available only to authorized users. 

KPMG found that accounting for EDA accrued grants needs improvement. During FY 2014, 

NOAA, one of EDA’s service providers, and EDA did not establish an effective review process to 

ensure that the underlying data and assumptions in the grant accrual methodology are appropriate 

and the overall calculation is accurate. EDA needs to continue making improvements in the 

calculation and review of the EDA accrued grants. 

KPMG also reported one violation of the Antideficiency Act at the U.S. Census Bureau for 

obligating FY 2011 funds in advance of its appropriation. In addition, KPMG reported three 

potential Antideficiency Act compliance matters that are being reviewed by the Department’s Office 

of the Secretary and the Department’s Office of General Counsel: (a) potential incorrect use of 

budgetary funding sources to support its programs; (b) acceptance of terms of agreement on 

purchases made through the internet; and (c) an indemnification clause. Because these reviews are 

not complete, the ultimate outcomes of these potential matters are not currently known. 

NONFEDERAL AUDIT RESULTS FOR THE 6-MONTH PERIOD ENDING JUNE 30, 2014 

(OIG-15-003-M) 

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

January 1, 2014, through June 30, 2014, 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. 

NONFEDERAL AUDIT RESULTS FOR THE 6-MONTH PERIOD ENDING 

DECEMBER 31, 2014 (OIG-15-018-M) 

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

July 1, 2014, through December 31, 2014, 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 MARCH 31, 2015) 

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 nonprofit 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 121 audit reports during this semiannual period to determine whether they 

contained audit findings related to departmental programs. For 64 of these reports, the 

Department acts as an oversight agency and monitors the audited entity’s compliance with OMB 

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

other 57 reports cover entities for which other federal agencies have oversight responsibility. We 

identified 3 reports with material findings related to the Department. 

 

 

 

Nonfederal Audit Activities 

Report Category OMB A-133 Audits Program-Specific Total 

Audits 

Pending Review 

(October 1, 2014) 52 12 64 

Received 54 9 63 

Examined 106 15 121 

Pending Review (March 31, 2015) 0 6 6 

The following table shows a breakdown by bureau of approximately $270 million in Department 

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

Nonfederal Audits by Bureau 

Agency Funds Audited 

Economic Development Administration 46,210,920 

Minority Business Development Agency 898,336 

National Institute of Standards and Technology 22,063,965a 

National Oceanic and Atmospheric Administration 66,082,998 

National Telecommunications and Information Administration 81,694,092b 

Multibureau 53,546,995 

Total 270,497,306 

a This includes $14,476,420 in program-specific audits; A-133 audits account for the remaining $7,587,545 of the total amount. 

b This includes $11,895,557 in program-specific audits; A-133 audits account for the remaining $69,798,535 of the total amount. 

Department-Wide Management 15 
16 Office of Inspector General | Semiannual Report to Congress | March 2015

The audits identified a total of $215,003 in the federal share of questioned costs, as well as 

$12,234 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 3 reports with material findings are listed in table 

7-a on page 44. 

ANNUAL LETTER TO OMB RE: GOVERNMENT CHARGE CARD ABUSE PREVENTION 

ACT OF 2012 (CHARGE CARD ACT) (OIG-15-015-M) 

The Charge Card Act requires each OIG, in coordination with its department, to perform annual 

risk assessments and submit to OMB semiannual reports of employee purchase or integrated 

card violations and the resulting actions taken. The Charge Card Act also requires each OIG to 

submit an annual purchase and travel card audit recommendation status report to OMB. 

In this correspondence, we provided a summary of the actions we have taken during FY 2014 

to fulfill these requirements, as well as additional information on our related work. We provided 

information regarding known and completed reviews and investigations of fraudulent use or 

abuse of purchase cards for the Department’s July 2014 and January 2015 reports to OMB. Also 

in FY 2014, we assessed purchase, travel, and fleet card usage as components in our annual 

Department-wide risk assessment. We assessed risks associated with government charge card 

use at 28 organizational units of the Department—24 were rated as low and 4 were rated as 

medium. None were rated as high. 

Lastly, we performed relevant work in FY 2013—as well as issued an FY 2014 audit that assessed 

travel spending in calendar year 2012—that required Department and bureau responses this 

fiscal year. In May 2013, we issued a Department-wide audit report on internal controls over the 

use of purchase cards. The Department completed implementation of the final recommendation 

resulting from the audit during FY 2014. In addition, in February 2014, we issued an audit report 

that identified findings related to the travel card misuse by NIST employees who attended two 

conferences in 2012. The NIST resolved all related recommendations by June 2014. 

SPECIAL AGENT REMOVED AFTER TAKING A SHOTGUN FROM ANOTHER FEDERAL 

AGENCY AND NOT DISCLOSING BEING UNDER INVESTIGATION 

In December 2014, a special agent working for a Departmental bureau was removed from 

federal service, following an OIG investigation into allegations of improperly taking possession 

of a shotgun from another federal agency when leaving employment there. The investigation 

found that the shotgun had been loaned to the federal law enforcement agency by a weapons 

manufacturer and that the employee obtained the weapon pursuant to official duties there. The 

individual then brought the weapon to his personal residence without informing the agency—and 

kept it there upon leaving employment at that agency. OIG’s investigation also found that the 

individual failed to disclose being issued a proposed 2-day suspension at a previous agency for 

failing to follow orders. 

