IG’s 


Semiannual 


Report 


 to Congress
 

March 2008 

CONTENTS 

From the Inspector General....................................................................................................................................1
 

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

2010 Decennial Census............................................................................................................................. 3
 

Department-wide Information Security................................................................................................. 5
 

NTIA’s Administration of $2.5 Billion for Grants and Digital TV Converter Coupons............... 6
 

NOAA’s High-Risk Environmental Satellites.........................................................................................7
 

Protecting and Conserving Our Oceans and Living Marine Resources............................................ 9
 

Work in Progress........................................................................................................................................ 9
 

Agency Overviews 

National Institute of Standards and Technology.................................................................................11
 

National Oceanic and Atmospheric Administration...........................................................................13
 

United States Patent and Trademark Office.........................................................................................17


 Department-Wide Management............................................................................................................19
 

Office of Inspector General 

Office of Investigations...........................................................................................................................25
 

Other OIG Activities...............................................................................................................................26
 

Tables and Statistics..................................................................................................................................28


 Reporting Requirements..........................................................................................................................35
 
Copyright Jim Pruitt/www.istockphoto.com 

The Washington Monument and the famous cherry blossoms. 
1

FROM THE 


INSPECTOR GENERAL
 

We are pleased to present the Department of 

Commerce Office of Inspector General’s Semiannual 

Report to Congress for the 6 months ending March 31, 

2008. 

This is the first semiannual report issued by my office 

since my confirmation as Inspector General this past 

December. In the short time since then, I have met 

extensively with senior officials from the various bureaus within the Department. I have been impressed 

by the diversity of Commerce’s many critical missions 

and by the strong appreciation Secretary Gutierrez 

and his top officials have for the role of the Inspector 

General and the importance of oversight. 

This report summarizes the work we have completed 

and initiated during this semiannual period on a number of important departmental activities, for example, 

NOAA’s progress on the latest Geostationary Operational Environmental Satellites and its efforts to protect marine resources under the National Marine Sanctuary Program; real property at NOAA and personal 

property management at USPTO; and the outcomes 

of the annual financial statements audits for the Department and USPTO. In addition, our investigative 

activities resulted in 14 convictions and more than 

$12 million in fines, restitutions, and recoveries. 

We had the opportunity in February to brief Congress 

on what we consider to be the highest risk programs 

and activities within Commerce. First on our list was 

the 2010 decennial census—specifically, the problems 

the Census Bureau was encountering in developing 

handheld computers that could support major field 

operations. As you know, the bureau has since abandoned plans to use these devices for collecting data 

from people who do not return mailed questionnaires. 

Instead, the bureau will use paper forms as it has in 

the past. 

Reverting to paper processes so late in the decade 

poses new challenges and is certain to add to the 

final costs of the decennial, as the bureau must retool numerous systems and procedures to handle the 

change. As part of our decennial census oversight, 

we will closely monitor how the bureau accomplishes 

this major operational shift. We will promptly inform 

Congress, Secretary Gutierrez, and Census officials of 

our findings to ensure that any problems we identify 

are addressed expeditiously. 

I wish to thank Secretary Gutierrez and his management team for their support during this time of 

transition for the Office of Inspector General. It is 

a privilege to serve as Commerce IG. I look forward 

to a productive partnership with the Department and 

Congress in ensuring sound operations Departmentwide. 

1 
Photo by OIG 

One of the many exquisite architectural details of the exterior of the Herbert C. 

Hoover Building, Commerce’s headquarters. 
3

MAJOR CHALLENGES 


FOR THE DEPARTMENT
 

The Reports Consolidation Act of 2000 requires 

inspectors general to identify the top management 

challenges facing their departments. At the close of 

FY 2007, Commerce OIG had identified 10 areas that 

posed significant challenges to departmental management because of their complexity, importance to 

TOP 10 MANAGEMENT CHALLENGES 

(As reported in the FY 2007 Department of Commerce 

 Performance and Accountability Report) 

1. Control the cost and improve the accuracy of 

the decennial census. 

2. Strengthen Department-wide information 


security.
 

3. Effectively manage departmental and bureau 

acquisition processes. 

4. Strengthen internal controls over financial, 


programmatic, and business processes.
 

5. Ensure that USPTO uses its authorities and 

flexibilities as a performance-based organization 

to achieve better results. 

6. Effectively manage the development and 


acquisition of environmental satellites.
 

7. Promote U.S. exports and fair competition in 

international trade. 

8. Effectively manage NOAA’s stewardship of
 

ocean and living marine resources.
 

9. Aggressively monitor emergency preparedness, safety, and security responsibilities.
 

10. Enhance export controls for dual-use 


commodities.
 

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

their sizable resource or financial requirements, or 

their need for large-scale management improvements. 

These challenges provide the focus for much of our 

work, as we assess the Department’s progress in addressing them. 

During this semiannual period, our completed and inprogress work has focused on critical programs and 

operations within five of the challenge areas: the Census Bureau’s 2010 decennial operations (challenge 1), 

Department-wide IT security (challenge 2), NTIA’s 

management of $2.5 billion in funding for the digital television conversion program and interoperable 

communications grants (challenge 4), NOAA satellites (challenge 6), and NOAA’s stewardship of oceans 

and living marine resources (challenge 8). 

Major Setback for 2010 Decennial 

Census Operations 

This past April, Secretary Gutierrez informed Congress that the Census Bureau was abandoning plans to 

automate a major decennial operation—nonresponse 

follow-up—a significant setback in its efforts to reengineer decennial operations. During nonresponse 

follow-up, a half-million temporary workers go doorto-door in communities around the nation to collect 

census data from households that do not mail back 

their questionnaires. The bureau had intended to 

equip these workers with handheld computers as part 

of a redesign of traditional census-taking operations 

proposed at the conclusion of Census 2000. Officials 

believed such reengineered processes would improve 

3 
4

Major Challenges for the Department March 2008—Semiannual Report to Congress
 

data accuracy while containing costs. Initial estimates 

of costs for the entire 2010 decennial program were 

roughly $11.5 billion over the course of the decade. 

But the problems encountered in developing needed 

handheld capabilities and the cost of reverting to paper processes and retooling associated systems and 

procedures at this late date are expected to add up to 

$3 billion to the final decennial tab. 

U.S. Census Bureau 

The Census Bureau’s plans to automate key decennial operations have been 

beset by problems developing the handheld computers and related systems. As 

a result, the devices’ role in the 2010 Census will be much more limited than 

originally intended. 

Long-Standing Problems with 

System Development 

Our work throughout the decade has documented a 

host of technical problems with the handheld systems, 

which were first developed by Census as prototypes 

for the 2004 and 2006 tests and are being developed 

for the decennial under the Field Data Collection Automation (FDCA) contract. 

The bureau had determined in early 2004 to contract 

for the systems because it did not have the in-house 

resources to develop them. But it took nearly 2 years 

to award the contract. We reported in 2005 that this 

late decision and initial slow pace in planning the 

acquisition shortened the amount of time available 

for developing and testing the handhelds. In addition, insufficiently defined requirements for the field 

systems have plagued their development. Although 

primarily intended as a proof of concept, the Census-developed prototype handhelds did not perform 

adequately in the 2004 and 2006 census tests. The bureau subsequently had to delay the start of the 2008 

dress rehearsal address canvassing operation in hopes 

of improving the devices’ performance, yet the handhelds and other critical systems continued to have 

serious problems, including crashes, slow response 

times, and lost data. 

The bureau still intends to use the handheld computers for address canvassing in Census 2010, but will 

now need to equip only 140,000 temporary workers with handhelds instead of 500,000 workers. Yet 

FDCA costs—originally estimated at $600 million— 

may more than double to $1.3 billion, even after eliminating automated nonresponse follow-up. 

Inattention to Other Operations 

Automation problems have consumed an inordinate 

amount of the bureau’s efforts, to the detriment of 

other decennial areas that need attention—such as 

paper-based operations targeting hard-to-count populations (American Indians living on reservations, the 

homeless, etc.). 

The inadequate outcome we reported in the bureau’s 

2006 test of paper-based procedures for counting 

reservation populations is a case in point. Our evaluation found that, despite long-standing challenges to 

producing accurate reservation counts, Census field 

staff had a hard time locating housing units because 

the bureau’s maps were poor and the address lists 

incorrect. In the same test, a revision to the survey 

designed to improve the accuracy of the count for 

this traditionally undercounted population identified 

only one additional person who might otherwise have 

been missed. (See September 2007 Semiannual Report, 

page 25.) 

We have additional concerns with the ongoing 2008 

dress rehearsal. During this final test, the bureau was 

supposed to conduct most decennial operations at 

two representative sites. But it cut the number of 

tested processes by half to focus on the handheld 

computers and related automated systems. Census 

attributed the cut to FY 2008 funding problems. 

4 
March 2008—Semiannual Report to Congress Major Challenges for the Department
 

However, the decision to eliminate the handheld computers for nonresponse follow-up has left the bureau 

without enough time to plan a paper-based dress rehearsal; thus testing of the largest operation of the 

decennial has been cancelled. 

Other significant paper-based operations, including 

group quarters enumeration, homeless enumeration, 

and update/leave (in which temporary workers update 

the address list and maps and leave a Census questionnaire at each housing unit), were excluded from 

dress rehearsal. Without testing these operations, the 

bureau has no data against which to assess and improve them, and this increases the risk for problems 

during the actual census. Such problems could reduce 

accuracy if people are missed in the count or increase 

costs if additional temporary workers are needed to 

meet decennial deadlines. 

As the bureau retools nonresponse follow-up, it must 

ensure that it has sufficient management structures 

and plans in place to address and troubleshoot these 

other critical operations. We will closely monitor its 

efforts in this regard. 

Uncertainty Regarding Background Checks 

for Temporary Staff 

In previous decennials, the bureau obtained criminal 

history records for temporary decennial applicants 

using only a name check. This procedure checks the 

applicant’s name, social security number, and date of 

birth against the FBI’s database of criminal histories. 

The Census Bureau has reported that its use of name 

checks during the last two decennials was an effective 

way to screen a large volume of applicants at a reasonable cost without disrupting recruitment or hiring. 

