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March 29, 2001

GAO-01-491T

BUREAU OF LAND

MANAGEMENT

Improper Charges Made to

Mining Law Administration

Program

Statement of Linda M. Calbom

Director, Financial Management and Assurance

Testimony

Before the Subcommittee on Energy and Mineral

Resources, Committee on Resources, House of

Representatives

United States General Accounting Office

GAO
Page 1 GAO-01-491T

Madam Chairman and Members of the Subcommittee:

I am pleased to be here today to discuss our review of certain charges

made to the Bureau of Land Management’s (BLM) Mining Law

Administration Program (MLAP). Accurate cost information is crucial for

proper program management and is especially important for MLAP since

this program is partially funded through mining fees that the Congress has

designated to be used only for mining law administration operations.

We last reported on this program a year ago when we briefed your office

on BLM’s administration and use of mining maintenance fees. That work

resulted in BLM undertaking a review of its contracts and services charged

to MLAP in the previous 2 fiscal years and identifying some improper

charges to that program. Our prior work also led to your request that we

(1) review labor charges to MLAP during the first 10 months of fiscal year

2000,

(2) review the methodology that BLM used in its review of MLAP charges

for contracts and services during fiscal years 1998 and 1999 and

evaluate its approach for correcting improper charges, and

(3) determine whether BLM employees were aware of the sources of

MLAP funding.

My statement will focus on the results of our work in these three areas. A

detailed discussion of our findings is contained in our report Bureau of

Land Management: Improper Charges Made to Mining Law Administration

Program (GAO-01-356), which is being released today.

In brief, BLM employees we surveyed disclosed that many of the hours

charged to MLAP during the first 10 months of fiscal year 2000 did not

accurately reflect hours actually worked on MLAP. Based on our survey

sample, we estimate a net overcharge of almost 11 percent for the 10

month audit period, resulting in a potential overcharge of about
Page 2 GAO-01-491T

$1.2 million1 for the nine BLM administrative states2 and offices included

in our review.

BLM’s review of contracts and services over $1,500 that were charged to

MLAP during fiscal years 1998 and 1999 employed a methodology that was

appropriate and identified the majority of the contracts and services that

were improperly charged to MLAP operations during that time period.

Specifically, BLM determined that about $716,000 in contracts and services

should not have been charged to MLAP.

Finally, in response to our survey, approximately 70 percent of BLM

employees stated they were either not aware of the source of MLAP

funding or did not know that the program is partially funded by fees

collected from miners and designated for MLAP operations.

To address the weaknesses identified through our work, we have made

recommendations to BLM intended to create more specific criteria and

clearer policies related to the use of MLAP funds.

BLM’s MLAP is responsible for managing the exploration and development

of locatable minerals on public lands. Locatable minerals include the socalled “hardrock minerals,” such as copper, lead, gold, silver, and uranium.

MLAP operations include activities such as

ï reviewing and approving plans and notices of mining operations,

ï conducting inspections and enforcement to ensure compliance with the

terms of plans and notices of operation and related state and local

regulations, and

ï identifying and eliminating cases of unauthorized occupancy of mining

claims.

MLAP operations do not include work on nonlocatable or common variety

minerals, such as sand or gravel, or oil and gas work.

 1Since this figure is derived from sample data, it is subject to sampling error. Taking this random

variation due to sampling into account, we are 95 percent confident that the actual overcharge ranges

between $0.6 and $1.9 million. This result offers assurance that a net overcharge for MLAP occurred

for the survey period.

2Administrative states are BLM’s administrative offices, which in some cases have jurisdiction over

areas beyond the boundaries of the state named. Our work examined 9 of BLM’s 18 administrative

states and offices.

Background
Page 3 GAO-01-491T

The program is funded through mining fees and by appropriations to the

extent that the fees are inadequate to fund the program.3 Since 1993,

mining fees have included an annual $100 mining maintenance fee on

unpatented mining claims and sites and a $25 location fee on new claims

and sites. The maintenance fees are collected in lieu of the annual $100

worth of labor or improvements (also called “assessment work”) required

by the Mining Law of 1872. The authorization for these fees expires on

September 30, 2001.

Our survey of BLM employees showed that the number of hours charged

to MLAP were not a reliable record of the number of hours actually

worked on the program. According to employees, the number of hours

charged to MLAP were often in excess of the number of hours worked on

MLAP issues, or were charged for work unrelated to mining. In addition,

some employees received bonuses or awards from MLAP funds although

they charged no hours to the program.