CONGRESSIONAL TESTIMONY 

IG’S TESTIMONY ON COMMERCE DEPARTMENT’S FY 2016 BUDGET REQUEST: 

HOUSE APPROPRIATIONS COMMITTEE (OIG-15-016-T) 

On February 25, 2015, the Inspector General testified before the Committee on Appropriations’ 

Subcommittees on Commerce, Justice, Science, and Related Agencies of the U.S. House of 

Representatives about the Department’s FY 2016 budget request. The request was for 

$9.8 billion for the Department and $3.2 billion for the USPTO. The Inspector General noted that 
Department-Wide Management 17 

the Department faces significant management and performance challenges in the coming year, 

including enhancing weather satellite development and mitigating coverage gaps; addressing 

serious cybersecurity concerns; innovating a cost-effective design for the 2020 Census; providing 

stronger controls over finances, contracts, and grants; addressing USPTO backlogs, quality, and 

workforce management; addressing FirstNet management challenges; continuing an emphasis on 

compliance and ethics; and ensuring IG access and independence. 

IG’S TESTIMONY ON COMMERCE DEPARTMENT’S FY 2016 BUDGET REQUEST: 

SENATE APPROPRIATIONS COMMITTEE (OIG-15-017-T) 

On February 26, 2015, the Inspector General submitted written testimony at the request of the 

Senate Committee on Appropriations’ Subcommittees on Commerce, Justice, Science, and 

Related Agencies about the Department’s FY 2016 budget request. The request was for 

$9.8 billion for the Department and $3.2 billion for USPTO. His testimony mirrored his earlier 

written testimony for the House Committee. 
ECONOMIC DEVELOPMENT 

ADMINISTRATION 

The U.S. Economic Development Administration’s mission is to 

lead the federal economic development agenda by promoting innovation 

and competitiveness, preparing American regions for growth and 

success in the worldwide economy. Its investment policy is designed 

to establish a foundation for sustainable job growth and the building 

of durable regional economies throughout the United States. This 

foundation builds on two key economic drivers: innovation and 

regional collaboration. 
Economic Development Administration 19 

FORMER EMPLOYEE FROM SNOQUALMIE, WASHINGTON, INDICTED IN EXTENSIVE 

BENEFITS FRAUD SCHEME 

A federal grand jury indicted a former federal employee for multiple counts of wire fraud and mail 

fraud, as well as making false statements in connection with an extensive scheme to fraudulently 

obtain federal and state benefits. The indictment was returned following an investigation that 

revealed that a former EDA employee was making false and conflicting claims to various agencies 

in an effort to fraudulently obtain benefits. The charged criminal conduct allegedly occurred from 

2005 to the present, during which the employee is alleged to have fraudulently received more than 

$250,000 in benefits. 

The case was investigated by multiple agencies—led by the Social Security OIG—including OIGs 

of Veterans Affairs, Department of Commerce, Office of Personnel Management, and General 

Services Administration, as well as other federal law enforcement entities. Despite the severity of 

the charges, subjects of criminal indictments are presumed innocent until proven otherwise. 
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 21 

ITA MANAGEMENT SHOULD ADDRESS SIGNIFICANT CHALLENGES RELATED TO ITS 

RECENT CONSOLIDATION (OIG-15-021-I) 

We conducted this evaluation in response to a requirement in Senate Report 113-78 for the 

Departments of Commerce and Justice and Science, and Related Agencies Appropriations Bill 

for FY 2014. Our objectives were to 

•		 identify management and leadership challenges that might hinder the consolidation effort, 

•		 evaluate whether resource changes as a result of the consolidation are aligned with ITA’s 

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

•		 assess the status of ITA consolidation. 

We found that progress in attaining ITA’s consolidation goals is lagging, primarily because ITA’s 

management did not execute an effective organizational change management plan. Efforts to 

achieve operational goals related to the consolidation—such as revising work processes and 

aligning workforces—remain ongoing and are largely uncoordinated. The consolidation was 

also hindered by leadership changes in the period leading up to and just after the October 

17, 2013, administrative reorganization—which was delayed from October 1 because of the 

federal government shutdown that took place October 1–16, 2013. As a result, and as we 

found out through our employee survey, ITA’s employees were unclear about their new roles and 

responsibilities, and had concerns about increased levels of management. We also identified 

employee dissatisfaction with communication and feedback as a common theme. Finally, we 

confirmed that ITA saved $8 million as a result of the consolidation. However, because not all 

of the claimed savings came from reductions in management and overheard costs, resource 

allocations at ITA headquarters may not be optimal. 

We recommended that the Under Secretary for International Trade 

1.		 develop a comprehensive project plan to manage remaining consolidation activities and 

monitor progress until completion, 

2.		 prioritize the development of revised performance plans and training for employees who were 

affected by the consolidation, 

3.		 develop an employee engagement plan that solicits and incorporates employee feedback and 

communicate the changes to ITA staff, and 

4.		 conduct a workforce analysis of headquarters programs to determine the appropriate level 

of resources. 
NATIONAL OCEANIC AND 

ATMOSPHERIC ADMINISTRATION 

The National Oceanic and Atmospheric Administration’s 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 atmospheres, 

the space environment, 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 23 

ALLEGED CONFLICT OF INTEREST INVOLVING THE ATLANTIC STATES MARINE 

FISHERIES COMMISSION INVESTIGATED 

On February 12, 2015, OIG provided a letter to Representative Walter B. Jones regarding a 

constituent concern about an alleged conflict of interest in the Atlantic States Marine Fisheries 

Commission, a fishery commission created by interstate compact. OIG’s investigation revealed an 

apparent gap in ethics laws governing the Commission and at least some of its commissioners. 

In addition, our analysis of the matter revealed a lack of clarity between federal conflict-ofinterest requirements and a regulation governing federal Fishery Management Councils. OIG also 

provided this letter to the Senate Committee on Commerce, Science, and Transportation, as well 

as the House Committee on Natural Resources, and posted it on our public website. 