In the years since the last decennial, there have been 

questions about whether the bureau will be required 

to submit fingerprints of its temporary decennial job 

applicants in order to get the criminal history information it had previously accessed with only a name 

check. To date, there has been no final determination 

as to whether the bureau will need to submit fingerprints for temporary job applicants. 

As the 2010 decennial approaches, the uncertainties 

regarding this issue increase the risks to the operation, 

both in terms of the cost and the logistics involved in 

hiring the estimated 1.33 million temporary employees needed to run the decennial. If fingerprinting is 

required, it could cost the bureau hundreds of millions of dollars to purchase equipment and supplies 

and hire and train staff to conduct the fingerprinting. 

Hiring for the decennial starts in 2009, yet money to 

cover the cost of fingerprinting was not included in 

the President’s 2009 budget request. It is critically important that this issue be resolved promptly. 

Department-wide Information Security 

The Federal Information Security 

Management Act 

(FISMA) and OMB 

policy require agencies to certify that 

their systems and 

data are protected 

with adequate, 

functioning security 

controls before authorizing (accrediting) the system to 

operate. For the past 

7 years, information security has 

http://csrc.nist.gov/publications/CSD_DocsGuide.pdf been reported as a 

material weakness 

at the Department, NIST published this guide in 2007 to give 

IT security professionals a consolidated listing despite fairly sub- of the more than 250 NIST documents per­ stantial spending to taining to information security. The section on secure its 300-plus certification and accreditation alone lists 28 

information sys- documents—many of them required reading 

for federal C&A teams. tems. Commerce’s 

IT security budget 

for FY 2008 totals $131 million—roughly 7 percent 

of its nearly $1.8 billion IT budget. 

The material weakness is the result of insufficient 

certification and accreditation (C&A) processes: year 

after year, our reviews of the Department’s C&A efforts find a process that does not adequately identify 

and assess needed controls. As a result, authorizing officials do not have the information they need to make 

sound decisions for allowing systems to operate, and 

some systems are at risk for compromise. 

5 
Major Challenges for the Department March 2008—Semiannual Report to Congress
 

Expanded Focus for FY 2008 C&A Review 

This year’s FISMA work entails reviews of C&A packages for selected systems from the Bureau of Economic Analysis, Office of the Secretary, Census Bureau, National Institute of Standards and Technology, 

National Oceanic and Atmospheric Administration, 

and U.S. Patent and Trademark Office. But our focus 

has broadened to accommodate anticipated changes 

to NIST Special Publication 800-37, Guide for the Security Certification and Accreditation of Federal Information 

Systems. 

NIST officials say the update will place greater emphasis on agencies’ efforts to continuously monitor 

security controls as part of the C&A process. Continuous monitoring is designed to ensure that agencies 

make appropriate adjustments to security controls and 

the security plan as changes to the system or external 

environment occur. So in addition to our traditional 

review of the information produced by the system security certification process, we are assessing continuous monitoring activities. We also will assess security 

controls on a sample of system components to determine if the controls are implemented correctly, operating as intended, and meeting the system’s security 

requirements. 

In determining whether a system has been adequately 

certified and accredited, we will consider the findings 

of the C&A evaluation, the success of continuous 

monitoring, and the implementation of security controls on system components. The emphasis on continuous monitoring is part of a strategy that OIG and 

the Office of the Chief Information Officer (OCIO) 

are collaboratively developing to improve C&A and 

resolve the material weakness. 

Another aspect of the strategy is to jointly develop 

test cases for selected operational and technical controls to assist bureaus in improving their IT security 

testing. OCIO has also begun to implement the Justice 

Department’s Cyber Security Assessment and Management tool to standardize the C&A process. We 

have established a 2-year implementation time frame 

with completion targeted for the end of calendar year 

2009. 

NTIA’s Administration of $2.5 Billion 

for Grants and Digital TV Converter 

Coupons 

Congress enacted the Digital Television Transition and Public Safety Act of 2005 to switch television broadcasting to all-digital signals, freeing up 

airwaves for advanced wireless services and to enable police, fire and rescue departments, and other first responders to contact each other faster and 

more reliably. Under the act, NTIA will receive 

up to $1.5 billion to help analog television viewers access digital TV when the switch occurs, and 

$1 billion to fund grants for interoperable communications projects through 2010. 

Digital TV Converter Coupon Program 

Congress has set 

February 17, 2009, 

as the firm date that 

television broadcasting will become alldigital. With the transition, the 15 million 

households that still 

rely exclusively on 

analog signals will 

lose service unless 

they buy digital-toanalog converter 

boxes or digital TVs, 

or subscribe to cable 

or satellite service. NTIA will use the $1.5 billion allocated for this program to distribute coupons worth 

$40 each to help defray the cost of the converters 

(which range in price from $40 to $70). NTIA has 

contracted with IBM to operate the program, which 

includes integrating the systems and implementing 

procedures for distributing and redeeming coupons 

and for certifying retailers. These systems must be 

able to handle the potentially large volume of transactions if the program is to be effective. 

The agency began taking orders for coupons on January 1, 2008, and rolled out the nationwide distribution/redemption operation in February, after IBM 

pilot tested the systems. We monitored that test, in 

which a limited number of consumers received and 

NTIA 

6 
March 2008—Semiannual Report to Congress Major Challenges for the Department
 

OIG 

The events of 9/11 exposed serious weaknesses in critical emergency communications networks. Since then, most federal agencies have developed state-of-the-art 

emergency communications centers. The Digital Television Transition and Public Safety Act provides grants to help state and local jurisdictions improve their 

interoperable communications capabilities. 

redeemed the coupons. The test revealed some processes and procedures that required fine-tuning. 

The operation’s true test will be its nationwide execution. By early April, more than 5.2 million households 

had ordered some 9.9 million coupons (a household 

may order 2 coupons). At this writing, some 300,000 

had been redeemed. With less than a year remaining 

before the transition deadline, NTIA’s senior management must closely monitor the success of coupon distribution and redemption to ensure that all American 

viewers are digital ready by February 2009. 

Our Office of Investigations has already worked with 

NTIA to resolve some questionable activity related 

to the coupon program, such as noncertifed retailers offering to redeem coupons. We will continue to 

monitor the program’s administration, with a particular focus on its efficiency and the agency’s efforts to 

mitigate fraud. 

Public Safety Interoperable Communications 

(PSIC) Grant Program 

The $1 billion PSIC grant program is a huge undertaking for NTIA. Before this initiative, the agency’s 

primary experience administering grants had been 

with the Public Telecommunications Facilities Program, whose FY 2008 funding availability is just 

$16.8 million, and the discontinued Technology Opportunities Program, which from 1994 through 2004 

made grants totaling $233 million. We are closely 

monitoring NTIA’s implementation of the PSIC initiative. We are required by law to audit the program’s 

management annually and to conduct at least 25 financial audits of grants made under the program over the 

next 4 years. 

The act also requires NTIA to consult with the Department of Homeland Security (DHS) in establishing and 

implementing the program. DHS has provided NTIA 

with grants management services and technical assistance. In September 2007, all 50 states, the District of 

Columbia, and the five American territories received 

grant funds that they will in turn make available to eligible public safety organizations for approved projects. 

We have worked closely with NTIA, DHS, and the 

states and territories to ensure they understand the audit issues and federal requirements. We are currently 

monitoring the grant award process and reviewing applications, allocation formulas, and awards. Given the 

amount of funds involved, the critical importance to 

public safety of using them as effectively as possible, 

and the relative inexperience of NTIA in administering a program of this size, we consider this a major 

watch item. 

NOAA’s High-Risk Environmental 

Satellite Programs 

NOAA is in the midst of modernizing its environmental monitoring capabilities, spending billions of 

dollars on two critical satellite systems: the National 

Polar-orbiting Operational Environmental Satellite 

System (NPOESS) and the next-generation Geosta7 
Major Challenges for the Department March 2008—Semiannual Report to Congress
 

tionary Operational Environmental Satellite (GOESR). The $12.5 billion NPOESS project will provide 

continuous weather and environmental data for civilian and military needs through the coming 2 decades. 

The $7.7 billion GOES-R system will offer an uninterrupted flow of high-quality data for weather forecasting, severe storm detection, and climate research 

through 2028. 

NPOESS: Cost Overruns, Schedule Delays, 

Reduced Capabilities 

We previously described the challenges facing the 

troubled National Polar-orbiting Operational Environmental Satellite System (NPOESS) in our September 2006 and September 2007 semiannual reports 

(pages 29 and 10, respectively). This joint project of 

NOAA, NASA, and the Department of Defense will 

be a critical element in the nation’s ability to provide 

continuous weather and environmental data for civilian and military needs through the coming 2 decades. 

The project had to be restructured in 2006 after cost 

estimates increased and launch dates slipped. Much 

of the cost increase was attributable to problems developing a key sensor, the Visible/Infrared Imager 

NOAA 

The $81 million NOAA Satellite Operations Facility opened in June 2007. 

It’s an underground “green” building, with a grass roof covering 146,000 

square feet. The 208,000-square-foot facility houses nearly 550 employees of 

NOAA, contract companies, and other agencies, and more than $50 million 

worth of equipment. Sixteen antennas control more than $4.7 billion worth 

of environmental satellites. The facility currently is preparing to support the 

GOES-R and NPOESS satellite systems. 

 Radiometer Suite (VIIRS), which is intended to collect 

images and data on the Earth’s clouds, atmosphere, 

oceans, and land surfaces. 

The restructuring of the NPOESS program was completed in 2007. The revamped program calls for more 

rigorous management controls and oversight, and a 

more objective incentive payment play for the contractor. 

Despite these changes, problems with VIIRS continue, which means that the launch date for a pilot mission to test the new VIIRS instruments and bridge any 

gaps in data may be pushed further back while the risk 

of cost growth increases. 

Untested Management Structure for GOES-R 

GOES-R is wholly funded by Commerce, though the 

satellites will be developed and acquired jointly with 

NASA. The Department’s investment in GOES-R 

for fiscal years 2009 to 2013 is projected to be about 

$3.7 billion. 