Our survey population consisted of BLM employees who charged labor

hours to MLAP during the first 10 months of fiscal year 2000. The 9

administrative states and offices included in our review reported MLAP

obligations of over $23 million in fiscal year 2000, representing

approximately 72 percent of total reported MLAP obligations. In this

survey population, about one-half of the employees reported working and

charging the same amount of time to the program. However, almost 39

percent reported that they charged more time to MLAP than was actually

worked, while only about 11 percent reported charging less time to MLAP

than was actually worked. These results are summarized in attachment 1.

These improper charges to MLAP mean that BLM’s financial records do

not reflect the true cost of the program. They are also in conflict with

BLM’s policy, which stresses that “Charging work tasks, employee salaries,

procurement or contract items, or equipment purchases to any subactivity

other than the benefiting subactivity violates the terms of the

Appropriations Act.” BLM’s policy also emphasizes that “records of actual

costs and accomplishments must be (as) accurate as possible.” Based on

our survey sample, we estimate a net overcharge to MLAP of almost 11

 3BLM has general statutory authority to use receipts from mining fees for MLAP operations. Annual

appropriations acts establish an amount of BLM’s appropriation for Management of Land and

Resources (MLR) to be used for MLAP operations. The appropriations acts require, however, that the

mining fees that BLM collects be credited against the MLR appropriation until all MLR funds used for

MLAP are “repaid.” To the extent that fees are insufficient to fully credit the MLR appropriation, the

MLR appropriation absorbs the difference and therefore partially funds MLAP.

Some Labor Costs

Were Improperly

Charged to MLAP
Page 4 GAO-01-491T

percent for the 10-month audit period, resulting in a potential overcharge

of about $1.2 million for the 9 BLM administrative states and offices

included in our review.

Many employees reported that the improper charges to MLAP were driven

by BLM’s funding allocations4 rather than the actual work performed.In

other words, charges were improperly made to MLAP because that

subactivity had funds available for obligation. Based on our survey,

approximately 56 percent of the employees who charged more time than

worked to MLAP said they did so because funds were available in that

program. Employees also stated that they charged MLAP based on

directions from their supervisor or a budget officer. Approximately 50

percent5 of the employees who charged more time than worked to MLAP

reported that they did so based on the directions of a supervisor or budget

officer. Again, this is in direct conflict to BLM’s policy that indicates

charging a subactivity simply because “money is available there” is a

violation of the appropriations act. These results are summarized in

attachment 2.

Of the employees who stated that they charged more time to MLAP than

they actually worked, some reported charging time for such non-MLAP

related tasks as processing applications to drill oil and gas wells; working

on environmental remediation projects; doing recreation management;

preparing mineral reports for land exchanges; and conducting work on

common variety minerals, such as sand and gravel. BLM officials

characterized these tasks as generally not appropriate for MLAP.

Our analysis of BLM records also showed that certain BLM employees

received bonuses and awards from MLAP funds for work unrelated to

mining. In clarifying BLM’s policy, BLM’s Director of Budget stated that

any bonuses and awards received as a result of the labor performed

should be charged to the subactivity that benefited from that labor.

However, awards were given to individuals for tasks unrelated to MLAP

operations,6 such as assisting in the moving of a BLM office to a new

 4OMB Circular A-34 defines allocation as one method of restricting federal funds available for

obligation. It is used broadly to include any subdivision of funds below the suballotment level, such as

subdivisions made by agency financial plans or program operating plans, or other agency restrictions.

5Employees could provide more than one explanation, therefore the percentages listed above do not

total to 100 percent.

6We also found individuals who received awards from MLAP funds for MLAP-related work, even

though the hours and associated labor were not charged to MLAP. BLM officials stated that charging

these awards to MLAP was appropriate and that the associated labor should also have been charged to

the program. Not charging the associated labor costs to MLAP resulted in program costs being

understated.
Page 5 GAO-01-491T

facility and as compensation for not using BLM’s relocation service when

selling a private residence as part of a lateral transfer. When asked why

such bonuses and awards had been charged to MLAP, BLM officials either

could provide no explanation or stated that MLAP had been charged by

mistake.