FORMER WEATHER SERVICE CONTRACTOR CONVICTED OF THEFT 

OF IT EQUIPMENT 

In October 2014, a former contract employee for the National Weather Service was convicted 

of theft for stealing computer equipment and government funds from NOAA. OIG worked the 

investigation in conjunction with the Montgomery County (Maryland) Police Department, and the 

case was prosecuted in the Circuit Court for Montgomery County. OIG initiated the investigation 

after receiving information from NOAA indicating that the contractor employee had purchased 

over 70 wireless devices with government funds and converted them for personal use, for a 

total of $18,000. It was also reported that several laptop computers assigned to this individual 

were missing from the NWS office; two were returned, along with a mobile device during the 

investigation. The Montgomery County Police Department established that the individual had 

pawned one of the laptops stolen from NWS. In December 2014 the individual was sentenced to 

18 months’ incarceration (suspended) and 3 years of supervised probation, as well as ordered to 

pay restitution to NOAA of over $17,500. 

GRANTEE RETURNS FUNDS FOLLOWING INVESTIGATION OF HURRICANE SANDY 

RELIEF FUNDING FOR THE NATIONAL ESTUARINE RESEARCH RESERVE SYSTEM 

(13-0963) 

In the previous semiannual period, OIG reported on the issuance of a public investigative report 

concerning the use of Hurricane Sandy funds under the Disaster Relief Appropriations Act and 

Sandy Recovery Improvement Act. We concluded that under the plain language of the Act, some 

applications for this funding that were approved by NOAA did not meet the threshold requirement 

for equipment that was “damaged by Hurricane Sandy.” OIG recently learned that, as a result of 

the investigation, one grantee chose to return $75,840 to the government—the entire amount that 

had been awarded under the Sandy Recovery Improvement Act. 
NATIONAL TELECOMMUNICATIONS 

AND INFORMATION ADMINISTRATION 

The National Telecommunications and Information Administration 

serves as the executive branch’s principal adviser to the President on 

domestic and international telecommunications and information policy 

issues. NTIA manages the federal use of the electromagnetic spectrum, 

provides grants for national information and public broadcasting 

infrastructure projects, and performs telecommunications research and 

engineering. It works to enhance citizens’ access to cable television, 

telephone, and other telecommunications services and educates state and 

local governments and other entities on ways to use information technology 

and telecommunications more effectively. 
National Telecommunications and Information Administration 25 

FIRSTNET MUST STRENGTHEN MANAGEMENT OF FINANCIAL DISCLOSURES AND 

MONITORING OF CONTRACTS (OIG-15-013-A) 

We reviewed ethics- and procurement-related matters in response to concerns raised by a board 

member of the First Responder Network Authority (FirstNet) in April 2013, seeking to determine 

whether the Department (1) had adequate processes in place to ensure that FirstNet Board 

members properly filed financial disclosures and identified potential conflicts of interest, and 

(2) used the appropriate contract type, fairly awarded and appropriately administered FirstNet 

contracts, ensured services purchased under those contracts met industry standards, and were 

consistent with contract requirements. 

We found that: 

•		 The Department’s confidential and public disclosure monitoring procedures were inadequate. 

•		 Board members did not file timely public financial disclosure reports. 

•		 The FirstNet Board operational procedures for monitoring potential conflicts of interest need 

improvement. 

•		 FirstNet contracting practices lacked transparent award competition, sufficient oversight of 

hiring, adequate monitoring, and procedures to prevent payment of erroneous costs. 

We offered recommendations to 

•		 the Secretary, regarding financial disclosure noncompliance issues; 

•		 the general counsel, regarding OGC internal controls pertaining to financial disclosure and 

conflict of interest at FirstNet; 

•		 the chair of FirstNet, regarding the submission of initial disclosure and final public filer 

termination reports, as well as the routine updating of lists of entities presenting potential 

conflicts of interest; and 

•		 the Department’s senior procurement official, regarding contracting procedures, quality 

assurance, and administration. 

CONGRESSIONAL TESTIMONY 

IG’S TESTIMONY ON FIRSTNET’S PROGRESS AND CHALLENGES IN ESTABLISHING 

A PUBLIC SAFETY BROADBAND NETWORK: SENATE COMMERCE, SCIENCE, AND 

TRANSPORTATION COMMITTEE (OIG-15-019-T) 

On March 11, 2015, the Inspector General testified before a hearing of the Commerce, Science, 

and Transportation Committee of the U.S. Senate focusing on FirstNet’s work to date; the OIG’s 

completed oversight efforts; OIG’s ongoing oversight of FirstNet; and the continuing challenges 

the Department and FirstNet face in their efforts to ensure implementation of a nationwide, 

interoperable, wireless broadband network for the public safety community. 

Regarding OIG’s FirstNet oversight to date, the IG testified that we have established a dedicated 

audit and evaluations team to oversee the Department’s and FirstNet’s effort. In addition, we 

operate a fraud, waste, and abuse hotline for the Department of Commerce through which we 

have received complaints related to FirstNet, and we conduct follow-up on those complaints. 
26 Office of Inspector General | Semiannual Report to Congress | March 2015

Building on OIG’s experience with broadband and public safety programs (e.g., the Public Safety 

Interoperable Communications grant program and BTOP), the team’s initial audit and evaluation 

activities have included the following: 

•		 Tracking the progress of FirstNet by observing Board proceedings, meeting with NTIA and 

FirstNet officials, monitoring FirstNet and NTIA for key actions taken to implement the network, 

and reviewing key program documents (e.g., Federal Register notices and webinar slide decks) 

•		 Developing an initial risk assessment in FY 2013 and reassessing risk as part of annual 

Department-wide assessments 

•		 Identifying FirstNet as a management challenge in our FYs 2013–2015 Top Management 

Challenges reports 

•		 Providing an information memorandum for FirstNet in February 2014 to identify FirstNet’s initial 

management challenges (including establishing an effective organization, fostering cooperation 

among various state and local public safety agencies, integrating existing grants to enhance 

public communications capabilities into FirstNet, and creating a nationwide long-term evolution 

network) 

Regarding further FirstNet work OIG has completed, the IG testified about a December 2014 

audit report we issued on ethics- and procurement-related issues raised by a FirstNet Board 

member in 2013. Our audit work, which covered 2012 and 2013, found the following: 

•		 Confidential and public disclosure monitoring procedures were inadequate, some Board 

members did not file timely disclosure reports, and monitoring of potential conflicts of interest 

needs improvement. 