The structure of the program has introduced a new 

element of risk: NOAA has the lead management role 

over the entire project (ground and space segments) 

for the first time, giving the Department direct oversight authority as well. These are roles for which neither has experience. 

We evaluated whether NOAA and the Department 

have established effective mechanisms for handling 

their expanded responsibilities. We found that they had 

not adopted some crucial best practices for managing 

satellite acquisitions. We concluded these omissions 

cost the agency time and money and recommended, 

among other things, that Commerce and NOAA bring 

GOES-R oversight and management practices in line 

with those used by NASA and the Department of 

Defense in satellite acquisitions, and that the Department delegate decision-making authority at key decision points to NOAA. (See page 19.) 

Since our review the Secretary of Commerce delegated key decision-making authority to the NOAA 

administrator while retaining overall oversight of the 

program. NOAA exercised this authority in January 

2008, authorizing release of requests for proposals for 

the spacecraft and ground system. Also, NOAA agreed 

8 
March 2008—Semiannual Report to Congress Major Challenges for the Department
 

to follow appropriate NASA oversight and management procedures for the GOES-R program. NOAA 

and NASA have defined these procedures in a joint 

management plan, which now includes additional key 

decision points and a distinguished independent review team that conducts assessments and advises the 

agency. While these actions are major steps, proper execution of this next phase is crucial: the Department 

and NOAA must be vigilant in overseeing contractors 

and managing systems development against cost and 

schedule goals. 

We will continue to monitor cost, schedule, and technical progress on both GOES-R and NPOESS and 

report our findings in future semiannual reports. 

Protecting and Conserving Our Oceans 

and Marine Resources 

This NOAA mission represents a huge federal investment: more than $1 billion is spent annually on marine-related protection and conservation programs. 

During this semiannual period, we issued a report on 

NOAA’s management of the National Marine Sanctuary Program, which encompasses more than 158,000 

square miles of ocean and Great Lakes marine habitats. We identified the need for greater enforcement 

of regulations protecting the sanctuaries, and several 

areas in which improved management and interagency 

cooperation would enhance operations and advance 

the goals of the sanctuary protection program (see 

page 13). 

Work in Progress 

Privacy Program 

The E-Government Act of 2002 requires agencies 

to (1) conduct “privacy impact assessments” to verify that personal information from or about individual citizens that is collected or otherwise processed 

by federal IT systems is sufficiently protected; and 

(2) develop privacy notices explaining their practices 

for handling information and post these notices ontheir web sites. 

NOAA 

DARTTM monitoring systems are positioned at strategic locations throughout 

the ocean and play a critical role in tsunami forecasting. Each deployed system 

can detect and relay real-time data about tsunamis as small as 1 centimeter. 

We are assessing the Department’s and USPTO’s adherence to these requirements as well as their progress in implementing administrative, technical, and 

physical controls for protecting personally identifiable 

information. 

National Data Buoy Center 

NOAA’s National Data Buoy Center operates three 

buoy systems and a network of coastal marine observing stations that provide critical weather and environmental data to scientists, weather forecasters, 

commercial shippers, recreational boaters, and others. 

They are maintained by Science Applications International Corporation under a service contract worth up 

to $500 million over 10 years. 

We are evaluating (1) the maintenance and repair operations for the buoys; (2) the adequacy and reliability 

of the buoy data; (3) the structure and administration 

of the support services contract; and (4) the transition 

of two buoy programs from research to operations. 

9 
Major Challenges for the Department	 March 2008—Semiannual Report to Congress
 

Fisheries Finance Loan Program 

We are auditing the direct loan portion of this NOAA 

program, which accounts for $412 million of the total 

amount of loans approved since the program’s inception in FY 1997. Our audit is assessing the following 

aspects of the loan program: 

1.	 Effective use of funding. 

2.	 Coordination with fishery management councils 

to ensure loans support NOAA goals for ending 

overfishing, eliminating overcapacity, and rebuilding fisheries. 

3.	 Metrics for determining whether performance 

measures have been met. 

4.	 Internal controls for minimizing risk of financial 

loss to the government and for ensuring compliance with federal legislation. 

5.	 Processes for verifying that borrowers and projects meet eligibility and other program requirements. 

Commerce’s Congressional Earmarks 

We are analyzing the cost, oversight, and impact of 

FY 2006 congressional earmarks at the Department in 

response to a 2006 request from the then-chairman of 

the Senate Subcommittee on Federal Financial Management, Government Information, and International 

Security. We are examining a sample of 32 earmarks to 

ascertain how their administration compares with that 

of other grants. 

Decennial Census Dress Rehearsal 

The dress rehearsal is under way in San Joaquin County, California, and nine North Carolina counties. These 

locations offer both urban and rural conditions under 

which to test census operations. 

We originally planned to assess the address canvassing operation, including the readiness of supporting 

automated systems, to determine whether canvassers 

properly followed canvassing procedures and made 

appropriate corrections to the address list using the 

handheld computers. We have modified our scope in 

response to the bureau’s decision to limit the use of 

the handheld devices: our review now focuses on the 

extent to which address canvassing improved address 

list accuracy. 

10 
NATIONAL INSTITUTE OF 


STANDARDS AND TECHNOLOGY
 

The National Institute of Standards and Technology promotes U.S. innovation and industrial competitiveness by advancing measurement science, standards, and technology in ways that enhance economic security and improve quality of life. NIST manages four programs: the Advanced Technology 

Program, the Manufacturing Extension Partnership program, the Baldrige National Quality Program, and NIST 

Research Laboratories. 

Nearly $900,000 Questioned 

in Biotech Firm’s Project 

Performance 

In September 2003, NIST awarded an Advanced 

Technology Program (ATP) cooperative agreement 

to a Maryland company to develop genetically engineered caterpillars capable of producing therapeutic 

human proteins at far faster rates then currently possible. These proteins are used in a variety of medications that treat autoimmune diseases. The company 

estimated that accelerating production of the proteins 

would lower drug development costs by $140 million per medication and shorten the time to market 

for new drugs. Estimated costs for the 3-year project 

totaled $2,031,208, with the federal share capped at 

$2 million (98.46 percent) of allowable costs. 

We audited costs claimed by the recipient for the 

3-year period of the award (October 1, 2003, through 

September 30, 2006), examined the company’s annual 

audit reports and its compliance with laws and regulations, and evaluated internal controls for its procurement and accountability systems. The approved budget 

for direct costs during the first year of the award totaled $777,284 with no match. Approved costs for the 

second and third years were $846,101 and $407,823, 

respectively, with the company’s total required share 

set at $31,208. 

We found the recipient did not fully comply with 

award terms and conditions: among other things, it 

had awarded a contract that was outside the scope 

of the project and could not substantiate a variety 

of materials costs and salary expenses. We therefore 

questioned $880,453 in costs claimed. We recommended that NIST disallow this entire amount and 

recover $647,273 in excess federal disbursements. 

(Office of Audits: CAR-18440) 

www.sxc.hu/Photo No. 597169 

In September 2003, NIST awarded a 3-year ATP cooperative agreement to 

a company to research using caterpillars to grow human proteins. 

11 
 

Photo by C. Clark/NOAA 

NOAA’s National Weather Service captured this image of 

multiple cloud-to-ground and cloud-to-cloud lightning strikes 

during a night thunderstorm. 
U.S. DEPARTMENT OF COMMERCE

N TIONALOCEANICAND ATMOSPHERICADMINISTRATION

NATIONAL OCEANIC AND 


ATMOSPHERIC ADMINISTRATION
 

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

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

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

A

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

to the general public. 

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

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

National Marine Fisheries Service conducts a program of management, research, and services related to the 

protection and rational use of living marine resources. 

National Environmental Satellite, Data, and Information Service observes the environment by operating a national 

satellite system. 

Office of Oceanic and Atmospheric Research conducts environmental research, provides scientific information 

and research leadership, and transfers research into products and services to help NOAA meet the evolving 

economic, social, and environmental needs of the nation. 

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 analyses with decision-making. 

Marine Sanctuary Program 

Fulfilling Its Mission But Could 

Improve Resource Protection 

The National Marine Sanctuary System, established 

by the Marine Protection, Research, and Sanctuaries 

Act of 1972, comprises 13 marine sanctuaries and one 

national monument that have conservation, scientific, 

or historical significance. The Office of Ocean and 

Coastal Resource Management, located in NOAA’s 

National Ocean Service, manages the system under a 

program designed to protect and enhance each sanctuary’s biodiversity and ecological integrity. 

Historically, the sanctuaries have had modest budgets, 

limited staffs, and few assets. The FY 2008 enacted 

appropriation for the National Marine Sanctuary 

Program (NMSP) was $61 million. The President’s 

FY 2009 budget calls for roughly $50 million, but this 

level is still well below the program’s funding peak of 

$67.8 million in FY 2005. 

13 
National Oceanic and Atmospheric Administration March 2008—Semiannual Report to Congress
 

NURC/UNCW and NOAA/FGBNMS 

A ball of rope sponge living in the Flower Garden Banks National Marine 

Sanctuary in the Gulf of Mexico off the Texas coast. 

We evaluated the sanctuary program to see if it is providing long-term protection for marine and cultural 

resources and effectively collaborating with the National Ocean Service and other NOAA offices, and 

with federal, state, and local entities. We also assessed 

the efficiency with which selected activities are conducted. 

We found that the sanctuary program is generally fulfilling its mission. It has successfully protected certain components of marine ecosystems and certain 

cultural resources; and effectively complements other 

federal, state, and local resource protection efforts 

by offering benefits other laws or regulations do not. 

However, we identified a few areas where the program 

could be improved. 

Enforcement of Sanctuary 

Regulations 

The National Marine Fisheries Service’s Office for Law 

Enforcement (OLE) has primary law enforcement responsibility for the sanctuary program. OLE works 

closely with the U.S. Coast Guard and, where possible, 

a number of state and territorial marine enforcement 

agencies under joint enforcement agreements. Enforcement challenges in the sanctuaries range from 

permit compliance to offshore vessel traffic to a range 

of natural resource injuries. Another challenge is that 

many sanctuaries are located at considerable distances 

from shore making them difficult to routinely patrol 

because of the transit time to reach them. A number 

of sanctuary and enforcement officials told us they 

believe current law enforcement presence in the sanctuary system is insufficient to meet these challenges. 