BLM’s review of contracts and services over $1,500 that were charged to

MLAP during fiscal years 1998 and 1999 employed a methodology that was

appropriate and thorough and identified the majority of the contracts and

services improperly charged to MLAP operations during that time period.

The contracts reviewed represented over $8 million, or almost 90 percent,

of the contracts and services obligated to MLAP during that time period.

BLM determined that about $716,000 in contracts and services should not

have been charged to MLAP. The improper payments, as shown in

attachment 3, included

ï over $34,000 for janitorial services,

ï $30,000 for the appraisal of federal coal leaseholds,

ï $25,000 for an attorney in an Equal Employment Opportunity settlement

for an employee who had not worked on MLAP tasks, and

ï $2,000 for a habitat survey of a threatened and endangered species of

butterfly in an area with no active mining.

In addition, our review identified an additional $40,000 for 2 contracts and

services that were improperly charged to MLAP. These contracts and

services were for a cooperative agreement for geographic information

system support and a biological survey. BLM officials agreed and stated

that correcting adjustments would be made to the proper appropriation

for the additional $40,000.

BLM prepared an instruction memorandum to provide guidance on

correcting the contracts and services charges that were improperly

charged to MLAP in fiscal years 1998 and 1999. BLM officials have told us

that they are identifying the appropriations for fiscal years 1998 and 1999

that should have been charged for these costs and that there are sufficient

funds to make the correcting adjustments of about $716,000.

Although BLM is taking the appropriate steps to correct these past

improper charges of contracts and services to MLAP, it has not yet

established specific procedures to prevent the recurrence of similar

improper charges in the future. Until such procedures are established and

BLM Effectively

Identified Contracts

and Services

Improperly Charged

to MLAP but Needs

Additional Procedures

to Prevent Recurrence
Page 6 GAO-01-491T

implemented, there continues to be a high risk of improper use of MLAP

funds for unrelated contracts and services.

Finally, as requested, in our survey we asked BLM employees whether

they were aware of the source of funding for MLAP. Approximately 70

percent of BLM employees who responded were either not aware of the

source of MLAP funding or did not know that the program is partially

funded by fees collected from miners and designated for MLAP operations.

In summary, the costs of some labor and a number of contracts and

services were improperly charged to MLAP, resulting in other subactivities

benefiting from funds intended for MLAP operations. Therefore, fewer

funds have been available for actual MLAP operations. Although BLM has

taken steps to make correcting adjustments for some of these improper

charges, it has not established specific guidance or procedures to prevent

improper charging of MLAP funds from recurring in the future. Until

additional procedures for MLAP are developed and effectively

implemented, the Congress and program managers can only place limited

reliance on the accuracy of MLAP cost information.

We have included in our report the following four actions that the Director

of the Bureau of Land Management should take to address the issues I

have discussed here today:

ï make correcting adjustments for improper charges to appropriation

accounts;

ï remind employees that time charges and other obligations are to be made

to the benefiting subactivity as stated in BLM’s Fund Coding Handbook

and develop a mechanism to test compliance;

ï provide detailed guidance clarifying which tasks are chargeable to MLAP

operations, such as those listed in the background section of our report;

and

ï conduct training on this guidance for all employees authorized to charge

MLAP.

Madam Chairman, this concludes my statement. I would be happy to

answer any questions that you or the Members of the Subcommittee may

have.

Many Employees Are

Unaware of Source of

MLAP Funding

Conclusions

Recommendations for

Executive Action
Page 7 GAO-01-491T

For further information regarding this testimony, please contact Linda

Calbom, Director, Financial Management and Assurance, at (202) 512-

9508. Individuals making key contributions to this testimony included

Mark P. Connelly, Edda Emmanuelli-Perez, Lisa M. Knight, W. Stephen

Lowrey, Miguel A. Lujan, Mark F. Ramage, Shannah B. Wallace, and

McCoy Williams.

Attachments

Contact and

Acknowledgments
Page 8 GAO-01-491T

Attachment 1

Mining Law Administration Program (MLAP)

Time Worked Versus Time Charged
Page 9 GAO-01-491T

Attachment 2

Explanations for Overcharging Labor to

Mining Law Administration Program (MLAP)
Page 10 GAO-01-491T

(190009)

Attachment 3

Examples of Improperly Charged Contracts

to Mining Law Administration Program

(MLAP)
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