•		 FirstNet’s contracting practices lacked transparent award competition, sufficient oversight of 

hiring, and adequate monitoring. 

The IG also testified regarding OIG’s current audit work. OIG continues its oversight of FirstNet. 

In November 2014, OIG initiated an audit of FirstNet’s technical development of the Nationwide 

Public Safety Broadband Network (NPSBN). We plan to issue a final report on our audit later in 

FY 2015. 

In addition, we are currently reviewing interagency agreements used to support FirstNet 

operations along with its work with entities such as the Public Safety Advisory Committee, NIST, 

and the Federal Communications Commission to determine whether FirstNet fulfilled consultation 

requirements of the Middle Class Tax Relief and Job Creation Act of 2012 (the Act) that 

established FirstNet. 

We are also reviewing expenditures and costs related to technical design efforts to assess 

spending levels, and information related to initial state consultation meetings to assess progress in 

incorporating key state concerns into the development of the technical design. 

Finally, the IG testified regarding the continuing challenges for the Department and FirstNet. Three 

years after the passage of the Act, FirstNet faces various short- and long-term challenges. As 

it proceeds, the Department and FirstNet will require continued oversight from OIG, GAO, and 

Congress. Among the most significant challenges: 
National Telecommunications and Information Administration 27 

•		 ensuring the adequacy of funding for a nationwide network 

•		 determining the sufficiency of assets contributed to the network by states, local governments, 

and commercial entities 

•		 incorporating lessons learned from the Broadband Technology Opportunities Program 

•		 addressing identified internal control weaknesses 

•		 addressing staffing and other organizational issues 

•		 effectively executing the consultation process 
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 

USPTO IT MODERNIZATION IS PROGRESSING, BUT IMPROVEMENTS ARE NEEDED 

(OIG-15-004-A) 

We conducted an audit of Patents End to End (PE2E) during the early stages of the portfolio’s 

life cycle in 2011 to provide proactive, value-added feedback that could identify potential issues 

that might hamper the success of the overall project, and published a report of our findings 

and recommendations on September 29, 2011. In that report, we recommended that USPTO 

improve development and acquisition planning as well as portfolio oversight. In the current audit, 

we reviewed the actions USPTO has taken regarding the above-mentioned recommendations, 

and we found that USPTO has not fully implemented our first recommendation to improve 

development planning. 

We recommended that the USPTO Director 

•		 fully implement unsatisfied recommendations from our 2011 audit by prioritizing all user 

stories at the portfolio level, and by developing a high-level model of reusable services for the 

entire portfolio, 

•		 identify and implement methods to increase adoption and monitor usage of the PE2E 

examination tools prior to deployment to the full patent corps, 

•		 fully define and estimate user stories as well as improve scheduling and estimation of defects, 

•		 develop and implement a plan to conduct more robust automated testing, earlier integration 

of functional quality testers, and performance testing more representative of the production 

environment, and 

•		 develop and implement a plan to integrate IT security controls earlier in design and 

development activities and better align automated code reviews with USPTO 

coding standards. 

USPTO FY 2014 FINANCIAL STATEMENTS AUDITS (OIG-15-007-A, OIG-15-005-A) 

Independent auditor KPMG LLP performed the audit in accordance with U.S. generally accepted 

government auditing standards and OMB Bulletin 14-02, “Audit Requirements for Federal 

Financial Statements.” In its audit of USPTO, KPMG determined that the financial statements 

were fairly presented in all material respects and in conformity with U.S. generally accepted 

accounting principles. 

KPMG identified no instances of internal control over financial reporting that were considered 

to be a material weakness, as defined in its report. (A material weakness is a deficiency, or a 

combination of deficiencies, in internal control such that there is a reasonable possibility that a 

material misstatement of the entity’s financial statements will not be prevented, or detected and 

corrected, on a timely basis.) 

In addition, KPMG identified no instances of reportable noncompliance with applicable laws, 

regulations, and contracts. 

KPMG also issued a report that summarized information technology deficiencies noted in access 

controls, configuration management, and contingency planning, which were also included in 

KPMG’s report on information technology controls in support of the Department’s FY 2014 

Consolidated Financial Statements audit (OIG-15-006-A). 
30 Office of Inspector General | Semiannual Report to Congress | March 2015

THE U.S. PATENT AND TRADEMARK OFFICE’S AWARDING AND ADMINISTERING 

OF TIME-AND-MATERIALS AND LABOR-HOUR (T&M/LH) CONTRACTS NEEDS 

IMPROVEMENT (OIG-15-012-A) 

We determined that contracting and program officials did not follow best practices to award and 

administer T&M/LH contracts and task orders for work performed. Contracting and program 

officials did not follow OMB memorandums, Federal Acquisition Regulation (FAR), the Commerce 

Acquisition Manual (CAM), and relevant USPTO policies, specifically regarding contract and task 

order award procedures, contract oversight procedures, and contract files. 