We also found that most sanctuary officials do not 

routinely receive information about the nature and 

scope of ongoing and closed sanctuary violation 

cases from NOAA’s Office of General Counsel for 

Enforcement and Litigation and OLE. Without such 

information, officials cannot appropriately target enforcement resources or public outreach activities. We 

recommended that NOAA’s Office of General Counsel provide the sanctuary program with non-law enforcement sensitive information pertaining to ongoing and closed cases (including the type of regulations 

violated, date and location of violations, and penalties 

assessed and collected). 

Sanctuary Management 

Each sanctuary is required by statute to develop a 

management plan and to review and update it every 

5 years. We found that staff at nearly all the sanctuaries have not reviewed their plans in over 10 years, 

although program managers are currently devoting 

additional resources to completing the reviews. We 

recommended that managers complete these reviews 

promptly. 

We also found that prior to the FY 2008 budget process, the sanctuary program failed to plan for life-cycle 

costs for new vessels, data buoys, and visitor centers, 

particularly those that were acquired with one-time 

congressional funding. Program managers need to deSpotlight on Sanctuaries 

National marine sanctuaries range in size from onequarter square mile in American Samoa’s Fagatele Bay 

to more than 5,300 square miles in Monterey Bay, California. At 138,000 square miles, Papahanaumokuakea 

Marine National Monument—added in 2006—is the 

largest marine protected area in the world. The sanctuaries and marine monument encompass more than 

158,000 square miles of ocean and Great Lakes habitats and include deep ocean and near-shore coral reefs, 

whale migration corridors, deep sea canyons, areas of 

deep water upwelling, seamounts, kelp forests, and sea 

grass beds. Historic shipwrecks are also part of the 

system. 

14 
March 2008—Semiannual Report to Congress National Oceanic and Atmospheric Administration
 

NOAA 

Volunteers for the seal program at the Gulf of the Farallones National 

Marine Sanctuary in California gather on the beach for a training session. 

termine how to cover these costs for existing equipment and centers. 

Coordination with Partners 

Most sanctuaries have active outreach and education 

programs to promote public awareness of marine 

resources, and they actively collaborate with a broad 

range of research partners, such as universities, other 

federal agencies, and nongovernmental organizations. 

Partners do much of the research, monitor resources, and provide data needed by the sanctuary sites. 

But they need to do a better job of communicating 

research results to the public and key constituencies. 

We found that by improving coordination with several 

other NOAA offices and with the Navy, the sanctuary program could leverage additional resources that 

would enhance marine protection activities. But improved coordination with the National Marine Fisheries Service is most imperative. We found that the 

sanctuaries and Fisheries Service generally collaborate well to protect and manage endangered species 

and marine mammals, and remove marine debris and 

derelict gear. But the relationship can become contentious when NMSP proposes to regulate fishing within 

a sanctuary’s boundaries. 

Persistent disagreements and lack of communication among sanctuary personnel, fishery management 

councils, and the Fisheries Service have considerably

 delayed reviews of several sanctuary management 

plans and drawn public antipathy. We were told dissension within NOAA has compromised the agency’s 

ability to gain or maintain public trust. We recommended that leadership officials from the National 

Ocean Service, Marine Sanctuary Program, and Fisheries Service commit to improved dialogue and coordination, and take action to improve working relationships across the board. 

NOAA generally concurred with our recommendations and reported a series of actions it plans to take 

and a timeline for implementing them. (Office of Inspections and Program Evaluations: IPE-18591) 

NOAA Could Strengthen 

Controls over Real Property 

Management 

NOAA has a portfolio of more than 3,000 properties, 

consisting of 1,477 parcels of land, 824 buildings, and 

721 other structures. NOAA’s buildings alone have a 

current replacement value of nearly $4 billion (excluding the value of the land they occupy). This portfolio 

is both diverse and dispersed—ranging from state-ofthe-art marine science and research facilities to operational facilities that support multibillion-dollar satellite 

programs. 

We reviewed NOAA’s management controls over its 

real property portfolio to identify ways in which the 

agency could enhance management accountability for 

these assets. We also evaluated (1) NOAA’s compliance with Executive Order (EO) 13327, “Federal Real 

Property Asset Management” (see p. 16), (2) the reliability of computer-processed data produced by the 

agency’s Integrated Facility Inspection Program, and 

(3) the NOAA Real Property Management Division’s 

FY 2006 survey of real property holdings. 

We found that in the past several years, NOAA has 

strengthened management of its real property portfolio, but could improve some management controls 

and its compliance with EO 13327, particularly with 

regard to the following issues: 

15 
National Oceanic and Atmospheric Administration	 March 2008—Semiannual Report to Congress
 

Executive Order 13327 

The federal government owns hundreds of billions 

of dollars in real property assets, and either owns 

or manages 1 in every 4 acres of land in the United 

States. Much of the federally owned real property assets are used to support agency missions, but it is not 

clear how many of these properties are being used efficiently, how many are underused, or how many are 

no longer needed. 

EO 13327 directs agencies to 

•	 Establish the position of a senior real property 

officer, who will be accountable for the effective 

management of the agency’s real properties; 

•	 Determine what they own, what they need, and 

how and what it costs to manage their real properties; 

•	 Develop and implement asset management 

plans; 

•	 Develop and monitor real property performance 

measures; and 

•	 Dispose of unneeded properties. 

Holdover Leases. NOAA’s lease agreements generally 

contain an option for renewal under the initial lease 

terms, provided the government gives written notice 

of its intention to renew 30 days prior to the agreement’s expiration. This option allows the agency to 

lock in favorable rates and other terms. If NOAA fails 

to exercise this option, the leases go into “holdover” 

status, during which time NOAA pays rent month-tomonth while renegotiating terms. 

The number of leases in holdover status is extensive 

and growing. In January 2006, a real estate services 

firm hired to evaluate the Property Management 

Division’s lease portfolio reported 127 such leases.1 

NOAA disclosed that by September 2006, this number had increased to 318. And the consulting firm reported that 1,199 agreements would expire between 

2006 and 2010, with the majority (627) expiring in 

2006 and 2007. Many of the leases represent relatively 

small dollar amounts or rent-free arrangements. But 

Property Management still needs a strategy to address 

the growing backlog. Occupying leased property 

1 Lease Portfolio Evaluation, presentation to NOAA’s Real Property 

Management Division by Jones Lang LaSalle, January 2006. 

without a legal agreement puts NOAA at risk for losing these favorable terms, increasing its leasing and 

related expenses, or perhaps even dealing with the 

costs and disruptions of relocating operations. 

Integrated Facilities Inspection Program Database. In order 

to report on real property conditions as required by 

EO 13327, the Property Management Division’s Integrated Facilities Inspection Program (IFIP) surveys 

employees in NOAA’s line offices regarding the current condition of various facilities. Their responses are 

retained in a database. As part of the survey process, 

the division calculates a facility condition index by dividing the estimated cost of an asset’s repair needs by 

its current replacement value. The lower the index, the 

better the condition of the asset. 

Property Management’s FY 2006 survey generated facility condition indexes that were significantly greater 

than 100 percent for 13 of 670 properties. Estimated 

costs to repair a property should not exceed its replacement value unless the structure is in such bad 

shape that it would be cheaper to replace than to repair. We urged NOAA to investigate the anomalies 

and determine if they were attributable to data entry 

errors. 

We also urged NOAA to continue monitoring its use 

of property and adhere to OMB guidance for disposing of unneeded assets because such properties are 

costly to maintain. Our report did not contain formal 

recommendations. (Office of Audits: BSD-18256) 

OIG 

The National Weather Service’s Northeast River Forecast Center in Massachusetts is one of NOAA’s 3,000 real properties that support critical 

mission activities. 

16 
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, commercialize new technology, and draw attention to inventions that would otherwise go unnoticed. USPTO also collects, assembles, publishes, and disseminates technological information 

disclosed in patents. 

USPTO Property Management 

Procedures Need Improvement 

We audited the effectiveness of USPTO’s internal 

controls over laptops and other accountable property 

after a similar audit we conducted at the U.S. Census 

Bureau last year found improvements were necessary 

despite initiatives to strengthen such controls. (See 

September 2007 Semiannual Report, pages 23-25.) The 

Census audit was prompted by Commerce’s September 2006 announcement that 1,138 laptops had been 

lost Department-wide in a 5-year period, 672 of which 

belonged to Census. 

Like Census, USPTO has substantial accountable 

property assets. Approximately 20 percent of these 

assets (mostly computer equipment) are located offsite supporting telework programs. All USPTO personnel are responsible for the proper use, care, and 

protection of personal property in their possession 

or control, but overall responsibility resides with the 

property management officer within USPTO’s Office 

of Corporate Services. 

Since the fall of 2006, USPTO has supplemented its 

internal control structure with new controls put forth 

in departmental initiatives. Current controls include a 

system that tracks property from receipt to disposal; 

quarterly inventories and certifications of accountable 

property; a quality control program; physical security 

that includes locking assets; a property review board 

that addresses lost, missing, and stolen property; and 

performance plans that establish accountability for 

property officials. USPTO also has an asset management team that meets regularly to discuss accountable 

property issues and potential solutions. The team has 

recommended changes to improve the quarterly inventory process, coordinated the installation of mobile data security technology on USPTO laptops, and 

provided input on USPTO’s proposed asset management web site. 

Despite these many controls, the agency needs to 

strengthen inventory procedures to ensure that it 

(1) conducts inventories as stipulated in the Department 

Personal Property Management Manual, (2) assigns properly trained personnel to perform inventories, (3) has 

readily accessible policies and procedures relating to 

accountability over personal property assets, (4) conducts an appropriate quality assurance review of the 

inventory, and (5) segregates inventory duties. 

In addition, USPTO should strengthen its procedures 

17 
United States Patent and Trademark Office	 March 2008—Semiannual Report to Congress
 

Quick Facts
 

•	 As of November 2007, USPTO owned about 

84,000 pieces of accountable property (such 

as laptop computers, personal computers, 

copiers, and fax machines) valued at approximately $154 million. 

•	 USPTO has approximately 18,000 use-athome assets valued at approximately $13 million. 

for addressing lost, missing, or stolen property by excluding property management officials from property 

review boards. 

USPTO concurred with our recommendations and described actions it was taking to address them. For example, the agency (1) expanded property accountability 

training to include all individuals who support a property custodian; (2) established an asset management 

web site; and (3) developed a plan to notify property 

accountability officers that they must verify the inventory of property assigned to their property custodians. 

(Office of Audits: CAR-18701) 

KPMG Renders Clean Opinion 

on FY 2007 Financial Statements 

Potential Violation of Anti-Deficiency 

Act Under Review 

Independent auditor KPMG rendered an unqualified 

opinion on USPTO’s FY 2007 financial statements 

and reported that the agency continues to maintain a 

sound internal control structure that supports preparation of reliable financial and performance information. 

The audit disclosed a potential instance of noncompliance with the Anti-Deficiency Act and the Patent 

and Trademark Fee Fairness Act of 1999: in FY 2005, 

obligations related to processing patent applications 

temporarily exceeded patent fees collected. As a result, fees intended for use in processing trademark 

registrations were used temporarily to fund patent 

obligations. The Department’s Office of General 

Counsel is reviewing this matter to determine whether 

it constitutes a violation of the Anti-Deficiency and 

Fee Fairness acts. 

As part of the financial statement audit, KPMG 

assessed general controls for the agency’s IT systems 

used to process and maintain key financial data against 

criteria in GAO’s Federal Information System Controls 

Audit Manual (FISCAM). KPMG found that USPTO 

had resolved one weakness reported last year—in the 

area of access controls. One weakness continues to 

be reported in the area of service continuity. Eleven 

new FISCAM weaknesses were identified—four in 

the area of entity-wide security program planning 

and seven in access controls. (Financial Statements and 

Accountability Audits: FSD-18531-1 and -2) 

18 
-

 

 

DEPARTMENT-WIDE
 

MANAGEMENT
 

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

tunity by promoting innovation, entrepreneurship, competitiveness, and stewardship. The Department 

has three stated strategic goals: 

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

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


technical standards, and advancing measurement science. 


Goal 3: Observe, protect, and manage the Earth’s resources to promote environmental stewardship. 


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

Achieve organizational and management excellence. 

GOES-R Setbacks Caused by 

Lack of Standard Satellite 

Acquisition Practices 

NOAA and NASA are 7 years into the planning 

and development of the next series of Geostationary Operational Environmental Satellites—dubbed 

GOES-R—which provide the United States with 

critical meteorological data for weather observation, 

research, and forecasting. NOAA, rather than NASA, 

has the lead role in GOES-R’s program management 

and acquisition, thus giving the Department direct 

oversight authority for both the ground and space 

segments. Neither the Department nor NOAA has 

experience in this role. 

In 2007, we evaluated whether NOAA and the Department had established effective mechanisms for 

handling their expanded responsibilities and found 

they had not adopted some crucial best practices for 

managing satellite acquisitions. 

Because of problems in prior GOES acquisitions, 

NOAA initially decided to use a new acquisition approach for GOES-R: award of a single prime contract 

for the space and ground segments. This was a significant departure from previous GOES acquisitions, 

which used separate contracts for each segment and 

NASA as the systems integrator. This change, coupled 

with the Department and NOAA’s expanded oversight 

and management roles, added risk to an already highly 

complex undertaking. 

In October 2005, at a key decision point in the program 

(decision point “B”), the Secretary approved the award 

of three contracts for program definition and risk reduction. At that time, GOES-R costs were estimated 

to be $6.2 billion. Roughly 7 months into the program 

definition phase, new cost data prompted NOAA to 

revise the estimate to $11.4 billion. An independent 

review team subsequently confirmed that the new estimate was accurate and expressed concerns about the 

acquisition approach. At about the same time, problems with the National Polar-orbiting Operational En19 
Department-wide Management March 2008—Semiannual Report to Congress
 

NASA 

Artist’s rendering of the first hyperspectral imager. This instrument was 

launched into space aboard a NASA satellite in 2000 and has since 

produced thousands of images of volcanoes and other features of the Earth’s 

surface for a variety of military and civilian uses. NOAA had planned to 

equip GOES-R with enhanced hyperspectral instruments but scrapped the 

plan because it was proving too technically challenging and costly. 

vironmental Satellite System (NPOESS) were putting 

pressure on NOAA and Commerce to reassess the approach to GOES-R. In response, NOAA revised the 

acquisition strategy to more closely align with the traditional approach: NOAA would acquire the ground 

segment and NASA would acquire the satellites and 

integrate the systems. But NOAA would retain acquisition decision authority and the lead role in program 

management. To reduce costs, NOAA eliminated several planned satellites and instruments. 

Commerce Officials Had Insufficient 

Program Information for First Key 

Decision Point Review 

Viewed by the Department and NOAA solely as a 

procurement milestone, key decision point B was held 

at a much earlier stage in the program’s life cycle 

than prescribed by standard satellite acquisition processes and without the benefit of a comprehensive 

program assessment and independent reviews. Such 

assessments and reviews are key to the NASA model. 

Without them, Department and NOAA officials did 

not have the information they needed to make sufficiently informed decisions about the path forward for 

GOES-R, namely, thorough and accurate evaluations 

of cost, schedule, technological readiness, acquisition 

strategy, and risks. An independent assessment of the 

program began some 7 months after decision point 

B, ultimately confirming escalating cost estimates, 

unacceptable risks, and a flawed acquisition strategy. 

The changes that followed cost the agency time and 

money: millions to redefine the overall system architecture and management structure, and a 9-month delay in the planned schedule for awarding the space and 

ground contracts. 

GOES-R Plan Needs Additional 

Key Decision Points

 In NASA and DOD space acquisition processes, decision point C occurs at the completion of preliminary 

design, and a subsequent decision point (D) is conducted before the system is built. At the time of our 

review, GOES-R was roughly 2 years from completing 

preliminary design and even further from being ready 

to build the first satellite, but its final planned decision 

point (a combined decision point C/D) was to occur 

soon. Its purpose was to obtain Department authorization for releasing solicitations for the multibilliondollar space and ground segment contracts. Particularly in light of the significant program changes since 

key decision point B, it was essential for the Department and NOAA to thoroughly review all aspects of 

the program in order to make well-informed decisions 

about how to proceed before releasing the solicitations—giving strong consideration to the findings and 

recommendations from the independent assessments. 

However, after decision point C/D, we recommended 

that the Department plan for and conduct additional 

key decision point reviews in accordance with NASA’s 

procedures to determine GOES-R’s readiness to proceed to subsequent phases. And if key decision point 

authority were to be delegated to NOAA, the Department needed to clearly delineate its authorities as well 

as those of NOAA. 

20 
March 2008—Semiannual Report to Congress Department-wide Management
 

The Department Must Align 

Independent Review Procedures 

With Those of NASA 

Commerce lacks adequate capacity and experience for 

effective oversight of the highly technical and complex 

issues of space acquisitions, and it has no independent 

reviewers. Therefore, the Department should consult 

directly with NOAA and NASA independent reviewers at each decision point to help identify any serious 

program weaknesses and determine the best path forward for GOES-R. The Department should require 

documentation and explanation for any decisions 

made on the basis of assumptions or findings that differ from those of the independent assessments. In addition, both the Department and NOAA should use 

NASA Procedural Requirement (NPR) 7120.5D for 

satellite acquisition as guidance to better focus these 

reviews on the key objectives and products of each 

program phase. 

NOAA Has Not Adapted Relevant 

NASA Processes to GOES-R Ground 

System Acquisition 

The GOES-R memorandum of agreement between 

NOAA and NASA stipulates that the space segment 

will be managed according to NPR 7120.5D, but the 

agreement is silent on NOAA’s use of the directive 

for the ground segment. NOAA needs to define how 

these processes will apply to that segment and to the 

overall program. We recommended that NOAA describe in the GOES-R management control plan, how 

it will use NASA’s procedural guidelines to manage 

and oversee the overall program as well as the ground 

segment. NOAA should plan and document its approach for handling key decision points. 

The Department lacks procedures for reporting and 

approving major deviations from plans. Commerce 

has not described its requirements and procedures 

for reporting and managing variances for GOES-R, 

or determined thresholds for holding special decision 

reviews when considering program enhancements. We 

recommended the Department establish thresholds 

and procedures for reporting and approving major deviations from GOES-R’s capability, cost, and schedule 

baseline, as well as enhancements to the baseline. 

NOAA 

This giant antenna at the Command and Data Acquisition Station located 

at Wallops Island, VA, transmits commands to the GOES satellites and 

downloads data from them. Wallops Island is the primary ground station 

interface with GOES satellites. 

Response from the Department 

and NOAA 

The Department disagreed with certain of our findings and with our recommendation that it implement 

procedures similar to NASA’s for key decision point 

reviews. The Department suggested instead that application of NASA’s procedural guidance is more appropriately the role of NOAA. Accordingly, we recommended that decision authority for key decision 

points be delegated to NOAA. NOAA subsequently 

sought and received decision-making authority. In 

January 2008 it exercised this authority for decision 

point C/D. 

NOAA concurred with the recommendations directed to the Under Secretary for Oceans and Atmosphere and revamped its acquisition management 

and oversight procedures. (Office of Systems Evaluation: 

OSE-18291) 

21 
Department-wide Management March 2008—Semiannual Report to Congress
 

FY 2007 Consolidated Financial 

Statements Earn Clean Opinion 

For the 9th consecutive year, the Department received 

an unqualified opinion on its consolidated statements, 

and its financial management systems were in full 

compliance with the Federal Financial Management 

Improvement Act of 1996. However, independent 

auditor KPMG noted continuing deficiencies in information technology controls that together constitute a 

significant deficiency. Commerce was also cited for one 

instance of noncompliance with the Anti-Deficiency 

Act in connection with an indemnification clause contained in a NOAA contract, which was identified in 

the FY 2005 audit. 