We recommended the Director of Office of Procurement 

•		 require contracting officers to document the contract file providing the specific justification 

supporting the decision for choosing a T&M/LH contract type, 

•		 establish and document ceiling prices in the contract award document for all task orders and 

stand-alone contracts, 

•		 require contracting officers to prepare and maintain a surveillance plan in the contract file for 

T&M/LH contracts, 

•		 ensure contracting officer’s representatives (CORs) and task order monitors (TOMs) 

document the acceptance of all deliverables in accordance with contract requirements and 

USPTO policy, 

•		 reemphasize that CORs and TOMs document surveillance over contractor performance, to 

ensure work performed on a T&M/LH basis is done in accordance with contract and task 

order requirements, 

•		 ensure future T&M/LH contracts include FAR Subsection 52.232-7, the T&M payment clause, 

•		 require contracting officers to appoint in writing properly trained and certified CORs and TOMs 

prior to awarding T&M/LH contracts, and remove those who fail to meet those requirements, 

and 

•		 improve controls to properly maintain and safeguard contract files. 

CONGRESSIONAL TESTIMONY 

IG’S TESTIMONY ON ABUSE OF USPTO’S TELEWORK PROGRAM: HOUSE 

OVERSIGHT AND GOVERNMENT REFORM AND JUDICIARY COMMITTEES 

(OIG-15-009-T) 

On November 18, 2014, the Inspector General testified before a joint hearing of the Committee 

on Oversight and Government Reform and the Committee on the Judiciary of the House of 

Representatives on the abuse of USPTO’s telework program. In our most recent Top Management 

Challenges, we reported that USPTO faces significant workforce management challenges; our 

testimony detailed some of those challenges. 

In the summer of 2014, our office issued two public investigative reports: one related to concerns 

with hiring practices at the Trademark Office, and the other related to waste and mismanagement 

at the Patent Trial and Appeal Board (PTAB). In the PTAB investigation, we found that managers 

and supervisors at USPTO were aware that, of their 38 to 51 paralegals (95 percent of whom 
United States Patent and Trademark Office 31 

participated in USPTO’s Patent Hoteling Program), many had insufficient work assigned to 

them over a 4-year period despite a significant and growing backlog of appeals. As a result, 

USPTO wasted approximately $5 million in salary and bonuses over that period on paralegals 

who had significant idle time and engaged in personal, non-work-related activities while on 

government time. Although the paralegals billed significant time to a code designated for doing 

no work, the vast majority of them received the highest performance rating of “outstanding.” 

Moreover, supervisors and senior managers who oversaw the program received over $700,000 in 

performance bonuses during the relevant time period. 

Our Top Management Challenges report also noted that additional challenges exist with the 

management of USPTO’s telework programs. In a 16-page memorandum dated July 8, 2013, 

USPTO responded to OIG’s request that it examine allegations of systemic misreporting of 

time and attendance and how supervisors did not have the tools, and were not empowered by 

USPTO senior management, to adequately address it. Essentially, the 16-page memorandum 

failed to substantiate multiple anonymous allegations of systemic time and attendance abuse 

occurring at USPTO. The 16-page memorandum did, however, include eight recommendations, 

including supervisory training and better oversight of such practices as “end-loading” and “patent 

mortgaging.” 

After receiving USPTO’s July 2013 memorandum, OIG learned of an earlier, 32-page version 

of the report—which was not officially provided to OIG, and which included findings and 

recommendations, in much greater detail. Unlike the 16-page report, the 32-page report 

concluded that 12 of 16 specific allegations were substantiated; the 32-page report also made 

15 specific recommendations. While these findings and recommendations were not formally 

issued by the agency, their publication by The Washington Post highlights additional controls that 

may be put in place—and identifies challenges that USPTO must address. 

In our testimony, we covered: 

•		 Background information on USPTO, including recent legislation affecting the U.S. patent award 

system, a brief overview of the current status of patents awaiting examinations, and the various 

flexible schedule options available to patent examiners. 

•		 OIG’s ongoing USPTO-related audit work (e.g., regarding the quality control of patent 

examiners’ work, which includes analysis of patent mortgaging) and investigative work 

pertaining to whether USPTO sufficiently addressed alleged time and attendance abuse 

reported by supervisors to senior management. 

•		 USPTO’s current and ongoing corrective actions—as well as additional OIG recommendations 

for further action. 
32 Office of Inspector General | Semiannual Report to Congress | March 2015

5

2

1

3

1

3

6

1 1

5

Department- BIS EDA ESAa ITA NIST NOAA NTIA USPTO Recovery

wide Act b

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


b The Recovery Act work in progress concerns BTOP, within the National Telecommunications and Information Administration.
 


WORK IN 

PROGRESS 

WORK IN PROGRESS (BY OVERSIGHT AREA) 

During this reporting period, 29 OIG audit and evaluation projects were initiated or underway. 

DEPARTMENT-WIDE 

Incorporating Contract Audits into Contract Administration Planning and Performance 

at the Department of Commerce 

To explore the value of following Federal Acquisition Regulation (FAR) guidance in planning, 

designing, and executing Departmental audits of contractors. 

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. 

Audit of FY 2015 FISMA Compliance 

Assess the effectiveness of the Department’s information security program and practices— 

specifically, the Department’s and selected bureaus’ policies and procedures and selected 

IT systems. 

Review of the Department’s FY 2014 Compliance with Improper Payment Requirements 

Evaluate the accuracy and completeness of the Department’s reporting and its performance in 

reducing and recapturing improper payments. 
Work in Progress 33 

Audit of Accuracy of Federal Procurement Data System (FPDS) Information 

Originally to determine whether contracting officials effectively managed and executed 

undefinitized actions (UAs). However, because NOAA’s and NIST’s FPDS-Next Generation 

(FPDS-NG) data were not sufficiently reliable to identify the universe of UAs, the audit will 

address the miscoding of UAs in FPDS-NG and contract file maintenance. 

Audit of Department’s FY 2015 Consolidated Financial Statements 

Determine whether the 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 test compliance with certain provisions 

of laws, regulations, contracts, and grant agreements that could have a direct and material effect 

on the financial statements. 

BUREAU OF INDUSTRY AND SECURITY 

Audit of Bureau of Industry and Security’s Continuous Monitoring Strategy 

and Practices 

Assess 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. 

Audit of BIS USXPORTS Adoption and CUESS Implementation 

Determine whether BIS is (1) effectively and efficiently managing its transition toward using the 

USXPORTS system to perform export licensing processing and (2) using effective and efficient 

software development practices for CUESS. 

ECONOMIC DEVELOPMENT ADMINISTRATION 

Audit of EDA’s 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 Continuous Monitoring Strategy and Practices 

Determine 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 risk-based decisions. 

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

Management Reforms 

Determine whether 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 Census Bureau’s 2014 Site Test 

Assess whether design alternatives tested in Montgomery County, Maryland, and Washington, 

DC, align with originally developed project goals—and whether Census is continuing its plan to 

utilize an iterative testing approach. 
34 Office of Inspector General | Semiannual Report to Congress | March 2015

INTERNATIONAL TRADE ADMINISTRATION 

Audit of ITA’s Enforcement and Compliance Unit’s Efforts to Ensure Quality and Timely 

Trade Remedy Determinations 

Review the adequacy of ITA’s intake and quality control processes, with a focus on antidumping 

investigations and administrative reviews. 

NATIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY 

Audit of NIST’s Oversight of Contracts 

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

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

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

of qualifications. 

Audit of NIST Quality System for Measurement Services 

Determine whether NIST manages its laboratories in accordance with its quality management 

system policies and procedures. 

Audit of Controls over NIST’s Working Capital Fund 

Evaluate budgetary controls over the working capital fund. As part of this audit we will review 

NIST’s budget process and financial management of the fund. 

NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION 

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. 

Audit of the National Marine Fisheries Service’s (NMFS’) Observer Program 

Understand how effectively NMFS has evaluated and implemented alternative fishery monitoring 

options, innovations, and methods in the National 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 NOAA Hurricane Sandy Disaster Relief Funds 

Determine whether NOAA adequately followed federal and departmental guidelines in 

awarding Hurricane Sandy Relief grants for repair and replacement of equipment damaged by 

Hurricane Sandy. 

Audit of NOAA’s IT Security Practices 

Determine the significant factors that contributed to the successful cyber attack on NOAA 

information systems and evaluate NOAA’s handling of the detection, analysis, eradication, and 

reporting of the attack, as well as recovery from it. 

Review of NOAA Common Satellite Ground System Architecture 

Determine (1) the progress of NOAA’s planning efforts and milestones for implementing a 

common satellite ground system architecture and (2) whether NOAA’s plans and efforts provide 

adequate consideration for system redundancy, security, and scalability. 
Work in Progress 35 

NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION 

Audit of FirstNet’s Efforts for the Nationwide Public Safety Broadband Network’s 

(NPSBN’s) Technical Design 

Evaluate and assess FirstNet’s efforts and progress to develop the technical design aspects for 

the NPSBN against key technical requirements and standards, the requirements of the Middle 

Class Tax Relief and Job Creation Act of 2012, stakeholder requirements, and established 

performance metrics and milestones. 

UNITED STATES PATENT AND TRADEMARK OFFICE 

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. 

Audit of USPTO’s Contracts Awarded Using Other Than Full and Open Competition 

Determine whether USPTO’s noncompetitive contract awards were properly justified. 

Audit of USPTO Office of Trademark’s Activity-Based Information System 

Review allocation algorithms and controls of USPTO’s Activity-Based Information (ABI) system 

and determine whether the Office of Trademark’s use of ABI justifies and supports fee changes. 

Audit of USPTO’s FY 2015 Financial Statement 

Determine whether the financial statements are presented fairly, in all material respects, 

in accordance with generally accepted accounting principles. The audit will also consider 

the USPTO’s internal control over financial reporting and test compliance with certain 

provisions of laws, regulations, and contracts that could have a direct and material effect on 

the financial statements. 

Audit of USPTO’s Unliquidated Obligations 

Evaluate the effectiveness of USPTO’s obligation and deobligation review policies and procedures 

that were implemented as a result of audit report OIG-13-026, issued June 2013. 

AMERICAN RECOVERY AND REINVESTMENT ACT 

Audit of Broadband Technology Opportunities Program (BTOP) 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. 
36 Office of Inspector General | Semiannual Report to Congress | March 2015

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	 	 36



2. Audit Resolution and Follow-up	 	 37



3. Audit, Evaluation, and Inspection Statistical Highlights for This Period	 	 38



4. Audits with Questioned Costs	 	 39



5. Audits with Recommendations That Funds Be Put to Better Use	 	 39



6. Report Types for This Period	 	 40



6-a. Performance Audits 41



6-b. Financial Statement Audits 41



6-c. Evaluations and Inspections 42



7. Single Audit and Program-Specific Audits	 	 43



7-a. Processed Reports with Material Audit Findings 44



8. Audits Unresolved for More Than 6 Months	 	 45



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 present 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. 
Allegations Received 

Total hotline contacts 822 

Of which are complaints related to Commerce programs 313a 

Number of hotline referrals to Commerce management 209 

Investigative Caseload 

Investigations opened this period 39 

Investigations closed this period 48 

Investigations in progress as of March 31, 2015 104 

Prosecutive Actions and Monetary Results 

Indictments/Informations 4 

Arrests 0 

Convictions 2 

Monetary issues identified (waste, questioned costs, recoveries, and fines.) $21,421 

Administrative Actions 

Suspension/Debarment 0 

Disciplinary action 2 

Statistical Data 37 

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 estimates. 