Weaknesses in Financial Systems 

Controls Persist 

The auditors assessed general IT controls over the Department’s major financial reporting systems against 

the six criteria in GAO’s Federal Information System Controls Audit Manual, finding weaknesses in all six areas— 

entity-wide security, security access controls, application software development and change control, system 

software, segregation of duties, and service continuity. 

Effective general 

IT controls are 

essential to ensuring the integrity 

and reliability of 

data used to prepare and report 

financial information. Weaknesses 

in these controls 

have been a problem for Commerce 

since 1998, though 

each year the Department has taken 

steps to strengthen 

them 

The Department reports the findings of our 

financial statements audits in its annual 

Performance and Accountability Report. 

Noncompliance with Anti-Deficiency 

Act Largely Resolved 

As mentioned earlier, the FY 2005 audit reported 

that the Department’s Office of General Counsel had 

identified a real property agreement between NOAA 

and a nonprofit entity that contained an indemnification clause. The clause was in violation of the AntiDeficiency Act because it constituted an open-ended 

obligation of government funds. 

NOAA subsequently identified another 81 agreements 

containing indemnification clauses or provisions involving questionable liability. The Department’s Office 

of General Counsel determined that these agreements 

also constituted violations of the Anti-Deficiency Act. 

The Secretary reported these violations to the President, Congress, and the Comptroller General as required by 31 USC § 1517(b). Our FY 2007 audit found 

that 79 of these agreements have been amended, terminated, or allowed to expire, and NOAA is taking 

action to correct the 3 remaining. 

“Special Purpose” Statements Also 

Receive Clean Opinion 

As part of the FY 2007 consolidated audit, KPMG 

examined Commerce’s special purpose financial statements and assessed the Department’s compliance with 

financial reporting requirements stipulated in the Treasury Financial Manual. The Treasury Department uses 

the audited special purpose statements to prepare the 

Financial Report of the U.S. Government. KPMG rendered 

an unqualified opinion on the special purpose statements and reported no material weaknesses in internal 

control over financial reporting and no instances of 

noncompliance with the Treasury manual. (Specialpurpose statements include the reclassified balance 

sheet, statements of net cost and of changes in net 

position, and accompanying notes.) (Financial Statements and Accountability Division: FSD-18530-1, -2, -3) 

22 
March 2008—Semiannual Report to Congress Department-wide Management
 

Preaward Financial Assistance 

Screening 

As part of our ongoing emphasis on prevention of 

fraud, waste, and abuse, we continue to work with 

the Office of Acquisition Management, NOAA and 

NIST grant offices, and EDA program offices to 

screen the Department’s proposed grants and cooperative agreements before they are awarded. Our 

screening serves two functions: it provides information on whether the applicant has unresolved audit 

findings and recommendations on earlier awards, and 

it identifies any negative financial or investigative history on individuals or organizations connected with a 

proposed award. 

On January 1, 2004, we implemented new policies 

and procedures for our preaward screening process. 

OIG and the Department determined that there are 

several categories of recipients for whom the costs 

and administrative burden of the screening process 

may well outweigh the government’s risk of financial 

loss. Our new policies exempt from review, recipients 

who (1) receive awards of $100,000 or less, (2) have 

received financial assistance from the Department for 

3 or more consecutive years without any adverse program or audit findings, or (3) are units of a state or 

local government. 

During this period we screened 17 proposed 

awards. For 4 of the awards, we found major deficiencies that could affect the ability of the prospective recipients to maintain proper control 

over federal funds. On the basis of the information we provided, the Department delayed all 

4 awards to resolve concerns. (Office of Audits) 

Preaward Screening Results 

Results Award 

Number Amount 

Awards 

delayed 

to resolve 

concerns 

4 $ 2,662,775 

Nonfederal Audit Activities 

In addition to undergoing OIG-performed audits, 

certain recipients of Commerce financial assistance 

are periodically examined by state and local government auditors and by independent public accountants. 

OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, sets forth the audit requirements for most of these audits. For-profit 

organizations that receive Advanced Technology 

Program funds from NIST are audited in accordance 

with Government Auditing Standards and NIST Program-Specific Audit Guidelines for ATP Cooperative 

Agreements, issued by the Department. 

We examined 166 audit reports during this semiannual period to determine whether they contained any 

audit findings related to Department programs. For 

82 of these reports, the Department acts as oversight 

agency and monitors the audited entity’s compliance 

with OMB Circular A-133 or NIST’s program-specific reporting requirements. The other 84 reports are 

from entities for which other federal agencies have 

oversight responsibility. We identified 14 with findings 

related to the Department. 

23 
Department-wide Management March 2008—Semiannual Report to Congress
 

Report 

Category 

OMB 

A-133 

Audits 

ATPProgramSpecifics 

Audits 

Total 

Pending 

(October 

1, 2007)

 26 3 29 

Received 130 37 167 

Examined 131 35 166 

Pending 

(March 31, 

2008)

 25 5 30 

The following table shows a breakdown by bureau 

of approximately $397 million in Commerce funds 

audited. 

Bureau Funds 

EDA $ 60,285,111 

ITA 367,523 

NIST* 67,021,273 

NOAA 75,250,694 

NTIA 2,013,157 

Office of the Secretary 12,018 

USPTO 795,815 

Multiagency 191,488,396

 Total $ 397,233,987 

* Includes $65,257,379 in ATP program-specific audits. 

We identified a total of $2,978,303 in federal questioned costs and $104,711 in funds to be put to better 

use. In most reports the subject programs were not 

considered major programs; thus the audits involved 

limited transaction and compliance testing against 

laws, regulations, and grant terms and conditions. 

The 14 reports with Commerce findings are listed in 

Appendix B-1. (Regional Offices of Audits) 

24 
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OFFICE OF INSPECTOR GENERAL
 

The mission of the Office of Inspector General is to promote economy, efficiency, and effectiveness 

and detect and prevent waste, fraud, abuse, and mismanagement in the programs and operations of 

the U.S. Department of Commerce. Through its audits, inspections, performance evaluations, and 

investigations, OIG proposes innovative ideas and constructive solutions that lead to positive changes for the 

Department. By providing timely, useful, and reliable information and advice to departmental officials, the 

administration, and Congress, OIG’s work helps improve Commerce management and operations as well as its 

delivery of services to the public. 

Office of Investigations 

Telemarketing Fraud Investigation 

Continues to Produce Convictions, 

Fines, and Imprisonment 

An ongoing OIG investigation of a major interna

tional telemarketing fraud scheme based in Costa Ric

(see September 2007 Semiannual Report, page 50) re

sulted in additional arrests and convictions this sem

annual period. On January 31, 2008, a key defendan

was convicted by a jury in U.S. District Court for th

Western District of North Carolina on one count o

conspiracy to commit wire fraud and 22 counts o

wire fraud. The jury also found him liable for crimina

forfeitures totaling more than $8.4 million. The de

fendant faces a potential sentence of 30 years to lif

in prison and payment of restitution to victims of th

fraud. A sentencing date has not been set. 

Four other participants in the scheme also were ar

rested during this period, and 10 defendants entere

guilty pleas on conspiracy and wire fraud charges. I

addition, 2 defendants previously convicted of con

spiracy, wire fraud, and making false statements wer

sentenced to 10 years’ incarceration and ordered t

pay restitution of $1,797,557 each. 

Since its inception nearly 5 years ago, our investigaion has netted 36 arrests, 29 convictions, and nearly 

$12 million in fines, forfeitures, and restitution. Some 

9,600 people have fallen victim to the scam, which 

was perpetrated by callers posing as agents of a bogus national lottery purportedly sanctioned by the 

Department of Commerce and other federal agencies. Victims were persuaded to wire money to various 

ocations in Costa Rica, purportedly to cover insurance and customs fees required to redeem cash prizes 

upposedly worth up to $4 million. Identified losses 

o U.S. residents total more than $30 million to date. 

Atlanta Field Office) 

Former Commerce Intern Convicted 

of Credit Card Fraud 

n January 2008, a former intern of the Department 

was convicted of felony credit card fraud in Fairfax 

County, Virginia, Circuit Court after a joint OIG/Fairax County Police investigation established that he had 

raudulently used the government travel card account 

numbers of several senior Commerce employees 

and other personal credit card numbers to purchase 

25 
Office of Inspector General March 2008—Semiannual Report to Congress
 

thousands of dollars 

worth of international 

plane tickets and hotel accommodations 

through an Internet 

travel site. Sentencing is scheduled for 

May 2008. (Silver Spring 

Resident Office) 

NOAA Employee Sentenced on 

Purchase Card Fraud 

As reported in our September 2007 Semiannual Report 

(page 49), in August 2007, a NOAA employee was 

convicted of theft of government property after an 

OIG investigation found he had used his government 

purchase card to charge nearly $4,000 worth of personal items including cigarettes, beer, gift cards, CDs, 

video games, and a television. On November 14, 2007, 

the defendant was sentenced in U.S. District Court 

for the Southern District of Mississippi to 2 years’ 

probation and ordered to pay $3,938.80 in restitution. 

(Denver Resident Office) 

OIG Forensic Analysis Contributes to 

Successful State Murder Prosecution 

In our September 2007 Semiannual Report (page 51), 

we described assistance provided by our Computer 

Crimes Unit to the Fairfax County, Virginia, police in 

connection with its investigation of a Census employee charged with murdering a man who was dating the 

employee’s former girlfriend. OIG was initially asked 

to join the investigation to seize government computer 

equipment assigned to the defendant and examine it 

for evidence linking the employee to the crime. Working with local police, OIG investigators subsequently 

seized a number of home computers at the defendant’s 

residence. We conducted a forensic analysis of 13 

computers and hundreds of removable disks, which 

revealed, among other things, that the defendant had 

been accessing the woman’s personal e-mail account 

for months and reading personal messages from the 

victim. After a trial in Fairfax County Circuit Court in 

March 2008, the jury found the defendant guilty of 

first degree murder, and hewas sentenced to 35 years’ 

imprisonment. Data recovered during the OIG analysis helped establish motive. (Computer Crimes Unit) 

OIG Aids Money Laundering 

Prosecution of Census Contractor 

During this period, we provided assistance to Immigration and Customs Enforcement (ICE) with the investigation of a Census Bureau contractor suspected 

of laundering the proceeds of illegal drug deals. On 

December 11, 2007, the defendant was tried in U.S. 