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 (October 1, 2014) for which no management 

decision had been made by the end of the period (March 31, 2015). Eleven audit reports remain 

unresolved for more than 6 months for this reporting period (see table 8, page 45). 

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. 
38 Office of Inspector General | Semiannual Report to Congress | March 2015

Report Category Modifications Appeals 

Actions pending (October 1, 2014) 0 5 

Submissions 0 2 

Decisions 0 4 

Actions pending (March 31, 2015) 0 3 

 

 

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 $35,823,577 

Value of audit recommendations that funds be put to better useb $0 

Value of audit recommendations agreed to by managementc $24, 631,770 

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 pre-award 

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. 
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 

reporting period 

B. 	 Reports issued during the reporting period 

Total reports (A+B) requiring a management 

decision during the period 

C. 	 Reports for which a management decision 

was made during the reporting perioda 

i. Value of disallowed costs	 

ii. Value of costs not disallowed	 

D. 	 Reports for which no management decision 

had been made by the end of the 

reporting period 

4 

5 

9 

3 

6 

703,380 

35,823,577 

36,526,957 

35,641,463 

35,631,770 

9,693 

885,494 

 

574,760 

35,644,004 

36,218,764 

35,631,770 

35,631,770 

0 

586,994 

a In category C, the sums of 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 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 0 0 

B. 	 Reports issued during the reporting period 0 0 

Total reports (A+B) requiring a management decision during the period 0 0 

C. 	 Reports for which a management decision was made 

during the reporting period 

i. Value of recommendations agreed to by management 0 0 

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 

Statistical Data 39 
40 Office of Inspector General | Semiannual Report to Congress | March 2015

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. 

Financial statement audits provide reasonable assurance through an opinion (or disclaimer 

of an opinion) about whether an entity’s financial statements are presented fairly in all material 

respects in conformity with generally accepted accounting principles, or with a comprehensive 

basis of accounting other than these principles. 

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. 

Type Number of Reports Table Number 

Performance audits 4 Table 6-a 

Financial statement audits 5 Table 6-b 

Evaluations and inspections 5 Table 6-c 

Total 14 
TABLE 6-A. PERFORMANCE AUDITS 

Report Title Report 

Number 

Date 

Issued 

Funds to Be 

Put to 

Better Use ($) 

Amount 

Questioned 

($) 

Amount 

Unsupported 

($) 

National Telecommunications and Information Administration 

FirstNet Must Strengthen Management OIG-15-013-A 12.05.2014 

of Financial Disclosures and 

Management of Contracts 

0 11,000,000 11,000,000 

Office of the Secretary 

Audit of the Department’s Cloud 

Computer Efforts Identified 

Contractual Deficiencies 

OIG-15-001-M 10.14.2014 0 0 0 

U.S. Patent and Trademark Office 

Patent and Trademark IT Modernization 

Is Progressing, but Improvements 

Are Needed 

OIG-15-004-A 10.30.2014 0 0 0 

The U.S. Patent and Trademark Office’s 

Awarding and Administering of Timeand-Materials and Labor-Hour 

Contracts Needs Improvement 

OIG-15-012-A 12.03.2014 0 24,631,770 24,631,770 

TABLE 6-B. FINANCIAL STATEMENT AUDITS 

Report Title Report 

Number 

Date 

Issued 

Funds to Be 

Put to 

Better Use ($) 

Amount 

Questioned 

($) 

Amount 

Unsupported 

($) 

Office of the Secretary 

FY 2014 Financial Statements Audit: 

Assessment of Information Technology 

Controls Supporting Financial 

Management Systems 

OIG-15-006-A 11.12.2014 0 0 0 

FY 2014 Consolidated Financial 

Statements Audit 

OIG-15-008-A 11.14.2014 0 0 0 

FY 2014 Closing Package 

Financial Statements 

OIG-15-010-A 11.18.2014 0 0 0 

U.S. Patent and Trademark Office 

FY 2014 Financial Statements OIG-15-007-A 11.14.2014 0 0 0 

FY 2014 Financial Statements Audit: 

Assessment of Information Technology 

Controls Supporting Financial 

Management Systems 

OIG-15-005-A 11.03.2014 0 0 0 

Statistical Data 41 
42 Office of Inspector General | Semiannual Report to Congress | March 2015

 

 

 

 

 

TABLE 6-C. EVALUATIONS AND INSPECTIONS 

Report Title Report 

Number 

Date 

Issued 

Funds to Be 

Put to 

Better Use ($) 

Amount 

Questioned 

($) 

Amount 

Unsupported 

($) 

International Trade Administration 

ITA Management Should Address OIG-15-021-I 03.25.2015 0 0 0 

Significant Challenges Related to Its 

Recent Consolidation 

Office of the Secretary 

Nonfederal Audit Results for the OIG-15-003-M 10.03.2014 0 0 0 

6-Month Period Ending June 30, 2014 

Top Management Challenges, FY 2015 OIG-15-002-I 10.16.2014 0 0 0 

Annual Letter to OMB re: Government OIG-15-015-M 01.30.2015 0 0 0 

Charge Card Abuse Prevention Act 

of 2012 

Nonfederal Audit Results for the OIG-15-018-M 02.26.2015 0 0 0 

6-Month Period Ending 

December 31, 2014 
Statistical Data 43 

TABLE 7. SINGLE AUDIT AND PROGRAM-SPECIFIC AUDITS 

OIG reviewed and accepted 121 audit reports prepared by independent public accountants 

and local, state, and other federal auditors. The audits that reported 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 0 