District Court for the District of Columbia and found 

guilty of one count of conspiracy to launder monetary instruments. Sentencing was scheduled for April 

2008. ICE has also been working with the General 

Services Administration to debar the defendant and 

his CPA firm from obtaining future government contracts. (Washington Field Office) 

Other OIG Activities 

IG Briefs House Subcommittee 

on Oversight Priorities 

On February 27, 2008, Commerce Inspector General 

Todd J. Zinser briefed the House Subcommittee on 

Commerce, Justice, Science, and Related Agencies 

about OIG’s oversight operations at the Department, 

emphasizing the most critical areas he believed deserved close watch: the Census Bureau’s 2010 decennial operations, NOAA satellite programs, Department-wide IT security, and NTIA’s management of 

$2.5 billion in funding authorized by the Digital Television Transition and Public Safety Act. 

2010 Decennial Census 

The Inspector General told subcommittee members 

that the bureau’s plan to use handheld computers to 

collect certain data was in serious jeopardy because 

the $600 million Field Data Collection Automation 

contract had yet to produce systems that could support Census operations. He also discussed several 

nonautomated census programs in need of improve26 
March 2008—Semiannual Report to Congress 

ment that were not receiving proper attention because 

the bureau has had to focus so much energy on the 

FDCA-related problems. 

NOAA Satellites 

IG Zinser recounted some of the problems and challenges facing the Department and NOAA in completing the multibillion-dollar National Polar-orbiting Operational Environmental Satellite System (NPOESS) 

and the next-generation Geostationary Operational 

Environmental Satellite (GOES-R). Both systems will 

provide critical weather and environmental data, but 

both have been scaled back because of significant delays and ballooning cost estimates. 

The IG stressed that agency officials and program 

planners must maintain strong mechanisms for 

promptly identifying and mitigating problems, and 

must quickly apprise the Secretary and Congress of 

any issues that threaten the timely, cost-effective completion of critical tasks. 

Department-wide Information Security 

Mr. Zinser discussed the root cause of the Department’s material weakness in IT security: inadequate 

processes for certifying and accrediting computer 

systems. He reported that senior Department officials 

are very aware of the need for improving the IT security program and described their efforts to do so. 

NTIA’s Administration of Consumer Coupon Program and Public Safety Grants 

The Inspector General gave a status report on NTIA’s 

efforts to help analog television viewers purchase digital converter boxes in advance of the February 17, 

2009, switch to all-digital TV broadcasting. He also 

discussed OIG’s oversight of NTIA’s $1 billion grants 

program for interoperable communications projects 

designed to enhance state and local emergency response efforts. OIG staff will review the program’s 

management annually and conduct at least 25 financial audits of funded programs over the next 4 years. 

Office of Inspector General
 

Other Watch List Items 

The IG also described several other oversight priorities the office has added to its watch list: 

•	 NOAA’s Expanding Responsibilities for Protecting 

Oceans and Marine Resources. The Magnuson-Stevens Fishery Conservation and Reauthorization 

Act of 2006 provides new authority to combat Illegal, Unreported, or Unregulated (IUU) 

fishing, and the 2008 Omnibus Appropriations 

Act specifies that the Secretary develop a list 

of vessels and vessel owners engaged in IUU 

fishing. NOAA’s use of these new authorities 

and its implementation of the 2008 appropriations requirement are important items for follow-up. 

•	 BIS’ Dual-Use Export Control System. In 2007, 

GAO added the Bureau of Industry and Security’s dual-use export control system to its 

government-wide high-risk list because the 

Department was unable to readily identify 

weaknesses in the system or implement corrective measures. OIG has carried out a substantial amount of work in this area over the past 

9 years, and will continue monitoring the progress of BIS and the Department in addressing 

this high-risk area. 

•	 Department-wide Grant Oversight. OIG’s inventory of criminal investigations contains cases 

involving grant recipients under investigation for converting grant funds to their own 

personal use. Such activity indicates the need 

for stronger oversight. Mr. Zinser stated that 

he plans to follow up on this issue and report 

back to the subcommittee. 

27 
Office of Inspector General	 March 2008—Semiannual Report to Congress 

TABLES AND STATISTICS 

Statistical Overview 

TABLES PAGE 

1. Investigative Statistical Highlights for this Period 28 

2. Audit Resolution Follow-Up	 29 

3. Audit and Inspection Statistical Highlights for this Period	 29 

4. Audits with Questioned Costs	 29 

5. Audits with Recommendations that Funds Be Put to Better Use	 30 

APPENDIXES 

A. Report Types this Period 	 31 

A-1. Performance Audits 31 

A-2. Financial Assistance Audits 31 

A-3. Financial Statements Audits 31 

A-4. Inspections and Evaluations 32 

B. Processed Audit Reports	 32 

B-1. Processed Reports with Audit Findings 33 

Table 1. Investigative Statistical Highlights for this Period
 

Criminal Investigative Activities 

Arrests 4 

Indictments and informations 6 

Convictions 14 

Personnel actions 1 

Fines, restitutions, judgments, and other civil and administrative recoveries $12,072,102 

Allegations Processed 

Accepted for investigation 26 

Referred to operating units 5 

Evaluated but not accepted for investigation or referral 43 

Total 74 

Audit Resolution and Follow-Up 

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

before the beginning of the reporting period (October 1, 2007) for which no management decision had 

been made by the end of the period (March 31, 2008). 

Six audit reports remain unresolved for this reporting 

period (see page 34). 

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. 

28 
March 2008—Semiannual Report to Congress Office of Inspector General 

Table 2. Audit Resolution Follow-Up 

Report Category Modifications Appeals 

Actions pending (October 1, 2007) 0 7 

Submissions 1 5 

Decisions 1 6 

Actions pending (March 31, 2008) 0 6 

Table 3. Audit and Inspection Statistical Highlights for this Period
 

Questioned Costs $ 3,845,197* 

Value of audit recommendations that funds be put to better use 104,711 

Value of audit recommendations agreed to by management 4,236,568 

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

Table 4. Audits with Questioned Costs 

Report Category Number Questioned 

Costs 

Unsupported 

Costs 

A. Reports for which no management decision had been 

made by the beginning of the reporting period 22 $ 31,168,505 $ 6,724,891 

B. Reports issued during the reporting period 15 3,845,197 624,028 

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

the period 37 35,013,702 7,348,919 

C. Reports for which a management decision was made 

during the reporting period2 16 11,383,909 2,806,979 

i. Value of disallowed costs 3,878,361 157,673 

ii. Value of costs not disallowed 7,960,548 2,649,306 

D. Reports for which no management decision had been 

made by the end of the reporting period 21 23,629,793 4,541,940 

NOTES: 

1

 Four audit reports included in this table are also included among reports with recommendations that funds be but to better use (see table 5). However, the 


dollar amounts do not overlap. 


2

 In Category C, lines i and ii do not always equal the total line C because resolution may result in values greater than the original recommendations.
 

29 
 

Office of Inspector General March 2008—Semiannual Report to Congress 

Table 5. Audits with Recommendations that Funds Be Put to Better Use 

Report Category Number Value 

A. Reports for which no management decision had been made by the 

beginning of the reporting period 6 $ 456,405 

B. Reports issued during the reporting period 1 104,711 

Total reports (A+B) requiring a management decision during the period1 7 561,116 

C. Reports for which a management decision was made during the reporting period2 6 456,405 

i. Value of recommendations agreed to by management 358,207 

ii. Value of recommendations not agreed to by management 98,198 

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

of the reporting period 1 104,711 

NOTES: 

1 Four audit reports included in this table are also included among reports with questioned costs (see table 4). However, the dollar amounts do not overlap. 2

 In Category C, lines i and ii do not always equal the total line C because resolution may result in values greater than the original recommendations. 

Definitions of Terms Used in the 

Tables 

Questioned cost: a cost questioned by OIG because 

of (1) an alleged violation of a provision of a law, 

regulation, contract, grant, cooperative agreement, 

or other agreement or document governing the expenditure of funds; (2) a finding that, at the time of 

the audit, such cost is not supported by adequate 

documentation; or (3) a finding that an expenditure 

of funds for the intended purpose is unnecessary or 

unreasonable. 

Unsupported cost: a cost that, at the time of the 

audit, is not supported by adequate documentation. 

Questioned costs include unsupported costs. 

Recommendation that funds be put to better use: 

an OIG recommendation that funds could be used 

more efficiently if Commerce management took 

action to implement and complete the recommendation, including (1) reductions in outlays; (2) deobligation of funds from programs or operations; (3) 

withdrawal of interest subsidy costs on loans or loan 

guarantees, insurance, or bonds; (4) costs not incurred 

by implementing recommended improvements related 

to Commerce, a contractor, or a grantee; (5) avoidance 

of unnecessary expenditures identified in preaward 

reviews of contracts or grant agreements; or (6) any 

other savings specifically identified. 

Management decision: management’s evaluation 

of the findings and recommendations included in the 

audit report and the issuance of a final decision by 

management concerning its response. 

30 
March 2008—Semiannual Report to Congress Office of Inspector General 

Appendix A. Report Types this Period 

Type Number of Reports Appendix Number 

Performance audits 2 A-1 

Financial assistance audits 1 A-2 

Financial statements audits 5 A-3 

Inspections and systems evaluations 2 A-4 

Total 10 

Appendix A-1. Performance Audits
 

Report Title Report Number Date Issued Funds to Be Put 

to Better Use 

National Oceanic and Atmospheric Administration 

Real Property Portfolio: Opportunities to 

Strengthen Management Accountability 

BSD-18256-8­

0001 03/06/08 — 

U.S. Patent and Trademark Office 

USPTO Has Reasonable Controls Over Personal Property, but Additional Improvements Are 

Needed 

CAR-18701-8­

0001 03/27/08 — 

Appendix A-2. Financial Assistance Audits
 

Report Title Report 

Number 

Date Issued 

Value of 

Funds to 

Be Put to 

Better Use 

Federal 

Amount 

Federal Amount 

Unsupported 

National Institute of Standards and Technology 

Chesapeake Perl, Inc., MD CAR-18440­

8-0001 02/25/08 — $ 866,894 $ 395,263 

Appendix A-3. Financial Statements Audits
 

Report Title Report 

Number Date Issued 

Office of the Secretary 

Assessment of Information Technology Controls Supporting the Department’s Financial Management Systems FY 2007 Financial Statement Audit FSD-18530­

8-0001 10/05/07 

Department of Commerce’s FY 2007 Consolidated Financial Statements FSD-18530­

8-0002 11/09/07 

Department of Commerce’s FY 2007 Special Purpose Financial 

Statements 

FSD-18530­

8-0003 12/12/07 

31 
Office of Inspector General March 2008—Semiannual Report to Congress 

Appendix A-3, continued 

Report Title Report 

Number Date Issued 

U.S. Patent and Trademark Office 

Assessment of Information Technology Controls Supporting USPTO’s 

Financial Management Systems FY 2007 Financial Statement Audit 

FSD-18531­

8-0001 10/05/07 

USPTO’s FY 2007 Financial Statements FSD-18531­

8-0002 11/06/07 

Appendix A-4. Inspections and Evaluations
 

Report Title Report 

Number Date Issued 

Funds to Be 

Put to Better 

Use 

National Oceanic and Atmospheric Administration 

Successful Oversight of GOES-R Requires Adherence 

to Accepted Satellite Acquisition Practices OSE-18291 11/20/2007 — 

National Marine Sanctuary Program Protects Certain Resources, But Further Actions Could Increase 

Protection 

IPE-18592 02/12/2008 — 

Appendix B. Processed Audit Reports
 

The Office of Inspector General reviewed and accepted 166 audit reports prepared by independent public 

accountants and local, state, and other federal auditors. The reports processed with questioned costs, 

recommendations that funds be put to better use, and/or nonfinancial recommendations are listed in 

Appendix B-1. 

Agency Audits 

Economic Development Administration 60 

International Trade Administration 3 

National Institute of Standards and Technology* 39 

National Oceanic and Atmospheric Administration 25 

National Telecommunications and Information Administration 4 

Office of the Secretary 1 

United States Patent and Trademark Office 1 

Multiagency 33 

Total 166 

*Includes 35 ATP program-specific audits. 

32 
March 2008—Semiannual Report to Congress Office of Inspector General 

Appendix B-1 - Processed Reports with Audit Findings 

Report Title Report 

Number 

Date 

Issued 

Funds to 

Be Put to 

Better Use 

Federal 

Amount 

Questioned 

Federal 

Amount 

Unsupported 

Economic Development Administration 

Tri-County Economic Development 

District, WA 

ATL-09999­

8-3084 03/21/08 0 $ 57,158 $ 57,158 

City of Akron, OH ATL-09999­

8-3086 03/26/08 0 12,618 0 

Portable Practical Educational 

Preparation, Inc., AZ 

ATL-09999­

8-2988 03/26/08 0 197,343 0 

Vermont Council on Rural 

Development, Inc. 

ATL-09999­

8-3132 03/26/08 0 43,878 43,878 

EDC Loan Corporation, MO ATL-09999­

8-2950 03/28/08 0 1,163,349 0 

National Institute of Standards and Technology 

DAFCA, Inc., MA ATL-09999­

8-3017 03/13/08 0 190,748 0 

Icoria, Inc., NC ATL-09999­

8-3122 03/13/08 0 171,276 0 

NexTech Materials, Ltd., OH ATL-09999­

8-3113 03/17/08 0 513,845 0 

Cinetec Landis Corporation, PA ATL-09999­

8-3121 03/20/08 0 11,241 11,241 

Aether Wire & Location, Inc., CA ATL-09999­

8-3118 03/31/08 104,711 268,938 0 

National Oceanic and Atmospheric Administration 

State of Louisiana ATL-09999­

8-2949 03/26/08 0 144,000 0 

State of Rhode Island and Providence 

Plantations 

ATL-09999­

8-2876 03/26/08 0 116,488 116,488 

The JASON Project, VA ATL-09999­

8-2929 03/26/08 0 57,421 0 

Commonwealth of Puerto Rico, 

Department of Natural and 

Environmental Resources 

ATL-09999­

8-2927 03/28/08 0 30,000 0 

33 
Office of Inspector General 

AUDITS UNRESOLVED FOR 

34 

MORE THAN 6 MONTHS 

Census Bureau 

ITS Services, Inc. In March 2005, we reported that 

3 of the 32 task orders awarded under an IT services 

contract were audited to determine whether the costs 

billed by the firm were reasonable, allowable, and allocable under contract terms and conditions and federal 

regulations. We found that the firm had failed to comply with numerous contract and federal requirements, 

and questioned more than $8.5 million in direct labor 

and reimbursable costs. 

Computer & High Tech Management, Inc. We reported in our September 2005 Semiannual Report (page 

14) the results of audits of 2 of the 21 task orders 

for another firm providing IT services to Census. We 

sought to determine whether the firm had complied 

with contract terms and conditions and federal regulations and had billed Census for work performed in 

accordance with specifications of the task order. We 

found that the firm failed to comply with numerous 

March 2008—Semiannual Report to Congress 

contract and federal requirements, which caused us to 

question more than $10.7 million in direct labor and 

other reimbursable costs. 

We have suspended audit resolution on both of these 

contract audits pursuant to an agreement with Census. 

NIST 

Computer Aided Surgery Inc., New York. An 

OIG audit of this NIST cooperative agreement (see 

September 2004 issue, page 35, and March 2005 issue, page 33—ATL-16095) questioned costs totaling 

$547,426 in inappropriately charged rent, utilities, and 

certain salary, fringe benefit, and other expenses because these costs were unallowable, in excess of budgetary limits, or incorrectly categorized. This audit 

remains unresolved because we requested that NIST 

postpone its submission of an audit resolution proposal. 
March 2008—Semiannual Report to Congress Office of Inspector General 

REPORTING REQUIREMENTS 

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

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

Section Page

4(a)(2)
 

5(a)(1)
 

5(a)(2)
 

5(a)(3)
 

5(a)4
 

5(a)(5) and 6(b)(2)
 

5(a)(6)
 

5(a)(7)
 

5(a)(8)
 

5(a)(9)
 

5(a)(10)
 

5(a)(11)
 

5(a)(12) 

Review of Legislation and Regulations 35-36 

Significant Problems, Abuses, and Deficiencies 11-27 

Significant Recommendations for Corrective Action 11-27 

Prior Significant Recommendations Unimplemented 35 

Matters Referred to Prosecutive Authorities 28 

Information or Assistance Refused 36 

Listing of Audit Reports 31-33 

Summary of Significant Reports 11-27 

Audit Reports—Questioned Costs 29 

Audit Reports—Funds to Be Put to Better Use 30 

Prior Audit Reports Unresolved 36 

Significant Revised Management Decisions 36 

Significant Management Decisions with Which OIG Disagreed 

Section 4(a)(2): Review of Legislation 

and Regulations 

This section requires the inspector general of each 

agency to review existing and proposed legislation 

and regulations relating to that agency’s programs and 

operations. Based on this review, the inspector general 

is required to make recommendations in the semiannual report concerning the impact of such legislation 

or regulations on the economy and efficiency of the 

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

and detection of fraud and abuse in those programs 

and operations. Comments concerning legislative and 

regulatory initiatives affecting Commerce programs 

are discussed, as appropriate, in relevant sections of 

the report. 

36 

Section 5(a)(3): Prior Significant 

Recommendations Unimplemented 

This section requires identification of each significant 

recommendation described in previous semiannual 

reports for which corrective action has not been completed. Section 5(b) requires that the Secretary transmit to Congress statistical tables showing the number 

and value of audit reports for which no final action 

has been taken, plus an explanation of the reasons 

why recommended action has not occurred, except 

when the management decision was made within the 

preceding year. 

To include a list of all significant unimplemented recommendations in this report would be duplicative. 

35 
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Office of Inspector General March 2008—Semiannual Report to Congress
 

Information on the status of any audit recommendations can be obtained through OIG’s Office o

Audits. 

Sections 5(a)(5) and 6(b)(2): 

 Information or Assistance Refused 

These sections require a summary of each report t

the Secretary when access, information, or assistanc

has been unreasonably refused or not provided. Ther

were no instances during this semiannual period an

no reports to the Secretary. 

Section 5(a)(10): Prior Audit 

Reports Unresolved 

This section requires a summary of each audit repo

issued before the beginning of the reporting perio

for which no management decision has been made b

the end of the reporting period (including the dat

and title of each such report), an explanation of why

decision has not been made, and a statement concern

ing the desired timetable for delivering a decision o

each such report. There were five Census reports an

one NIST report more than 6 months old. 

Section 5(a)(11): Significant 

evised Management Decisions 

his section requires an explanation of the reasons 

or any significant revision to a management decision 

ade during the reporting period. Department Adinistrative Order 213-5, Audit Resolution and Folw-up, provides procedures for revising a manageent decision. For performance audits, OIG must be 

onsulted and must approve in advance any modificaon to an audit action plan. For financial assistance 

udits, OIG must concur with any decision that would 

hange the audit resolution proposal in response to an 

ppeal by the recipient. The decisions issued on the six 

ppeals of audit-related debts were finalized with the 

ull participation and concurrence of OIG. 

ection 5(a)(12): Significant 

Management Decisions with 

Which OIG Disagreed 

his section requires information concerning any 

gnificant management decision with which the inpector general disagrees. Department Administrative 

Order 213-5 provides procedures for elevating unreolved audit recommendations to higher levels of Deartment and OIG management, including their conderation by an Audit Resolution Council. During this 

eriod no audit issues were referred to the council. 

36