Economic Development Administration 47 

International Trade Administration 0 

Minority Business Development Agency 1 

National Institute of Standards and Technologya 17 

National Oceanic and Atmospheric Administration 22 

National Telecommunications and Information Administrationb 11 

Multibureau 18 

No Departmental expenditures 5 

Total 121 

a Includes 11 program-specific audits. 

b Includes 4 program-specific audits. 
44 Office of Inspector General | Semiannual Report to Congress | March 2015

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 

City of Saint Paul OIG-15-05147 02.12.2015 0 12,234 12,234 

National Institute of Standards and Technology 

ELXSI Corp OIG-15-05077 10.10.2014 0 155,196 0 

(70NANB9W9009) 

National Oceanic and Atmospheric Administration 

University of the Virgin Islands OIG-15-05127 11.06.2014 0 24,377 0 
 

 

 

Statistical Data 45 

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 FY 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. 

National Institute of 

Standards and Technology 

OIG-14-05115, Kent Displays Inc. 

(September 30, 2014). 

NIST is working with recipient to resolve. 

National Oceanic and 

Atmospheric Administration 

OIG-14-025-A, Significant Security Deficiencies in NOAA’s 

Information Systems Create Risk in Its National Critical 

Mission (July 15, 2014) 

NOAA and OIG continue to work to resolve this audit. 
46 Office of Inspector General | Semiannual Report to Congress | March 2015

 

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 46 

5(a)(1) Significant Problems, Abuses, and Deficiencies 12–31 

5(a)(2) Significant Recommendations for Corrective Action 12–31 

5(a)(3) Prior Significant Recommendations Unimplemented 46 

5(a)(4) Matters Referred to Prosecutorial Authorities 36–37 

5(a)(5) and 6(b)(2) Information or Assistance Refused 47 

5(a)(6) Listing of Audit Reports 43–44 

5(a)(7) Summary of Significant Reports 12–31 

5(a)(8) Audit Reports—Questioned Costs 39 

5(a)(9) Audit Reports—Funds to Be Put to Better Use 39 

5(a)(10) Prior Audit Reports Unresolved 47 

5(a)(11) Significant Revised Management Decisions 47 

5(a)(12) Significant Management Decisions with Which OIG Disagreed 47 

5(a)(14) Results of Peer Review 47 

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. Information on the status of any audit recommendations can be obtained through OIG 

upon request. 
Reporting Requirements 47 

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. Current issues include (1) a 2-year 

delay from the Department’s Office of General Counsel (OGC) in processing audit policies to 

ensure OIG’s full and unrestricted access to records during OIG audits and (2) denied access to 

“badging-in and -out data” from the Census Bureau headquarters necessary to conduct a data 

analytics project. 

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 11 nonfederal audit reports concerning three NIST grant recipients 

which are more than 6 months old and for which no management decision has been made. There 

is one OIG audit report which is still unresolved after more than 6 months. (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 three 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 completed in 2015 by 

the Office of Inspector General of the Board of Governors of the Federal Reserve System. Their 

System Review Report of our audit operations is available on our website. We received a pass 

rating, the highest available rating. We are in the process of implementing their recommendations 

for process and policy improvements. 

On March 2, 2015, OIG’s Office of Investigations received official notification that the system of 

internal safeguards and management procedures for our investigative function was in compliance 

with the quality standards established by CIGIE and the applicable Attorney General Guidelines. 

The peer review was conducted by the Federal Reserve Board OIG. 
48 Office of Inspector General | Semiannual Report to Congress | March 2015

 

 

 

 

 

 

 

 

 

 

 

 

ACRONYMS AND ABBREVIATIONS
 


AIA America Invents Act 

BIS Bureau of Industry 

and Security 

BTOP Broadband Technology 

Opportunities Program 

CAM Commerce Acquisition 

Manual 

CCL Commerce Control List 

CIGIE Council of Inspectors 

General on Integrity 

and Efficiency 

CIO chief information officer 

COR contracting officer’s 

representative 

DATA Act Digital Accountability and 

Transparency Act of 2014 

ECMO Enterprise Cybersecurity 

Monitoring and Operations 

ECRI Export Control Reform 

Initiative 

EDA Economic Development 

Administration 

ESOC Enterprise Security 

Operations Center 

FAR Federal Acquisition 

Regulation 

FirstNet First Responder Network 

Authority 

FISMA the Federal Information 

Security Management 

Act of 2002 

FPDS-NG Federal Procurement Data 

System-Next Generation 

GOES-R Geostationary Operational 

Environmental Satellite-R 

Series 

ITA International Trade 

Administration 

JPSS Joint Polar Satellite System 

MEP Manufacturing Extension 

Partnership 

MHz megahertz 

NEI National Export Initiative 

NIST National Institute of 

Standards and Technology 

NMFS National Marine Fisheries 

Services 

NOAA National Oceanic and 

Atmospheric Administration 

NOP National Observer Program 

NPSBN Nationwide Public Safety 

Broadband Network 

NTIA National 

Telecommunications 

and Information 

Administration 

NWS National Weather Service 

OIG Office of Inspector General 

OMB Office of Management 

and Budget 

PE2E Patents End to End 
PTAB Patent Trial and 

Appeal Board 

RCE request for continued 

examination 

RLF Revolving Loan Fund 

RLFMS Revolving Loan Fund 

Management System 

Suomi NPP Suomi National Polarorbiting Partnership 

T&M/LH time-and-materials and 

labor-hour 

TOM task order monitors 

UA undefinitized action 

USPTO U.S. Patent and 

Trademark Office 

WCF Working Capital Fund 

Acronyms and Abbreviations 49 

>> 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.